Ken Fairchild, director of U.S. compensation, Medtronic, Inc.
Ken Fairchild, director of U.S. compensation, Medtronic, Inc.

In 1949, in a 600-square-foot garage in northeast Minneapolis, an electrical engineering graduate student and his brother-in-law established a medical equipment repair shop. Their goal: To transform the lives of patients.

That's exactly what they did.

Today, Medtronic, Inc., has grown into the world's largest independent medical technology company, serving patients and physicians in 120 countries. This success is due in large part to the company's simple mission: to research, design, manufacture and sell products that alleviate pain, restore health and extend life. However, with 41% of the company's revenues outside of the U.S., it recently became time to focus on Medtronic's evolving global culture. The company needed to expand on its 60-year mission.

Medtronic had multiple reward philosophies worldwide, and it needed one clear, consistent reward philosophy that would be flexible for all of its local offices. It had been 15 years since the company had last evaluated its philosophy, and the working world had changed dramatically. "It was imperative for us to develop a truly 'glocal' — globally applicable and locally relevant — reward philosophy that was compelling, appropriate and easy to understand," says Dawn Galas, Medtronic's total rewards philosophy project manager. "It had to motivate employees to fulfill our mission to serve patients."

At the same time, Medtronic wanted to revise its compensation structure to make it less U.S.-centric and create a governance framework to allow managers to make good decisions and implement them more efficiently. Medtronic turned to Towers Watson (Watson Wyatt at that time) for assistance. "Towers Watson had the tools, as well as the best process to meet our specific needs," says Galas.

(Left to right) John Bremen,Towers Watson managing director and leader of rewards, talent and communication in North America; Ken Fairchild, director of U.S. compensation, Medtronic; Sue Kanne, Towers Watson account director; Dawn Galas, Medtronic's total rewards philosophy project manager; and Marlies Noll, director of international compensation and benefits, Medtronic
(Left to right) John Bremen,Towers Watson managing director and leader of rewards, talent and communication in North America; Ken Fairchild, director of U.S. compensation, Medtronic; Sue Kanne, Towers Watson account director; Dawn Galas, Medtronic's total rewards philosophy project manager; and Marlies Noll, director of international compensation and benefits, Medtronic.

Reaching out

Before the work began, it was important to strategize and clarify the HR team's goals and objectives. "Building a successful philosophy meant reaching out and learning about the needs of employees, the leadership and the organization as a whole," says Ken Fairchild, director of U.S. compensation. To accomplish this, the team structured the project around four critical areas: a competitive analysis, key stakeholder interviews, employee surveys and a human capital return-on-investment (HCROI) analysis.

The first step was to complete a current-state review and market analysis to assess the company's competitiveness in the areas of compensation and benefits. "We conducted a high-level compensation and benefits analysis in 10 countries, focusing on specific employee segments," says Sue Kanne, Towers Watson account director. "We then analyzed Medtronic's global governance practices using an assessment tool with information from one hundred multinational companies."

Next, Towers Watson conducted interviews with executives, business leaders and board members to understand their vision of Medtronic's total rewards, as well as the impact of the business and human capital strategy on the company's employee value proposition (EVP) and total rewards philosophy.

Another crucial component of the project was a total rewards and engagement pulse survey for sales, scientific and other randomly selected employees in 10 countries, as well as those considered high-performing and high-potential. Responses were compared to global benchmarks revealing the overall satisfaction and understanding of Medtronic's compensation and benefits and the perceived value of specific compensation and benefit components.

The team gained important insights from learning what Medtronic employees around the world value most. Feedback from the survey demonstrated differences among regions in terms of which rewards employees appreciate. It also provided the team with information on what to communicate to employees regarding their benefits.

The last piece of the puzzle was an in-depth analytical process using HCROI analysis, which looked at Medtronic's competitive total rewards data in combination with Towers Watson industry data. The analysis enabled the team to look at employee perceptions about the competitiveness of Medtronic's benefits.

"Out of these analyses came a priority list of potential actions for Medtronic to take based on these results," says John Bremen, Towers Watson managing director and leader of rewards, talent and communication in North America.

Medtronic's world headquarters in Minneapolis
Medtronic's world headquarters in Minneapolis.

A work in progress

The result of the HR team's efforts is a new global total rewards philosophy. But Medtronic is not going public with its outcomes just yet.

Before the launch, HR is refining its compensation structure and creating a new governance framework. The HR team then plans to introduce the philosophy to employees as the framework for communicating compensation program changes. "We need to put this in strategic context and make it significant for employees by drawing connections between the EVP and fulfilling the company's mission," says Galas. "We first must show employees what they'll see as a result of the philosophy — because the philosophy is only as good as our actions to back it up."

Sage Advice

Medtronic's HR leadership team offers the following recommendations for companies approaching a revamp of their total rewards philosophy:

  • Find a true partner. You and your consultants must work together as a solid team.
  • Understand what you're trying to achieve at the very beginning.
  • Pay attention to your data. All elements of the data tell a story.
  • Be open to constant editing.
  • Reach out to employees and leadership in order to build a meaningful and successful philosophy.
  • Follow up with all employees and managers who provide feedback.
  • Thank them, and show them how their comments have been used.