‘Most Admired Companies’ Find More Success Than Peers in Reward Programs
Philadelphia — March 3
Hay Group, a global management consulting firm, and Fortune magazine released the 11th annual rankings of The World’s Most Admired Companies list and America’s Most Admired Companies list. Hay Group also conducts supplemental research each year to identify business practices that distinguish companies on the lists from all others. This year’s analysis focused on how these companies manage their employee reward programs and found that they do a much better job of leveraging their reward investments than their peers.
“We know from previous research that companies on these lists actually manage to pay less for talent than their peers — about 5 percent less. They tend to have less of a need to hire expensive outside talent for jobs because they are better at grooming people internally and retaining employees. The lower costs of recruiting and training new people have a ripple effect across an organization,” said Hay Group Vice President Mel Stark.
“In addition, these companies do a better job of rewarding top performers, delivering the best pay increases to those who are truly deserving and holding the line on pay for marginal performers. Over time, this results in a compounded effect of top performers earning appreciably more than others,” he said
“These companies also do a much better job of engaging and leveraging their managers to reinforce with employees the total value of what the organization provides, encompassing both the tangible and the intangible nature of rewards,” Stark noted.
Other notable gaps between companies on America’s Most Admired Companies list and The World’s Most Admired Companies list and their peers include:
- 79 percent regularly provide employees with total reward statements, versus 53 percent of peer group respondents.
- 82 percent regularly reinforce the company’s reward philosophy in communications with employees, while only 64 percent of peer companies do the same.
- 74 percent state their employees understand and appreciate that rewards consist of both tangible and intangible components, compared with 61 percent of their peers.
- 41 percent say line managers in their organizations create positive work climates, whereas only 21 percent of peer companies respond similarly.
- 28 percent state that line managers utilize financial and nonfinancial recognition programs, compared with 16 percent of peer companies.
- 41 percent believe their reward program is internally fair, while only 27 percent of their peers believe the same.
- 48 percent report their reward programs support efforts to retain their best talent, versus 28 percent of their peers.
- 45 percent say their reward program allows them to attract the talent they need, compared with 25 percent of their peers.
“Our research found that companies who make the lists haven’t stumbled on a silver bullet for making employee reward programs work more effectively. They are simply able to execute more successfully on a number of basic HR best practices and tend to have a cultural understanding and recognition of the value brought to their organizations,” said Hay Group Insight Senior Consultant Mark Royal. “Implementation is really the primary differentiator between employee reward programs at companies on America’s Most Admired Companies list and their peers — communication, aligning reward programs with business priorities and operationalizing the pay-for-performance relationship.”
Hay Group's research covered more than 160 companies and compared companies that ranked in the top three within their industries against “peer group” companies, which scored lower in the rankings. Respondents included human resource executives, as well as senior leaders in other line and staff management roles.
Hay Group has collaborated with Fortune magazine annually since 1997 to identify, select and rank companies on The World’s Most Admired Companies and America’s Most Admired Companies lists and uncover the business practices that make these companies both highly regarded and successful.