How does a reward strategy evolve while an organisation grows at pace?

June Cover Story

Need to know

  • When an organisation grows quickly, preserving the culture and benefits offering can pose a challenge.
  • Asking employees what they want can help organisations to develop their benefits package to support their continued growth.
  • Employers can consider ways to upscale the more informal benefits staff receive when they are part of a small organisation.

Why do organisations get started? A lightbulb moment. A frustration with faceless corporate bureaucracy. A desire for a sense of true ownership, and the accompanying rewards.

At first, the start-up feels like liberation. Late nights brainstorming over pizza. Everyone’s opinion matters, because there are only a handful of people. The start-up grows, thrives.

Out of necessity, more staff are hired. What was five people around a desk turns into 10, 30, 100. Before its founders know it, they have gone full circle. They have become the corporate culture that they originally innovated in order to better.

Chris Charman, principal in consultancy Mercer’s talent business, says: “The thing that drives everyone nuts is faceless corporate bureaucracy. If I know anything after 20 years of advising businesses, it is that all the large organisations want to create the entrepreneurial, shared-ownership culture.”

To keep staff engaged, fast-growing organisations need to work out how to avoid becoming victims of their own success. How can they preserve the unique culture and purpose that set them apart in the first place, and how can they upscale their benefits offerings to ensure employees remain engaged?

Keep benefits under review

As an organisation grows, its reward package will need to adapt too. What was affordable for a handful of staff may be less so once an organisation reaches a larger size. Equally, as a business grows, it will need to ensure employees are treated fairly and consistently, whenever they joined the organisation.

The important thing is to review and adjust an approach regularly and ensure staff appreciate what is on offer, says Aliya Vigor-Robertson, founding partner at JourneyHR, an HR consultancy that works with a range of predominantly founder-owned agencies and start-ups within creative industries.

“We ran an assessment with [an organisation that] has lots of lovely things, [including] private medical, death in service, [but] hardly anyone had sent in their death-in-service next of kin, the response rate was around 28%, and private medical was under 50%,” says Vigor-Robertson. “The reason why was, first of all, the administration involved, and also the lack of clear communication. Some people thought they had to pay for those benefits out of their salary. It really does show that communications are critical.”

John Hayes, a principal at Constantine Law, adds: “[Employers] have to define and understand the needs of the employees concerned. Different things will motivate different people.

“If you are a sales employee, you will be motivated by an attractive commission package. If you are non-sales, you may be attracted by lifestyle benefits.”

In addition, there are ways to upscale the more informal benefits staff receive when they are part of a small organisation. That impromptu yet regular pizza outing could morph into a subsidised on-site restaurant or bar as the business grows, to foster a communal, informal culture.

As an organisation increases in size, it should consider what makes its culture different to anyone else’s, and bring in benefits to reflect that. Patrick Heath-Lay, chief executive officer at financial services firm B&CE, says: “It’s the little things that are often missed; we have an ice cream van turn up on a summer’s day, we offer massages, we have a small gym with a personal trainer, a subsidised restaurant, nutrition advice. There are little things we do that not everyone else does.”

Accept that not everything can be preserved

The development and growth of an organisation may prevent it from being able to offer the same benefits package to staff as it did in the early days of operations.

“It’s best to recognise this early,” says Charman. “At some point, people are going to stop joining because it’s going to be a fantastic ride and an awesome experience, and they are going to be asking about market-competitive benefits packages. It’s a much less groovy conversation.”

Organisations should be realistic and unafraid of bringing on different talent as they need it, adds Charman. “Organisations grow up and [employers] want to make the adolescence as short as possible,” he explains.

Information from exit interviews can be used to benchmark benefits packages, says Vigor-Robertson. “Find out what other benefits packages are, that’s an opportunity for competitor analysis, and see where you are benchmarked against them,” she adds.

With their 360-degree view of the employment market, recruitment consultants can also often help HR managers to benchmark their benefits, says Vigor-Robertson.

Employers may struggle to preserve some of the generous benefits they offered when they were smaller. B&CE’s Heath-Lay says: “We had to re-evaluate some of our benefits. We had an open defined benefit pension scheme when we started, but auto-enrolling people ourselves, we had to unfortunately close that scheme to new members and effectively adopt The People’s Pension going forward. It was a difficult decision to change that but it was the right one.”

B&CE’s solution was to compromise with a generous defined contribution (DC) scheme. “If [employees] contribute up to 7%, the organisation will double match that with 14%, so [they’d] get 21% in total,” says Heath-Lay.

Ask employees what matters to them

If staff do not feel they are developing, whatever benefits the organisation offers will not persuade them to stay, says Hayes.

“I tend to deal with exit consequences when organisations don’t get this right,” he adds. “It’s not all about pay. Increasingly, you need to give people a sense of ownership in what they’re doing that goes above and beyond pay. That’s about interesting work and a sense of career progression.”

Farzana Baduel, managing director of Curzon PR, asked her staff this question. The results surprised her and helped her to formulate an imaginative and compelling benefits package (see Curzon PR box).

Consider offering early hires skin in the game

Offering equity to founding members of staff is the ultimate compliment, and it will keep them motivated, says Hayes. “The best [benefits] I’ve seen are share equity ownership. That’s the most motivating tool because [organisations] are seeking to define an equity upside in the future, contingent on staff engagement today. If [staff] work hard now and the organisation is sold later, they will see significant upside, and it’s also advantageous to employees from a tax point of view.”

There may be challenges involved, but reviewing benefits and listening to employee feedback can help preserve organisational culture and employee engagement levels while supporting business growth.

