Measuring Total Rewards Satisfaction: A Scale Development Study.
| Author | Sarkar, Jeeta |
Introduction
With Steven Hankin of McKinsey and Company (1997) coining a thought-provoking term 'The War for Talent', several scholars and practitioners have embraced the concept of Total Rewards to deal with the issues of retaining the skilled employees. In depth given to Total Rewards for retention has given way to a stream of analysis, seminal research work (e.g., Alhmoud & Rjoub, 2019) and surveys from organizational scholars (e.g., World at Work, 2015) and practitioners worldwide. Total Rewards signifies a holistic and a rewarding relationship between an organization and an employee (Tsede & Kutin, 2013). Why do some industries experience lower voluntary employee turnover as compared to ones with the highest? Scholarly findings have hinted towards using reward strategies to mold employee behavior and attitudes by linking organization goals of attaining high performance, attaining competitive advantage and increased retention (Gould-Williams, 2016). Then the questions that crops up over here are, whether total rewards is a mere organizational strategy? Is it not taking into account changing needs and requirements of the employees? Unfortunately, little efforts have been put in to understand employees' satisfaction with what they are receiving, not confined to compensation but going beyond. Till date there has been very few systematic scholarly works in the context of Indian organizations (e.g., Rai et al., 2019). Therefore, understanding reward satisfaction might be instrumental in understanding their intention to stay with the present organization, thus meriting a closer study. Thus, this study focuses on constructing a multi-item scale capturing the satisfaction level of employees towards Total Rewards practices. We have carried a qualitative literature review and interacted with practitioners resulting in generating a six-dimension structure and developing a scale on TRS in the form of a questionnaire after receiving empirical acceptance from experts on its dimensions and statements. An exploratory factor analysis (EFA) and confirmatory composite analysis (CCA) was carried out resulting in a six-dimension structure.
Total Rewards Satisfaction & Its Dimension
There are two sections of scholarly work on Total Rewards. One section has conceptualized and categorized Total Rewards in terms of transactional (financial) and relational rewards (non-financial) (Newman & Sheikh, 2012). On the contrary there has been a section that defined Total Rewards in terms of pay, benefits, work environment, career development highlighting its value proposition for the employees. It attempts to encompass the entire "employee value proposition" (Nienaber et al., 2011). Drawing insights from past literatures we define Total Rewards as a set of practices not confined to monetary compensation and benefits but including performance management, recognition, work environment, career development and work-life balance that strengthens the relationship between an employee and an organization. TRS is defined as the degree to which an employee is satisfied with these practices.
Total Rewards is a multicomponent concept and on fundamental level, one can easily distinguish between satisfaction aspects from economic outcome. Satisfaction aspect of Total Rewards denotes employees' attitudes towards rewards an organization is offering (De Gieter et al., 2012), whereas economic outcome denotes economic contract between organization and employees (Cropanzano & Mitchell, 2005). Apparently, the satisfaction aspect and economic outcomes are related to each other (Peterson & Luthans, 2006), but the overlap between the two have been overlooked. Most notable seminal work on reward satisfaction was presented by Vandenberghe and Tremblay (2008) with the oldest one being Heneman and Schwab (1985). These studies have focused on pay satisfaction including benefits with few studies on other dimensions of TRS viz. (e.g., De Cooman et al., 2012).
Monetary Compensation Satisfaction (MCS) stems from Incentive theory underpinning the fact that employees get attracted by pay and incentives (Silverman, 2004). Heneman and Schwab (1985) conceptualized compensation satisfaction as a multidimensional construct that included pay level (e.g., current salary), pay raise (e.g., increase in salary), pay administration, and pay structure denoting hierarchical positioning of pay rates based on performance, and benefits reflecting indirect pay (e.g., leaves and insurance etc.). Heneman and Judge (2000) however argued that pay benefits is a different construct. Compensation satisfaction focusses on the basis for pay facilitated through pay policy choices and therefore, MCS is the attitudinal response of employees for the basis of pay. Thus, MCS comprise pay raise (salary and the amount of raise received), pay structure and administration (pay-for-performance including individual and organizational) (Williams et al., 2006).
