OUR PERSPECTIVES
Introduction
As organizations navigate an era of rapid change, the role of HR has become increasingly critical in driving both business performance and employee outcomes. Today, HR leaders face mounting pressure to demonstrate their value, compete for top talent, and embrace technological transformation.
The HR-X Framework is designed to be viewed holistically, but this report intentionally narrows the focus to the Market Discernment dimension. Market Discernment encompasses Recruiting and Total Rewards, two critical practice areas. Market Discernment reflects HR’s ability to understand both the business environment and the external labor market and to translate those insights into talent strategies that give the organization a competitive advantage.
The HR-X Framework
As organizations navigate an era of rapid change, the role of HR has become increasingly critical in driving both business performance and employee outcomes. Today, HR leaders face mounting pressure to demonstrate their value, compete for top talent, and embrace technological transformation.
To help organizations understand and assess HR’s impact, SHRM developed the HR Excellence (HR-X) Framework. This foundational model defines HR across four dimensions: Functional Acceleration, Talent Optimization, Market Discernment, and Organizational Impact. Together, these dimensions capture the full scope of HR responsibilities through 16 core practice areas and more than 70 sub-practice areas.
SHRM research has shown that higher levels of HR maturity across these four dimensions are associated with better organizational outcomes:
- High HR maturity is associated with stronger financial performance and greater productivity, resulting in higher revenue projections.
- High HR maturity results in lower turnover and voluntary turnover rates, along with higher worker intention to stay with the organization.
- High HR maturity results in higher employee engagement, increased job satisfaction, and stronger employer brand ratings.
Explore the Role of Market Discernment
The HR-X Framework is designed to be viewed holistically, but this report intentionally narrows the focus to the Market Discernment dimension. Market Discernment encompasses Recruiting and Total Rewards, two critical practice areas. Market Discernment reflects HR’s ability to understand both the business environment and the external labor market and to translate those insights into talent strategies that give the organization a competitive advantage. The following table provides an overview of each practice area within the Market Discernment dimension:
Attracting and selecting talent as well as delivering effective benefits packages have become increasingly significant obstacles for many organizations. Over the past year, CEOs, CHROs, recruiting executives, and HR professionals have all cited issues pertaining to attracting and retaining talent as key challenges. Over 1 in 4 CEOs (27%) cited attracting top talent as a key organizational priority for 2026. CHROs highlighted talent shortages (40%), demanding candidate expectations (39%), skills shortages (37%), and labor market competition (35%) as top macroeconomic challenges for their function. Recruiting executives’ challenges and priorities mirrored those of other leaders, with 46% identifying labor market competition as a top macroeconomic challenge and 49% citing a lack of qualified job candidates as a top organizational challenge.
HR professionals more generally have also cited a range of challenges related to recruiting, and said challenges are occurring across all job levels and types. SHRM’s 2026 Talent Trends report found that nearly 7 in 10 HR professionals (69%) are reporting difficulties recruiting for full-time regular positions, which is consistent with 2025’s numbers. Furthermore, of those who said they are experiencing recruiting challenges, over half (53%) said that recruiting has become more difficult compared with one year ago. HR professionals are struggling to fill positions at all levels, including midlevel nonmanagerial positions (66%), entry-level positions (50%), midlevel managerial positions (37%), and senior or executive-level positions (19%).
At the same time, employees are sending a direct message about total rewards. Recent SHRM research revealed that only 9% of U.S. workers said they are satisfied with their current benefits packages.1 Additionally, when asked which issues should rank among HR’s top three priorities for 2026, 32% selected total rewards, tying it with employee experience for the top spot. This creates a clear opportunity for HR. When organizations strengthen Market Discernment, they can attract the right talent in a competitive market while also ensuring that employees are rewarded in ways that support retention, engagement, and long-term business success.
Inside Market Discernment: Strengths and Gaps
Within the HR-X Framework, Market Discernment ranks as the second least mature dimension. Only slightly more than 1 in 10 organizations (12%) have reached a high level of maturity in this area. Market Discernment shapes how well organizations understand the external labor market and how effectively they respond with competitive recruiting and rewards strategies. When this capability remains underdeveloped, organizations often rely on routine processes that keep operations moving but do not create a lasting advantage. Advancing maturity in Market Discernment can strengthen workforce planning, improve hiring outcomes, and help organizations deliver rewards that matter to employees.
