Wellness as a reward strategy

Image

Introduction

The UK Health and Safety Executive claim that 27 million days were lost to sickness or injury in 2011/12 at a cost of 13.4 billion in in previous year.  A lot of the illness is due to lifestyle choices such as diet, lack of exercise and stress.  There is a strong argument that including “Wellness” as part of a reward strategy is a powerful and cost effective way of increasing engagement, reducing sickness absence and increasing productivity.

Advantages of wellness initiatives

  • It is a cost effective way to improve engagement
  • Employees appreciate the interest shown by their employer
  •  Increase in productivity
  • Contributes to the “common good” – therefore good CSR management
  • Wellness initiatives can integrate with health and safety programs and occupational health activity giving a virtuous circle of employee wellbeing aligned with good business practice.

Development of a “wellness” culture

One of the most difficult things to do; but the most rewarding, is to develop a culture in your organisation of wellness.  By which I mean developing and encouraging behaviours that support wellness.  So it becomes the norm in an organisation for people to eat property, take exercise and take responsibility for their own and their family’s health.

This can be achieved by the same tools that we achieve any culture change.  Leadership is important. In one company I worked for there was an open competition between the CEO and the CFO on a number of sporting achievements.  Lots of staff took part with these leaders or at least supported their healthy activities.

The “nudge” approach so favoured by the UK government can also work.  By only serving healthy food in the canteen employees have little choice.  By having employees opt out instead of opting in to annual health checks will considerably increase the take-up.  Reducing the number of car parking spaces and replacing them with bike racks and showers nudge people in to considering using a bike rather than a car.   There are a number of small, inexpensive changes that can nudge people in to a healthier lifestyle.

Pricing actions can also help with the establishment of a wellness culture. Subsiding health options and making more expensive less health options is a good way to nudge people in the right direction.  Increasing the reimbursement rates for using public transport and decreasing milage rates make people consider the costs of motoring against public transport.  Subsidising gym membership is another good approach to encourage take up.  With some work and analysis these types of pricing approaches can lower the total benefits spend while leading to a more healthy group of employees.

Wellness culture can also be encourage by carrying out regular health audits of staff.  These can be carried out by occupational health or an outside advisor looking at patterns of staff activity and how wellness initiatives are working and perhaps suggesting new lines of attack.

Examples of wellness approaches

Wellness approaches can be split in to:

  • Risk Benefits
  • Environmental changes
  • Catering
  • Professional support services

Risk Benefits

The two most obvious benefits here are private health insurance and Health screening.  Many organisations offer private health insurance with, in the UK for example, BUPA or PPP.  But what is sometimes overlooked is that most health insurance organisations offer and in some cases encourage health screening.  A mixture of these two benefits can pay big dividends to organisation by both reducing time off sick by obtaining immediate treatment and health screening can pick up health issues at an early stage and deal with them before they turn in to long-term sickness issues.

Although not strictly speaking a risk benefit (although with some ingenuity it can look like one) is the provision of an on-site or near site private GP service.   I worked for a financial services organisation that provided a near site private GP service; which, while expensive, paid for itself by the reduction in staff having to take time off to see their local GP; often requiring a half day for a simple 10 minute appointment at their home location.  It was also very useful for visiting overseas staff and inward expatriate staff who often found it difficult to  get treatment with a local doctor.  (This tends to apply to the UK rather more than other countries).  The same type of approach can be used for the provision of private dental treatment on a “near site” basis.

Environmental changes

Making the workplace healthier is easily undertaken.  Replacing high fat snacks and drinks with healthy alternatives is but one suggestion.  Provision of showers for staff that bike ride in to work or like to exercise at lunchtime is another key initiative.  Opening up staircases as the preferred access and egress routes rather than elevators or lifts, perhaps by designating half of these as for visitor use only.  There are a number of simple environmental changes that will encourage a healthier lifestyle.

