Today, businesses have the opportunity to increase their competitive edge by better managing human capital by broadening the reward options and using collaborative technology to share guidelines and analyze employee needs. This is a great opportunity for companies who understand that they need to improve the line manager profile, enabling them to design and market a custom, total reward offer to each member of the team. It's not a small investment, but today's technology can really help. What is at stake? The ability to maximize total personnel investment, drive more motivation, retention, and performance at no additional cost.
This article analyzes the four fundamental events in order to face, with pragmatism and effectiveness, the total reward management (TRM) challenge.
Managing people is a discipline that, unlike other managerial fields, changes slowly. This is probably because the subject of analysis, the person, tends to adapt over time and by generations rather than fiscal quarters. Human resources (HR) trends are usually talked about for years or decades before being implemented. Since people's behavior changes slowly, so do HR practices and because it takes time for trends to become a mass phenomenon, we have time to study and analyze their results through case studies, and decide whether to accept or refuse a particular practice.
In other units or departments, like logistics, marketing, and finance, business trends progress at a faster pace and companies need to decide quickly whether to implement them or not. When a new paradigm is introduced, such as the introduction of radiofrequency (RF) tags into the logistics market, companies only have a few months to decide if they want to start the experiment. The wrong decision could plunge the company in a situation of great competitive disadvantage.
However, when managing people this rarely happens. Ten years ago, for instance, the competency buzz started: pay for competence, or even more important, reward competency achievement. Ten years later, there is still a high level of consensus about the idea, but almost no one would dream of putting it in practice, and I don't think there are companies on the verge of crisis for not implementing it.
The purpose of this introduction is to remind us that, when speaking of people and organizations, we shouldn't expect revolutions. Changes are born, evolve, and spread through cycles more similar to nature than to finance. At the same time, notwithstanding its evolutionary slowness, how people are managed influences an organization's results. As time goes by, the impact of investment capitals to improve production tools (both in industrial and in service industries) is decreasing. When this last investment cycle on transformation processes finishes, it will once again become apparent that to generate new growth and development, a company will need to intervene on its most complex and volatile asset: its human capital.
The importance of managing people is therefore constantly growing. However it is also an area where current methods and tools are not adequate, and where innovation is slow and complex. Moreover, it hasn't helped that new technology projects in this area have been supported by the obsession of short-term return on investment (ROI) and were focused on optimizing process and reducing paperwork. Instead of grabbing the opportunity to use technology to improve the quality of people management, and improve their motivation and performance, companies focused on reengineering HR processes. It's a noble activity, but is rarely strategic.
To overcome this impasse, a new concept is emerging. Total reward management (TRM) is a holistic practice that interprets the growing needs in organizations and offers a new action mode. It is oriented towards pushing the use of new technologies (with Internet in the lead) in improving people performances by understanding employee needs and by designing customized incentives and rewards.
TRM starts with two basic assumptions:
- HR and line managers share a goal to create conditions that stimulate high performances.
- no one can achieve this goal alone.
This assumption is mainly based on two facts: the limitations of the HR department, and the close contact line managers have with their employees. An HR department has, on average, one person for every 100 employees. If we exclude recruitment staff (as they rarely focus on employees) this number decreases to, on average, one person for every 150. If we then consider that a significant part (usually 50 percent) of an HR professional's time is dedicated to administrative activities, we can reasonably say that the people who are dedicated to listen to, analyze, and prescribe solutions are, on average, one for every 300 employees.
It is analogous to the patient load of doctors in the healthcare system. Anyone who has dealt with a medical doctor in the public health system knows that if a person is forced to work with a large number of responsibilities, they cannot offer the degree of attention that is required. The same thing holds true for HR personnel.
Unlike HR personnel, line managers, on average, are in an ideal position to offer assessments on their employees' performance. They know their employees work performance and ethic well and sometimes they even hired them. They also share objectives with them and sometimes line managers even assigned objectives. Furthermore, through every day working contact, line managers enjoy, at least theoretically, more trust and credibility from their staff.
