Hay Group posed the question to Human Resource professionals about total rewards in 2012. Just 20% said it was a question they asked themselves. That means only about two years ago, 80% of organizations did not report that they questioned the ROI of their reward programs. But, 57% did predict it would be a greater focus in the future.
The firm went on to point out that if pay is viewed as a cost, the obvious goal would be to manage it down. Look at what others do, calculate how much you can afford and leave it at that. If pay were considered an investment then an organization would:
- Have a reward strategy that supports its business strategy
- Design plans to align employees' interests with the organizations
- Reinforce other management processes via the reward strategy
And so on.
Here we are two years later, and our main excitement is that our merit budgets will be .1% to .3% higher than last year. Am I the only one who thinks that cost is drowning out investment in our strategic conversations? Nope. Check out this quote from Hay Group's more recent research:
"Return on investment has become an important metric and one that needs to be better used and tracked. There has been a marked shift from 'pay and treat people well' to really getting a return on HR investment." US S&P 500 manufacturing company
I am bringing this up not because the new priorities are a surprise to anyone or that these priorities are uncalled for. I am bringing up because it all happened so fast. Struggling through the recession powered by the traditional emphasis on 'pay and treat people well' has in the last two years morphed into straightforward cost/benefit analysis.
I am actually bringing it up because someone should talk candidly to employees about it. It's not happening yet, I bet -- I mean the part about, "Your salary is considered a cost that has to be justified." And because with every reaction there is (should be) an equal and opposite reaction. Now that you really have to measure results, what will you invest in?
Margaret O'Hanlon, CCP is founder and Principal of re:Think Consulting. She brings deep expertise in communications, compensation and career development to the dialog at the Café. Before founding re:Think Consulting, Margaret was a Principal with Towers Watson. She's proud that Everything You Do (in Compensation) Is Communication, was just released at www.everythingiscommunication.com. Margaret collaborated with Ann Bares and Dan Walter to bring the ebook into the world. Filled with innovative ideas, practical tips and experienced advice, it's a quick read and a valuable resource for building your influence as a compensation strategist. Come visit and tell us what you think!