By Melissa J. Anderson

According to a new global study by consulting firm Towers Watson [PDF], companies that link compensation and performance through management processes and culture are more likely to have engaged employees.

This is important, the firm says, because engagement levels are at an all time low, due to years of slashed budgets and increased working hours. The study explains, “Even as organizations continue to rein in operational costs, many push expectations for employee and financial performance ever higher. As a result, the workforce is often providing greater efforts without the promise of greater rewards.”

“Growing global competition leaves the demand for the right talent as strong as ever, and drives the stakes for attracting, keeping and engaging critical-skill talent even higher,” the report continues.

That’s one cause behind high stress levels reported by employees around the world. And Towers Watson doesn’t anticipate that stress level going down. For example, “more than half of all employers report that employees have been working more ours than normal for the past three years. Nearly as many employers (43 %) say they expect to maintain that pace for the next three years as well.”

But, the firm believes, employers can do more to maintain morale, which may help stem the loss of overworked and undervalued high performers. By effectively communicating what Towers Watson calls the “employee value proposition,” companies may be able to boost engagement and stop attrition before it starts.

Employee Value Proposition

According to the study, based on the answers of 1605 global respondents, the “employee value proposition” (EVP) describes what employees get in exchange for working at a specific company. “The EVP is an implicit contract, or deal, between  employer and employee, articulating the nature of the experience the employer offers in exchange for the employee’s dedication, productivity and sustainable engagement.”

According to the report, employers that communicate the EVP effectively have fewer difficulties in attracting and retaining high performing employees.

“For example, in fast-growing economies, Group 4 companies [top tier EVP communicators] are 13% less likely to report difficulty attracting critical-skill employees and 23% less likely to have retention problems than less integrated Group 1 organizations [bottom tier EVP communicators] (Figure 3). In addition, Group 4 organizations are five times as likely to report their employees as highly engaged than Group 1 organizations. As a result, Group 4 companies are more than twice as likely to report achieving financial performance significantly above their peers.”

Companies could see a boost by talking more openly about the transactional nature of the employer-employee relationship.

In Practice

The report produced some interesting data revealing that, for example, many employees are in the dark about how their base pay is determined.

“Just over half of organizations report that employees understand how their base pay is determined (57%) or believe their managers execute the base pay program well (55%). As for employees, fewer than half (47%) say their organization does a good job of explaining their base pay programs, and only four in 10 (42%) believe there is a clear link between their job performance and their pay.”

And communicating the EVP means more than talking about base pay or bonuses. EVP encompasses factors like special recognition, career development management programs, and leadership development as well.

“In the high-stakes quest to find, keep and highly engage the right workforce, the EVP can be an effective tool in creating the right balance between employee preferences and employer needs — leading to stronger overall performance and improved financial outcomes. Organizations willing to drive the design, delivery and differentiation of their EVP forward can create a successful future for both the organization and its employees.”

As the global jobs market thaws and employees begin to see greater jobs mobility, the companies that can better communicate what employees receive for their work are the ones that will retain the competitive edge. “More than three times as many employees (58% versus 16%) are highly engaged at companies that have highly effective EVPs than at companies with low EVP effectiveness,” the study notes.