Catering

The provision of healthier snacks, drinks, tea trollies and canteen meals can make considerable changes to the diet of our employees.  Healthy eating does not have to mean uninteresting eating.  When I visited the Head Office of Commerzbank in Germany they had interesting Asian and African foods in the canteen; as well as it being open to the public…

Professional support services

This is another area that can create considerable leverage in employee wellness.  As an example, mental health is now recognised as a major issue for employers.  Time off for stress and depression is rising rapidly.  The provision of confidential counselling is an excellent way to provide support to employees.  Likewise drink and drug awareness and support initiatives can often catch problems at an early stage.

This type of support can extend to the provision of “at desk” massages’ to help relieve stress and long hour exhaustion.  There are many other creative and innovative solutions available in the market place to drive home the wellness message and provide support to staff.

Finally in this section, let us not forget trauma support.  Unfortunately, unexpected but dramatic incidents are an on-going fact of life in all countries.    These can vary greatly from terrorist attacks to train or airline crashes or sadly mass shootings in our locality.  It is essential to have appropriate professional, qualified trauma counselling available immediacy after an incident. Services can support staff, managers and families in the event of tragedy; minimising the possibility of long term mental issues arising from the trauma.  Do not forget, in the event of an incident many organisations will be looking for this type of support so simply get in first and have contingency arrangements in place with approved suppliers.  This is all part of the wellness agenda; be it often over looked.

 Conclusion

Wellness is an important, but often overlooked part of reward strategy.  Yet it is a cost effective way to improve both productivity and engagement to our valued staff.  It turns the phase “our staff are our biggest asset” from meaningless marketing to a working reality appreciated by staff and other stakeholders as part of a cohesive CSR policy.

On the subject of cohesiveness a well manufactured wellness approach can be closely integrated with business continuity, health and safety and occupational health.  The impact on the employee brand and proposition will be enormous – without a large cost.

I do not know why this approach is not more widely used.  Do you? And, have you any suggestions for innovative approaches on wellness in the workplace that I can share as part of an on-going dialogue on “Wellness in the Workplace” which will focus on some of the individual initiatives and providers who can help build this simple but highly effective reward intervention.

Advertisements

Rewarding Reward Podcast http://www.idavidson.podbean.com/

Ian Davidson Reward podcast

I have produced the fourth podcast in the series “Views over the City”  http://www.idavidson.podbean.com This podcast covers pay and reward issues on a global basis.  This podcast includes:

For more on Banking remuneration see: https://iandavidson.me/2013/06/12/rebuilding-trust-in-the-city-of-london/

“I was at a recent meeting in the City of London to launch the document “Focus on rebuilding trust in the City” a Chartered Institute of Personnel and Development (CIPD) survey of staff in financial services in the City of London on trust and their employment relationship”

For more on Executive pay https://iandavidson.me/2013/06/18/balance-of-power-executive-pay-and-shareholders/

“There is considerable controversy over levels of executive pay.  There are a multitude of stakeholders or would be stakeholders pugnaciously striving for influence.  Remuneration committees are supposed to control executive remuneration.  However, as the MM&K recent survey shows, FTSE CEO Remuneration increased, on average, by 10% in 2012.  Why are shareholders allowing this to happen?”

For more on strong analytics:

https://iandavidson.me/2013/05/30/strong-analytics-3/

“As a reward specialist I am asked questions like, what is our pay inflation going to be next year?  I used to go away, do research and say 2.4% – having used the historic average.  Of course it was never exactly 2.4% so my boss would turn round and say – “but Ian, you said it was going to be 2.4%, you’re fired”.  If asked the same question now, I respond with an answer; “there is a 50% probability that it will be 2.4%; but there is as 10% probability it could be 4%, so we should factor that in to our budget.”

My new reward podcast give a wide view over the reward landscape as well as a fascinating conversation with innovation guru and author Peter Cook.

http://www.idavidson.podbean.com

If you would like a guest blog post or to guest blog post on this influential reward blog please get in touch.

blog@mauritius.demon.co.uk

UK Government’s own goal pay farce

Image

Introduction

It is reported today that UK politicians are seeking to block a pay rise for themselves recommended by an independent body.  The IPSA, an independent body that acts as a policeman on MP’s pay and allowances is alleged to be recommending a pay increase of £10,000 per year for UK Members of Parliament.  The politicians are rumoured to be very concerned about how the public would view such a rise in the context of UK standards of living decreasing over the last ten years with average pay increases being well below the rate of inflation

Caught in the pay paradox

Politicians are facing exactly the same paradox as remuneration committees.  The expert, independent advice is that the CEO or CFO are underpaid against the market; but the remuneration committee knows that to give a large increase to the CEO to bring her up to market rates would be unacceptable.  Caught in the pay paradox. 

