Best performing companies pay less

Research has revealed that the best performing companies pay five per cent less in wages than the average, because they are better at grooming people internally and retaining employees. They therefore have less need to recruit expensive outside talent.

This is according to global management consultancy the Hay Group, that studied over 1,467 senior executives and directors in 358 global companies for the 2008 Fortune’s Most Admired Companies (MAC) list. Almost half of top performing companies (45 per cent) claim their reward programme allows them to attract the talent they need, compared with an average of 25 per cent.

Colin Evans, associate director of reward consulting at Hay Group, commented: “Our research found that companies who make the MAC list haven’t just stumbled on the formula for making employee reward programmes work more effectively.

“A key differentiator between higher and lesser performing companies is the implementation of successful employee reward strategies. The best strategies excel at communicating benefits, optimising performance-related pay and ensuring that reward programmes are aligned with business priorities.”

The results revealed that 48 per cent report their reward programmes support efforts to retain their best talent, versus 28 per cent of poorer performers. Of the organisations surveyed 41 per cent say that line managers in their organisation create a positive work climate, whereas only
21 per cent of peer companies respond similarly.

The study also shows that 41 per cent of MAC believe their reward programme is internally fair, compared with an average of just 27 per cent. Furthermore, 74 per cent of MAC employees understand and appreciate that rewards consist of both tangible (salary, bonus, health cover, pension) and intangible (company culture, career, development) components, compared with 61 per cent on average.