Chapter 2. Why the Total Rewards Approach Works

Throughout the decades, there has been compelling evidence showing that the best way to attract, engage, and retain employees is to focus on total rewards, not just pay and benefits.

In the 1950s, Frederick Hertzberg conducted his famous study of factors affecting job attitudes. He identified 16 factors and categorized them into 10 “hygiene factors” and 6 motivators (growth, advancement, responsibility, work itself, recognition, and achievement). Note that the motivators do not include pay and benefits—these are hygiene factors. To motivate, a total rewards approach must be taken.

Since the 1960s, psychologists (including Abraham Maslow) stressed how less tangible needs, such as growth and self-actualization, were equally important to individuals’ sense of worth. Figure 2.1 illustrates how total rewards maps to Maslow’s famous hierarchy. This message has been reinforced over the years by other leading thinkers and management gurus, including Maslow, Ed Lawler, Peter Drucker, and Edward Demming.

The link between total rewards and Maslow’s hierarchy of needs.

Figure 2.1. The link between total rewards and Maslow’s hierarchy of needs.

Most data show that work and career opportunities, leadership, and recognition are leading drivers in employee engagement and retention—not pay.

What do you do when you get a job offer? Take a sheet of paper, draw a vertical line down the middle, label one column “stay” and ...

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