Not carrying out the recommendations risks MP’s falling further behind the market (is there a market for MP’s?), but granting the statistically justified increase would bring large amounts of unpopularity with the (voting) public.  I hear echoes in the Great Hall of Westminster of “We are all in this together” dying an unpleasant and messy death.

A touch of real life

It is just possible that politicians will begin to appreciate the very real challenges of remuneration committees as they struggle to balance the demands of a thriving market in executive talent with the environment created by the politicians and the media that consider any pay increase for executives as some form of inherent evil.

Endgame

How will this end up.  I would guess that some messy compromise will be reached that will further distort the “earnings” of UK politicians; which will please no one and still result in a further dilution of public trust in the institution of parliament.

Conclusion

The pay paradox has been recognised for some time.  There is no easy answer, if any answer at all.  Politicians have designed and built a rod for their own backs.  Remuneration Committees have the same issues before them in the current environment.  Although I think it is unlikely, let us hope that UK politicians get a better understanding of the pay paradox as a result of this unfortunate farce.
What do you think?

Balance of power – Executive pay and shareholders

Image

Introduction

There is considerable controversy over levels of executive pay.  There are a multitude of stakeholders or would be stakeholders pugnaciously striving for influence.  Remuneration committees are supposed to control executive remuneration.  However, as the MM&K recent survey shows, FTSE CEO Remuneration increased, on average, by 10% in 2012.  Why are shareholders allowing this to happen?

Balance of power argument

I had a fascinating discussion with the executive pay guru Cliff Weight on the subject of the balance of power argument (although the discussion below is entirely mine) when looking at executive pay. 

The Executive’s power

Most of the time the executives hold the balance of power because:

  • Changes in executive board members, unless well managed, tends to lead to a fall in share price
  • Changes in senior management generally signals a failure of strategy or strategic uncertainties – which lead to a fall in share price
  • A lack of good succession planning by the Board so there is no immediate, obvious internal or external replacement.
  • A shortage of good candidates with the relevant experience and willingness to take high profile roles.  This tends to mean organisations can be without a CEO or Finance Director for six to nine months; which leads to a fall in share price.

No Board or Remuneration Committee wants to be seen to be acting in a way that damages shareholder returns. 

The Stephen Hester debacle

A good example of how NOT to carry out changes in senior management is shown by the apparent decision of the UK Treasury to replace Stephen Hester, the CEO of RBS.  The announcement seemed to take the markets by surprise – leading at one point to a 7% drop in RBS share price.  Further, the lack of any successor or allegedly any succession planning by HM Treasury means there is something of a leadership vacuum in RBS (even with their excellent senior management team) that causes great uncertainty to both investors and employees.  This, just at the point when RBS had turned around and had a clear and compelling vision of its mission and future.

The Shareholder’s power

Shareholders have limited power over executives; they have the upper hand mainly when:

  • There are downside earnings surprises
  • Takeover or mergers are under discussion
  • There is a strategy dislocation – a disruptive technology or social trend; look at Smartphones impact on the traditional phone manufactures
  • The market loses confidence in the management of an organisation

These tend to be seminal points in an organisation’s existence that hopefully do not occur too often.

Important issues for Remuneration Committees and Executive management

Both parties to pay discussions need to think about the balance of power issues and how they influence the reward dynamic.  Strategy needs to be owned and driven by the entire executive team; hopefully mitigating the effect of the departure of any executive.

Good management of shareholder relations and open communication will help reduce any share price “shocks” when changes do take place.  Good financial PR will again mitigate both the shock and share price impact.

