“On Aon” - Episode 90:
Title: Navigating the Future of Total Rewards
The right Total Rewards strategy is crucial for an organization to reward, recruit and retain talent. In this episode of On Aon, we examine how people leaders are playing a vital role in bridging the gap between employee needs and organizational goals. Our hosts, Heidi Burnett and Stephanie DeLorm, discuss a multi-dimensional approach to decision-making and how AI, while promising greater efficiency, also highlights the importance of human connection and purpose.
Key takeaways:
Experts in this episode:
Heidi Burnett — People Solutions and Impact Leader, Aon People Organization (HR)
Stephanie DeLorm — Global Total Rewards Commercial Leader, Aon
Key Moments:
Additional Resources:
Soundbites:
“The way we look at it, when it's done right, a really well-structured Total Rewards program really drives both for the employer and the employee value so that your workforce is engaged, productive, aligned with your business objectives, and your people are feeling that sort of compelled belief and motivation to show up at work every day.” — Heidi Burnett
“Overall, Total Rewards five years from now will be even more dynamic, more data-driven, more personalized, purpose-led, and tightly aligned to both employee expectations and business priorities.”
— Stephanie DeLorm
Intro
Hello and welcome to this episode of On Aon, where we dive into some of the most pressing Risk Capital and Human Capital issues businesses around the world are facing. Today, we're looking at the latest developments in Total Rewards and how Total Rewards leaders are playing an increasingly important role in the financial success of an organization. This requires them to balance business objectives and employee needs to ensure they drive value for both. Joining us on this episode are Heidi Burnett, who leads People Solutions and Impact for Aon’s People Organization, and Stephanie DeLorm, Aon’s Global Total Rewards Commercial Leader.
Heidi Burnett
Hi, I'm Heidi Burnett, and I'm actually inside Aon in our people organization, and I'm responsible for our people's solutions and impact. In today's On Aon episode, we're looking at Total Rewards. So as we all know, the name Total Rewards will bring something to mind when you think about a holistic approach to it. It means looking well beyond just compensation and benefits.
The way we look at it, when it's done right, a really well-structured Total Rewards program really drives both for the employer and the employee value so that your workforce is engaged, productive, aligned with your business objectives, and your people are feeling that sort of compelled belief and motivation to show up at work every day.
With me today to discuss is one of our experts in the field, and may I add a friend, Steph DeLorm. In our discussion, we're going to try to uncover how the concept and just the definition and expectations for Total Rewards has evolved and how the continual balance between employee needs with the needs of the business has hit even a new kind of level of both opportunity and friction.
So let's get started. Steph, first of all, do you want to introduce yourself any other way that I have? Because I want to give you that stage. And I also know you travel a lot. So I was going to ask, where's the last place you just were?
Stephanie DeLorm
Yeah, the last place was Boston, Massachusetts. That was for work, not personal, but I love Boston. It’s a great city.
Heidi Burnett
Well, the reason I wanted to do that, and hopefully you feel good that your role now is sort of leading the charge for Total Rewards at Aon. Do want to explain that a little bit so that anyone listening understands what that means and why we have that role?
Stephanie DeLorm
Sure. Yeah, thanks, Heidi. So I am global Total Rewards Commercial Leader and essentially really trying to bring our health, wealth and talent practices together in a more integrated way under the umbrella of Total Rewards. So, thinking about solving client issues across our Human Capital structure.
Heidi Burnett
Excellent. Yeah, and I think it's exciting that we have recognized the importance of understanding how to dig deep and then pull the thread together. And the reason I loved asking where you were is because part of what you're doing is spending time with colleagues and with clients in these roles with these responsibilities around the world.
So, I know I've talked to you when you're in Poland and the next week you're in someplace. So, I'm glad to know that you were just with our friends in Boston.
And a lot of the conversations you're having are really a great two-way of listening, learning, gathering insights, and then sharing.
So, the first question I have to ask you is the one I know that even you and I were discussing in preparation and then with some clients in Chicago. But when you think of the words Total Rewards, I want you to erase what you used to think it was, but tell me what you think it is today and then how it's changed and even just the last few years.
Stephanie DeLorm
Yeah, great question. And what I'll start by saying is that every organization that I've talked to defines Total Rewards a little bit differently. And traditionally, I think everybody can agree that when you think about Total Rewards, really was, think of pay and you think of benefits and you think of retirement and probably time off. But today it's so much more.
