In the last several years, HR teams have made the leap from business supporters to business partners. With increased understanding and appreciation of the importance of employee engagement, senior management is more aware than ever of how necessary it is to invest resources in HR practices and programs that will drive employee engagement.
As part of the transformation to business partners, many HR professionals have encouraged senior leadership to adopt a total rewards approach to compensation. If employees are to appreciate the full scope of their remuneration, they must understand the value of each component, not just the cash compensation. Armed with this information, employees are better able to make an apples-to-apples comparison of their total rewards with that of the competition.
With the move to total rewards, compensation specialists will need to expand their knowledge beyond purely cash compensation and have a greater understanding of other elements of benefit offerings.
Industry and professional associations are recognizing this need as well. A few years ago the Canadian and American Compensation Associations became WorldatWork: The Total Rewards Association and began making a broader curriculum of courses available to help members with expertise in compensation to become total reward specialists.
Assuming a broad definition of benefits is essential for those aiming to become total reward specialists. They need to have an understanding of benefits and retirement plans, wellness initiatives, flexible work arrangements, community relations programs, adoption assistance and time off (including sabbaticals). They must not only understand the costs of these programs but also the value placed on them by an increasingly diverse workforce.
Is it vital for all compensation specialists to increase their knowledge of benefits? The answer may depend on the specialist’s career plans. Even if the compensation professional’s employer has adopted a total rewards approach, other organizations will continue to seek the services of those with compensation knowledge and expertise, especially in a tight labour market. Compensation specialists may also consider a career with an outsourcing provider. As more companies shift transactional activities to a third party, there is a growing demand for compensation specialists in the outsourcing field.
Business partner to driver
Many organizations, however, require compensation professionals to think holistically and understand the broader picture of total rewards and how it relates to the business strategy.
In this environment, compensation specialists and other HR professionals will likely feel the need to build even broader business and HR knowledge, such as an understanding of employment law (including Sarbanes-Oxley), changes in global pay and how to manage the compensation budget to deliver more value for the same dollars.
Having a wider perspective will lead to new ways of thinking about how HR can better meet business objectives. The next step is for HR to transition from a business partner to a business driver whose value to the organization is recognized and acknowledged at the most senior level.
Other business areas, such as purchasing and manufacturing, have moved to a “supply chain” process approach with documented improvements in efficiency, service and business impact. HR must take the same approach if it’s to deliver similar results.
Four business outcomes
Doing so, however, requires a shift in mindset for HR practitioners. Rather than focusing on activities, HR needs to consider four key business outcomes it can affect:
•ensuring a continuous supply of qualified talent;
•building a high performance/ high engagement workforce;
•growing leadership and key talent capabilities; and
•creating a compelling employment relationship.
To build value, HR must move from its traditional, functional silos to become accountable for processes that will deliver these four business outcomes. The compensation (or total rewards) specialist could affect those four business outcomes in the following ways:
•As part of the talent supply process, monitor and report on market pay levels and ensure compensation is competitive with the organization’s desired positioning (such as 50th or 60th percentile).
•As part of the high performance/high engagement process, design and apply pay differentiation and incentive programs that drive the behaviour required to meet business objectives in a manner consistent with company culture.
•As part of the leadership/key talent development process, define and implement executive rewards and pay branding strategies that are linked to business and organizational success.
•As part of the compelling employment relationship process, become involved in the design, communication and delivery of all programs considered components of total rewards.
Change invariably breeds innovation. Now is the time for HR professionals, including compensation specialists, to consider how they can help transform the HR function to one geared to driving business outcomes.
Keri Humber is the leader of the analytics group and Manny Campione is a senior consultant within Hewitt Associates’ Talent and Organizational Change practice in Canada. Keri can be reached at email@example.com and Manny can be reached at firstname.lastname@example.org.