Putting share schemes at the heart of the reward strategy

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• More employers are making use of their company brand to promote share plans to staff.

• Mirroring the look and feel of external communication materials can help employees to identify with an already-established brand.

• Using a single brand can help staff in organisations with many disparate brands feel part of the wider business.

• However, employers should ensure share scheme communications stand out from other branded materials that employees receive.

Case study: Kingfisher promotes teamwork

In December 2011, about 2,000 employees at B&Q and Screwfix found themselves with a bit of extra cash before Christmas, after a three-year sharesave scheme reached maturity.

The scheme paid out a total of £13.8 million – a gain of £7.4 million – with employees making an average of £3,516.

Louise Bentham, group reward director at parent company Kingfisher, says: “It worked out at about 35% annual compound growth over the three years.”

For the company, a major benefit of the scheme was the ability to align employees under its various divisions to the wider Kingfisher brand. Kay Ballard, share plans manager at Kingfisher, says: “In the last year in particular, the group introduced a new ethos to help people understand they are all part of a bigger team using the OneTeam logo.

“All of our publications that go out regarding the sharesave scheme and our share incentive plan have this branding all the way through them, and the Kingfisher logo at the top. Everyone is starting to think in a team way.”

Executive share plans

Executive share plans are very different from all-employee models, such as sharesave or a share incentive plan. In the past, many executives would have been rewarded through company share option plans, says William Cohen, partner and head of the share plan practice at Deloitte.

These plans, which enabled employers to grant executives up to £30,000 worth of shares tax-free, have now largely given way to awards linked to company performance under long-term incentive plans.

In such schemes, there is less emphasis on education and promotion, but it is important to keep executives informed as to how they are faring against the performance conditions, says Sophie Black, principal, executive remuneration, at Mercer. “Some will communicate quarterly or half-yearly about how they are doing, but some have become more interactive so executives can see at any time how they are getting on,” she says.

Sue Wilson, director of human resource services at PricewaterhouseCoopers, says it is important that performance targets are not too complicated. “If [employers] have too many or too complex targets, people do not know how they can influence them and when the call comes from the headhunters, they may be willing to walk away,” she says.

Share ownership creates a bond between employer and employee, and corporate branding can strengthen the communication of schemes, says Nick Martindale

The issue of employee ownership in organisations has become topical following pledges by prime minister David Cameron and deputy prime minister Nick Clegg to make it easier for staff to take a stake in their employer and benefit from its success.

The advantages of share schemes from an employer’s perspective are well established. Staff who either invest in or are given shares, usually through a share incentive plan, or take part in a save-as-you-earn plan such as sharesave, are likely to be more engaged and productive, as well as being more minded to stay put for a reasonable period of time.

Where organisations have often failed is in the effective communication of such schemes to employees. But there are signs that this could be changing, particularly with employers making more use of their brand to promote schemes to staff. Neil Sharpe, principal at Aon Hewitt, says: “Companies are trying to use their corporate branding more than they used to and are reflecting that in their employee communications. They are trying to bring the share plan into a message for the whole company, rather than it just being about buying shares. There is probably not as much of that going on as there could be, but it is a growing trend.”

In practice, this means making the look and feel of any communications mirror the material the organisation uses to present itself to the outside world, enabling staff to identify with an already well-established brand. “It is the livery of the branding, the font, the colours that are used, the whole presentation of what the share plan is about,” says Sharpe. “There are some very notable brands that have a very strong public appearance and that has been replicated through their share plan.”

Alongside this, employers need to make the connection between the ethos of the organisation and the launch of a share scheme, says Katie Frost, director of Shilling Communication. “Any company offering share ownership needs to be very clear about why it is doing so,” she says. “The John Lewis mission statement says that ‘partners share in the benefits and profits of a business that puts them first’. This kind of clear, simple statement is something employees can understand and relate to.”

