Tactic started during war for talent, fueled by pressure to contain costs
Under pressure to contain costs while still finding and retaining top talent, more HR departments are turning to workforce segmentation, according to a recent global study.
Workforce segmentation, systematically identifying top performers and giving them the most significant rewards, is being used by employers to control staffing costs without reducing head count, says the study Reward and Performance Management Challenges: Linking People and Results.
The practice has become increasingly popular, said Christopher Hatch, national leader for Towers Perrin’s rewards and performance management practice, based in Toronto. “It started during the war for talent and it got exacerbated by increasing cost containment pressures since then.”
About 56 per cent of Canadian firms identified workforce segmentation as the top tactic for managing people costs (versus 52 per cent globally), according to the survey of more than 1,300 organizations in Asia, Europe, North America and Latin America.
Reynold Douyon, director of global compensation for Bombardier Aerospace, said the company is moving tentatively toward some workforce segmentation, but only “gently so,” he said.
The company is facing a number of important human resources challenges, complicated by the fact that it is in an industry hard hit by the terrorist attacks of Sept. 11.
“Number one is retaining the people that I want,” he said. “You need to take care of them. You need to let them know that you care about them,” he said of the plan to single out important workers for special treatment. “It will be done relatively gently, but we put a little more money into somewhat fewer people,” he said. It may mean increases to compensation or offering more development opportunities.
Any company with a large manufacturing workforce, where teamwork needs to be encouraged, has to be leery about too much workforce differentiation, he said. For now, the practice will only be applied to the sales and marketing workforce.
The difficulty many organizations face with workforce segmentation is that it requires effective performance management, said Hatch. “But the performance management programs in most organizations are not working properly,” he said. They are being communicated or implemented poorly and often the problem is that managers aren’t using the tools and setting goals correctly, he said.
Managers will play a vital role in the success of the workforce segmentation programs at Bombardier Aerospace, said Douyon. When an employee is being rewarded for special contributions, the manager has to make sure the employee understands why he is getting an increase. That discussion is between the manager and the employee, he said.
Aside from workforce segmentation, the study also confirmed the continued increase of variable pay generally.
More organizations are really eager to be viewed as an employer of choice, said Douyon. At Bombardier Aerospace, that means employee engagement has become an important metric. Part of that is improving employee understanding of the relationship between business performance and individual compensation, he said. As a result, there has been a concerted endeavour to improve communication right from the top of the organization, he said.
“There is a big effort in terms of measuring all of our leaders in terms of how effective they are in communicating company results. If (employees) don’t understand what you are trying to do it may create more problems than you are trying to resolve,” he said.
“We will be improving communication and making it more frequent and more focused on some of our results as it is linked to compensation.”
