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3 Employee Value Proposition Assumptions that Put Your Offer at Risk

May 01, 2018 • By Ken Gibson

CEOs and other business leaders are figuring out that they need to pay closer attention to the value proposition they offer new and existing employees.  Too often that realization is coming at a cost.  A key person leaves.  A critical recruit chooses someone else’s offer over yours.  Your employer brand is getting hit hard on social media and company rating sites like glassdoor.com.  This is becoming an increasingly critical and time sensitive issue for more and more companies as the skilled labor market continues to shrink and the competition for the best talent increases.

A quote from the summary of PwC’s 18th annual global CEO survey gives some context for why business leaders are feeling the need to take a more strategic approach to building a compelling value proposition:

One of the biggest headaches for CEOs is making sure that the organization has the right people to cope with what lies ahead.  There’s the basic question of planning for the skills that are needed now and in the future: Which roles will be automated?  What new roles will be needed to manage and run emerging technology?  What skills should the company be looking for, and training their people for?  Where will we find the people we need?

But more importantly, CEOs need to be sure that the business is fit to react quickly to whatever the future may throw at it – and that means filling it with adaptable, creative people, working in a culture where energy fizzes and ideas spark into life. If they can’t be found, they must be created.  (PwC’s 18th Annual Global CEO Survey)

With that much at stake, it’s a shame so many are making unforced errors in their approach to their value offering and not giving it the comprehensive and strategic attention it needs.  Here are the three most common assumptions I see CEOs making that are putting their value propositions at risk.

3 Mistaken Value Proposition Assumptions

Assumption 1: Your Employee Value Proposition is your Compensation and Benefits Package

Certainly, employers need to make pay offers that are compelling and that meet the demands that premier talent expect in the current business environment.  The best people will look at your compensation plan and compare it to four core financial objectives they want fulfilled: 1) Cash flow and standard of living requirements; 2) Protection and security; 3) Retirement planning, and; 4) Wealth accumulation.  If your offer comes up short in any of those areas, the people you are trying to attract will likely not find it acceptable.  And as it relates to wealth accumulation, they want to know that there is a means of participating in the value they help the business create.

The problem is, most employers stop there—if they even get that far.  They seem to believe that as long as they have a great rewards approach, they will be able to attract and retain who they want.  This is a bad assumption.  A pay strategy is only one of four different parts of a Total Rewards strategy that attract great talent to an organization and keep them there.  Organizations need to have a superior approach in each of the following areas:

  • Compelling Future. Business leaders need to be able to articulate a vivid and captivating vision of where the company is headed and why it matters.  More importantly, they need to be able to place their employees in that future as they communicate the opportunity to new and existing employees.  Key people in particular will want to feel they are essential to the fulfillment of the future business and that they can relate to the purposes that will be served if the company achieves its goals.
  • Strategic Fulfillment. Highly sought after people want to know the are fulfilling a strategic role and will impact the trajectory of the company.  They recognize they have unique abilities that need to be let loose so they can have the impact they were brought on to have; and can be unfettered by activities that dilute their ability to provide strategic leadership.  They also want to know they are surrounded by people who also have unique abilities, different from their own, and so together they can form a unique team that consistently “wins.”  They realize when that happens, a culture of confidence emerges and they have a true competitive advantage that will drive sustained success.  Then, everyone wins. 
Employee Value Proposition
  • Personal and Professional Development. People join and stay with organizations where they experience growth—and when they can see a clear path for how that will happen.  This occurs naturally when they are experiencing strategic fulfillment.  However, in great organizations, people development is not left to chance.  Creating opportunities for people to grow in their roles, assume ever greater levels of responsibility and autonomy and to access the resources they need to not just perform their company role but to become better personally and professionally has to be approached intentionally.
  • Financial Rewards. When a value proposition is created in a Total Rewards context, the compensation plan becomes a means of defining the financial nature of the partnership the company wants to have with its key people in particular (although it applies to other employees as well).   The nature of your pay strategy communicates to employees whether you consider them growth partners and if you are willing to apply a wealth multiplier philosophy to their earnings potential; meaning that if they create value they will participate in it—without limits.  This instills an ownership mindset in the minds of your people and encourages them to take a stewardship approach to the outcomes for which they are responsible.

