‘Total Rewards’ Opportunities Growing for Consultants

By Lin Grensing-Pophal, SPHR Dec 10, 2008

While 80 percent of firms tell surveyors that communicating total rewards philosophies and strategies to employees is “effective” or “very effective” for the organization’s performance and for employee satisfaction, retention and engagement, only 33 percent of companies say such rewards strategies are communicated to employees, says a study by the Hay Group, a global management consulting firm.

Because there is a clear gap separating what firms are aware of when it comes to total rewards strategies and the lack of communication to employees on those strategies, HR consultants can play a significant role helping clients implement total-rewards programs, say consultants who have consulting experience in this area. In addition, because the total rewards area is a business domain that is increasing in demand, consultants who provide bottom-line results that can be measured and communicated to clients and prospects will be engaged, the experienced consultants say.

Because companies are concerned about managing costs while attracting and retaining qualified staff, total-rewards strategies can be a measurable factor in meeting those objectives by linking worker performance to the totality of the rewards—salary, benefits and development opportunities—provided through the course of employment. HR consultants need to make clear to the client that the organization can benefit by linking employee performance to rewards and to show the client how an organization can gain more value at less cost.

Good Fit for HR Consultants

While rewards programs represent one of the most significant areas of controllable expense for most organizations, few spend adequate time or resources evaluating the effectiveness of their efforts or communicating the value of rewards to employees. HR consultants who have finance and benefits backgrounds will find that evaluating the effectiveness of total rewards strategies, and communicating that information to employees, is a natural fit. In addition, HR consultants who can augment their skills with the ability to help organizations communicate the total package to employees have an even greater advantage. But even HR consultants that are weak in the areas of finance and benefits might have opportunities in this area.

Steve Kerr, former chief learning officer for GE and Goldman Sachs, says the basic principles behind a successful reward system are as well known as putting out the monthly payroll. In addition, developing a total rewards strategy well is actually less expensive than doing it poorly, yet the principles are usually violated, says Kerr, who has written a soon-to-be-released book, Reward Systems: Does Yours Measure Up? (Harvard Business School Press, 2008). But the companies that get it right have an opportunity for a huge competitive advantage, and that is where HR consultants with the right background can make a difference, he says. In the book, Kerr outlines a three-part program for developing a competitive reward system:

Define performance in actionable terms. Start by converting the company’s values, mission statements and strategies into tangible goals—including stretch goals—followed by converting those goals into actions.

Devise comprehensive metrics. By establishing such metrics, clients can track results.

Create reward systems that work. That means creating financial and non-financial reward systems that meet employees’ needs, reinforce company metrics and align the company’s goals with employees’ work and responsibilities.

In addition, the Hay Group study lists additional areas of opportunity for HR consultants. Those areas are:

Evaluation. Of the organizations that responded, 40 percent conduct no evaluation.

Marketing. Only 25 percent of the respondents said they communicate to specific employee groups, but of those, 74 percent said it was an effective or very effective strategy.

Training. While about 50 percent of the survey respondents offer some type of training, only about 30 percent of eligible employees participate.

Total reward statements. While identified as one of the most effective methods for communicating about benefits, they are the least likely method of communication to be used.

Small Consultants Can Add value

Syd Robertson, executive vice president for ORC Worldwide, a global workforce management consultant, says there are opportunities specifically for small, independent consultants to help clients develop total rewards strategies. Small consultancies have an advantage because they are better able to offer truly customized solutions, he says. Because most organizations are not produced with a “cookie-cutter” strategy, consultants cannot just approach a firm and say, “Do I have the performance management system on the shelf for you,” he says. Consultants have to diagnose a client’s problems and design programs that fit an organization. Small organizations can design such programs easier, and “that’s a real advantage,” he says.

While Robertson believes that small or solo practitioners have advantages in the total rewards area, there are challenges and roadblocks those consultants need to be aware of, such as “the presenting problem.” The presenting problem occurs when a client presents as the organization’s problem the need to implement a new performance management system, or completely overhaul one, but usually the problem is something else, he says. The opportunity for consultants is helping the client determine the real problem, he said.

In addition, consultants need to recognize that there are situations where clients might be more comfortable receiving feedback they want to hear rather than feedback they need to hear, Robertson said. Providing unwanted—but needed—feedback to clients occurs in all facets of HR consulting, but in the area of compensation the measurable impacts can be greater, he said. That creates a greater upside for clients who are willing to listen to what they need to hear, but also a greater potential downside for those clients who do not want to hear unwanted feedback.

There are situations in which even HR consultants who do not deal with a client’s financial structure need to be “business people first, HR consultants second,” Robertson says. “It doesn’t matter what kind of consulting you’re talking about; everybody needs to be a businessperson if they’re working with business organizations,” he says.

Lin Grensing-Pophal, SPHR, is a Wisconsin-based business journalist with HR consulting experience in employee communication, training and management issues. She is the author of Human Resource Essentials: Your Guide to Starting and Running the HR Function (SHRM, 2002).

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