Benefits Satisfaction (BS) is a distinct construct comprising two things viz. cost incurred by the employees in terms of contribution, the quality of the benefits package and coverage offered to the employees (Miceli & Lane, 1991) and employees' experience with respect to insurance, leaves, educational benefits etc. (Danehower & Lust, 1992). The present study is deviating from the findings of the seminal study on pay satisfaction by Heneman and Schwab (1985) in the sense that BS is not used as a part or subset of compensation satisfaction. BS is defined as "an employee's attitude towards organizational benefits focusing on employee safety and security-related needs" (Blau et al., 2001). Therefore, benefits are rewarded to take care of personal needs such as security and personal and family welfare. Evolutions of benefits package over the years has met employees' needs so much so that benefits package have become flexible in nature with numerous options to choose from (Williams et al., 2008).
Along with MCS and BS, studies have been conducted to ascertain the significance of Satisfaction with Performance Management and Recognition (SPMR) to understand what organization wants, how employees can improve and steer their motivation to achieve organizational and personal goals (Mishra & Farooqi, 2013). It is of vital concern since positive organizational outcomes are linked with employees experiencing SPMR (Jawahar, 2006). These studies hinted towards different practices focusing on regular feedback throughout the year, role clarity, performance reviews and outcomes related to ratings. The significance of SPMR lies in the fact that the satisfaction level should be increased in terms of the manners their performance expectations are communicated and feedback sessions and recognitions are carried out.
Employees ought to be marketable and would also maintain the value of their expertise. Therefore, career and development opportunities (CDO) that build potential and cultivate ability are important. Analysis undertaken by CIPD (2005) showed that if given the chance to improve, employees are more inclined to continue. The incorporation of CDO within total rewards derives from the idea that preparation for the development of expertise and the creation of careers within companies often requires engaging a workforce, thereby creating a symbiotic partnership (World at Work, 2015). Previous studies on Satisfaction with CDO (SCDO) highlighted the primacy of learning culture within the organization and matching employee's personal and organizational goals (Hall, Schneider, & Nygren, 1970). Relying on Social Exchange theory and norms of reciprocity approach, a demanding work setting, relational learning, casual engagement with coworkers, structured learning programs delivered in varying ways, mentoring, and coaching, and career advancement provide higher satisfaction with growth and learning opportunities (Lee & Bruvold, 2003). Hence, SCDO denotes individual-organizational goal alignment coupled with higher learning and developing culture within the organization.
An employee's ability to be efficient and productive depends on Quality of Work Environment (QWE) (Brennan et al., 2002). For work environment satisfaction, Van der Voordt (2004) coined a useful definition, namely "the extent to which the physical work environment meets the employee needs". A helpful categorization of needs was given by Vischer (2008), including the need for physical comfort, functional comfort i.e., work-related, and psychological comfort. These studies hint at two perspectives of looking at QWE: firstly, safe physical working conditions and secondly, extent to which needs are met at the workplace. However, there has been limited research on examining Quality of Work Environment Satisfaction (QWES)'s impact on organizational commitment and retention (Veitch et al., 2007). Thus, QWE applies to a friendly environment that may often contain on site facilities and advanced work techniques and QWES can be defined as the degree to which employees feel comfortable and content under the constraints of physical working environment.
Work-Life Balance Satisfaction (WLBS) is important for job satisfaction, performance, and retention. WLB in a broader sense, refers to the balance achieved in work role and in life roles and requires successful allocation of time, attention, and energy (Grawitch et al., 2010). Conceptually, WLB satisfaction is different from other work-life constructs such as interface, conflict, and facilitation (Fisher et al., 2009; McNall et al., 2010). Relying on Conservation of Resources (COR) Theory (Hobfoll, 1989), Resource Drain Perspective (Edwards & Rothbard, 2000), Resources-and-demands Approach (Schaufeli & Bakker, 2004) and adopting Grawich et al. (2013) definition, we defined WLB satisfaction as...
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