As anyone in compensation knows: the times are rapidly changing. The aftermath of the COVID-19 pandemic, the rise of the remote workforce, and a highly competitive hiring environment are prompting organizations to re-evaluate their compensation strategies today, and plan their approach for the future.
What will that future look like?
We asked Elizabeth Mlekush, Senior Director of Compensation for FirstGroup America, and Christian Leufgen, Head of Corporate Compensation for Merck Group to share their thoughts.
Here are four predictions and ways they’re preparing for what’s to come at their own organizations.
Expanded focus on data and technology
“Most organizations take a very traditional approach to how they use data, relying primarily on benchmarking and similar comparisons,” Leufgen said. “But, we have far more types of data available to us today. Analyzing it and modeling it can make a big impact on how we create and differentiate our programs, and ensure we focus our resources and money where it matters.”
Leufgen sees the application of data analytics improving how companies monitor diversity, inclusion and pay equity as well as helping organizations better understand employee group needs around compensation.
He also believes that predictive analysis will be widely used to combat employee attrition.
“We can look at areas where we have retention issues, and use data models to predict which employees are at risk of leaving, so we can take preventative action,” Leufgen said.
To prepare for a more-data-driven future, Leufgen and team are focused on leveraging their existing technology and optimizing current processes to capture as much of their existing data as possible, then building from there.
Deeping the employee relationship beyond the paycheck
While offering a competitive compensation package will always be important, the commitment a company has to the employee has to go well beyond that to compete for talent in the future.
“You have to look at how you treat your employee, how you support them so they don’t burn out, particularly in stressful times, like those we’ve just experienced,” Mlekush said. “It’s not just about wages, but looking outside of those wages to other data points.”
How are they dealing with stress and change? How is their mental status and do they need resources to cope? What is their career path and what are their goals—and how can you, as a company, help them achieve those?
“Expectations have changed. People want to work for a company that is interested in them—and that expectation will continue to grow,” Mlekush said. “You have to add career path and planning to your model to retain your best talent. You have to find tangible ways to show them that they’re not a number, but part of a family.”
Redefining perks and benefits
In a traditional work environment, companies could differentiate themselves with perks like free lunches, a coffee bar, an onsite gym or other office amenities. How do companies change those offerings to attract talent in a remote work model?
At the same time, organizations have to reconsider how to attract and retain those workers in positions that don’t have a remote option.
“In our world, some of our roles can be remote, but our drivers, who make up the bulk of our workforce, have to be at a physical location. If remote work is a perk or a benefit for our other workers, we have to look at how we offer a competitive package to our drivers who are the core of our business,” Mlekush said.
In many cases, organizations are not only trying to keep these workers from going to a competitor, but from making a career change that affords them the opportunity to work from home.
Customized and holistic approach
Both of our experts expect a significant shift away from job-based or a “one-size-fits-all” compensation model.
“Instead of lumping all salaried workers and non-salaried workers together, organizations are going to start looking at the individual role level, and approaching compensation more holistically,” Mlekush said.
This shift is particularly important to building a pipeline of new talent.
“With new generations coming into the workforce, it’s becoming more important to understand what really matters to your employee groups, in terms of compensation and benefits,” Leufgen said. “Using data, we can model what those scenarios will look like.”
Although no one has a crystal ball or the power to predict what the future will look like, this much is clear: “The way we’ve always done it” is not going to get the job done.
“The last couple of years have had a big impact on how we look at compensation, even from a total rewards perspective,” Mlekush said. “Expectations have changed, and with that, how we approach compensation will continue to evolve.”
The companies that come out on top are those that are planning the next iteration of their program right now.
Watch the full video here.
