Why Companies Are Embracing the Employee Value Proposition

As a college student scouting out potential employers, Greg Bostrom was immediately drawn to Chicago-based Red Frog Events.

In a sea of suits and ties at one career fair, Red Frog’s co-owners wore T-shirts and jeans. He discovered the events company holds races with competitors crawling through mud, jumping over fire and downing beers at the finish line, so it seemed like a fun place to work.

But Bostrom quickly learned that Red Frog had a lot more to offer than a laid-back vibe. An array of benefits and perks spoke to his passions, goals and lifestyle. He’d have to travel around the world to help run the events and put in long hours, but the company offered free health insurance and unlimited vacation days, allowing employees to truly self-direct their time.

Beyond that, there was a clear path for advancement within the company, one-on-one coaching and competitive pay. Even the office space was cool, with a giant treehouse for staff meetings and free beer on tap for after work. Then there was this unusual perk: After five years, any employee could earn a four-week, all-expense-paid sabbatical for travel outside the United States, an incentive for rejuvenating employees and sparking creativity.

Human resources leaders are giving Red Frog’s thoughtful approach to traditional compensation packages another term today: the “employment deal” or the “employee value proposition.” In the proposition, employers spell out the overall deal they offer employees beyond basic salary and benefits, and often include a company vision for what employees can get and give back in return. At a time when many industries are still struggling to attract and retain top talent, many human resources experts say the employment deal is clearly gaining importance.

Bostrom, 24, now Red Frog’s chief innovation officer, says he believes Red Frog’s success lies largely in the co-founders’ employment deal, essentially a vision for a culture built on meeting the goals and expectations of its customers and employees. That special culture also matched the company’s vision for its events: fun, extraordinary affairs that stand out among competitors.

“Every day I come into work at Red Frog, the people here are motivating me. There’s a real team mentality,” Bostrom says. “And there’s always a focus at every meeting on goal setting and accountability for our goals, and where Red Frog envisions people being and where Red Frog envisions the company going.”

Laura Sejen, global practice leader, rewards for HR consultancy Towers Watson & Co., says the employment deal has been a focus of much of Towers Watson’s recent research because there’s mounting evidence of its importance.

“It’s the broadest possible definition of the relationship, or the deal, between the employer and the employee,” she says in describing the ideal employee value proposition. “It encompasses every aspect of the employee experience, and it’s not just about the portfolio of total rewards programs, but it extends to the mission, purpose and values of the company as well as the way they define jobs and the culture of the organization. It really is about that full experience of being an employee in an organization.”

David Insler, senior vice president and West region leader in Sibson Consulting’s Los Angeles office, says his firm has also seen clients place a greater emphasis on the employee value proposition in recent years. Sibson’s clients vary considerably from less than $100 million to Fortune 100 companies and across industry segments, including higher education institutions.

“I have seen more and more companies become more concerned about the clarity of their vision and their visibility and their transparency with employees,” Insler says. “I can’t tell you it’s always because they fully understand the EVP concept, but with the kind of challenging times they’ve experienced over the last three to five years, they know they’ve really got to engage with their employees and develop that level of communication. When things are tough, they know the employees are the ones who will make the difference.”

According to several recent studies, salaries in North America are expected to rise only modestly in 2013, and that’s on top of several stagnant years through the recession. That salary scene also plays into the importance of an employee value proposition, Sejen says.

The recession “put a lot of pressure on the normal financial forms of rewards and caused employers to think more broadly about what it really means to work at an organization,” Sejen says. They’re looking at: “What are the compelling reasons for someone to work in an organization beyond pay and benefits?”

Many HR leaders advise firms to pay close attention to base pay. It’s a rising concern among longtime employees, and a growing number of top talent might leave if base pay doesn’t rise above the modest increases of the past several years. However, once base pay is competitive, all the other factors take on added significance, says Murat Philippe, director of workforce consulting services for Avatar HR Solutions in Chicago.

“We find that salaries and bonuses are definitely part of the equation, and you need to be in the ballpark as far as compensation goes,” Philippe says. “But you don’t have to be the highest payer. You don’t have to be better than 95 percent of the others out there. Then, when you’re in the fair-salary area, you need to look at higher-level ideas, such as your career and development options.”

Many HR consultancies also argue that a stronger employee deal can lead to better company performance and an enhanced bottom line. For its 2012-2013 Global Talent Management and Rewards Study, Towers Watson surveyed 1,605 employers. The study found that organizations that had done the most work developing and executing their employee value proposition achieved superior financial performance over businesses with less-developed ones.

Take Red Frog Events for example. The company has seen wide success after developing a comprehensive vision for its culture. Since its founding in 2007, the company grew from a handful of employees to 80 full-timers, 41 interns and

$50 million in revenue in 2012. The company has roughly 2,000 job applicants per month, Bostrom says, and has been at the top of several “Best Places to Work” lists in Chicago.

When American Express Co., a frequent Fortune magazine “Best Places to Work” winner, recently looked to strengthen its employment deal, it turned to a survey of employees that identified key factors employees felt made the company a top place to work. “The two things we found that were most important were challenging work and advancement opportunities, and they were looking to work in a manner where they could use their creativity,” says Cameron Batten, the company’s global director of recruitment, marketing and branding.

With that in mind, the company rolled out a series of videos, all available on YouTube, which featured American Express employees. The clear message: American Express is looking for creative leaders focused on meeting the company’s mission, “to serve people and inspire extraordinary lives.”

Today, the company has 98 employee videos. Two years ago there were none. As a result, the company doubled its traffic from recruits over various online channels, Batten says. At the same time, the company offers an array of robust benefit options and work-life balance options. “The way we look at it is: The war for talent is fierce and that talent helps you bring in the bottom line,” he says.

Like American Express, many companies looking to shore up their employment deal first turn to a frank survey of employees. While shoring up an employee value proposition can seem relatively straightforward on paper, the results from employee surveys are often where vision meets a hard reality.

Philippe strongly advised the firm to loosen up its shift policies, and pointed to the high cost of replacing burned-out employees. The client didn’t budge. “It was just like pulling teeth to get the senior manager and leader there to see that this wasn’t an effective way of running your business,” Philippe says.

Still, Towers Watson’s Sejen says companies that want to do a better job with their employment deal need not be intimidated.

“To get the returns we’re talking about, meaning better financial performance and fewer attraction and retention issues, you don’t have to do it all,” she says. “What we’ve found is that even just starting down the path … helps you start realizing better outcomes.”

Meg McSherry Breslin is a writer based in the Chicago area. Comment below or email editors@workforce.com.