There are a couple of ways to define what constitutes an employee value proposition. One is to simply identify everything a typical value offer includes. The other is to describe what an employee value proposition is intended to help you—the business leader—accomplish. Since both are relevant—we will address each in answering our title question.
But first, let’s provide some context for our discussion.
An employee value proposition in today’s business environment is much more significant and carries more weight than it did even a few years ago. This is because a company’s value offer is the means by which it competes for the best people—and in today’s talent market, that competition is fierce. As a result, the employee experience you promise needs to frame your organization as unique—even irresistible.
Historically, as long as a company had an “adequate” compensation and benefits plan, it didn’t have to spend much time thinking about what it offered an employee. It wasn’t that long ago that many people felt lucky just to have a job and employers did not have to do much to impress their people. When either existing or prospective employees felt fortunate just to be employed, they were not inclined to “upset the apple cart” by trying to negotiate a higher salary or better benefits. If an employer offered a competitive salary and had a 401(k) plan, they were considered to be going above and beyond what was necessary to attract and hold onto great people.
But times have changed. Today, a value proposition is a means of differentiation. You distinguish your organization by how you define the opportunity you will provide those who join and stay with your company. Because skilled, educated, experienced people are in short supply, they have many options in today’s talent market. The tables have shifted and top talent is now in the driver’s seat in setting the terms they will accept for their employment.
The realities of today’s business environment make it critical that you understand what your company’s employee value proposition should help you achieve. Its primary role is to attract top talent and then turn them into growth partners. Let’s explore what that means.
As a business leader, you have a vision for your company. Presumably, you envision a business that is bigger and better tomorrow than it is today. You see your enterprise through the lens of potential—and are confident that if the right pieces are put in place, you can build something meaningful and lasting. However, you recognize that you cannot realize that future vision alone. You will need people around you who are as passionate about the future possibilities as you are—and have the talent and skills to make it happen. You need people who will be stewards of your vision and can produce the results that will lead to the growth you seek.
So, who are those people and how do you attract them?
People who will commit to partnering with you in building the future enterprise are referred to in business literature as either catalysts or strategic leaders. Whichever term you prefer, they are individuals who, by virtue of their skills and experience, can significantly alter the growth trajectory of your company. People in this category will typically desire to come into a successful organization and apply their unique abilities towards leveraging the company’s resources to build something great. If they cannot find that kind of opportunity, they will likely go out and start their own business. As a result, they are looking for a value proposition that mirrors what owners experience.
Owners benefit from their business investment through value creation. As profits increase, business growth is fueled and shareholder value grows. Similarly, catalysts want an opportunity that allows them to participate in the value they help create. This does not necessarily mean they have to receive stock in the business. There are many other ways to reward their performance. It just means that their role as a growth partner should be reflected in the way they are compensated.
Today’s business talent seeks an employer experience that addresses all dimensions of the career growth it seeks. Among other things, this means that although your value proposition must include a stellar pay offer, compensation is not the only element the people you are trying to attract are going to evaluate. Top talent is looking for an opportunity that effectively addresses all four parts of a Total Rewards experience:
This is what catalysts want to be able to say about the company they work for:
If the people you are trying to attract (or retain) do not feel this will be part of their experience, they will likely feel your company is not a fit for them.
Positive Work Environment
Catalysts are looking for a career experience that they can describe as follows:
If top talent is not experiencing all five of those things, they will not have a positive feeling about their work experience or environment. Sooner or later, that will prompt them to leave.
Personal and Professional Development
This is what strategic leaders want to be able to say as a result of the experience they are having working for your company:
I feel personally and professionally fulfilled as a result of my immersion in the culture and resources of this organization. Because I work here, my unique abilities are getting stronger.
Again, if this does not describe reality for top performers, they will look for it elsewhere.
Regarding pay, top talent wants to experience this:
Most organizations don’t run into problems with their compensation offering because they pay their people too little. They have problems because there is no philosophy driving in what form and how much they compensate their people. As a result, employees feel pay decisions are arbitrary and they become suspicious. Catalysts want compensation to appropriately reflect the growth partnership they are seeking; one that encourages a unified financial vision for growing the business.
