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Employers That Focus On People Strategy Provide Greater Returns To ShareholderBETHESDA, MD, December 1, 1999 - Employers that view their people strategy as a source of competitive advantage are outperforming companies that don't, by a margin of more than two to one, according to a new survey of 551 large employers by Watson Wyatt Worldwide. Watson Wyatt's fourth annual Strategic Rewards® survey also revealed significant gaps between what employers and their top-performing workers believe is important when it comes to attracting, motivating, and retaining employees. While only 14 percent of respondents view their people strategy as a source of competitive advantage, those that do realized a median total return to shareholders of 109 percent between 1996 and 1998, versus 52 percent for employers that don't, lending weight to the conclusion that companies that focus on people perform better. "It appears that companies that take seriously the truism 'your people are your most important asset' are winning," says Rick Beal, national practice leader for Strategic Rewards at Watson Wyatt and co-author of the study. "Assets are tangible elements of a business strategy that organizations can invest in and expect a return from. Our research shows that companies that back up their people strategy with flexible, performance-based reward plans are outperforming their competition." The survey also found that companies across industries are having great difficulties attracting and retaining the critical skill employees they need to compete. In fact, eight out of 10 reported having moderate or great difficulty attracting critical skill workers, while 58 percent reported difficulty retaining them. "The results are not surprising given the fact that just under half of the employers don't even have a formal recruiting strategy, and even more don't have a formal retention strategy for keeping employees once they've been hired," said Beal. "This is a classic case of employers reaping what they have sown. In the downsizing years of the early 90s, employers asked employees to take control of their careers -- the best and brightest have accepted the challenge, but most employers haven't kept pace with the change and developed new responsive people strategies." Gaps in Employer/Employee PerceptionFor the first time, the Watson Wyatt study also included responses from more than 500 top-performing employees at participating companies. It revealed some surprising gaps between employers and employees in terms of compensation and non-compensation reward plans. Nearly three-quarters (72 percent) of top-performing employees rated "paying above market" as very effective in attracting workers, compared with 33 percent of employers. More than half (51 percent) of top-performing employees believe that stock options and sign-on bonuses are very effective attraction vehicles, versus less than one-third (31 percent) of employers. The gap in employer and employee perception also extends to non-compensation-based programs, the survey noted. For example, employers far underrate the importance to employees of such things as flexible work schedules or opportunities for advancement in the decision to join or leave a company. Effectiveness of Non-Compensation-Based Reward Plans in Attraction and Retention
* percentage responding "very effective" "The bottom line is that employees want a more flexible deal with employers," says Beal. The most competitive companies have a reward strategy that focuses on the distinct needs of different employees rather than continuing the "one-size-fits-all" programs of the past, he notes. "Employers that don't adjust to the new market realities will continue to struggle to attract and retain key talent in this hyper-competitive environment. And the shifting demographic terrain will continue to exacerbate this problem for the foreseeable future." Watson Wyatt is a leading global consulting firm with more than 5,000 associates in 30 countries. For more information, please contact Gretchen Ace at 202-715-7089 or Ed Emerman 609-452-5967.
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