Segmenting employees can help employers target communications in order to boost benefits take up, says Clare Bettelley
Employees are rarely the same. What appeals to one is unlikely to have the same pull for another. Similarly, the way that staff engage with the benefits package offered by their organisation, and respond to communications is likely to differ widely.
Some employers have now begun to recognise this fact and react accordingly in a bid to promote a reward package that is suited to employees' individual tastes.
Up until recent years, this often meant offering a flexible or voluntary benefits scheme in order to provide as wide a choice of perks as possible. Some employers, however, have now begun to take this a step further and are segmenting their workforce according to various factors in order to tailor their benefits communication.
Segmentation literally involves dividing staff into groups according to a pre-defined set of criteria, to enable organisations to target benefits information according to the specific needs of each cluster.
The growing interest in segmentation parallels changing workforce demographics. Fewer staff now undertake desk-based office roles, with many spending a significant percentage of the time off-site and often offshore. New joiners and staff on maternity or long-term sick leave also need to be considered.
This means companies need to be more innovative and proactive about how they communicate benefits, particularly when it comes to flex and voluntary schemes, which require staff to make their own decisions about what options, if any, to take up.
The segmentation of communication around flexible and voluntary benefits can be fairly labour intensive for employers, so many may question why they should bother when it is far easier to simply place information about all the perks on offer in a benefits booklet or on the organisation's intranet site.
Alex Tullett, head of benefits communications at Jardine Lloyd Thompson Benefit Solutions, says: "If you take the workforce of the typical employer, at least one third has English as a second language, one third is English educated and the bottom level has an average of two GCSEs. You can't give them the information and expect them to understand it. [Segmentation] is about giving them the information and ensuring they understand it. It might be that canteen food is more important than a company's pension. It's about what's most valued by the workforce."
The first step for employers that decide to go ahead with the process is to set the criteria against which they will segment staff. Particular attention should be paid to which variables will best suit the employee demographic and whether these will cover all staff. These could include salary brackets or employees' length of service.
Employers could also consider their workplace structures. For example, retailers may hinge segmentation on staff location.
Lisa McEneny, a senior consultant at consulting firm Watson Wyatt, adds: "Home workers are too often forgotten about. They don't see posters in the office, so it's an important group to do something special for."
A further option is to segment communications in line with employees' previous flexible or voluntary benefits choices. Collecting such information and updating communications to fit, however, can prove costly, so employers should consider whether such segmentation is really right for their organisation. If so, they should then consider how sophisticated their approach needs to be in order to achieve their desired outcome.
The Royal Bank of Scotland (RBS), for example, initially segmented its employees according to earnings in order to help communicate the company's flexible benefits scheme. Managers were also segmented in terms of age and length of service.
Tullett adds, however, that the cost of segmentation may be prohibitive for smaller employers. He recommends it is most suited to organisations with more than 500 staff.
A cheaper alternative is to personalise communications around a flexible or voluntary benefits scheme. At its most basic level, this can take the form of a standard letter informing an employee about the benefits on offer on the first day of their employment, or tailored information contained in a wage slip. McEneny suggests employers could use personalised desk calendars, that include a staff member's name and flag up specific benefits, as well as podcasts. Some benefits systems even communicate perks to staff depending on their past selections and personal details.
This concept of personalisation can be used alone or in conjunction with segmentation. RBS uses both alongside each other through an online portal, which allows staff to access total reward statements using a personal pin number. Such statements should include perks taken up as a result of targeted communication enabled by segmentation.
Jim Cowan, senior consultant, remuneration and benefits at RBS, says the majority of staff surveyed over the years have expressed a preference for a more personal approach to benefits, such as a one-to-one chat at their desks with someone who can explain the intricacies of relevant products for their circumstances. He adds the portal is the best alternative, as a one-to-one approach isn't workable within a group the size of RBS.
Employers should be aware of the potential pitfalls attached to segmenting staff and communicating benefits in this way, however, such as making the wrong assumptions about what perks are likely to appeal to staff. Assuming that all female employees in a certain age range will be interested in childcare vouchers, whether now or in the not-so-distant future, for example, could backfire if this information is sent to someone who has recently suffered a miscarriage or is struggling to conceive. In these cases, segmenting communications is likely to achieve the opposite of its intended result and actively disengage employees or lower loyalty levels.
But segmentation projects will always generalise about staff to some extent, regardless of how far down into the workforce a company drills. "There are probably more cost-effective ways of communicating benefits to staff," concludes Tullett. Therefore, before employers start to use segmentation they need to ensure that their existing communication methods are as effective as possible.
Top tips for segmentation
- Create a focus group to help establish whether you need to target groups of staff for the purpose of benefits communication, or if your existing organisation-wide approach fits.
Case study: RBS takes staff facts into account
Segmentation was the logical step for Royal Bank of Scotland in 2005 following the introduction of its flexible benefits scheme in 1988.
Jim Cowan, senior consultant, remuneration and benefits at RBS, says: "We saw a mismatch between the cost of benefits provision and the perceived value." Segmentation was designed to identify the benefits requirements within a range of staff groups, and target communications accordingly to maximise take-up. "We were looking at decisions people had taken over a period of time and if there were trends we could identify," says Cowan.
Staff were initially segmented into five clusters, according to job role.
Managers were then subdivided according to age and length of service. Criteria used included whether they were under or over 33 years of age and whether they had more or less than two years' service.
Since segmentation, RBS has doubled the number of staff participating in flex.
