OUT: MERIT PAY IN: STRATEGIC REWARDS If employees think of merit pay as an entitlement, how can it motivate them to work harder or better? If a reward program is not linked to your business strategy, how can you expect to get results?

These might seem like simple questions, yet most businesses have not wrestled with the obvious answers, according to a new survey from Watson Wyatt Worldwide in St. Louis. The report, "Strategic Rewards: Improving Business Performance Through People," analyzes a survey of nearly 700 U.S. employers who were asked about their reward plans.

Only about one in three of those companies create strong links between their reward program and their business strategy. Further, only about one in five reported that their reward plan is flexible in meeting changing business conditions.

Jerry McAdams, national practice leader, reward and recognition systems, at Watson Wyatt and author of the report, says companies must use their reward plans to send messages to employees about what is important to the organization. McAdams calls for strategic rewards, which he defines as "a system of rewarding individuals or groups for achieving or contributing meaningfully to an organization's strategic goals."

Other findings: * Just over one quarter of companies said employees value their reward plans to a great extent, and about the same number said their employees value their reward plans "to a little extent." The other half said their reward plans were valued "to some extent."

* 95 percent of respondents said employees view merit pay as an entitlement.

* Analysis of the survey results demonstrates a correlation between reward plans and companies that performed well (using total shareholder return as a measurement). The better-performing companies had reward plans that encouraged desired behaviors, were linked to business strategy, were clearly articulated, were continuously measured, were valued by employees, and were sensitive to business performance.

SURVEY FINDS 70 PERCENT OF INCENTIVES IMPACT SALES Nearly 68 percent of respondents to a recent survey said incentive programs have at least some impact on sales, with nearly half reporting a "tremendous impact." Dartnell, a Chicago-based research firm, surveyed sales managers from more than 800 companies in 30 industries on their sales force compensation practices.

Other findings: * The average cost of keeping a sales-person in the field has increased to $16,154 per year. After several years of cost-cutting, the survey reports, companies are restoring spending to former levels.

* Training spending on sales professionals is also up dramatically, to $7,937 per year from $6,287 reported two years ago.

COMMUNICATE EARLY AND OFTEN DURING CORPORATE CHANGE Companies need to do a better job of communicating with their employees, according to a recent survey from Hewitt Associates LLC. "The nature of work has changed, and only some companies have explained what those changes mean to employees," says Ed Gubman, human resources consulting practice leader for the Lincolnshire, ILbased management consulting firm.

"Companies that communicate early, often, and about issues that matter are creating an environment that inspires employee commitment."

Hewitt Associates surveyed more than 46,500 employees from 38 different companies for its opinion survey on the changing workplace. Seventy-five percent of those surveyed reported first hearing news through the corporate grapevine (see box at right), while 45 percent said communication from senior management to employees is good and 44 percent said employee communication is timely.

The survey, however, found that employees lack confidence and trust in senior management, with most employees feeling undervalued. Only 60 percent expressed confidence in their senior management team, only 31 percent felt senior management knows what's on their minds, and only 41 percent said senior management really cares.

More companies are realizing that employee commitment can be the definitive factor in achieving business results, says Hewitt's Gubman.

"The leading companies in the next century will be those that recognize that people are their best sustainable advantage," he says. "The companies that nurture talent and gain commitment based on trust will be best positioned for future success."

Among the survey's other findings: * Overall employee job satisfaction is relatively high: 86 percent of respondents were satisfied with the work they do, 88 percent were satisfied with their coworkers, 78 percent were satisfied with their benefits, and 72 percent were satisfied with their direct managers.

* Still, many employees feel undervalued. Just over half were satisfied with their compensation, half were satisfied with recognition, and 44 percent found advancement opportunities satisfactory.

THE COMPANY THAT LEARNS TOGETHER,EARNS TOGETHER "It is time to put people back into the center of our companies' universe," say the authors of A Better Place To Work, recently published by the American Management Association.

Adolf Haasen and Gordon F. Shea say many companies claim that people are their most important assets, yet often don't understand that turning employee involvement into competitive advantage requires "profound changes in the role and philosophy of management, corporate values, organizational hierarchy, and labor relations."

Haasen and Shea analyzed eight companies whose unusual workplace structures illustrate the importance of motivation.

Among them is the Columbia, MDbased Apex Group, where ongoing learning is considered not only essential--as it would be at any high-tech company--but motivational. Apex provides computer software engineering services and network and systems integration. The company's intense focus on learning has been integrated into its three-pronged Technology Advancement Program (TAP).

TAP consists of a system of mentors; a guided development plan for each employee, including career path options and training programs; and a testing and examination system offering employees certification in different technical areas.

In addition to TAP, there are a variety of ad-hoc learning experiences at Apex. Kevin Nolan, director of the Mid-Atlantic region for the company, says he has tried to create an organization where "learning is a life-long habit.

"There is a tremendous amount of time and effort that goes into learning and into creating ways for people to learn," Nolan explains.

One of those ways is through meetings. While many employees view a meeting as something that "takes them away from their work," Nolan says, he has transformed his group's meetings into learning sessions. "I minimize the administrative part of the meeting and maximize the learning by bringing in a vendor or by creating some other opportunity for learning."

Apex's emphasis on continuous learning, Nolan adds, has paid big dividends for company profitability and employee recruitment, retention, and motivation.