These four parts of a Total Rewards experience must frame the value proposition you make in today’s environment. If it does, then the specific programs you include will have proper context and intent.
The centerpiece of your value proposition is your pay offer. And in today’s competitive environment, what you offer must be distinctive and compelling. The compensation proposals made by most organizations to the talent they are trying to recruit do not meet that standard because they are not complete. Let’s explore what that means.
A complete pay strategy is one that addresses all aspects of the financial partnership top talent wants to have with your organization. It is also one that aligns employees with the vision, business model and strategy of the company. This can only happen if a company adopts a balanced approach to building its compensation offering. Consideration is given to all the pay plans that might be included in the company’s rewards construct and how each might help fulfill the pay philosophy of company owners. In general terms, these elements are either benefits or compensation related. Plans you consider will typically fall into these categories:
|Executive Benefits||Performance Incentives|
|Qualified Retirement Plans||Sales Incentives|
|Supplemental Retirement Plans||Growth Incentives|
To create a complete and compelling pay offer, you must determine which of these will be part of your value proposition and what “weight” each will be given. This can differ by tier or class of employee. For example, not all employees will participate in a growth incentive or supplemental retirement plan.
Your intent should be to create a pay strategy that is both flexible and enduring. This is accomplished the same way a balanced investment portfolio is engineered. You select a variety of asset classes (compensation plans), each playing a role in the overall portfolio (pay offering). As economics change, you don’t replace asset classes in your portfolio (at least if you are following prudent investment principles). You just rebalance the allocation. This is how you create and manage a flexible but enduring compensation offering as well. As things evolve, you do not have to redo your entire pay strategy and substitute new plans for old ones. You just need to adjust the amount of emphasis or opportunity each will have within your overall rewards structure.
To make your pay offer stand out, it must be built around a value-sharing model. This means you are committed to a wealth multiplier philosophy when it comes to compensation. Such organizations believe that their people should participate in the wealth multiple they help create. Companies that base rewards on value creation are able to offer employees unlimited earnings potential. This is because the “incentives” they offer are “self-financing”; they are only paid out once the value has been created that justifies value-sharing.
Top tier employees will be looking for this kind of pay structure in the value proposition you make. They are seeking ways to leverage their unique abilities within a company that has the resources to drive significant business growth. If they help the company grow, they want their earnings to reflect that contribution. Again, they want to be considered growth partners, not just employees.
The ultimate outcome that a well-designed employee value proposition should produce is a unified financial vision for growing the company. This means your people feel financially aligned with the company vision, it’s business model and strategy, employee roles and expectations and how individuals are rewarded for fulfilling those expectations. When your employees sense there is this kind of “line of sight” in your organization, they feel confident the experience they are going to have with your company will be superior.
In 21st century business, company leaders must treat their employee value proposition as a strategic issue. It is a defining piece of the employer brand that is crucial in today’s highly transparent environment; where potential employees can easily research the reputation of the company that is courting them. So, understanding both what an employee value proposition can help you achieve and what it should contain is essential to ensuring yours will provide a competitive advantage in recruiting and retaining top talent.
Need Help with Your Pay Strategy?
If you lead a business and are struggling with developing an effective compensation approach, it might be the right time to have a conversation with a VisionLink consultant. To speak with one of our experts about the rewards issues you are facing, call us at 1-888-703-0080.
About the Author
Senior Vice President, The VisionLink Advisory Group
Ken has been consulting with middle-market private and public companies on executive compensation and benefits issues for over 30 years. In addition, he has authored numerous articles and white papers addressing compensation and rewards topics that modern businesses face. Ken also conducts a monthly webinar series on compensation best practices for business leaders throughout North America. His client work centers on the development of overall compensation strategies designed to enhance and improve shareholder value and workplace productivity. He is one of VisionLink’s six principals.
For a business to succeed in today’s environment it must develop a strategic employee value proposition that treats existing and potential employees as audiences to which it is marketing an opportunity. The assumption must be that your “brand” is competing against many others—and you need to differentiate yourself.
VisionLink’s report, What is an Effective Employee Value Proposition, solves this dilemma by outlining the key components of an effective employee value proposition and how a unified financial vision will be the result between your company and employees.