As the Sunday Times publishes the 2014 showcase of ‘best companies to work for’, there is no doubt that engagement is good for employees, good for business and good for the economy.  A read of the rigorous research outlined in ‘The Evidence’ [PDF, 1.1mb] paper from the Employee Engagement Task Force will confirm the link with company performance, customer satisfaction and innovation. We are seeing an exciting raft of new reward practices emerging, particularly in response to the demands of the new Generation Y workforce. But, get the basics of reward wrong at your peril as this will severely affect engagement.   

A fair deal

We know engagement is fundamentally about leaders providing strong strategic vision, managers managing people well and great two-way communication where employees feel involved. Reward has an impact on all three and ‘fair deal’ certainly earns its place as one of the eight ‘best company’ factors. 

A struggle with ‘fair deal’ is usually a sign that there’s something awry with the basics such as a well thought-through reward strategy linked to business goals and behaviours and a robust pay and grading structure. Having employees who feel their pay is unfair and managers who cannot make and justify consistent and robust pay decisions will inevitably demotivate. Get this bit wrong and the impact is significant. All other aspects of the employment relationship will be seen in a less positive light. 

How can reward really motivate?

To determine what are important aspects of the employee deal consider what is happening in the workforce. Generation Y currently make up around a third of the global workforce, by 2025 it will be 75%.  Brought up to be independent, self-confident and unafraid to challenge, they are looking for something different from the employment relationship. 

Flexibility is a big one. As the lines between ‘reward’ and ‘work’ becoming increasingly blurred, young talent will see the way an organisation communicates as a part of the overall deal. They will want to be trusted to be in control of how and when they work, and where from. As long as the job gets done. They’re just as likely to update Facebook in the office as read work-related information in the supermarket queue, so why create an artificial barrier between the two?    

Flexible working is no longer about part-time working for new mothers. It’s the flexibility for employees to balance work with other activities and ambitions that are important to them such as running a business, carrying out volunteer work, extended travel or property development.  Similarly, education has traditionally been used as a reward where the course is relevant to the business, yet the emerging trend is to offer opportunities to study subjects aimed at personal growth such as a language or a creative skill. Businesses that understand the wider benefits of encouraging personal ‘mastery’ and ‘purpose’ will take their employee deal to another level. A read of Dan Pink’s Drive will support this.

For an intelligent vision of an engaging approach to HR, take a look at the Netflix story that has recently gone viral.  They talk of hiring the best, removing the policies and trusting employees to ‘Act in Netflix’s best interests’.  There are examples of managers and employees agreeing personal annual leave levels and a flexible approach to stock options where employees choose how much equity they want to fit with their personal tolerance for risk.

The new generation of employees bring with them a demand for clear and strong ethics around fairness and equal pay. This makes it even more important that every aspect of reward can stand up to even more scrutiny than ever before. Get it wrong and the impact is magnified through social media which is integrated into the lives of this tech-savvy group.  But equally, get it right and the word will be shared.  

Here are some practical tips:

• Start with your reward strategy – spend time up front discussing reward with key stakeholders to ensure that your reward fits well with your business strategy. Once agreed, key messages that clarify ‘how reward is done around here’ can to be shared with employees  
• Reward good practice – recognise and reward good practice among people managers using the engagement scores within their teams
• Have a robust pay and grading structure – clearly define your organisational levels and implement an associated job evaluation system 
• Be clear about pay – create robust pay structures that stand up to scrutiny, address any anomalies, train your people managers to use them well and be transparent
• Be innovative about total reward – ensure your overall employee deal aligns with what employees want, including aspects such as flexible working, volunteering and sabbaticals
• Communicate, all the time – too easy to forget but, as a core driver of engagement, ongoing two-way communication needs to become a part of everyday activity

In summary, we’re really not talking rocket science or significant financial investment. It’s about getting the strategy and structures in place to make consistent, informed and understood decisions about pay and creating a compelling deal in line with what your employees really want.