The paradox of succession planning

One of the potential failings of Boards when considering the balance of power argument is succession planning.  In an ideal world a replacement for the CEO would have been identified and prepared for the new role well in advance of the change.  Unfortunately there is a paradox here.  A CEO could perceive that work by the Board to identify her successor was a signal of their imminent departure.  As invariably such issues leak, so the market would view it in much the same way.  Dammed if you do and dammed if you don’t.  There is also the issue that the heir apparent may become impatient with the wait and either go elsewhere or worse actively seek to undermine the existing CEO with the Board.

There is no easy or obvious answer to the succession paradox; but clearly it is an issue that must be taken on board in the balance of power debates.

Conclusion

The balance of power approach is a useful framework to view trends in executive pay.  I can see no immediate answer to how or even if, the balance of power should be more equally distributed.  Like any good explanatory framework, the balance of power debate asks more questions than it answers.

 

 

 

CIPD Hackathon – Hacking HR to Build an Adaptability Advantage; A reward perspective

Image

Introduction

The UK’s HR professional body, the CIPD has recently set up a “Hackathon” to look at how HR can build an adaptability advantage.  A good idea with an interesting approach.  There appears to be limited consideration of how reward will support and enhance the approaches.  Reward has powerful implements in its tool kit to support change.   So I set my mind to an analytical structure to think about building adaptability advantage.

Wisdom of crowds – a challenge

I am a great believer in the wisdom of crowds.  Therefore I throw a challenge out to all those interested in reward, change, innovation and HR to generate ideas as to how the reward toolkit can be used to support adaptability advantage.

The reward blockers

Reward is largely designed to support existing behaviour.  So, in some organisations, it is used to support the status quo.  Rewarding behaviour that supports the organisation’s ideology and putting reward power in the hands of managers who have an understandable vested interested in supporting the status quo.  The challenge is to design an analytical reward framework that supports creative destruction, moving on from the status quo to a new organisational state and ideology.

A suggested framework – resource based strategy

I have used the resource based strategy framework as a starting place.  I know this may be consider a little old fashioned, but it works for me and if you have a better structure I would be very pleased to hear about it!  Using the resource based strategy approach we look at:

  • Resources
  • Capabilities
  • Competencies
  • Value Chain

that support adaptability and how we can use reward to support these factors.

Resources

What are the resources that support adaptability – how do we identify and cluster them?  Clearly people are the key.  But, what sort of people?  One could argue that it is the mavericks and free thinkers that lead the charge on adaptability.  Yet these types of people do not always fit or engage well with the corporate environment.  How do we reward the disrupters in our organisation without descending in to some Faustian pit of chaos?

Capabilities

How do we build organisational and personal capability to support adaptability?  What would the reward structure supporting such capability building look like?  Would we know it if we saw it, how would me measure it?  Organisational learning and routines would be key in building these capabilities – but it has always been an interesting question in the management of knowledge as to how we measure and reward organisational learning?  (Even ignoring the concept that organisations do not “learn” people do the learning).

To sustain competitive advantage our capabilities in adaptability must be hard to imitate – otherwise everyone will copy us and probability at a lower cost.    So we have to reward not only specific capabilities but those that are hard to imitate.  They may be hard to imitate because they are specific to our corporate environment – but to gain competitive advantage they must be so much more than just organisationally or sector specific.

Competencies

The competencies we need should flow out of the capabilities – or perhaps not?  What specific, observable, rewardable competencies are required and with what and how are we rewarding them?

Value chain

What are the internal and external value chains using our unique resources and capabilities that lead to adaptability advantage?  We must look to our clusters of resources and capabilities and how these are combined to give our competitive advantage.  What reward tools do we use to strengthen our value chains and the activities that support them; perhaps across enterprises and organisations, turning rigid barriers porous?

Conclusion

There are far too many questions and too few answers in this blog.  If the reward perspective; which is incredibility powerful in encouraging behaviour change can be harnessed, using the wisdom of crowds, to the task of “Hacking HR to Build an Adaptability Advantage” we will not only add enormous value to the process; but we will be key in ensuring its enduring success.  Over to you O wise crowds.