Posted on: 16 June 2015
How will 'disruptive' HR practices affect reward?
HR Reward | Reward Consultancy | Reward Intelligence | Reward Strategy |
There is movement afoot to bring credibility and new purpose to the often maligned yet critical function of HR in modern organisations. The CIPD conference last year was badged as ‘High-Impact HR’ and you will have no doubt heard the term ‘disruptive HR’ from a multitude of blogs, articles, conferences and soap-boxes.
‘Disruptive’ comes from the work on Disruptive Innovation by Clayton Christensen, a Professor at Harvard Business School. Christensen’s work states that, over time, successful products become complicated and expensive and, consequently, niche. That leaves a huge opportunity for innovative companies to introduce a simpler and cheaper product to the mass market.
A good example is the computer which started out with million-dollar mainframe computers that only a few very rich companies could afford but, over time, is now available to the mass market in the form of a smart phone – importantly, not developed by those original pioneering companies.
The challenge then is to avoid this happening. Disrupt ourselves before the market disrupts us. Complacency is the disease of the successful.
Let’s be disruptive
By continuing to develop our existing systems, processes and mechanisms beyond the needs of the market we are in danger of delivering nothing of value.
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 challenged 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 reward professionals are already doing this; they’re becoming true business leaders.
So, instead of being disrupted, let’s be disruptive.
To disrupt we need to innovate and to innovate we need to understand our environment. In the 1990s the US military developed a new way of describing and therefore understanding their environment. Later turned into the acronym, VUCA.
The term has now been adopted by business to describe the new, constantly changing and unpredictable world of business.
So how do you innovate and disrupt your reward in this VUCA world?
It’s no longer good enough to take your pay budget and distribute it among your employees, to be the guardian of best practice and reward guidelines. It is no longer good enough to be reactive on pay.
It’s not good enough to react to pay demands and threats from potential leavers on an ad-hoc basis as they arise. It’s not good enough to rely on an outdated performance management process to identify talent and allocate performance related pay elements such as the bonus.
Quite frankly, it’s not enough to be reactive full stop.
You need to get on the front foot.
Know your market. Where is your future talent coming from? And what will you need to offer to attract them to your business? How does your offer stack up in the market and will it be enough to retain people for the longer term?
Active and regular market benchmarking is the minimum.
Know your business. Be a leader and really understand what your business needs from its people. Your individual reward elements need to drive value creation and have the agility to adapt as the business and its environment changes.
Know your numbers. For reward to be effective you need to know what’s really happening in the business. By doing that you will not only build stronger and more effective reward, but you will build credibility too. Some of the metrics you may want to track are:
- The leaky bucket - How much money is spent through the year, between pay reviews, on ad-hoc, out of cycle increases.
- Flight risk - Running a comparison between identified high performers (though their performance review scores) and position against the relevant market can identify those at risk.
- Past glories - A comparison can identify those who are paid highly against the market but where current performance doesn’t justify this pay position.
- Pay control - Compare pay against the market by hire date. Are long-servers generally paid more by the virtue of just having been around a long time? Are new hires consistently paid at a higher relative start rate than their peers?
- Pay governance - How are pay decisions managed across the business and how do they vary between departments and line managers?
- 10%ers - How many employees have had a pay rise of more than 10% in a year? Does this tie in with the Talent Mapping programme?
- Variable pay - Comparisons of bonus payments against performance, long-service and gender.
Finally, our approach to innovation and problem solving needs to be agile so that we can adapt and respond to the fluid market we operate in and continue to stay relevant and ahead.
With this new mindset we can begin to create a disruptive HR environment - but to be disruptive is not to be without purpose or a plan; it’s part of the plan.
Disruption needs to become a part of our thinking in a modern business environment.
So, in answer to the original question, how will disruptive HR practice affect reward? Hopefully, massively and unpredictably.
This article was originally published in HRZone.