Despite the proximity of line managers to employees, managing people is not at the top of a line manager's priority list. The few that systematically do, don't have adequate training or tools. Again, using the analogy of healthcare, it is as if the public health system has identified a medical assistant for every ten citizens: a person that we know and who knows us, but who ignores the fundamentals of medicine, and whose objective is to reduce costs in the public system. We wouldn't consider it a good solution.
Taking into account these figures and facts, we need to find a solution to the structural limit that HR and line managers face when they act individually. It's crucial to amplify the impact of HR strategy through informed line manager involvement.
HR and managers can increase the effectiveness of their actions if they intervene in a coordinated and synchronized manner. They can improve performance and motivation of all the employees, not only those with high potential. Customer satisfaction, as it is known, is built with the contribution of everyone. The current "war of talents" culture has led companies to focus their HR strategy only on pools of talent, which tends to exclude front end-people, such as call center and sales personnel—key groups that often build customer satisfaction.
If we agree on this assumption, we can proceed in analyzing the total reward management best practice and the four progressive phases in which it should be developed. They are
- Creating awareness
- Building the collaborative platform
- Cataloging configuration and management
- Total reward communication
The first phase focuses on building increased awareness of the common mission and goal among HR and line managers, which is
"To motivate people to generate high performances and bring a contribution beyond expectations"
HR and line representatives (or board representatives) have to sit at a table and symbolically sign a partnership agreement to achieve the common goal. In order for this partnership to work, it is necessary that the two parties are aware of the importance of the objective and partnership. For this reason creating awareness is critical.
Human resources are progressively developing this awareness, although not always enthusiastically, because of their traditional coldness towards any decentralization processes. This is less so with line managers. They are usually too busy with their daily responsibilities to plan an active cooperation with the HR team. They are used to making inorganic, ad hoc "spot requests" to HR about their teams' compensations, demographics, performance, eligibility etc. and ask only when they have a need. Thus it is neither systematic nor structured.
This partnership, when not sponsored by the board, must be led by the HR department. HR must enforce the communication and internal selling techniques and communicate their importance to everybody.
Building the Collaborative Platform
Although the most famous and visible part of e-commerce is the one related to the sale to end users, every specialist in this field knows that 80 percent of e-commerce takes place within companies where distributors and partners exchange goods and information through integrated technological platforms that use the Internet as a communication channel. The platforms have been developed with the objective of bringing a bigger number of products and services to clients with fewer costs and in less time.
We can also extend this concept into the company and among employees. If we consider the people working in the organization as the final clients, we derive that line managers and HR must efficiently transform the employees into satisfied clients, so that they will work with enthusiasm and creativity to create company success.
Apparently this seems to recall one of the trends of HR: its slowness when reacting to change, largely to avoid the potential mistake of hard investments. As a result, over time it has downsized employee relationship management (ERM). While ERM reaffirmed the importance of considering employees as customers, it has never been able to go beyond directly giving employees corporate information and the possibility of buying some products or services at reduced prices. Managing people is a complex activity. It requires listening skills, understanding people's needs, and the definition of a customized offer. To do this well we cannot, to use a metaphor from e-commerce, "skip the channel", which, in the case of people management, consists of the line manager, team manager, store manager, branch manager, etc. Thus, ERM needs to be re-launched as a more pragmatic initiative in order for companies to better leverage their human capital.
The collaborative platform between HR and line managers must have some characteristics specifically designed to carefully manage the relationship with the employee. These characteristics
- Allow a bi-directional information route
- Manage effective security profiles, which are modeled on the organization
- Facilitate a workflow definition with approval rules
- Are multichanneled (Internet, intranet, e-mail, SMS, TabletPc, etc.)
- Stimulate actions and communication through agenda, reminders, alerts
- Are easy to use
- Allow a dynamic description of policies
Let's turn our attention to the last point. The HRline manager partnership is based on the acceptance of the policy-individual action relationship. The HR department is in charge of interpreting the strategic guidelines coming from the board and transforming them into rules, reference values, and guidelines that are more or less rigid, depending on the circumstances. The policies, if codified in a boring manual, risk discouraging even the most attentive and sensitive managers.