Curzon PRCurzon PR develops benefits offering based on employee feedback

Farzana Baduel, managing director at Curzon PR, has always been entrepreneurial. She founded her PR firm, Curzon, in 2009, in part because with a one-year-old child, she wanted the flexibility to balance work with the school run.

Baduel’s business grew slowly for the first two to three years. She had previously worked in politics for the Conservative party, and building contacts in the PR world took time. Today, she works with a host of governments worldwide. Curzon has offices in London, New York, Dubai and is opening in Delhi. It employs 15 people in London, three in New York, six in Dubai, and plans to hire 15 in Delhi.

She realised in the early days that finding and retaining good staff was a key challenge. “My biggest weakness is HR and that shows in my staff turnover,” she says. “It’s very disruptive and in the early years I really suffered because I couldn’t afford experienced staff.

“I became like a training machine. All I did was train people and after a year they would go and find another job in a bigger agency. I wasn’t able to meet their salary expectations either, so they would move to big agencies with bigger salaries and training academies.”

To solve the problem, and lacking a huge budget, Baduel had to think creatively about benefits.

She asked staff what benefits they would value. The answers were training opportunities, greater flexibility, gym membership, and more money.

To address the first point, Baduel tapped into her network. “I looked at all the courses and they cost a lot of money. I thought, actually, all the top PRs and journalists are my friends and you wouldn’t even get their calibre on a training course,” she explains.

So she invites a guest speaker to address the agency every few weeks over dinner.

Many PR staff enjoy writing and want to develop their skills in this area, so Baduel alighted on an innovative scheme that will also serve as a training opportunity. She is launching a magazine owned by the agency. “This gives staff the opportunity to write for a magazine but also when you write for a credible magazine, you are invited to top restaurants, bars and so on. It gives you access to a lifestyle. My team will all be contributing editors. It’s good for their CVs as well,” she says.

Baduel is arranging a corporate gym membership and has brought in flexible hours, so that staff can work 8-5, 9-6 or 10-7 ad hoc as they please. Senior members can work one day a week from home.

She introduced an annual bonus, structured to encourage staff to stay loyal over the course of the year. She is also considering introducing monthly targets, tailored to each member of staff. If they meet their targets, they are awarded bonuses.

“It’s a question of finding out what the team want, as opposed to assuming what they want,” she says.

June B&CEB&CE grows benefits package in line with its culture

B&CE was founded in 1942 as a simple way to help construction workers build up holiday pay. It branched out into offering other financial products, such as pensions. However, it is in the last few years that the business has seen its workforce grow, fast.

When the government decided to introduce auto-enrolment, as an established pensions provider to the construction industry, B&CE saw an opportunity, and in 2011 it created mastertrust The People’s Pension.

When it launched, The People’s Pension was hoping to capture around 5% of the auto-enrolment market. It landed 15%. Patrick Heath-Lay, chief executive officer, says: “It is fair to say that our level of growth exceeded our expectations.”

In 2011, B&CE had around 130 staff. Today it has 360. “That growth has been three or four times our expected level,” says Heath-Lay. “We will probably have to recruit another 50-60 people this year.”

Such radical growth has challenged the business. “You go through that rapid growth and change and I wanted everyone to have a lifebelt,” says Heath-Lay. “I want [staff] to stay true to some valued principles.”

When Heath-Lay joined in 2012, he re-wrote B&CE’s then-nine corporate values. “Nobody knew what they meant. We went through a process of evaluating what are we all about as an organisation. We came up with three very simple values, which remain integral to what we do.”

Another challenge was benchmarking its benefits. As a not-for-profit financial services organisation, B&CE is an unusual hybrid. Heath-Lay describes the feel as family-oriented. He and his team have grappled with whether offering bonuses is compatible with the culture and have decided against it for now. “That is a challenge for me,” he says.

“We have to stay competitive in the local market and take feedback from staff. We run regular surveys and have focus groups that will help us to understand what we could do differently going forward.”

The upshot is a generous package of benefits, which includes health insurance, death in service, and a leave entitlement that starts at 25 days and goes up to 28 with service. Employees also have access to study support, which provides them with time off to prepare for a qualification and £75 for every exam passed; the organisation has an annual staff training budget of £240,000. On-site fruit, access to a personal trainer and nutrition advice, and an on-site gym help staff stay healthy. The package also includes a generous pension scheme; if an employee contributes up to 7%, B&CE will double match that with 14%.

June Viewpoint CKViewpoint: Reward packages should adapt to the context in which an organisation operates

How an employer chooses to reward its employees sends out messages, both explicit and implicit, about their values and what is considered important. A well-designed reward strategy can act as an important driver for performance and employee engagement. However, the approach adopted needs to fit with the context of the organisation and the environment in which it operates.

How employees value the benefits offered is a subjective judgement and what is highly valued by one employee may not be valued by another. As the diversity of the workforce increases, it is important to recognise this and to design a reward package that will appeal to a wide range of employees.

Likewise, as organisations change it is important to recognise that employees may expect a different reward package from different types of employer. It is especially important to take account of this as organisations grow. The informality and flexibility that may be offered by small employers is often valued by employees and may be seen as compensation for less competitive levels of pay and fewer benefits offered.

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Employees who have been involved in a small business from its early stages may feel a have a high sense of involvement and feel a closeness to the business leaders, which is often highly valued. Sometimes small organisations offer ‘quirky’ benefits that reflect the personality or values of the owner. However, as an organisation grows, employees, especially new recruits, may have expectations of more competitive pay levels and a range of benefits offered by larger, progressive employers. Therefore, at this point, there is a need to review the reward package offered to remain competitive in the market place and to ensure it drives the desired behaviour.

Clare Kelliher is professor of work and organisation at Cranfield School of Management