World at Work defines Total Rewards as:
“All of the tools available to the employer that may be used to attract, motivate and retain employees. Total rewards include everything the employee perceives to be of value resulting from the employment relationship.”
We have invented more tools with corresponding rules, regulations and variations. And our employees have become more diverse. Explaining the totality of Total Rewards has become increasingly difficult for many in and out of the world of compensation.
My perspective is that “total rewards” are the company tools that impact an employee’s mind, heart, body and spirit. Each tool impacts every one of these aspects, but each tool is far stronger in one area than the others. The following is my stab at this, I hope you will provide your own thoughts in the comments.
Mind – The rational component. Pay plays most strongly in this space. The more it is aligned with employee goals and expectations, the easier it is for people to rationalize why they come to work and work hard. These programs are best when consistent and fully understood. They provide a solid ground for a foundation.
Heart – The emotional component. Tools that are the most impactful include: recognition, career advancement, personal development and a few types of incentive pay. These programs need to spur adrenaline, dopamine and our limbic systems. In other words, they need to excite and motivate people and make them happy. These programs, like emotions or music, are most effective in waves of activity. Repetition results in desensitization, boredom and inattentiveness.
Body –The requirements for continued existence and basic growth. These include benefits in general, health care, retirement, wellness programs and employee support. Not something most people love talking about. Not something most people get excited about. But, existence without these can be hard or even impossible. The key here is to make sure people understand these programs and have the inspiration to use them to improve their lives.
Spirit – The environment that permeates and nourishes a company. These are “touchy-feely” things like culture, personality, and work-life balance. These components of total rewards can be the hardest to define, build and the most important to foster. You know when you are experiencing them and you know when you’re not. All the mission statements, speeches and presentations cannot make your employees believe in something that isn't truly there.
There is no prescription for mixing these components that works for every company. Each company needs a custom mix and personal dosage. The unique balance is what makes a total rewards program work or fail. Mind. Heart. Body. Spirit. Look at your own pay elements today. Which category does each impact most positively? If you can’t immediately answer that you have some work to do.
Dan Walter is the President and CEO of Performensation a firm committed to aligning pay with corporate strategy and culture. Get your copy of the new book: “Everything You Do in COMPENSATION IS COMMUNICATION.”Written by Comp Café writers, Ann Bares, Margaret O’Hanlon and Dan Walter. Dan has also co-authored of several other books you may be interested in including “The Decision Makers Guide to Equity Compensation”, “If I’d Only Known That”, and“Equity Alternatives.” Please connect with him on LinkedIn and follow him on Twitter at @Performensation and @SayOnPay.