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Why HR Leaders Need to Take a Holistic View of Compensation and Benefits to Support the Business


When there is a major or even minor shift in a company’s objectives or strategy, HR leaders should pause and re-examine current compensation and benefits programs to gain a clear picture of current talent needs, and then adjust accordingly for the new direction to succeed.

Undoubtedly, the ripple effects of COVID-19 shifted objectives and strategy for most companies. Because of the sheer magnitude of the change, it’s worth reviewing compensation and benefits holistically to help secure a strong future for the company. With everything in alignment, employees will more likely understand how their individual efforts impact the bottom line and how the company is supporting them.

We encourage putting in this effort because employees at all levels in the organization are feeling a tremendous amount of stress and anxiety in today's "new normal." It is imperative for HR leaders to support the "whole person" and address everything from overall well-being to health (both physical and mental) to safety to the financial security of employees.

This includes gaining a deeper understanding of how compensation and benefits fits into a Total Rewards (TR) strategy and further how the total rewards strategy aligns with HR and business strategies.

Having a Total Rewards strategy in place that lines up with the business strategy, goals, and objectives is crucial to support the existing talent pool, retain it, and make it more productive. An effective Total Rewards program supports recruitment efforts in making the company more attractive to potential new hires. Remember, the key to an effective HR strategy is not only retention, but also recruitment to fill critical roles and keep the company moving forward.

How Compensation & Benefits Fits Into a TR Strategy

Total Rewards, which includes not only compensation and benefits but also intangibles such as career development, flexibility, and work-life integration, should all be in alignment with other functions of the business to reflect the desired post-pandemic culture.

Then, refer back to the TR philosophy. Do all the total reward programs support the philosophy and align with the new business objectives and strategies? To answer this question, we recommend focusing on these key elements:

- Gain a complete understanding of how the company objectives and strategy have changed. Ask questions, involve other leaders in planning sessions, and continue to stay involved in management discussions.

- Ensure that the HR strategy supports and aligns with the business. Take time to define the HR strategy in the “new normal.” Involve other leaders to help create a clear definition that guides the team’s efforts. Staying in lockstep will enable better management of people in a way that supports the business. Most importantly, examine how company changes impact the talent needed in the organization. Do changes or adjustments need to be made to any HR programs?

- Build the compensation philosophy and HR strategy. Ensure that the TR strategy aligns with the compensation philosophy and HR strategy, then set up a rewards system that is appropriate for the budget, culture, and operational needs.

- Create HR and Total Rewards programs that align. Now it’s time to implement and communicate the programs to support employees and build a strong future for the company. Also, take steps to communicate any changes to affected employees. Customize communication by role, level in the organization, or other variables.

- Communicate any changes. Clear and transparent communication about the TR philosophy will help garner trust among employees. They will understand exactly how they are being compensated in the new operating reality and understand how they stand to benefit from remaining with the company long-term. And, as a result, they will be more engaged and invested in the company’s success.

For example, if the company is shifting into a new market, answer the questions of what this will mean for the business, for each employee’s day-to-day roles and responsibilities, and how employees will be compensated. Or, if the company is trying to stay viable and has to make cuts to the roster, then answer questions about how the remaining employees will be affected by downsizing.

Focus on finding the best way to communicate information in a way that supports employees’ needs and addresses any concerns with plain, straightforward language.

Focus on Communication to Support a Holistic View of Compensation & Benefits

Many HR leaders reacted out of necessity in 2020 as a result of the pandemic. Perhaps some communication was strong, while other areas needed work to create certainty and assuage fears. Keep in mind that communication goes both ways in two different directions.

- Communication goes vertically to management expressing what is being observed and listening to concerns. HR leaders should work with executives to clearly understand the future of the business and align compensation and benefits with new objectives accordingly.

- Communication also goes downstream to managers and individual contributors to communicate pertinent changes and to listen to feedback and concerns.

HR leaders act as a critical part of the equation receiving, processing, and synthesizing information to influence decision-making. To do this effectively, HR leaders need to have continuous conversations with company leaders, examine the business vision, mission, and core values, and continuously review whether the TR approach is aligned with the needs of the company and the needs of employees.

It's also a good idea to perform TR program evaluation and track key performance metrics and success measures. Pay attention to the metrics and then tweak programs as necessary to meet the business's current needs to determine what will drive performance and/or desired behaviors.

Reaping the Benefits of a Holistic View

Companies that apply a holistic methodology to compensation and benefits will experience several intrinsic rewards. First and foremost, the company will present as a unified front. The HR department will be connected to the rest of the organization, and the right hand will know what the left hand is doing. Remember that alignment is key.

And, as previously discussed, clearly defining and communicating the Total Reward philosophy will generate trust and loyalty with people in the company. When trust is present, employees have a better understanding of how they are compensated -- and why. Decisions can be made more quickly, resulting in efficiency. Trust also encourages employees to take more risks, which could lead to innovative solutions to solve business challenges.

With regard to people, there is a tendency for higher engagement when trust is present. As a result, some of the benefits are absenteeism rates may be lower, turnover will decline, and employees will perform at a higher level. When employees feel valued, employee engagement has the potential to skyrocket. Employees are also less likely to steal financially from the company or engage in wasteful activity that “steals time” from the company.

Real-World Illustration of a Holistic Approach

When HR leaders aggregate compensation and benefits into the company's overall strategic direction, a complete transformation can occur.

Here's an example to consider. A waste services company wanted its customers to be more engaged and satisfied with the services they received. Organizational leaders knew that happy customers would translate into increased loyalty, higher profits, and more referrals. How would the company get there? By starting with employee engagement. The thinking was that if employees feel valued, then they would provide better customer service, would be safer on the job, and would find ways to do their work better and more efficiently.

Company executives conducted surveys among employees to get an accurate read on current HR programs and how to increase engagement. The survey sought to find answers on different aspects of employment such as culture, work environment, management, and safety. The focus on compensation was an important piece of the pie, but not the entire pie. Then, the company took appropriate steps utilizing the survey responses:

  • Introduced leadership development programs.
  • Designed management training programs that focused on employees.
  • Designed and implemented more safety-focused programs.
  • Invested money into better equipment to support job performance.
  • Implemented training for management.
  • Defined roles and job responsibilities.
  • Updated job descriptions to be more reflective of the work actually performed.
  • Aligned job titles to market job titles
  • Benchmarked jobs based on responsibilities to better understand competitive compensation.
  • Adjusted pay structures to align with the market and adjusted individual pay rates.
  • Designed incentive programs to recognize and reward a high-performance culture.

Throughout the entire initiative, the company often communicated to all employees to thoroughly understand the changes taking place. As a result, the waste services company experienced increased profit, and employees were happy, engaged, and motivated about performing duties. There was a clear commitment to the entire person through a holistic approach that supported the business objectives.

In Conclusion: Support the Business

No doubt, the biggest event that made the most significant impact in 2020 was the COVID-19 pandemic. In 2021, although vaccines have arrived and there is a glimmer of hope on the horizon about a return to "normalcy," the impacts of the pandemic in the workplace will be long-lasting.

Taking a holistic approach to compensation and benefits and optimizing the Total Rewards philosophy during this recovery phase will be paramount to ongoing success and growth.

- Find out more about how NB Business Solutions provides expertise and technical knowledge in the areas of strategic human capital management and execution, including business strategy, global compensation & benefits, and human capital performance and measurement to support your business objectives.

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by NB Business Solutions Team

04/01/2021

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