How to design a collaborative rewards strategy which drives business results

Design a collaborative rewards strategy which improves profit margins

Collaboration is an essential part of designing and deploying personalised, differentiated, agile, holistic rewards packages needed to attract, motivate and develop top talent, writes Peter DeBellis

You’ve probably heard the ancient Indian fable about the blind wise men and the elephant. In it, each of the men touch an elephant in a different spot – trunk, tusk, ear, leg, tail, etc. Unsurprisingly, each comes away with an incomplete and inaccurate description of the beast. Trying to design and manage employee rewards from a functional silo presents a similar challenge.

When rewards professionals isolate themselves in a silo, they are, in essence, choosing to work with blinders on. They can’t see the full picture – missing critical details and nuances regarding how rewards can support talent acquisition and retention, and drive employee productivity and business results, among other things.

Consequently, the rewards that they design, which often add up to the largest expenses on a company’s P&L, don’t generate the return that they could and should, and their definition of “rewards” may be missing key elements of their employer’s value proposition, such as learning and development opportunities and much more.

Where rewards strategies are falling short
Is this the case in your company? Bersin’s latest research into High-Impact Rewards suggests that approximately 80 percent of organisations are struggling to meet the expectations of their employees around rewards and are failing to drive high levels of maturity in their rewards function.

In many of these organisations, there is no or little collaboration between the rewards function and other HR functions, including talent acquisition, people analytics, learning and development, and diversity and inclusion. Moreover, when cross-functional communication does occur it tends to be uni-directional, with rewards functions sharing data, program, or policy information as needed and in a manner that does not generate or support true collaboration.

To help remedy this, the HR suite as a whole should look to embed regular communication across the suite, whether that means check-ins between functional leaders on a recurring cadence or, for more fluidity, deploying an online collaboration space.

“When rewards professionals isolate themselves in a silo, they are, in essence, choosing to work with blinders on”

The other 20 percent of organisations have more mature rewards functions. In these companies, rewards professionals collaborate consistently with their colleagues in other HR functions – especially talent acquisition – and throughout the broader organisation. Information sharing is a two-way street through which rewards teams not only share information, but also receive it from these other functions. Using such an approach with collaboration as a regular practice helps surface insights that can help rewards professionals design and deploy a compelling rewards offering, while also supporting the strategic mandates of other HR functions.

The “symphonic C-suite”
This cross-functional collaboration is a logical extension of the teaming trend that is increasingly evident in global human capital. These days, teaming extends all the way up to the C-suite – we call it the “symphonic C-suite,” because by working together in a more harmonious and synchronous way, senior leaders achieve better overall results for their companies. The same thing happens when the leaders of the various HR functions work together as a team.

And there is a big payoff associated with a more mature and collaborative rewards function: Our research revealed that organisations with high levels of rewards maturity have 28 percent higher revenues per employee and 7 percent higher change in profit margins than their low-maturity competitors over a three-year period.

Capturing the benefits of collaboration
One promising starting point for rewards leaders who want to begin capturing the benefits of greater collaboration is forging a closer relationship with the talent acquisition function. Of 12 functions and departments we surveyed in Bersin’s High-Impact Rewards research, this particular collaboration showed the strongest relationship to level of rewards maturity in our model. Unfortunately, only 38 percent of the companies we studied report a high level of collaboration between their rewards and talent acquisition functions.

Savvy rewards leaders can use talent acquisition as their ears on the street – providing valuable insight into the needs and wants of candidates that can inform the design of more effective rewards. In return, the talent acquisition function (both leaders and line recruiters) can gain a deep understanding of the rewards space and offerings.

“By working together in a more harmonious and synchronous way, senior leaders achieve better overall results for their companies”

Rewards professionals are naturally well versed about rewards offerings; however, this expertise does not always extend broadly across HR. When talent acquisition teams are able to harness more compelling data and insights about the total rewards offering at their organisation, they have another key selling point at their disposal when trying to engage and hire top talent.  In today’s competitive labor market, such tools are invaluable.

The role of diversity and inclusion
Another functional collaboration that may offer out-sized benefits is between rewards and diversity and inclusion. Rewards/diversity and inclusion collaboration is the least common of all we studied – with only 21 percent of companies reporting that there is a high level of collaboration between these two functions. But this collaboration is 5.5 times more likely to exist in high-performing companies than in low-performing companies.

Diversity and inclusion can help rewards professionals understand and identify the conscious and unconscious biases that can impact pay levels and decisions. And together these functions can work to create an environment in which no employee is held back or compensated differently because of their identity.

Savvy rewards leaders won’t stop pursuing collaboration at just talent acquisition and diversity and inclusion. There are payoffs to be gained from greater collaboration with performance management, people analytics, learning and development, and other functions, too.

For decades, designing rewards programs was a relatively straightforward exercise of finding the right mix of compensation and traditional benefits, such as health insurance and vacation time, based primarily on external benchmark data.

Today, however, we are in a new rewards environment, in which employees are looking for more than the same old standardised rewards programs. Collaboration is an essential part of designing and deploying personalised, differentiated, agile, holistic rewards packages needed to attract, motivate, and develop top talent.