Total Rewards: Functional for Many, Advanced for Few
Most organizations (71%) are operating at an average level of maturity in Total Rewards. These organizations usually have the foundational elements of Market Discernment in place. They use standard systems to support compensation reviews, segment benefits communications for different groups, and meet core requirements for fair pay and transparency. They typically support attraction and retention using standard rewards strategies.
In contrast, only 19% of organizations have reached high maturity in Total Rewards. These organizations take a far more strategic and data-informed approach. They align rewards decisions with business priorities, use advanced compensation technology, benchmark against the market with discipline, and build transparent pay practices into the employee experience. They also communicate benefits in more personalized ways, develop stronger relationships with providers, and adapt offerings based on ongoing trend analysis. Lastly, at the other end of the spectrum, 10% of organizations remain at a low level of maturity. These employers often manage compensation cycles through spreadsheets, take a reactive approach to rewards, and lack a clear strategy that connects total rewards to broader business goals.
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Recruiting: Strong Foundations, Limited Strategic Depth
Recruiting shows a similar pattern to Total Rewards. Most organizations (73%) sit at an average level of maturity. These organizations often use applicant tracking systems, build annual hiring plans, track traditional performance measures, and support structured interviews and bias prevention training. Many also promote their employer brand across digital and traditional channels.
Just 13% of organizations have achieved high maturity in Recruiting. These organizations treat talent acquisition as a strategic function, not an administrative one. They connect hiring plans to business priorities, use advanced analytics and predictive tools, and improve processes with labor market intelligence. They also build more inclusive recruiting systems through better job design, blind screening practices, diverse interview panels, and stronger manager accountability.
SHRM’s recent Finding Talent report showed that investments in these areas lead to measurable improvements in key recruitment performance indicators. When compared with low-performing organizations, high-performing organizations saw a nearly 7% reduction in job postings that remain open longer than scheduled due to lack of viable job candidates, while they also saw a 4% increase in job postings that close early due to high applicant volume.
Meanwhile, 14% of organizations remain at a low level of maturity in Recruiting. These employers often rely on reactive hiring, use generic job descriptions, and make decisions based on instinct more than evidence. For HR professionals, this is a call to lead with more precision. Recruiting has moved beyond requisition management. It now plays a central role in business readiness, workforce capability, and organizational growth.
Taken together, these findings highlight a significant opportunity within Market Discernment. Most organizations have established a functional baseline in both Total Rewards and Recruiting, but they remain firmly entrenched in average maturity. By elevating these capabilities, organizations can better align rewards and talent acquisition with evolving workforce demands, attract top candidates, and — ultimately — drive meaningful business results.
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Strengths and Opportunities: A Closer Look at Sub-Practice Areas
To provide a more comprehensive view of Market Discernment, SHRM examined the 17 sub-practice areas that underpin the two practice areas within this dimension. The data demonstrates a strong emphasis on transactional and operational activities, with organizations excelling at the core mechanics of building and delivering their benefits offerings, communicating those offerings, defining their employer brand, and creating a foundational total rewards strategy.
Benefits-related capabilities are an area of strength: The top-ranked sub-practice areas are Benefits Solutions, Benefits Trends, and Benefits Communications, indicating that organizations are relatively mature in structuring benefits offerings, tracking external trends, and communicating value to employees. High-performing organizations in these sub-practice areas embrace structured approaches, make decisions rooted in a clear understanding of workforce needs, and maintain ongoing alignment with industry trends and organizational goals. Leaders choose benefits solutions strategically and deploy communication efforts that ensure both internal and external audiences clearly understand and appreciate the available offerings. This suggests a strong foundation in benefits design and messaging.
Attracting and retaining critical talent are areas for improvement: Critical Talent and Talent Intelligence are two sub-practice areas where many organizations could enhance their performance. Organizations with low performance in these areas often lack a clear understanding of labor market competitiveness and do not use analytical tools to gain insights. Additionally, they often apply generic recruitment and pay strategies across all roles, leading to inefficiencies in attracting and retaining key talent.