And really, no matter how you define it, it shouldn't be thought of as a series of isolated programs. But really thinking about Total Rewards as an integrated and connected strategy that enables and strengthens your — or an employer's — employee value proposition and drives sustainable long-term growth.
And at Aon, we think about it as across five pillars, the first one being compensation, so thinking about it from all aspects of pay, including base pay and variable pay. And then benefits, which includes health, wealth, retirement, and wellbeing. Work environment, which you can think of as culture, but then also things like work-life, flexible work arrangements, and then paid time off. And then recognition, which includes non-cash recognition. And then finally, career development, which includes things like training programs, but then also career pathing.
And you know, Heidi you talked about this in the intro — which is when these elements are aligned, so not just designed well individually, but intentionally connected, they become a powerful lever to attract, engage, and retain talent. And so really the bottom line is this, when you think about Total Rewards, it's not just about checking off boxes. It's really about creating value for your people and for your business. And when it's done right, it's not just a set of programs, but it really can be a competitive advantage for the organization.
Heidi Burnett
Okay, so I'm so glad you just said that last comment because I really want to start asking you, so what's driving the need for change now? But before I do that, what you just said connects so well with what we've heard from our client organizations share with us — or at least those we believe are really leaning into why it's got to be different now — which is we've been, not all of us, but there's been a lot of emphasis on the programs and even the term “over-programmed and under-delivered” has sometimes been circling.
And so I love the way you just described that last sentence, but when you now dip into that and say, like, “Why now?” Like, when you look about where we are today from every angle, what do you think it is that's driving, in particular, this set of responsibilities, roles, and opportunities? I guess I'm gonna call them opportunities now, Opportunities in the total reward space. Why now?
Stephanie DeLorm
Yeah. So it's a lot actually, but I'll try to break it down into four key themes. And the first one, which we all are talking about, is that we're seeing a major shift in workforce expectations. And we keep talking about a stat that's come out from our latest Employee Sentiment Study, which is 57 percent of employees are saying that they're considering new opportunities in the next year which signals a serious retention issue.
Now, what we've seen is that voluntary turnover has started to decline. So whether or not people actually leave is unclear. But the mere fact that so many are thinking about it forces employers to ask themselves a tough question, which is, why should people stay? So pay, benefits, growth, flexibility, these are no longer just perks but they're expectations.
At the same time, cost management has taken center stage. And our Future of Total Rewards Employer Study shows that cost management is now the number one priority for employers, which is overtaking revenue growth as a number one priority from a couple of years ago. And healthcare costs are rising twice as fast as wages, which means that every dollar spent on healthcare is a dollar that's not going towards compensation or retirement.
So, the challenge becomes, how do you offer meaningful Total Rewards programs that meet employees' expectations without blowing your budget?
And it really does boil down to back to the value piece. So, making sure that every dollar that you're aligning, you align to what matters most to both your people, but then also to the organization.
Okay, so now you add reputational risk on top of that, which is increasingly shaped by employees' experiences and voices. And it's really easy for employees to voice their unfiltered opinions on open social media [plat]forms.
And then on top of that, there's growing complexity of managing Total Rewards. Employers are becoming increasingly concerned about their fiduciary responsibilities.
I said a lot there, but when you put it all together, rising employee expectations, tighter budgets, reputational pressure, and growing complexity — it's clear that employers, can't just keep thinking about doing things the way they've always done them in the past. They need to rethink how they deliver value through Total Rewards.
Heidi Burnett
Okay, so you've brought up a really good point where —and people out there like verbal grade, if you want to visual — I'm just imagining sort of like two major trucks on the freeway heading towards each other. What you don't want to do is have them hit and there's this implosion. So what I'm thinking when I say that is there's sort of these pressures that the employer's facing, right, that you explained to me. Then you talked about whether you called a pressure or an expectation the employees are all facing. And if they bump into each other and they don't align right… what I'm hearing you say is you're going to lose people, the company will have spent money that frankly they could have spent elsewhere, but they spent it in a place that didn't add value.
So, like that's the worst-case scenario. So when you think about, and I know we use the word balance a lot, but whether it's a balance, a trade-off or a wise way to approach it, how do you ensure that when the, this employee intersection with employer, do its best to sort of meet everyone's needs?
