The world of work is changing fast and total rewards approaches need to change with it. We all hear that “things will be different in the Future of Work”, but what does that really mean in practice? What opportunities are there for reward transformation, and what challenges do organizations need to address?
The changing shape of organizations can be defined as 3 things: how work itself is changing (e.g machine learning), who does the work (e.g technology) and where the work is done (e.g remote work). With this seismic shift, the old traditional job architecture approach will likely not work and needs to be addressed, which means a big impact on reward approaches. With this rapidly changing work environment, the embedded hierarchy within that structured eco-system can be a blocker to responding to change with agility. And with the close ties between pay and hierarchy, total reward strategies sit right at the heart of this.
Keep it simple
If organizations were to tear up their current job catalogs and start from scratch today, landing on what they currently have is very unlikely. This means that organizations should not only keep it as simple as possible when making any changes, they should experiment iteratively first. Defined structure can pose a challenge when responding to changing market demands in reward levels and staying competitive for the best talent across the market, as well as retaining your best people. It may mean, for instance, during annual review or making an offer to an external candidate, that a grade promotion is required just so that the next pay scale kicks-in, or a specific allowance is now payable. However, that defined job role may also come with managerial responsibilities that the individual does not want or is not suitable for, and so an exception is made in order for them to progress their compensation or match their compensation expectation coming in
How businesses and employees increasingly prefer to operate
The make-up of the workforce is changing. Teams based on networks are starting to replace graded hierarchies. And yet, pay levels and rewards are still tied to hierarchies of experience, seniority, tenure, and job titles. In the future, projects, and roles within those projects, will be filled with people who demand different ways of employment beyond just salaried work.
FTE’s, job sharers, contractors, and gig workers will be employed based on the skills they bring with them at the current market rate for their skills. And these workers move roles more frequently.
Rigid frameworks belong in the past
Rewards tied to inflexible hierarchies for traditionally salaried employees are no longer fit for every purpose. In fact, a large proportion of those possessing the right skills find their path blocked by those rigid frameworks. Networks and pods of teams, rather than linear line management and organization charts, are commonplace for delivering work. This is especially true across service delivery and professional services, among other industries. People come together as a team with different skills to deliver on a project or piece of work, with line management and direction not necessarily coming from your official line manager registered in the HR Information System.
That means the on-point person who often decides future progression through compensation levels requires input from various people about performance and impact, and would rarely have oversight on your work. This is a bigger shift than it might sound, and the impact on reward means it needs to be more agile and based on skills, competency within skills, and the impact those skills have had on outcomes.
Internal mobility to move from job to job within the same company is growing in prevalence. Sometimes called an internal marketplace, this is about the employer finding resources internally for short periods of time to fill a skills-gap and to enhance their EVP, and for employees to gain new experiences and to take ownership of skills acquisition and career progression inside or outside of the organization.
Employee Value Proposition
Of course, a huge recent trend has been the increase in flexibility and remote working, which has only sped up due to the global pandemic. While this has been on the rise in recent years, it was put into sharp focus by the crisis. As the shape of organizations change, the nature
of work being carried out, particularly in office-based roles, lend themselves naturally to be location-agnostic, supported by the right technology. Where outcomes and results are the key driver of success, rather than clocking-in and clocking-off.
Presenteeism rarely results in better outcomes and a work-life balance is now seen as a given for any Employee Value Proposition. We have seen organizations experiment with this further still where work-from-anywhere initiatives are being considered. This would be a game-changer for both employees and employers where opportunities to access much wider talent pools become an attractive lever for organizations, while workers would have access to a much wider portfolio of roles. The impact on reward will be huge, with internal consideration of salaries, allowances, and benefits, and external factors of taxation approaches.
Like with any new initiative, it will take some early adopter organizations to see genuine success with this approach before others start to join in mass. Organizations are increasingly reliant on contingent labor to fulfill roles. The growth in this feature is having a big impact on how reward teams need to respond with both a strategy for reward program design, as well as the technology to monitor it, given many of these workers sit outside of HR Information Systems, and perhaps even core payroll systems.
Never has the term ‘transferable skills’ been more relevant. As skills become an increasingly important driver for reward progression (not just tenure and seniority), recruiting teams are increasingly on the search for current hot skills, and competency within those skills and examples of where skills have been applied.
As organizations start to experiment with skills allowances as a supplement to basic salaries, the changing shape of reward in this case is actually the driver for the changing shape of the organization.
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(This article is part of a content partnership with Uflex. It was first published here)