Employee Wealth Creation: A Lever for Organisation Change
22 May 2008
The unfolding story of the crises and subsequent developments in pension provision has featured prominently in the PARC programme. At an early stage, we invited Frank Field MP to explore the future of retirement pensions as a result of his "thinking the unthinkable"!
After the pensions crisis, we set out to analyse and understand what had happened and what was to be learned from it with the help of Terry Faulkner (then of the NAPF) and Mike Faulkner of Psolve.
There followed a symposium; Rethinking Retirement, hosted by the Cabinet Office in April 2007 to examine future retirement benefit scenarios through expert speakers in a well-attended session. It created substantial interest amongst the membership.
With many employers having concentrated their pension efforts in recent times on resolving considerable challenges in relation to legacy promises, attention is turning now to what role (if any) employer-provided pensions should play in the future employment deal – and what the practical business implications are. Pensions are, after basic payroll, usually the largest single workforce-related cost and boardrooms are increasingly questioning what return is to be achieved from this considerable investment.
It is clear that the issue is much more than one of transitioning from a DB formula to DC. Other issues are at stake, and we need to ask how changing the approach to pension benefits can be used as a strategic tool in transforming the employment relationship and the style of the organisation itself.
If an employer is to provide a retirement benefit, this ultimately requires provision for long-term wealth creation. All parties increasingly recognise that pensions are not the only way of creating long-term wealth. In addition, employees value pension provision differently according to their life stages and personal needs. Thus, employers need to consider the full range of wealth creation options and how they may be offered to the advantage of employer and employee.
Traditionally, the way pensions are provided often remains disconnected from other elements of reward and the nature of the employment deal. So, how can (or should) pensions be used to change an organisation? For example, how can pension wealth creation reinforce a shift in focus from an entitlement culture to a performance culture?
In this session, we looked at these issues using case studies from a number of organisations – the changes they have made, with what purpose, what happened and what was learned in the process?
The cases included Royal Mail and BT. In these discussions, the emphasis was on practical implementation, along with the contributions of the HR and benefits functions in achieving change.
At our Rethinking Retirement symposium in April 2007, one member made this comment about the future of pensions: "it is hard for us to generate action when there are no burning platforms".
Well, the evidence seems to suggest that threats and opportunities are smouldering in abundance. Pension and overall benefits offerings are potentially amongst the most strategically powerful interventions that an HR function can make. But how can we set about this?
The session encouraged open discussion and experience sharing, and had facilitation and contributions from specialist experts.