Feeling part of the business

Such a strategy can also help employees in organisations with many disparate brands feel part of the wider business. Mark Childs, managing director of Total Rewards Group, says: “If you are a diversified company with multi-brands, it creates some global glue and becomes an effective vehicle of communication. As an example from my past, I used to be compensation and benefits director at Reckitt Benckiser when it launched a global share plan back in the 1990s. If staff were in the Indian business, they considered themselves part of Dettol because that was their primary business. The employees did not identify with Reckitt Benckiser, so giving them participation in shares enabled them to identify with the wider company.”

Anthony Bird, communications consultant at Towers Watson, stresses the need to make use of an existing corporate brand, but warns that material should stand out from the rest of the marketing communications staff receive. “It needs to have a consistent look and feel to what has been sent out before,” he says. “It is important to make sure employers do not have too many sub-brands.”

Some organisations have created distinct brands for particular campaigns, however. Sophie Black, principal in executive remuneration at Mercer, recalls Asda’s employee ‘share bear’, which it used on all communications sent to employees’ home addresses. “Companies that want employees to really buy into these plans spend quite a lot of money and time on communications and marketing them,” she says.

Others are even more imaginative. At Henderson Global Investors, the approach has been to focus promotional efforts on the year in which the company’s share option scheme matures. Jeremy Mindell, senior reward and tax manager at Henderson, says: “For schemes maturing this year, we focused on the Olympics. With another one the launch date was St Patrick’s Day, so we had a lot around leprechauns and had Irish food to launch it. Employers need to make it attractive, because if they do not put effort into publicity, they will get the same old people who are savvy to these things who do it.”

When communicating the potential benefits of employee share schemes, employers have to tread a fine line between promoting them as a good investment – which they are not allowed to do – and merely pushing out dull, uninspiring communications.

Targeting hearts and minds

William Cohen, partner and head of the share plan practice at Deloitte, says: “Companies are getting cuter at it. The really good communications look at hearts and minds. The whole piece should be linked in with general communication to employees about the strategy. Employers do not want technicians communicating these things.”

But Cohen says such models work only when tailored to an individual employer and are not a template for all organisations. “I have seen some really innovative things deployed at some companies, but they work really badly if they are then cut and pasted to another company,” he says. “Why they are so innovative is because they are so aligned to the general communication message of the business. All companies are different.”

Employers are also making good use of newer communication channels, which can help to interest and engage staff in a way that paper dossiers fail to, says Aon Hewitt’s Sharpe. “In the old days, companies would just send out brochures and paper applications, have a big launch of the plan and then there would be nothing for three years until the plan matured,” he says. “Now they have information on intranet sites and they use emails, text messaging and Twitter feeds. They do a much better job.”

One potential problem for employers is the risk of share prices falling, which could lead to the opposite effects to those that were intended. This is not an issue for staff in sharesave schemes, where the worst-case scenario is they simply get back the money they have saved, but it is a possibility for those who take ownership of shares directly.

Employers can mitigate the risk by matching the number of shares an employee takes, says Henderson’s Mindell. The fact that shares are paid for out of gross, rather than net, salary helps, but there is an onus on the employer to warn staff that they could lose money.

“We make it clear that if the share price goes down to zero, their holding will be worth zero,” he says. “A responsible share scheme will say employers cannot guarantee that staff will get a return, but in good times, they will, and our track record is good. So do not use it for the food and fuel budget; use it for a holiday, house decoration or new car.”

A step too far

But even this is a step too far for Total Rewards Group’s Childs. “I would encourage companies to think long and hard before promoting a share incentive plan to employees,” he says. “They are encouraging people to take on a risk profile that is not appropriate to their financial circumstances. Direct share purchase encourages people to take on inappropriate risks.”

But when set up and communicated effectively, share plans and share option plans can benefit both staff and the business. “Some of the big companies, particularly in this tough environment, are asking how they can re-engage people and get them to feel aligned as a business,” says Cohen. “These plans are modest in terms of their value at the beginning, but they have great potential to give meaningful rewards over a longer-term cycle.

“The key is to communicate not only that you have this potentially wonderful remunerative share interest, but what it means to the employee in the context of the company, and to link it in with all the other things you want to achieve.”

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