For every successful for-profit business, there are three essential value propositions:
- The market value proposition – the exchange of value between the company and its customers.
- The owner/shareholder value proposition – the value gained by an owner or shareholder from investing in the company.
- The employee value proposition (EVP) – the value employees get from being a part of an organization in return for their performance and contribution through the work they do.
Pre-COVID, new employee expectations were emerging and the EVP was shifting. Instead of simply putting in the work in exchange for a strong salary, good benefits and an annual review, employees at all levels were seeking greater development, work/life integration, ongoing performance conversations, less “bossing” and more coaching in addition to strong rewards. The pandemic added a significant amount of fuel to this shift by amplifying the humanness of the workforce and resulted in a call for companies to meet employee needs in a more wholistic way. The result is a “new” employee value proposition that organizations must deliver to attract and retain top talent now and in the future.
So what does the “new” EVP entail?
Our work with clients has highlighted five critical elements that drive the current employee value proposition. They represent what employees want in exchange for their commitment, engagement, and performance. When these elements are executed and balanced in a way that meet workforce needs, they act like a magnet – creating “pull” to attract top talent (even amidst talent shortages) and strengthening the ability to keep that talent longer. In addition, if cultivated well, a magnetic EVP will repel talent that doesn’t fit the culture.
The five elements of the new EVP include:
M – Meaningful Work and Purpose
A major shift in the EVP post-pandemic relates to Meaningful Work and Purpose. Employees want to be able to see the meaning and purpose in the work that they do, regardless of their role. And as leaders, we need to help team members see the line of site from their performance to the contribution and impact it provides. Gallup’s research shows that a 10% improvement in an employee’s connection with mission and purpose leads to an 8.1% decrease in turnover and a 4.4 % increase in profitability. To strengthen the EVP, we must ensure the each employee finds meaning and purpose in their role.
A – Affiliation
At its heart, Affiliation is about connection and belonging – how one feels a “part” of or “seen” by the team or the organization. It encompasses communication, diversity, equity, and inclusion. With the increase in distributed teams and work through hybrid and remote employees, satisfying this part of the EVP requires attention and intention. In employee research done by Gartner, 82% of employees say it’s important for their organization to see them as a person, but only 45% believe their organization actually sees them this way. The new EVP calls employers to create stronger Affiliation by making sure they not only “see” people but also create more purposeful ways to drive social connection between and among team members so employees know and are known by others with whom they work.
G – Growth and Development
Growth and Development is the element that has been most present and seen the greatest focus in the past decade, and it is a component that is highly sought after by the newer generations in the workforce. These team members are drawn to employers who have demonstrated learning paths, career paths, and individualized or customized development experiences. In its workforce research, Gallup finds that organizations that have made a strategic investment in employee development report 11% greater profitability and are twice as likely to retain their employees over other organizations.
N – Non-Financial Rewards
The element that shifted most significantly since the pandemic is Non-Financial Rewards. Non-Financial Rewards includes not only appreciation and recognition, but also flexibility and wellbeing. Because the pandemic helped prove that remote work can be executed with strong productivity, employees deeply value flexibility in how and where they work. IIn a 2021 study that was part of Citrix’s 2035 Work project, 88% of knowledge workers said that when looking for a new position, they would look for one that offers complete flexibility in their hours and location. In addition, the pandemic had a significant impact on employees reflecting on personal values and wellbeing. As a result, more than ever before, potential employees are closely examining the balance and work/life integration opportunities that are offered by an organization.
T – True Financial Rewards
Compensation and benefits (true financial rewards) have always been important as part of the EVP. While this EVP component is often perceived as the most straightforward, it is becoming more challenging as the labor pool shrinks. A rising demand and shrinking supply is driving compensation levels to new heights. In addition, employees are looking for opportunities to participate in financial rewards beyond the norm and earlier in their career – profit sharing, ESOP structures, or equity in some form. Companies must monitor compensation trends in the markets where they compete for talent to ensure they are competitive and maintain their desired positioning within that market.
What’s interesting about the EVP is that four of the five elements relate to “psychic income”. Psychic income is the nonmonetary, non-material, or intangible aspects of one’s job that serve as an incentive to work and fuel satisfaction and engagement. Pay is important and it always has been but pay alone will not create a strong value proposition. True Financial Rewards must be competitive, but the investment you make, the priority you give, and the resources you devote to the psychic income components will significantly drive the strength of your EVP (i.e., your MAGNeT) and your ability to attract and retain top talent.
A final nuance to the “new” EVP is that it’s not enough to simply define it at the organizational level. With the nature of the new workforce, “one size” will not fit all. An organization must have a well-defined and identifiable EVP that is foundational across the employee experience; however, it must also be prepared to further tailor elements of the EVP to individualize the approach and have “one size” fit one.
Delivering on the new EVP will require leaders to engage with their teams to discuss and define what success looks like for each of the elements in the context of the current and future workforce. It will then require intentional action, continuous cultivation, measurement, and monitoring to ensure it is successful. The time and attention is worth it to strengthen one of the greatest attraction and retention tools available – your Employee Value Proposition.