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Analyst Viewpoint
HR professionals and business leaders today have a challenging new set of workforce dynamics to deal with. They need to attract and retain talent from multiple generations with different career and compensation goals and interests. In today’s tight labor market organizations must remain talent-competitive by constantly evaluating the effectiveness of how they entice and incent both candidates and employees. They also must be responsive to employees’ ability to ever-more-easily ascertain their market value from freely available online salary information and to initiate conversations with their managers about pay structures. This evolving situation is placing increasing strain on HR and business managers to respond and engage employees.
Attracting and retaining top talent is also difficult because of two other dynamics: The increased demand for digital-era jobs that didn’t exist in past years and the limited talent available to satisfy the demands in particular locations. In this environment, employees have choices and so organizations must take creative steps to keep their employees loyal, productive and engaged, investing in programs and systems that can support their human capital management (HCM) efforts.
I view these HCM efforts as aiming to achieve a “superior employee experience” and see them as paralleling the organizations’ considerations in seeking to deliver an excellent customer experience. Both involve engaging with the desire to feel valued, be efficient, have needs and interests served even as they change, and be treated fairly. When this engagement effort is done well, it increases loyalty and improves retention. But it is only possible when it includes compensation that is personalized to the individual and his or her role and responsibility.
Many organizations that focus on a superior employee experience, whether they employ 1,000 or 100,000 people, have learned how to gather insights on their workers’ needs, likes, dislikes, interests and tendencies. This process of learning what is important to employees extends to the area of compensation packages that include the traditional elements of base salary, cash bonuses of various types and other long and short-term incentive vehicles. But I have also seen a dramatic shift from reliance on traditional compensation programs that typically recalibrate total compensation once a year to the use of programs that offer an array of other types of employee rewards and benefits across four major categories: retirement and wealth building, health and wellness, career growth and development, and work/life balance.
Using a total compensation management approach demands agility. Providing an employee experience that leads to improved engagement, retention and productivity requires effective personalization in many areas, including onboarding and providing coaching. An organization also must be able to work effectively with the current variety of compensation types and to take into account an individual’s role and unique career opportunity and professional development interests in shaping their compensation package. Agility in communication is also essential: The organization must ensure that an employee can see the merits of his or her total compensation while at the same time see the opportunity to advance and fully engage in the employment relationship.
Total compensation is perhaps the last area of HCM to be closely examined through the personalization lens, but ironically may well be the most important area of all. Focusing on fine-tuning rewards provides the best ROI among all HCM endeavors because it is by far the largest element of all employee costs.
An increasing number of organizations are finding ways to make employee compensation more effective by personalizing it and communicating
that as a compensation benefit to the employee. They are offering options that include working from home or more PTO to help relieve stress or for spousal needs. The cost-benefit analyses of options such as these often yield surprising results. As an example, Google found that when it increased paid maternity leave from 12 to 18 weeks, it saw a 50 percent increase in the retention of women who returned after they took maternity leave.
It is not enough just to personalize compensation; communication about what is being offered and the organization’s corresponding investment in each employee can go a long way toward ensuring all employees understand that they are valued and that their needs are vitally important to the organization. Individualized compensation statements or online access for on-demand viewing can help underscore the full value a company is providing to the employee. There’s work to be done in this regard, as Ventana Research’s Next-Generation Total Compensation Management Benchmark Research finds that more than 80 percent of organizations prioritize improving compensation-related communication.
The methods of achieving personalization, however, may vary widely among organizations. Often it isn’t practical for larger enterprises to manually segment and personalize their workforce into groups (high-potentials, late vs. early career, EEOC-protected groups) to deliver differentiated talent management and total-compensation approaches. They can and should, however, use applications that can provide to the extent possible a personalized compensation plan specific to each employee.
Analyst Viewpoint
HR professionals and business leaders today have a challenging new set of workforce dynamics to deal with. They need to attract and retain talent from multiple generations with different career and compensation goals and interests. In today’s tight labor market organizations must remain talent-competitive by constantly evaluating the effectiveness of how they entice and incent both candidates and employees. They also must be responsive to employees’ ability to ever-more-easily ascertain their market value from freely available online salary information and to initiate conversations with their managers about pay structures. This evolving situation is placing increasing strain on HR and business managers to respond and engage employees.
Attracting and retaining top talent is also difficult because of two other dynamics: The increased demand for digital-era jobs that didn’t exist in past years and the limited talent available to satisfy the demands in particular locations. In this environment, employees have choices and so organizations must take creative steps to keep their employees loyal, productive and engaged, investing in programs and systems that can support their human capital management (HCM) efforts.
I view these HCM efforts as aiming to achieve a “superior employee experience” and see them as paralleling the organizations’ considerations in seeking to deliver an excellent customer experience. Both involve engaging with the desire to feel valued, be efficient, have needs and interests served even as they change, and be treated fairly. When this engagement effort is done well, it increases loyalty and improves retention. But it is only possible when it includes compensation that is personalized to the individual and his or her role and responsibility.
Many organizations that focus on a superior employee experience, whether they employ 1,000 or 100,000 people, have learned how to gather insights on their workers’ needs, likes, dislikes, interests and tendencies. This process of learning what is important to employees extends to the area of compensation packages that include the traditional elements of base salary, cash bonuses of various types and other long and short-term incentive vehicles. But I have also seen a dramatic shift from reliance on traditional compensation programs that typically recalibrate total compensation once a year to the use of programs that offer an array of other types of employee rewards and benefits across four major categories: retirement and wealth building, health and wellness, career growth and development, and work/life balance.
Using a total compensation management approach demands agility. Providing an employee experience that leads to improved engagement, retention and productivity requires effective personalization in many areas, including onboarding and providing coaching. An organization also must be able to work effectively with the current variety of compensation types and to take into account an individual’s role and unique career opportunity and professional development interests in shaping their compensation package. Agility in communication is also essential: The organization must ensure that an employee can see the merits of his or her total compensation while at the same time see the opportunity to advance and fully engage in the employment relationship.
Total compensation is perhaps the last area of HCM to be closely examined through the personalization lens, but ironically may well be the most important area of all. Focusing on fine-tuning rewards provides the best ROI among all HCM endeavors because it is by far the largest element of all employee costs.
An increasing number of organizations are finding ways to make employee compensation more effective by personalizing it and communicating
that as a compensation benefit to the employee. They are offering options that include working from home or more PTO to help relieve stress or for spousal needs. The cost-benefit analyses of options such as these often yield surprising results. As an example, Google found that when it increased paid maternity leave from 12 to 18 weeks, it saw a 50 percent increase in the retention of women who returned after they took maternity leave.
It is not enough just to personalize compensation; communication about what is being offered and the organization’s corresponding investment in each employee can go a long way toward ensuring all employees understand that they are valued and that their needs are vitally important to the organization. Individualized compensation statements or online access for on-demand viewing can help underscore the full value a company is providing to the employee. There’s work to be done in this regard, as Ventana Research’s Next-Generation Total Compensation Management Benchmark Research finds that more than 80 percent of organizations prioritize improving compensation-related communication.
The methods of achieving personalization, however, may vary widely among organizations. Often it isn’t practical for larger enterprises to manually segment and personalize their workforce into groups (high-potentials, late vs. early career, EEOC-protected groups) to deliver differentiated talent management and total-compensation approaches. They can and should, however, use applications that can provide to the extent possible a personalized compensation plan specific to each employee.