2015 - the year HR and reward become disruptive
On the surface this year looks pretty much like the last. The economy is predicted to remain largely the same with pay budgets and settlements similar to 2014; but beneath the surface the reality is very different. Pressures on HR will be coming from all directions. Employees, who understand their value and aren’t afraid to make a move to another company or to work for themselves, will vote with their feet. So to keep good people HR will need to be much more strategic with their pay awards – and to do that will need a deep understanding of their business and the market. Pressure will also come from business leaders who increasingly expect more from their HR department and their reward specialists. They don’t want a reactive, delivery function. They want a strategic, proactive and business focussed team able to predict trends and gain advantage through people. Things are about to get exciting for HR and reward; I see three priorities for HR and reward this year to help meet those challenges.
Disruptive HR or ‘high-impact HR’ is the lastest buzz word – in fact it was the key topic for the 2014 CIPD conference. But what does it really mean? The US military coined the phrase VUCA World in the 90s to describe the changing nature of enemy action. It stands for volatile, uncertain, complex and ambiguous. It’s now becoming more widely used for the changing nature of business and organisations.
Traditional HR and reward practices are insufficient to meet these new demands and it’s time to develop fresh thinking. In short it’s time we challenge ourselves. If we don’t new roles will be created outside of HR. Roles such as chief talent officer, head of organisational effectiveness and head of business performance will take the exciting and sexy bits of the job – the reason we got into HR and reward in the first place. And we’ll be left with policies, running the payroll and transactional pay increases. Disruptive HR is just listening and understanding the needs of the business and delivering. Successful HR and reward professionals are already doing this; they’re becoming true business leaders.
There will be increasing pressure for HR to ‘know their numbers’. To have their own dashboard in order to identify trends and manage reward in a more commercial way. The benefits of data in HR has been known and promoted for some time but we predict 2015 will be the year that analytics will begin to add real value – and help the business move forward. HR is awash with data and it is now time to really think about how adopting a few good HR analytics can make this data meaningful, allowing you to gain real insight in to what areas of your HR and reward strategy are working and those which are not. Enabling HR to be on the front foot, predictive, identifying future gaps and threats. It will give HR and reward the tools to engage and challenge the business and have meaningful, informed discussions with Finance and the CEO.
A reward dashboard could contain a range of metrics. For example, flight risks (high achievers with low pay), past glories (current performance isn’t as good as it once was but have high pay) and the cost of the ‘leaky bucket’ (how much is spent on ‘out of pay review’ increases). These are just a few examples; they are simple but powerful.
Performance management isn’t working – it’s broken and needs a radical rethink. This is not a new concept, the problem has been discussed among HR professionals for some time, but not the solution. How many people believe that their performance management approach really delivers a business critical positive impact? I would suggest very few. If your performance management process isn’t working then how can you be sure your reward activities are being spent in the right way and with the right people. The two go hand in hand.
Performance management started in manufacturing to get employees to work in a similar way, to a set standard. But the world has changed and that isn’t what businesses need now – they need innovation, disruption and creativity. So performance management needs to change too. But it isn’t as simple as moving to a new ‘ideal’ process. There isn’t a once size fits all.
The skill is in understanding your business and your people and creating something that works for you. This year we will be supporting more clients as they embark on these projects. If you get it right, not only will it give you an effective way of identifying and rewarding the talent that adds real value today, but it will become part of your reward offer. It will attract, engage and stimulate performance in your people. It may be that the right solution for you is a very light touch, fluid and informal process without ratings. It may be changing to a coaching and mentoring approach with regular reviews and grown-up conversations. Or it may be a fairly structured, but personalised approach. It goes back to understanding and leading the business to success rather than running an operational process.
You may feel a bit defensive reading this article but isn’t that what disruption is about? We all need to change and adapt as the world changes around us. I say it’s an exciting year and I can’t wait!