RUCHI ARORA: Welcome to our series of Turbocharging HR videos. Today, we'll be talking about reward strategies. I am Ruchi Arora and I'm delighted to be joined by my colleague Tom Hellier. Welcome, Tom.
TOM HELLIER: Thanks. Hi there.
RUCHI ARORA: Hi. So let's start the topic of reward strategies. A lot has been changing around us for both organizations and in the external environment. Let's start by talking about what do we mean by reward strategy. Really basic question, but let's start there.
TOM HELLIER: It's a basic one, but it's an important one. When we think about reward strategy, what we're effectively doing is articulating how a company thinks about, develops, manages and organizes all aspects of rewards, whether that's pay, benefits, recognition, allowances, well-being, career development, all in a single kind of expression, hopefully one that's meaningful to employees as well.
RUCHI ARORA: And what does a good reward strategy look like?
TOM HELLIER: So I think the first thing that we'd look at in terms of an effective reward strategy is one that is holistic in nature. So it's covering all of those things that I just mentioned in a manner that is consistent. So we're not seeing piecemeal focus on this, focus on that. It's really looking at total rewards in the broadest sense.
The second thing we look at is some really clear guiding principles around how an organization designs defines their individual reward components in the context of that holistic messaging. I think one of the third things that a lot of companies struggle a little bit with is some meaningful segmentation.
So if we think about a reward strategy, you can have an overarching approach that fits a single organization. But within that, there might be some subtle differences that are needed for different parts of the organization to make sure that things are working as they need to for different types of work or different demographics, et cetera.
RUCHI ARORA: So really interesting thoughts there. As organizations think about their reward strategy over the next few years, I'm hearing a lot of companies think about reward strategy for 2030, what's new in the space?
TOM HELLIER: So there's a lot that's happening at the moment and some of it driven by legislation, some of it born out of technological advancements that we'll talk more about, I'm sure. We think about what's new. We're seeing a lot of focus on transparency, obviously, at the moment, particularly for organizations in Europe, with the pay transparency directive, looming, but equally in other parts of the world as well.
We're also seeing work changing and businesses transforming. So whether that's stripping out administrative work from organizations, focusing on value add or thinking about the way work is done through agile, for example, all of these things have an impact on how an organization thinks about and structures its reward programs. And there are things that organizations really need to get a grip on quite quickly.
RUCHI ARORA: Yeah. And you mentioned there or touched on technology, digitalization, AI. How is that making organizations think about their reward strategy and how are they incorporating that into their reward strategy?
TOM HELLIER: So there are a few different aspects. I think, probably less so than impacting reward strategy, it's looking more at how organizations execute or deliver reward programs. So for example, we see organizations using automation to manage old administrative processes like benchmarking. If we think about comp analysis, market analysis, you can do that at scale in a digital model or software now. Whereas previously, you would have spent hours looking at a spreadsheet to be able to manage those processes.
If we then get under the skin of some of the decisions that organizations have struggled most with over the years around things like differentiation and pay for performance, we're seeing technology being an enabler, sorry, of those types of processes as well. So making sure that you're able to make decisions that are fair, that are consistent and balanced, and really focusing in on the areas that matter most.
RUCHI ARORA: And a lot of the technology will certainly help drive efficiencies to save time. Is there an example you can give us of what organizations are thinking about as part of their reward strategy? Because you've touched on a number of topics. We've touched on AI. We've touched on regulations. Give us an example of what companies are thinking about.
TOM HELLIER: So a couple of areas. If we think about pay, for example, one of the things that companies have struggled with for a long time is making pay for performance work. If we think about the use of AI in performance management, for example, we're seeing much more consistency in terms of how goals are set.
And that's through, for example, generative AI being used to support goal setting through making suggestions based on accountabilities, levels, et cetera. It can also be used to support calibration processes to make sure that performance outcomes are more fair, that they're more consistent, and that leads leaders and employees to have greater confidence in things like pay for performance, outcomes and differentiation.
We then flip it and think about benefits. It's a slightly different story. So we're seeing data being collected in a much more tangible way than it perhaps was in the past and drawing on all of the information and data that we have on employees within the organization, but also outside as well.
We can use technology to perhaps nudge people in the direction of the benefits that are going to be most valuable to them, based on their demographic profile, and their level in the organization. Even if we look at some examples in the US being able to detect employee stressors earlier and push them towards well-being initiatives that are going to support them in managing through any particular circumstances that they're working on.
RUCHI ARORA: It sounds like from what you're saying, there's really value in thinking about the reward strategy for any organization because it will not only help the employee experience, but helps reward and HR make better informed decisions to make reward programs more impactful. And thinking of impact, how are reward strategies then turbocharging business performance and business impact?
TOM HELLIER: Well, if we look at one of the key priorities for any organization's reward strategy, it's going to be around making sure they attract the right people into the organization. Once they're in, they retain those people. And ideally, what you want is for them to feel engaged in the work that they're doing. And reward is obviously a cornerstone of all of those things.
If we're able to set rewards up in such a way that they're meaningful and relevant to employees, you're achieving those objectives. And it's going to obviously have a knock on impact on your business, sustainability, and performance. If we think more broadly, wages and benefits, one of the largest costs that most organizations have, if not the largest that most organizations have. So ensuring that you're getting effectiveness out of what you're spending is clearly important.
Again, tech AI can be used to determine not just what employees value, but how to connect what they value to the way they're being rewarded. So using all of that intelligence can really drive greater effectiveness out of spend, reward, spend allocation, et cetera.
RUCHI ARORA: Great. Thank you, Tom. There's some really helpful insights there in helping you and organizations think about how they think about their total reward strategy for 2030 or whatever future target they're looking at. Thank you, Tom, for sharing those insights. And thank you, everyone, for joining us on our video series.
