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Reward systems that work when work isn’t very rewarding

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When was the last time you had a knee-jerk reaction to a surprise? Maybe you were startled (in a good way) when a friend you hadn’t seen recently walked in the door unannounced. Perhaps you were less pleasantly jolted by water gushing from a ceiling leak or a snake that had camouflaged itself to mimic a tree root you were stepping over on a trail.

The world is experiencing a collective knee-jerk reaction as effects of the coronavirus spread through society, drastically affecting businesses and driving people into their homes to try to stay safe.

What will happen to the employees?

Many manufacturers have temporarily closed or are changing production. Restaurants, hospitality providers and retail stores are facing tough times. The risk of mass bankruptcies could double. 

Despite the dizzying contractions taking place in the business world, the coronavirus will eventually be brought under control. People will need to eat; roads, offices and buildings will need to be constructed; appliances and automobiles will need to be made.

Having a knee-jerk reaction to the coronavirus now will only hurt business outcomes in the long run. It’s not the easiest time to think long-term about compensation and benefits, but it’s necessary to force yourself to look beyond the immediate crisis toward a total rewards strategy.

Wage and benefit continuity matter

Talk of the pandemic is unavoidable these days, but it’s important to recognize where your employees’ biggest fears lie, says Amanda Wethington of Korn Ferry.

An Emerson College/Nexstar poll found that 42% of Americans surveyed were “very concerned” about personal finances, compared to 26% about personal health. Combine that with the fact that 60% of the working population has less than $1,000 in savings, and it’s clear that reward systems are an issue that existed before coronavirus descended (and one that will be around long after).

Existing challenges to wage continuity

Some challenges to wage continuity predate the coronavirus pandemic, such as:

  • 70% of US hourly workers don’t have sick leave
  • Staffing shortages and absenteeism issues
  • The gaps created by gig economy pay arrangements
  • Poor communication and decision-making in some businesses 

Here are some actions being taken given the disruption of the coronavirus:

  • Sick leave policies are being reviewed and reassessed
  • Shift policies are being reconsidered, as are compensation rates for hourly workers
  • Processes and equipment allocations are under review, especially for positions where remote work is not an option, such as health care
  • Catastrophe pay is being mulled
  • Supplemental payments and benefit continuation arrangements are becoming more of an option

Different industries face different reward system hurdles and opportunities

Mark Quinn of Korn Ferry notes that reward systems considerations faced by human resources vary by industry.

Manufacturing must lead from the top regarding pay reductions, Quinn notes, and be timely about entering into negotiations with unions. 

The service industry, on the other hand, should make employee safety a primary focus. The industry should also seek to structure temporary layoffs, taking advantage of any state support that is available. This industry is also uniquely positioned to take advantage of hiring increases as organizations such as CVS, Amazon and Tesco seek to meet heavy demand.

Financial services can implement staff rotations and defer salary increases and bonus payments. This sector should also provide mental health support (as should all sectors).

For health care, which has shouldered the brunt of this crisis, the front line workers have to be supported, says Quinn. The public and private sectors should unite to ensure services can be provided. The sector must pare down operationally to the priority at hand, putting aside nonemergency business matters.

Regardless of the industry, some common principles apply

Each industry has its own difficulties to navigate, but communicating well can fortify an organization to get through the problems brought on by this pandemic. Following a four-part framework can turn “knee-jerk reaction” into a calmer, more methodical plan, says Wethington.

First, make the immediate changes that will provide support to the continuity of labor while also addressing the realities of such an abrupt shift. It’s tempting to immediately resort to across-the-board salary or job cuts. This is not always avoidable, but it is smart to consider other options that are less damaging to employee morale and less likely to make the business look panicky. “Look at your reward strategy and involve the team of leaders to determine the what, the why and the how of labor cost management programs,” she recommends.

Second, develop a “multi-pronged approach” to managing labor costs. Layoffs are the traditional choice, says Wethington, but there are multiple other options. These include reducing hours, unpaid leaves/sabbaticals, reducing reliance on contractors, doing away with overtime, delaying bonuses or suspending benefits such as retirement savings.

Third, weigh the effects of your cost management choice against the risk to employee relations, “not just to the employees being affected, but to the organization as a whole.”

Finally, incorporate care and empathy when applying whatever reward change you make. 

Communication always matters

This is a time that calls for gut-wrenching decisions on the part of leaders. Even when you have to deliver bad news, keep employee well-being at the forefront, says Don Lowman of Korn Ferry. Take a balanced perspective, because there will be a turnaround, he says. This pandemic will pass, and when it does, the effects of your discipline in avoiding a knee-jerk reaction will show.

Finally, lead by example. John Murdock became the CEO of Centage virtually overnight when his predecessor (and dear friend) passed away. He was coping with the expectations of employees who were shocked and grieving at a time when he was too. “Even though on any given day I have a million things to attend to, I make time to walk the floor, talk to people and generally let people know I’m available. It’s disingenuous to state you want a collaborative and transparent environment but then have no time to connect with people,” says Murdock. 

This is a difficult time for almost every business. It’s tempting to leave questions about reward systems for calmer moments. Take the time now to address them, and you’ll find your post-pandemic world much more rewarding. 

(Concepts in this post are adapted from "Employing Agile Reward Strategies for a Volatile World," a Korn Ferry webinar.)

Paula Kiger edits SmartBrief's nonprofit sector newsletters and co-manages @SBLeaders on Twitter. She worked extensively in Florida's quasi-governmental children's health insurance program that became a national model, has served as a United Nations Foundation Shot at Life Champion leader, has proofread professionally and has extensive social media experience. You can find her at her blog Big Green Pen, on Instagram, at LinkedIn and on Twitter.

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