Compensation execution and communication are among the weakest areas: Pay Communications, Employee Total Rewards Preferences, and Compensation Management rank near the bottom. This points to challenges in how organizations manage pay systems operationally, communicate compensation philosophy, and incorporate employee feedback into rewards design. Many organizations approach these critical areas reactively. They rely on traditional talent sourcing, demonstrate a lack of communication around their pay philosophy, utilize ad hoc compensation cycles, and fail to track changing employee preferences.
The U.S. Worker Perspective
Overall, U.S. workers view their organizations’ practices within Recruiting and Total Rewards favorably. However, U.S. workers’ opinions on benefits and pay communications mirror the areas of strength and weakness according to HR professionals. Nearly 9 in 10 (87%) agreed that their organizations provide clear communication promoting the value of their benefits offerings, while slightly more than 3 in 4 (76%) agreed that their organizations effectively communicate their pay philosophy through multiple channels.
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Practical Recommendations for Progress Within Market Discernment
Market Discernment remains a significant opportunity within the HR-X Framework and a clear path for organizations seeking stronger business performance and better employee outcomes. Many organizations have built a functional foundation in Recruiting and Total rewards, but most remain at an average level of maturity, limiting their ability to respond to workforce expectations, labor market shifts, and growing competition for talent. The strongest organizations move beyond basic administration to take a more strategic approach by using data, clearer pay practices, stronger employee listening, and more intentional recruiting strategies to guide decisions. For HR leaders, the next step is clear: strengthen market insight, refine total rewards to reflect employee needs, align hiring practices with business priorities, and invest in the systems and skills that support more informed action. By advancing maturity in this area, HR leaders can help their organizations compete more effectively, build greater trust, and create a workforce strategy that is ready for what comes next.
Leverage artificial intelligence and predictive analytics to forecast headcount needs based on business unit objectives, ensuring budget and resources are allocated to strategic priorities.
Build proactive talent pipelines leveraging customer relationship management technology and data analytics to identify and engage passive candidates, focusing outreach efforts through targeted advertising, alumni networks, and industry events.
Develop personalized total rewards statements that provide employees with a complete picture of their compensation, including salary, bonus potential, equity, and the monetary value of their benefits.
Review and optimize benefits providers and offerings every three years through a formal request-for-proposal process, ensuring that prices are competitive and offerings meet the evolving needs of your workforce.
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Workforce Planning: The Future of Work
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CONCLUSION
Market Discernment represents a pivotal opportunity for HR excellence, empowering HR leaders to move beyond foundational execution to create real organizational impact. Strengths in operational areas such as Total Rewards and Recruiting establish a necessary baseline, but persistent gaps in strategic and data-driven practices underscore the need for focused investment and intentional action. By adopting our practical recommendations and advancing maturity in this dimension, organizations can better align their recruitment and rewards strategies with business goals and workforce expectations — unlocking the potential for stronger business performance and enhanced employee outcomes.
How to cite: A Closer Look at HR Excellence: Market Discernment, SHRM, 2026
Methodology
HR Professionals: A sample of 1,287 HR professionals was surveyed between April 29 and May 21, 2025, using the SHRM Voice of Work Research Panel and SHRM Membership. For the purposes of this study, participants were required to currently be employed at the director level or higher. In addition, these HR professionals were required to work at an organization with at least 50 workers. Each response represents a unique organization, and data cleaning measures were implemented to ensure there are no duplicate organizations included in the results. The data is unweighted.
U.S. Workers: A sample of 2,003 U.S.-based workers were surveyed between April 29 and May 12, 2025, using a third-party online panel. For the purposes of this study, participants were required to be employed by an organization with at least 50 workers and could not work in the HR function or in an HR role. SHRM utilized U.S. Bureau of Labor Statistics benchmarks, as of March 2025, to implement a balanced sampling approach on the basis of gender, race/ethnicity, age, and full-time or part-time work status that controlled for under-sampling and over-sampling on these characteristics. Those who were self-employed, retired, or independent contractors did not qualify. The data is unweighted.
1. April 2026 Current Events Pulse, SHRM, 2026.