Do you have any — I'm just thinking like when you think about that and you brought up the dollars, but is there just a new way to think about that that we're talking with clients about?
Stephanie DeLorm
So first off, your visual. I'm visualizing Heidi in explosion.
Heidi Burnett
I don't want to be that tragic. I don't know, Steph, but like, mean, good intentions here.
Stephanie DeLorm
Yeah, I will say striking the right balance, it's not easy, but it is critical. And it really boils down to making deliberate decisions around where to invest, where to pull back, and how to help people navigate the change.
So employers really need to take a multi-dimensional approach and think about four key value-drivers to help them model the trade-offs and then the impact of those trade-offs.
And so those four values, we'll start with the first one, which is competitive value. So, thinking about it from the standpoint of are we positioned at, above, or below the market for pay and for benefits?
And then the second one is employee value. So, are we investing in what truly matters to our employees?
And then the third one is around financial value. So, are our Total Rewards programs delivering ROI and driving business outcomes?
And then the last one is around strategic value. So, how does our people strategy impact performance, retention, and productivity?
And this framework allows organizations to optimize their investments, ensuring the best return for both their employees and then for their business.
But I talk about the values framework, but even the best strategy can fall short without the right communication. So, when employees understand the “why” behind decisions, especially when messaging is tailored to different segments, it builds trust. And trust matters. It matters even more when decisions are tough. So, getting the communication and the messaging rate is also so critical.
Heidi Burnett
You know, it's hitting me as you're talking. And again, I'm so thrilled that you've been talking with organizations and people in these roles all over the world. So, your perspective may vary by geo and you might say: “No, it's not, it's the same Heidi.” But it's hitting me as this has evolved and changed in all things you're explaining. If you were someone in this role, or let's even think differently, if you were someone who wanted, and always said, I want to be a head of Total Rewards, like what kind of like capabilities or skillset do you think are different than maybe used to be?
And I know I'm throwing this out of the blue, but it's hitting me as we talk about all these different things. What should a person who's sitting in that job wants to be successful or somebody wants this job? What would you think of as sort of one, two or three just key skillsets to learn or to have?
Stephanie DeLorm
Yeah, I think it's such a great question and one that keeps coming up in conversations that I'm having with employers. And I would say the Total Rewards leader role today plays a very different role than it did even three years ago. And so it's no longer about just about managing pay or managing benefits administration or being behind the scenes. The role has become so much more of a strategic driver of business success.
So, in the past, the skills needed for a Total Rewards leader, if we just focus on the from and then the to, they were mostly technical experts. So really focused on making sure that programs were running, making sure that they're supporting their broader HR teams or finance teams. But today that's changed and it's going to continue to evolve.
I think that Total Rewards leaders today, they're at the table helping organizations answer some of the most pressing questions like how do I retain top talent? How do I create an employee expectation or experience that supports performance and wellbeing? How do I spend smarter in a cost-constrained environment? And so that means, back to your point around the skills, it really means that the skills that are required are evolving as well.
And so you need to understand the mechanics, but you also need to be a strategic thinker, a data translator, a storyteller, and even a marketer. So, you have to be able to go back to the communication being so important. You need to be able to communicate the value of your programs in a way that resonates — both with executives, so as you're trying to build your case for why you need to make change, but then also to your employees.
The other piece to this too is, we started the conversation saying that your Total Rewards strategy can't be developed in individual silos.
And so another part of this is the Total Rewards leader needs to be deeply collaborative, working across those silos, working across the various functions within HR, finance, legal, other functional areas to really make sure that the total reward strategy is aligned and impactful.
So I'll just say, I know I've said a lot, but ultimately the Total Rewards leader today isn't just about managing programs. They're there really to help shape the organization's culture, their talent strategy, and reputation. And it's more complex than ever, but it's also one that has a lot more influence and a lot more impact.
Heidi Burnett
You know, what's fun about this is when you're talking, I think about the listener who gets excited about the opportunity and the challenge that we have, all of us, people that are in the jobs doing it at their company, those of us who partner with them to help them be successful.
And I think about what's changed, what you described, not only the environment, the employer, the employee, we know all the macro going around the skillsets that are needing. And for me, I'm listening to this thinking this is actually exciting for those of us that love to think about what do we do next to do better.