Now we see the importance of having a platform that is able to receive and present guidelines in a customized manner, one that is possibly graphical, which is modeled on the context with real data. These are elements that encourage the line manager to devise an action plan that is coherent and customized, or in other words, to plan individual actions specific for each person. Thus, the policy divulging support is a critical phase that requires specific attention when a collaborative platform is chosen.
The e-commerce experience, which ranges from the offer of steel from a steel company, to the sale of iPods on the Internet, shows that there is always a concept of a catalog. Applied to TRM, the catalog is composed by the overall offer that an organization can put to reward and compensate work, ideas, and performance that people deliver to achieve the company goals.
The catalog must contain all the elements that can positively influence the overall perception that each person has of his or her own total reward. In the catalog there should be the following products or services:
- Compensation including base pay and variable elements, stock options, and certificates and recognitions;
- Benefits including unemployment pay, family, insurance, and services, free time;
- Training and development including training programs and subsidies, career opportunities, and substitution plans; and
- Work including work or free time balance, and climate and environment.
The catalog must obviously be flexible and compliant to company policy. If, for instance, we would like to give a manager the ability to insert stock options or a company car into an employee's total reward, it is important that the manager can easily retrieve (remember the importance of divulgation) critical information regarding the employee, including salary grade, role, country, seniority, etc. The system should also allow the line manager to easily answer questions, such as
- Is the employee eligible for a specific reward element?
- If so, in which measure, or within which value range?
- What percentage of people in the company, with a similar profile, have that element and in which quantity?
- Which elements have been offered by other managers to people with a similar profile?
The communication platform must facilitate the circulation of an organized offer in the form of a catalog. The line manager has to be dynamically supported in the choice of products or services through which she or he can build the best combination of total reward. Much like when searching for a book on Amazon, we receive a suggestion that, based on our characteristics (demographic, previous purchases, books recently viewed, etc.), we might also be interested in another title that is proposed.
Total Reward Communication
I hope that from what we have said so far, it is clear that the communication campaign and the selected platform are the keys for the initiative to be successful. The communication campaign is critical in the initial phase because it develops feelings or the sense of partnership in line managers, and at the end, promotes the investment that the organization has decided to maintain. The platform also must facilitate the validation and the presentation of the customized offer, using some simple precautions:
- All the elements must be validated
- Less tangible elements must be visualized, through the use of graphic, icons, symbols, etc.
- Elements that are unique for a certain profile must be highlighted, possibly with a graphic. For example, only one product manager with stock option rights, or only one comptroller enrolled in the executive training for executives etc.
Total reward management is a working method that stimulates the simultaneous use of internal communication campaigns with the use of a platform for managing and exchanging information. Through TRM, HR professionals and line managers can build a lasting partnership that frees an individual's potential and generates extraordinary performances. The partnership must share a working tool, in other words, a platform that allows HR professionals to define and divulge company policy in the form of a catalog of offers. The catalog allows and assists managers in configuring the most efficient proposal, which is the best ratio between the company's investment and the employee's perceived satisfaction. Finally, in an effort to maximize employee satisfaction, it is necessary to be prepared to professionally communicate the offer and highlight its value and unique characteristics.
About the Author
Donatello Bianco is one of the leading European experts on software solutions for the management and development of human capital. He is currently the marketing director of Cezanne Software (http://www.cezannesw.com), a global provider of employee performance management solutions.
He has analyzed the processes and needs of HR departments across twelve countries, published interviews and articles in numerous magazines, such as Expansion, Computerworld, and Capital Humano. Bianco has been invited to talk at many conferences dedicated to human capital, including KMEurope, Brussels; APD & Capital Humano, Madrid; Concurrent Engineering Conference, Bremen; Assindustria, Bari; Forum Euro-Atlantico, Lisbona; and Somedia HR Conference, Florence. Bianco can be reached at Donatello.firstname.lastname@example.org