Building capacity for new HR and rewards practices

As the war for talent continues well into a second year, renewed concerns over a contracting economy are driving elevated operational risk and adding uncertainty.

This trend has fundamentally changed the employee–employer relationship and how organizations manage their workforce, and the expectations employees have about culture, leadership, and their pay and benefits. In many cases, this has required companies to undertake actions that were unprecedented, such as rapidly adopting new one-time adjustments, rewards vehicles and other practices as a way to attract and retain critical talent for different areas of the business and/or geographies.

An organization’s human resources (HR) team is at the center of these discussions, and business leaders have found the discipline a valuable partner despite its own constraints, or prior expectations that leadership had for the function. It now must seize the opportunity to add even greater value.

At the same time, as employers try to plan for their future and adapt to the emerging economic pressures and continuation of the demand for talent, many HR and total reward leaders have found themselves stretched for capacity at a critical period — and face a decision to adjust services, simplify their HR and rewards offerings, or escalate the business case for developing new capabilities and expanded capacity for new or more agile practices.

Identifying capacity constraints

This is a unique time to evaluate how your business has changed — or must change — and how HR can lead the way to more productive workforce and rewards practices.

Addressing ways to build additional HR capacity to “do more” through stakeholder engagement, trade-off analysis and action planning may be key. However, managing capacity is challenging — it’s a finite resource no matter how it’s viewed. Positioning HR function’s capacity in a flexible manner gives the greatest probability of being able to help business leaders succeed. At the same time, merely having capacity does not ensure success — each functional area within human resources must have internal capabilities which are up for the challenge.

One approach to building HR capacity involves three steps: (1) to stop performing activities or discontinue programs that don’t add any value or could actually be creating additional barriers to HR’s ability to add value impact, (2) continue with those activities or programs that are working well, and (3) identify new services, activities or programs that add value and result in improved effectiveness.

Of course, the “Stop-Start-Continue” framework oversimplifies HR practitioners’ challenges. HR departments need to create a balance between creating the right processes and building the right capabilities. Some HR areas lead with a review of their existing business processes but lack certain capabilities that could make these processes even more effective. Similarly, having well-developed capabilities without sound, functional processes can cause even more disasters and added expenses. 

Creating capacity for HR and total rewards teams may come down to identifying ways that companies can manage internal demands on their HR functions and the talent supply and skills that HR functions have. Many HR leaders see the value of approaches to managing demand — these are probably the most prevalent actions taken.

One method companies can take to manage supply and build capacity is to evaluate HR service gaps in light of company priorities. This is fundamentally an alignment exercise — are the services HR provides aligned with the expectations employees have of HR? Or are some HR activities creating added burdens, costs and inefficiencies such that, if changed or removed, this adjustment could benefit the company?

Factors that influence the success of the Stop-Start-Continue approach rely heavily on stakeholder engagement and well-developed measures of effectiveness. Companies can gather stakeholder feedback through structured interviews, surveys or a combination of the two, which can focus on business leaders or the HR team or division. Developing the rationale to evaluate the effectiveness of an organization’s compensation, benefits and other programs can be much more complex.

Creating a path forward

HR and total rewards planning involves increasing levels of sophistication to achieve strategic business objectives. Matching anticipated business demands with the contingencies of new workforce requirements can be very complex. For businesses that invest time for a critical review of HR capacity and capabilities, engaging stakeholders, and a structured review of their total rewards programs, the results can be significant.

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