And what I also think that's interesting is when we think about finding that solution and the way to work towards that solution that brings all these, what used to be siloed and are often competing elements, but to bring them together in a way that becomes, we're going to do this with better outcomes than we used to think.
But the other thing I'm thinking of, and here's a visual again, we always talk about a seat at the proverbial table. And we know that means we want HR at that table. But what I'm hearing you're talking about is, we're already at this table, but what's great is we're taking that table, which is all about where the employees are and talking and what they need before they've even joined a company once they're there and when they're deciding to go.
And then we have this other table where it's the board and the leaders of organizations figuring out what do we really need to do to keep our business thriving, growing and competing.
And what's kind of neat about what you've just explained to me is like thinking of all the skills it takes and the pieces brought together, this is actually a job that has the gift of bringing together those two different tables and saying like, it's actually a center table that we can do this together at.
So, and no pressure because you've done a really lovely job of explaining where we've been, where we at, and just sort of this, this great moment, which is, I see it as an opportunity more than a challenge. If you were to pause, and I want you to pull out your crystal ball, and I want you to share with all of us, what do you think it's going to look like in five years from now?
Stephanie DeLorm
Yeah. And so maybe I'll take it from the standpoint of when we think about Total Rewards in general, what do employers need to be thinking about in terms of evolving their Total Rewards strategy? I would say, mean, there's so much, right? So I'll try to boil it down a little bit. And I'll say the first one is longevity, right? Longevity will shape workforce and Total Rewards strategy going forward.
People are living longer, they're working longer. The concept of retirement is evolving. So fewer employees will exit the workforce at a fixed age. Which is going to lead to higher healthcare costs, delayed retirement, multi-generational workforces with widely divergent needs. So, certainly a challenge for employers to think about what that means in terms of their Total Rewards programs.
Personalization will accelerate and be powered by AI, right? You can't have any conversation without talking about AI. And personalization isn't just a trend, but it's really an expectation. Employees want benefits and reward experiences tailored to their individual needs, and AI is enabling that at scale. So, we expect that AI tools will replace traditional health advocates and even benefit advisors, fundamentally reshaping the overall employee experience.
And then I'd say that Total Rewards strategy and philosophy must be aligned and business-responsive. So, meaning that static total reward strategies are becoming obsolete. They need to be agile. Companies now are demanding Total Rewards philosophies that can pivot quickly with business cycles and market shifts. And cost savings will always matter, but even more so will ROI and what that ROI looks like in terms of investment on talent.
And then differentiated employee experience. Experiences will define culture and ultimately the brand. So, companies will increasingly use Total Rewards as a way to live their brand and culture and not just support it. So, recognition programs, incentive structures, and flexible benefits will all reflect and reinforce the organization's purpose and value.
Overall, Total Rewards five years from now will be even more dynamic, more data-driven, more personalized, purpose-led, and tightly aligned to both employee expectations and business priorities. And I'll leave it at that because there's probably I can go on and on when we think about the crystal ball looking out into the future.
Heidi Burnett
Well, no, I love that. And so, a couple of little reflections as you said that, which and then maybe it's one reflection or two and then I'd like to put an anchor on our calendars, which is I love that you brought up AI, which everyone talks about. But what you just said was the way that both the businesses and the employees lens, which we've been talking about this whole time, the impact of AI will be there and it will be live and thriving. But you also talked about the fact that the human moment is going to be so big. You have all that attraction and attention and those things you brought about individualization, about the experience, that's just a reminder that when AI is really implemented and optimized, the part that makes us human gets bubbled to the top.
So thank you for explaining that way. And then the other thing I'd like to say is let's put a date for five years from today and you and I can like take our notes and say, how much do we check the box and how much did the world move faster than we expected and surprise us.
Stephanie DeLorm
I have a quote that aligns, Heidi, with what you just said about AI. Yeah. I used this in a client meeting the other day, which is, real promise of AI is not just efficiency, but intention. If we use it well, can help us reclaim the time to lead, connect, and create with more purpose.
Heidi Burnett
So this was fun. Thank you so much. That's our show for today. And thank you all for listening.
Outro
Thanks for tuning into the latest episode of On Aon. If you enjoyed this episode, don't forget to subscribe wherever you get your podcasts. And be sure to visit Aon.com to learn more about Aon.