HR and Finance Executives Focus on Rewards ROI

By Stephen Miller, CEBS Jul 19, 2013
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HR executives and their finance counterparts agree on many people- and performance-related issues, including the need to better measure and improve the return on investment (ROI) of employee pay and benefits, according to a survey by consultancy Towers Watson.

As reported inDriving Performance through HR and Finance Collaboration, the top areas of joint activity were setting annual budgets for reward programs, determining changes to reward programs and setting reward strategy.

However, there was far less collaboration in areas likely to become more important in the future, including setting an overall workforce strategy and talent management.

Room for Improvement

ROI for reward programs is an area where greater collaboration could lead to improvement. According to the survey:

  • Less than overwhelming majorities of finance respondents (56 percent) and HR respondents (61 percent) agree that their company’s current ROI for rewards is acceptable.
  • To measure rewards ROI, 64 percent use financial metrics 53 percent use workforce metrics.

Both respondent groups identified the same top reward priorities for the next three years, all of which are aimed at improving their ROI for reward programs. These priorities are:

  • Linking rewards more often to company performance.
  • Differentiating rewards across talent segments to better reflect people’s roles and contributions.
  • Tying more rewards to individual performance.

Different Perspectives

A Towers Watson commentary on the findings noted that the survey also revealed some interesting disconnects between HR and finance.” For example:

Finance executives are less likely than HR execs to view executive incentive programs as appropriately structured to discourage excessive risk-taking. Almost three-quarters (74 percent) of the HR executives believe their executive incentives effectively discourage excessive risk-taking, compared to only 58 percent of the finance executives surveyed, possibly reflecting HR leaders’ deeper appreciation for the behavioral implications of incentives or maybe finance leaders’ greater sensitivity to the risk implications.”

“As the economy improves, companies are putting more emphasis on ways to enhance financial performance,” said Emmett Seaborn, a senior consultant at Towers Watson. “While the HR and finance functions have traditionally worked independently, both groups recognize that it’s their employees who ultimately add value and help drive performance, and that for these workforce programs to succeed, they will need to collaborate more in the future.”

The survey was conducted in February 2013 with 122 HR executives and 218 finance executives at U.S. and global organizations. Participating companies ranged in size from 1,000 to more than 25,000 employees and represented a broad range of industries.

Stephen Miller, CEBS, is an online editor/manager for SHRM.​

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