Assumption #2: Employees Understand your Value Proposition

Too often, business leaders just expect their people to understand how good they have it.  They feel like they pay well and create a great environment for their employees, so of course their workforce will automatically be impressed, appreciative and fully engaged.  This is kind of like making a great product and expecting that your customers will sing its praises and buy more and more of it without ever touting its virtues by marketing and selling it.  Somehow, there is an assumption that employees will absorb the goodness you are providing.

Business leaders need to spend the time to envision, create, promote and sustain the kind of employer brand they want to have.  Employer branding involves build a marketing strategy that has employees and future employees as its audience.  It places the employee value proposition in a broader cultural context that emphasizes performance standards, a sense of purpose, principles and values and why all of that matters.  The employer brand also communicates the company’s “personality” and what kind of person relates to the company’s environment and people.

The employee value position has to be communicated in a way that reflects the performance philosophy and culture the company has and how it rewards its key contributors.  Highly successful companies frame their value offering to employees in terms of a performance theme each year and encourage work associates to reach new heights so they and everyone else can participate in the wealth multiple their combined efforts create.

Assumption #3: An Adequate Offer is the Same Thing as a Competitive Offer

It is not unusual for the CEOs of even reasonably successful businesses to want to align their compensation plan with market pay data.  Their assumption is that mirroring what pay data shows should be paid for certain positions places them in “safe” territory when it comes to their financial value offering.  This is a dangerous hypothesis on which to base a rewards approach.  It confuses using competitive (market) pay data with having a competitive value proposition.  In reality, basing a pay strategy on what “the market” is doing actually means they will end up looking like everyone else—which does not exactly give them a competitive advantage.  Instead of standing out and being distinctive, they end up looking just like their competition. 

I am not suggesting your organization ignore market data in designing your pay programs.  I’m just suggesting it is only one of the things you will want to do to stand out from the rest of “the pack” when competing for talent. 

Think of it this way.  What if you approached the building of your pay strategy like you would the creation of a marketing plan?  In this case, the product you are selling is your compensation offering.  Your audience is your current employees and those you want to attract.  How would you approach pay planning in that context?

First of all, you would look at pay data as a research resource that gives you insight into the value the “market” places on certain positions.  This is kind of like looking at competitor pricing on products similar or the same as the ones your company markets.  You would next determine who your audience is.  Here, there is both an internal and an external audience (current and future employees).  If you are going to get both of those audiences to “buy” the opportunity you are offering, they will have to come to believe that your Total Rewards value proposition is better than they can get elsewhere—including the financial rewards component. 

As you define your audiences, more research will be needed.  How is the best talent defined for the position you’re trying to fill?  And from what “pool” of people will you be drawing to carry out the roles you need satisfied?  Will they be baby boomers? (Not likely.)  Gen Xers?  (More likely.)  Millennials?  (Highly likely.)  Gen Z (Less likely—for now, but not for long).  Each of these audiences is going to relate to your pay offering a little differently, and that needs to be considered before you ever decide on a single pay component for your value proposition.

This kind of strategic approach to pay development needs to be coupled with a well-thought out pay philosophy.   This is a written set of standards that defines what the organization believes about both how (in what form) and how much (within each form) people should be paid.  It begins with a clear definition of how the company measures value creation and what it believes about how and with whom that value should be shared. 

We are at an inflection point in the way businesses are recruiting, retaining and managing the performance of their employees.  Old school thinking will bury organizations if they do not adapt to the seismic shifts that are occurring in building and sustaining high performance cultures.  Without a clear-eyed view of the standard your value proposition needs to meet, you will perpetuate the mistakes that the assumptions we’ve just discussed inevitably create.  And that is no way to win.

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Ken Gibson

Ken is Senior Vice-President of The VisionLink Advisory Group. He is a frequent speaker and author on rewards strategies and has advised companies for over 30 years regarding executive compensation and benefit issues.