1. 2012 Talent Management & Rewards Study
The High Stakes and Return on Getting the
Employee Value Proposition and Total Rewards Right
Marc McBrearty
North American Leader, Data Services
May 14, 2013
© 2012 Towers Watson. All rights reserved.

2. more likely to report their employees are highly engaged
Companies face serious challenges when it comes to attraction, retention and engagement of talent. Our research reveals what it takes to get it right. 5X
more likely to report their employees are highly engaged 2X
more likely to report achieving financial performance significantly above their peers
Companies that have adopted an increasingly integrated approach to Total Rewards strategy, design and delivery decisions — supported by an overarching Employee Value Proposition — are:

3. About the survey The 2012 Talent Management & Rewards Survey
17th annual study of employers’ views on trends and issues in rewards and talent management
1,605 participants
30 markets
Fielded between April and June of 2012
Employee views captured via our Global Workforce Study
32,000 full-time workers
29 markets globally
Fielded between February and May of 2012

4. Headlines: Attraction and retention challenges continue despite variable economic conditions
Attraction – majority of employers report difficulty attracting pivotal employee groups: critical skill (72%), high potentials (60%)
Retention – similar issues globally retaining key employees
Significant variation across markets reflecting economic conditions
Workforce Segment
Problems Attracting
Problems Retaining
Critical skill employees
72%
56%
High potential employees
60%
55%
Top-performing employees
59%
50%
All Employees
31%
25%
Source: Towers Watson 2012 Talent Management and Rewards Study – Global.

5. Headlines: Ongoing disconnects between employee and employer views on drivers of attraction
Attraction Drivers
Employee View*
Employer View*
Base pay/salary 1 2
Job security 4
Career advancement opportunities 3
Convenient work location —
Learning and development opportunities 5 7
Challenging work 6
Organization’s reputation as good employer
Organization’s mission, vision and values
* Ranking of reasons an employee would be attracted to an organization (from a list of 27 possible reasons).
Sources: Towers Watson 2012 Global Workforce Study, 2012 Talent Management and Rewards Study — Global.

6. But, employers overvalue a few items relative to employees
Headlines: Better alignment between employee and employer views on drivers of retention
Retention Drivers
Employee View*
Employer View*
Base pay/salary 1
Career advancement opportunities 2
Relationship with supervisor/manager 3
Trust/confidence in senior leadership 4 —
Manage/limit work-related stress 5
Job security 6
Convenient work location 7
Learning and development opportunities
Challenging work
Short-term incentives
* Ranking of reasons an employee would leave their organization (from a list of 27 possible reasons).
But, employers overvalue a few items relative to employees
Sources: Towers Watson 2012 Global Workforce Study,2012 Talent Management and Rewards Study.

7. Headlines: Working more and doing more with less in the workplace
Item
Employers
Employees
Employees have been working more hours than normal past 3 years
53%
50%
Expect employees will work more hours than normal next three years
43%
47%
Employees have been using fewer vacation days or taking less personal time off over the past three years
29%
40%
Employees often experience excessive pressure in their job
48%
38%
Sources: Towers Watson 2012 Global Workforce Study,2012 Talent Management and Rewards Study.

8. Headlines: Eligibility and targets for annual incentives are mostly stable, but more likely to be increasing than decreasing
The trend is for higher performance expectations:
Nearly four in 10 (38%) participants have raised expectations for organizational performance
30% indicated increasing individual performance expectations
Percentage of organizations reporting changes in short-term incentive/bonus programs within the past 12 months
Global
Asia Pacific
EMEA
LATAM
North America
Eligibility
Decreased 5% 8% 3% 4% 2%
Stayed the same
83%
76%
85%
82%
89%
Increased
13%
16%
12%
14% 9%
Individual incentive targets 6%
75%
68%
74%
73%
84%
20%
26%
17%
24%
Employers and employees alike indicate a ratcheting up of expectations
And these challenges are having an impact on employee attitudes…
Source: Towers Watson 2012 Talent Management and Rewards Study — Global.

9. Headlines: The top drivers of Sustainable Engagement are about the EVP, and can be affected by Total Rewards programs
Leadership 1
Effective at growing the business
Sincere interest in employees’ well-being
Behave consistently with organization’s core values
Trust and confidence in job being done
Stress, Balance and Workload 2
Stress levels at work are manageable
Healthy balance between work and personal life
Work arrangements are flexible
Enough employees in work group to get job done right
Goals and Objectives 3
Good understanding of organization’s business goals and steps needed to reach those goals
Understanding of how job contributes to the organization achieving its business goals
Supervision 4
Treats me with respect
Encourages new ideas and ways of doing things
Acts in ways consistent with his or her words
Effective career development conversations
Image 5
Organization highly regarded by general public
Organization conducts its business with honesty and integrity
Source: Towers Watson 2012 Global Workforce Study — Global.

