At the start of this year, a conversation with a long-time client, a talent leader, painted a sobering picture of the challenges many organisations operating in Nigeria face today.
“My people are complaining that their take-home is not taking-home. In fact, some say it finishes before they get to the bus stop,” he lamented with a weary chuckle.
These staff sentiments were despite the organisation implementing a cost-of-living adjustment in the previous year’s third quarter.
Employee disengagement and attrition persisted, prompting our conversation and eventually our engagement to redesign their reward strategies in light of their executive management’s growing concerns over employee financial well-being amidst rising inflation and living costs in Nigeria.
In the face of real-world struggles by the average Nigerian with inflation, the rising cost of living, and the economic slowdown, it has become more urgent than ever for corporations to revisit their reward strategies and schemes.
Most talent and business leaders in the country will tell you that attrition and mobility of key talent have increased since the latter part of last year, fuelled primarily by talent searches for greater economic gain. This is also the driving force behind the talent drain ‘Japa syndrome’ that has bedevilled businesses in the last couple of years.
As the value of employee disposable income continues to diminish, organisations in the formal sector are facing mounting pressure to increase compensation even as their economic fundamentals stagnate or decline.
More than a dozen organisations have reached out in the last two to four weeks to explore their options for meeting the very legitimate needs of their employees for increased pay.
This is reflective of the growing conversations and recognition of the human imperative in boardrooms across the country. Moreover, the federal and some state governments’ commitment to increasing pay for civil servants further underscores the urgency of an organisational response.
Beyond altruistic considerations, recalibrating reward schemes is a business imperative. For businesses to not just survive but thrive in today’s economic landscape, their employees are going to have to increase their productivity and performance.
Given that employee productivity has been shown to be firmly tied to their well-being and that their physical and mental well-being is currently being negatively impacted by the prevailing economic challenges, it makes eminent sense for businesses to try to review their reward schemes to alleviate the concerns of their staff and foster a conducive environment for enhanced performance and overall organisational success.
A few corporations, those that can afford to, have implemented generous pay increases. However, for most organisations, a large percentage increase in staff compensation is not feasible, and they fear starting down the compensation review given how easily employee compensation costs can grow out of proportion and impact the survivability of the business. Most companies and employers take a present-value perspective on compensation, focusing on long-term cost commitments.
So, a decision to increase compensation presupposes a multi-year cost commitment, as consideration is given not only to today’s reward package but to future bonuses and promotions. Hence the seeming reluctance of organisations to greenlight compensation reviews.
A well-executed compensation and benefit review can yield a reward scheme that costs less than their current reward packages, in real terms and when juxtaposed with the comparative measurable improvements in engagement, satisfaction, retention, and performance.
In our work supporting clients in reimagining their reward strategies to improve employee satisfaction while optimising individual, team, and organisational performance, we encourage an approach based on a big-picture perspective of reward that can surface new avenues to tailor reward elements to fit their particular objectives and contextual nuances.
Businesses need to take a total rewards perspective, undertake a data-driven review of the existing reward system and employee preferences, embrace creativity, and communicate constantly with all stakeholders.
The insights obtained from listening to employees often provide employers with surprising insights as to what their employees value, which in turn helps in designing reward packages that fit the particular context of the organisation and its workforce.
Data from our work over the last couple of years consistently points to the relative importance of financial compensation to employees, which is not particularly surprising, but the data also clearly shows that they also value work-life balance (flexibility and hybrid work), health insurance, career development, bonuses, and recognition.
This points to levers available for organisations to pull when redesigning their reward packages. Tapping into these levers can allow organisations to impact employee well-being without substantial pay increases and necessarily increasing the cost to the organisation.
Considering how important compensation is in driving culture and strategy, organisations need to proactively redesign their reward schemes before they are forced to do so by a reduction in productivity and/or the loss of key talents.
Awodu is the chief operating officer, StreSERT Integrated Limited
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