HR reimagines itself through the pandemic

Our State of Work in America: HR Leaders report provides their perspective

Organizations and their leaders, more than ever before, need to listen and respond to the changing needs of their employees. If they don’t, there is another organization a short distance away that will lure that talent away and create a sustainable environment.

Talent shortages and shorter tenure overall is challenging enough, and when you include the need to create hybrid workforces, creative and meaningful rewards, and an inclusive environment, it is complicated. The questions every leader (human resources included) should ask are:

1. Do I have the true pulse of what our employees desire and what matters?
2. Do I have any biases that might get in the way of true success?
3. Does my organization recognize the needs, and the need to act?
4. What is my organization willing to do to create a sustainable environment for our talent?

Following the 2021 Grant Thornton State of Work in America employee survey and report, Grant Thornton surveyed 551 senior U.S. HR leaders during August 2021. Grant Thornton asked a wide range of questions, covering strategy, compensation and benefits, return to work, and DEI, and found some surprising and unexpected results. The compiled data revealed conclusions that at times reinforced, and at times contradicted, trends and conclusions uncovered in our earlier study.

HR Strategy

In the 2021 Grant Thornton State of Work in America survey of over 1,500 workers, 79% said they want flexibility in when and where they work and 40% don’t want to work for a company that would require them to return to the office full time. So, it comes as no surprise that HR leaders know they will need to re-assess job skills and job descriptions in the future because of COVID-19 and these new employees’ demands.

“COVID-19 has resulted in hybrid work, which has been widely popular with employees,” said Tim Glowa, a principal in Grant Thornton Human Capital Services. “Combine that with the massive increase in open positions, including 15 million voluntary resignations that have occurred since spring of 2021, and the fact is, organizations need to conduct the HR function differently.” The concept of whether employees can work effectively from home” has been shattered and there is no going back to the way things were.

Mature workers

Another critical issue is arising — many mature employees aren’t ready to retire and want to work longer. At the same time, nearly one quarter of companies aren’t doing much to create cultures and strategies to keep them.

“The long-held retirement age of 65 is now being pushed back,” said Angela Nalwa, a managing director in Grant Thornton’s HR Transformation practice. “Organizations need these experienced workers for several reasons; their experience, knowledge and mentoring of younger employees are critical. And there’s not enough talent to replace this segment of the workforce. So, there needs to be a focus on retention strategies for this valuable group.”

The eventual exiting of the mature workers in the next decade due to the aging of the Baby Boomer generation will only make the war for talent even more pronounced.

The ‘War for Talent’ rages

What is surprising in the survey is that only two-thirds of HR leaders believe that there is a “War for Talent,” despite the high number of open job positions and the findings from the 2021 Grant Thornton State of Work survey that shows 33% of employees are actively looking for a new job with a different company.

Some of this heightened interest in job-seeking could be a reaction to previous and current company policies.

“Turnover could be related to how organizations treated their employees at the start of the pandemic,” suggested Alex BeMiller, a Grant Thornton tax associate. “If employees were treated unfairly, such as experiencing large layoffs or 10% rollbacks on their salaries, all those short-term decisions may be coming back to bite companies. You reap what you sow.”

Employees are leaving not just for more money, but for a better work experience, career advancement, opportunities, working remotely, better benefits or to have a better manager.

More than more than half of the HR leaders say their organizations are planning to invest in employee retention strategies, including compensation and total reward models.

“Those organizations that choose to do nothing and hope that everything will go back to the way it was are putting themselves at a significant competitive disadvantage, and on the losing side in the war on talent,” said Nalwa.

Compensation and benefits

The survey results provide additional insights into the actions that business and HR leaders can take as they continue to accelerate change and prepare their workforce for the future. Key rewards themes from the survey show that employers have to be more agile and more resilient in their design and delivery of total rewards, including their cash and non-cash elements.

“What’s interesting is, during the pandemic, we didn’t have a choice to change,” said Bob Lemke, a director for Grant Thornton Human Capital Services. “You had to change the way you were working. You had to find a different way to engage. You had to do these things because you couldn’t continue business as usual. As the pandemic eases from the earlier days, you’re going to hear people ask, ‘Is our workplace really broken and do I need to fix it?’ It changes how people are driving change because it isn’t as much a necessity for some.”

Equipping managers with tools to help attract and retain talent is critical. Those tools could be cash compensation in the form of larger than average merit increases, more unique benefit offerings and/or employee bonus programs.

Communicating is key

“After deciding on a rewards strategy, the next step is successfully communicating with the workforce, as well as communicating externally to recruits and other market influencers,” said Jennifer Morelli, a principal in Grant Thornton Transformation.

As HR leaders consider their long-term total rewards strategy, whether becoming more specialized in terms of cash bonuses or by changing benefits based on employee preference, they need to think about how to position their company’s total rewards portfolio to engage employees and increase awareness of the efforts taken to shape the rewards package to enhance value.

“To make employees aware that they can adapt these arrangements to help meet their specific needs,” Morelli said, “requires making sure that your people leaders are prepared to champion communications programs that move beyond a firmwide email tied into benefits enrollment.”

Companies can orchestrate a series of changes that rebalance the mix of more traditional benefits with cash and begin to communicate what the rebalance will look like for 2022. So, the first communication could be the cost of the programs or how much the design changes.

Other changes can be made to reinforce the value of certain elements of the total rewards offering.

