Your Pay Programs Are Not Prepared for the Newest NEW Normal
A New New Normal
Compensation professionals face challenges in this post-pandemic environment that have not been present for decades. The business day has changed from a predictable office setting to one of the hybrids and alternative reporting structures. Established communications channels have morphed into a web of virtual connections on disjointed platforms that vary from one company to the next. Ads that are used to produce streams of resumes from qualified potential candidates may go unanswered for days or weeks. Rising stars on the management team are giving notice and heading either for more lucrative opportunities or changing careers to less stressful and more fulfilling pursuits. The former employees that were cut when the pandemic was at its worst are not coming back even when offered the prospect of higher wages. The annual compensation budget you proposed only months ago now seems short of the mark. On the horizon is the potential for inflation at levels not experienced in decades, coupled with the looming prospect of a war and resource scarcity-induced recession, which, when combined, is called stagflation. What was once a bad day has become every day.
Proactive Response
So, how do we respond to this new normal? One way is to map out the challenges and focus on what is under your control. Work has changed, and the hybrid workplace will likely be a permanent feature. At some point, Information Technology will settle on standards of how we communicate in this environment -- our HR structures need to follow also.
All employers and industries share the labor budget process, but there are ways to stand out from the pack. The attributes most often cited as important to talent retention and attraction are pay, the condition of the workplace (setting, environment, hours, people, etc.), job security, and position fit to current needs and aspirations. All these are partially or mostly under the control of managers and Human Resources, even that last one when addressed by active engagement and career path tracking.
One of the best foundations for weathering the storms of change is a thorough understanding of your organization's needs and carefully planning your reward philosophy and programs. Identify the talent needs critical to success and focus on how these units and positions perform in metrics like turnover and vacancy duration rates. Track the impact compensation and benefits programs, have on these positions. If you have star incumbents essential to the organization's future, ensure they are identified and offered training and advancement opportunities that are clearly communicated as their career progresses. Evaluate your merit process. Does it identify high performers, and does their pay reflects their valuable contributions to the company? You can also use performance management programs to identify strong and weak managers. Reward the strong managers and help provide training or assignment reallocation to less effective managers. Weak managers often damage a business unit far beyond the impact of many HR programs and processes.
If it is difficult to find talent, expand the range of potential candidates being considered. Consider other forms of compensation beyond fixed pay, such as short-and-long term incentives, recruiting and sign-on bonuses, etc., that may be used in tandem with base salary increases in a targeted way. Flexible work options and other job environment modifications can be used to attract candidates that otherwise may not attract to your open positions. Examples include retirees, parents with young children, individuals with blemishes in their job record, workers living in other states (or countries), etc.
There are steps that can be taken to ensure your business, people, and total rewards strategies remain competitive during periods of abnormally high inflation. Some organizations are considering a shift to a lead approach to market competitiveness so that range midpoints are consistent with talent market statistical targets throughout the year and do not lag the market before the next round of merit increases. Consider adding a mid-year review to ensure your programs are still effective and make adjustments when needed. Finally, consider adding longer-term benefits like a leave policy, retirement and wellness programs, etc., that show a corporate focus on the wellbeing of your talent. People are less likely to look at alternatives and leave if they feel appreciated by their current employer.
The coming months will be challenging for the workplace and Human Resource professionals and services – make sure you are ready to meet these challenges and stand apart from your competition.
Let us know if we can help.
About FutureSense
FutureSense is a management consulting firm that provides integrated solutions to build and sustain human capital capacity. The firm can work with you by offering support and guidance to manage your workforce. To learn more about FutureSense, please visit FutureSense.com.