The investment that organizations are making in employee training and career development is growing faster than all other areas, including base pay, according to a survey.

In 2008, almost half of the employers responding (46%) are planning to spend more money on training and just more than half (51%) plan to spend more on career development.

Mercer’s 2007 Total Rewards SnapShot Survey, which evaluates organizations’ talent and rewards strategies, includes responses from more than 580 companies across the United States and Canada. This year is the sixth consecutive year the survey has been conducted.

Other areas in which employers plan to increase spending are noncash recognition and work-life balance.

“Organizations are striving to balance the employee value proposition by investing more dollars on training and development and less on base pay to attract, retain and engage employees,” said Steven E. Gross, global leader of Mercer’s Broad-based Performance & Rewards consulting business. “Investments in training and development offer a number of benefits to employers by focusing on career opportunity and the employee experience. It also helps create an ‘employer brand’ that differentiates them in the war for top talent, while at the same time conveying the organization’s values and culture.”

Top Challenges

According to Mercer’s survey, the most pressing challenges for employers with respect to workforce and rewards strategies—reported by 88% of responding organizations—are attracting and retaining the right talent.

Other challenges noted by the majority of organizations are engaging employees (76%) and keeping total rewards costs affordable and sustainable (74%).

To make the most of their investments while focusing on top talent, organizations are segmenting their workforce and offering different rewards for different employee groups. The most common criteria to segment the workforce is job level, used by more than half (55%) of companies, followed by geographic location (35%) and business or product line (27%).

Additionally, Mercer’s survey shows that the most common rewards for differentiating among employee segments are base pay, and opportunity and eligibility for short-term incentives.

“Employers are struggling to determine where to best allocate their limited total rewards resources. By segmenting their workforce, they can focus their rewards investments on the employee groups that contribute the most to the organization’s growth and productivity,” Gross explained.

Aligning Rewards with Business Strategy

Along with addressing the challenges of attracting and retaining the right talent while keeping reward investments affordable and sustainable, employers must ensure their total rewards strategy is aligned with their business strategy. According to Mercer’s survey, nearly three-fourths of responding organizations (74%) report at least partial alignment between their total rewards and business strategies, with an additional 15% reporting full alignment.

Moreover, survey findings show a direct relationship between how often companies change their total rewards strategy and its alignment with the business strategy. Of the responding organizations indicating their total rewards strategies are fully aligned with business strategies, 78% made changes to their rewards strategy in the last three years. At the same time, 60% of organizations indicating a weaker alignment between the two strategies made changes to their rewards strategy more than three years ago.

“In order for organizations to achieve the greatest return on their rewards investments, it’s important that their business and total rewards strategies are aligned,” said Loree Griffith, principal in Mercer’s New York office. “Given how nimble companies are in today’s competitive world, taking a hard look at their rewards strategy at least every three years is necessary to keep pace with the changing business strategy.”

[www.mercer.com/compensation2008]