“We’re seeing an increased demand for leadership development across our clients,” said Lemke. “These leading organizations are identifying how leadership styles need to evolve in order to retain an engaged workforce, to manage and measure productivity, to motivate, to do all of those things that we traditionally have done face-to-face. This further reinforces the need to meet our workforce where they are in terms of their perception of value in compensation and benefits. Find out what they see as valuable — it could be cash or flexibility — by leading with listening as opposed to leading with what we may think is best.”

Return to work

As the survey highlights, 64% of businesses expect to return to work with a hybrid model, embracing the success of remote work and the importance of flexibility in working arrangements for employees. While workforce structures have liberalized globally, only a small amount of businesses are embracing a full work-from-anywhere approach, with the majority favoring a hybrid model designed to meet their business needs.

With the Delta variant of COVID-19 creating new uncertainties and disrupting return-to-work plans, employers are having to adjust and evolve hybrid and remote working policies in response to the fluidity of the current environment and the impact it is having on workforces in the U.S. and globally. In enabling and allowing remote working away from home offices or worksites, compliance obligations and potential risks will multiply and require diligent and robust management. Simple questions such as “Where are my employees?” may become challenging to answer when employees continue to work remotely; therefore, it is critical to be able to ring-fence and mitigate risks arising from hybrid and remote working arrangements, such as tax.

Most of the guidance and relaxation of compliance obligations that was available to employers early in the pandemic no longer applies. As such, companies may be accruing tax risks and obligations in states and countries where they do not currently have a presence. Richard Tonge, a principal leading Grant Thornton’s Global Mobility Services practice, commented, “While the workforce has changed, the global tax landscape for employers and employees has not. Pre-pandemic tax rules still apply, and employers have the challenge of navigating a path to compliance for a dramatically changed workforce.”

Leveraging technology will be a key component to a successful hybrid working strategy. From geolocation and tax analytics to the automation of risk assessments and approvals, the ability to streamline and automate policy and processes will allow employers to focus on a return-to-work strategy rather than administration.

The disruption to businesses and markets during the COVID-19 pandemic and the more recent impact of the “Great Resignation” have forced many companies to change their approach to talent attraction, employee costs and their strategy for their future workforce. Eighty-three percent of respondents have increased their use of part-time employees and independent contractors to meet the changing demands within the business and from clients, but this shift in talent demographics raises issues. Companies need to consider the impact of having a more fluid workforce comprised of full- and part-time employees, project-based and temporary workers, including what it may mean for individuals engaged on a series of contracts, or short-term engagements.

For companies engaging independent contractors, there is continuing tax authority focus globally on whether or not individuals should be regarded as employees, or if they are truly independent contractors. In the U.S., the implications are significant insofar as misclassification could result in taxes not being withheld from social security, and subsequent interest and penalties. With these individuals outside the regular employee population, risk management can be difficult with less visibility.

Diversity, equity, & inclusion implementation

Diversity, Equity & Inclusion (DE&I) needs to be integrated across an employee’s entire work experience. It’s one thing to recruit a diverse mix of employees, but it should go beyond this, as we think about professional development, advancement, and engaging employees with company values. Companies need to ask how a commitment to DE&I is demonstrated at every point of the employee’s work experience.

Communications gapThere’s a large gap between HR leaders and employees in their assessment of the effectiveness in communicating corporate values, ethics and expected conduct behaviors. While 81% of HR leaders believe they are effective in doing this, the 2021 Grant Thornton State of Work in America employee survey showed that only 57% believe their senior leadership actively demonstrates their organization’s desired values and behaviors.

“Companies believe they are communicating and living out their values, culture and DE&I efforts; however, the true voice in whether they are actually doing it can only be experienced by and through their employees,” said Margaret Belden, a director in Grant Thornton Transformation. Values need to go beyond a list that is posted to a wall, or a company screensaver — they need to be experienced and role modeled. Perhaps most importantly, employees need to feel safe in expressing their views and calling out behavior that does not create an inclusive culture driven by values. Take to your surveys and ask provocative questions, not the questions that will receive the most favorable responses! Create a true baseline, commit to action and engage in action.

There is a disconnect in moving from aspirational to operational; this should be the starting place for every HR leader. While 60% of HR leaders believe their organization provides a safe place for employees to speak out on matters, the 2021 Grant Thornton State of Work in America employee survey found that only 40% of employees believe this. This is a significant gap.

“People are much more comfortable speaking up and sharing their voice with peers who come from similar backgrounds as themselves,” said Kim Jacoby, a director for Grant Thornton’s Employee Listening and Human Capital Services. “As we listen to employees in focus groups, they share that when they tried to speak out, sometimes their managers didn’t want to hear about it or were uncomfortable with the conversation. It goes back to creating a culture so that employees can speak out, which comes from the top, and senior leadership needs to create that culture where people will share their opinions.”

Interestingly, while 66% said that they leveraged data to develop a DE&I strategy, only 47% are collecting diversity data.

“In order for DE&I to be successfully implemented at an organization, it needs to be measured and tracked the same way any other company priority is being tracked. This is accomplished by having strong data to support decisions being made and show progress toward the DE&I strategy and goals,” said Jonathan Philipp, a manager of Diversity, Equity & Inclusion at Grant Thornton.

Above all, HR leaders must embrace that there is no one key strategic decision that will solve a company’s talent retention issues. A multi-faceted approach using all the techniques described here would work best. To do so, consulting professional human resources advisors can help companies create, coordinate and carry out a talent retention strategy considering successful practices and desired outcomes.

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