10. Towers Watson’s EVP & Total Rewards Index tracks organizations’ progress in developing and realizing their EVP
Benchmarks of an effective EVP include:
Total Rewards elements include:
Developing a formal EVP
Effectively communicating the EVP to employees
Aligning the EVP with what the organization stands for in the marketplace
Delivering on EVP promises
Differentiating the company from competitors in the labor market
Designing customized EVPs for critical employee segments
Articulating a Total Rewards strategy aligned with the business and HR strategy
Using business strategy and objectives to inform talent management and reward programs
Creating specific objectives for each talent management and reward program to align them with the EVP
Employing organizational analytics (i.e., business performance and analytics, workforce demographics, workforce performance data) to test the effectiveness of Total Rewards programs

11. The evolution of an effective EVP and Total Rewards strategy
We defined four groups of organizations based on our EVP and TR Index
Segmenting and Differentiating
Communicating and Delivering
Group 4
Integrated and Strategic
Group 3
18%
Tactical
Group 2
23%
Have differentiated their EVP from other organizations with whom they compete for talent
Have customized EVPs for critical workforce segments
More likely to employ organizational analytics to test the effectiveness of total rewards programs
Group 1
26%
Have effectively communicated their EVP to employees and delivered on their EVP promises
32%
Have formally articulated an EVP and adopted a Total Rewards approach
Greater focus on an integrated strategy for managing rewards and talent management
Have stated objectives for each reward and talent management program
Have not progressed in formally articulating an EVP or in developing a total rewards strategy
Group 3 has accomplished the steps described for Groups 2 and 3
Group 4 has accomplished the steps described for Groups 2, 3 and 4

12. Achieving an effective EVP requires best practices in Total Rewards design & delivery
Building Blocks for Effective Rewards Design and Delivery
Best Practices in Design
and Delivery
Processes and Tools that Support Effective Implementation
Core underpinnings to promote effective design and delivery
Job Architecture
Job Leveling
Competencies
Segmentation
An effective Total Rewards strategy optimizes the Total Rewards portfolio:
Foundational Rewards
Performance-based Rewards
Career and Environmental Rewards
Effective execution has a critical impact on outcomes and requires:
Performance Management
Manager Effectiveness
Implementation of Technology
Monitoring

13. Organizations that have progressed their EVP and Total Rewards strategy are less likely to report attraction and retention
Global
Fast-growing economies
Developed economies
Group 1
Group 4
= Global sample
72%
56%
Problems attracting critical-skill employees
Problems retaining critical-skill employees
Source: Towers Watson 2012 Talent Management and Rewards Study — Global.

14. Organizations that have progressed their EVP and Total Rewards strategy are realizing better financial and engagement outcomes
Global
Fast-growing economies
Developed economies
Group 1
Group 4
= Global sample
19%
13%
Financial performance is substantially above peer group
Highly engaged workforce
Source: Towers Watson 2012 Talent Management and Rewards Study — Global.

15. An effective Total Rewards strategy optimizes the Total Rewards portfolio to meet business and workforce objectives

16. Foundational rewards: Base pay is the #1 driver of attraction and retention globally
Organizations need to ensure the baseline competitiveness of salaries to support their attraction and retention goals
Organizations with high EVP and TR Index scores are about 90% more likely to report that their base pay program supports attraction and retention goals
Percentage agreeing with statements about the way the base pay program is currently designed and implemented
Group 1
Group 2
Group 3
Group 4
Employees understand how their base pay is determined
39%
61%
63%
75%
Our managers execute our base pay program well
38%
54%
67%
72%
Our base pay program supports our attraction and retention goals
42%
62%
82%
Our base pay program supports our long-term business goals, strategy and objectives
40%
51%
65%
76%
Our base pay program supports our desired culture
34%
64%
79%
Sources: Towers Watson 2012 Global Workforce Study, 2012 Talent Management and Rewards Study — Global.

17. Performance-based rewards: Achieving best practice in annual incentive design and delivery
Group 4 companies are more likely to indicate effective execution of STI programs
Short-term Incentive Programs
Group 1
Group 2
Group 3
Group 4
Employees understand how their short-term incentive payouts are determined
51%
73%
76%
83%
Our managers execute our short-term incentive programs well
44%
58%
65%
Our short-term incentive programs support our desired culture
34%
60%
71%
84%
Source: Towers Watson 2012 Talent Management and Rewards Study — Global.

18. Performance management: Differentiating pay based on performance
Group 4 organizations are twice as likely as those with less evolved EVPs to report that their performance management process supports differentiating pay based on performance
Percentage agreeing that their performance management process is effective at the following
Group 4
Group 3
Group 2
Group 1
Linking salary increases to individual performance results
Linking bonus payouts to individual performance results
Linking bonus payouts to organizational performance results
Differentiating pay based on performance even for employees who receive the same performance rating
Sources: Towers Watson 2012 Global Workforce Study, 2012 Talent Management and Rewards Study — Global.

19. Conclusion
The EVP is an effective tool in creating the right balance between employee preferences and employer needs — leading to stronger overall performance and improved financial outcomes
Improve design and execution of Total Rewards programs
Realize improvements in sustainable engagement and stronger business performance
Communicate and deliver on promises to employees
Segment and differentiate populations for greater engagement and cost management

20. Questions

21. NMHC Survey Site

22. Participant Guide - Cover

23. Participant Guide - Benchmark Descriptions

24. Data Submission Workbook - Incumbent Data

25. Policies and Practices

26. CompQuest