5 ways to rebalance the total rewards portfolio

Ever-tightening budgets coupled with low unemployment in many areas of the country continue to force hospitals and health systems to take a critical look at the allocation of total rewards dollars – one of the biggest budgetary line items for health care providers.

Yet providers still challenged by seismic industry changes may find it hard to justify taking the time to rebalance their rewards portfolio when they are still so unsure of what they -- and their workforce -- will look like a few years from now.

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To help guide investment allocation decisions sooner rather than later, providers might want to consider some of the benefits we've seen other companies in general industry reap after rebalancing their rewards portfolio, When total rewards are working well for an organization, they:

1. Provide a strategic and holistic platform for effective communication
Just as an organization's brand communicates the promise it makes to customers, an organization's employee value proposition (EVP) communicates the employment deal to its employees. Of course, for health care providers providing in-house or "domestic" health care, employees are also its customers. Thus, to ensure consistency and credibility, an organization's "internal" brand must align with the organization's "external" brand. Health care benefits and wellness incentives are ideal vehicles for health care providers seeking to actualize their promises to employees, but even that's not enough. The entire total rewards suite should support the provider's EVP strategy.

Do your programs communicate your organization's promises? Do recipients understand all the ways they are rewarded for their contributions to the organization?

2. Differentiate across talent segments and life stages to support the workforce strategy
Health care providers have generally been responsive to the impact of talent and reward programs on attraction, retention and engagement: about 45% of those reporting use these metrics to measure the return on investment of total reward programs – in line with all U.S. organizations that have a highly-evolved employment deal.1 However, when it comes to measuring the proportion of spending on key employee segments, providers fall short with only 4% taking action, compared to 9% of all U.S. organizations. To optimize the total rewards process, HR needs to identify where total rewards dollars can have the greatest impact, and that means measuring data to understand what's important to attract, retain and engage different employee segments.

Have you identified your key employee segments? Are you allocating resources to those key employee segments that can most influence your organization's results?

3. Optimize the investment across and within programs based on employee preferences
One of the most striking findings of our 2014 Talent Management & Rewards Survey and 2014 Global Workforce Study was the employer-employee disconnect within the health care provider industry:

  • Employees rated base salary as the #1 attraction driver while employers ranked it 6th.
  • Employees rated career advancement opportunities as the #1 retention driver, while employers ranked it 4th.

Organizations that rely on their reputation as a good employer as the key driver of attraction or assume that relationships with supervisors are the key reason employees stay or leave may be ignoring opportunities to reallocate rewards to what really matters most to their workforce.

Do you know what your employees value most and are you allocating resources accordingly? Are you considering your non-employee workforce segments (e.g., per diems, contract employees) and how to optimize the investment in their rewards?

4. Ensure market positioning supports total rewards objectives
When considering how they want their organization positioned in the market, many health care providers immediately focus on their compensation program's target market percentile. While Towers Watson does indeed consider base salary a foundational reward that is provided as a condition of employment, we have also seen there is a right way and wrong way to do it. Done right, base salary and other foundational programs provide a solid platform on which performance-based and career/environmental rewards -- that can really drive performance -- can be built.

Providers need to deliberately calibrate their total rewards offerings relative to competition in the talent market, which increasingly includes organizations beyond traditional health care providers. Otherwise, they miss the opportunity to enhance their market position by making career management an increasingly important element to many employees, an integral part of their total rewards portfolio. Only 14% of health care providers report they have articulated a career management philosophy to employees, compared to 29% of all U.S. organizations. It's no wonder, then, that only 7% of health care providers report that their employees understand how they can influence their careers, compared with 24% of all U.S. organizations.2

Are you confident that your foundational programs are good enough to avoid distracting your workforce? Are there other programs you can enhance to differentiate your organization in the talent market?

5. Propel business performance by intentionally and deliberately driving individual behaviors
With consumer-driven health care an increasingly important focus of many health care plans, patient satisfaction has become an even more critical metric for the industry. As a result, a provider can differentiate itself in the marketplace by driving individual employee behaviors that directly impact the patient experience. Short-term incentives or bonus programs are one of many ways an organization can drive individual performance and our upcoming 2015 Talent Management & Rewards survey will focus on the effectiveness of these and other pay for performance programs. But in the meantime, we are seeing a gradual expansion of incentive programs that were once restricted to executive- and management-level positions into lower levels of the organization. We know from our work in other industries that these variable pay programs, if well-designed and communicated, can support a provider's rewards allocation and drive the organization's performance.

Do your total rewards programs drive individual performance? Do these programs clearly communicate the link between individual and organizational performance?

By improving – if not fully optimizing – total rewards, hospitals and health care systems can get one step closer to having a more sustainably engaged workforce, which can translate into:

  • Higher retention: only 17% of engaged employees compared to 58% of disengaged employees are high retention risks
  • Better presenteeism: highly engaged employees lost 7.6 days per year versus 14.1 days for disengaged employees
  • 3-times higher operating margins for organizations with a high vs. low engagement workforce.3

In short, small but wise decisions and investments can go a long way to supporting larger payoffs for health care providers.


1,2: Towers Watson 2014 Talent Management & Rewards Study – U.S. Health Care Providers

3: Towers Watson 2014 Global Workforce Study – U.S. Health Care Providers

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