Who Will Win the HR-Finance Tug-of-War Over Employee Rewards?

In its newly released report Forging an HR/Finance Partnership to Shape Rewards for the Future, Towers Watson notes tension between the functions regarding reward strategy going forward.

The research findings suggest that the balance of power may shift more toward Finance in the future, not only in the area of reward budgeting but also in the reward strategy realm.

The Towers Watson research offers interesting data worth some thought and reflection on the part of HR and reward professionals. A few pieces that jumped out at me are noted below; plus I took the liberty of throwing one set of findings up against some recent informal research conducted by the HR Bartender, Sharlyn Lauby.

Most important element in the reward package?

Finance says compensation (pay plus bonus) is number one, with 62 percent rating this element as “absolutely critical/very important.” HR sees training and development as most important (51 percent rating it as such), although compensation did come in second place among this group.

I thought it interesting to juxtapose the HR Bartender research against these particular findings. The former tells us that training and development is what HR people want most to do (by an enormous margin) and compensation is their least favorite thing to spend time on. Coincidence? I have to wonder.

Who owns rewards going into the future?

Both parties acknowledge that reward strategy today belongs largely with HR, but they differ in their predictions of the future. While HR believes it will continue to drive reward strategy with minimal involvement from Finance, Finance believes it will play a larger role going forward (63 percent of Finance respondents see their reward strategy role in the future being equal to or great than that of HR).

Why would Finance want to horn in on our turf here? One reason noted by the Towers Watson analysts is the upcoming challenges associated with employers’ responses to the requirements of health care reform law – and it certainly makes sense to me that we’d want both sets of players at the table to deal with this. The research suggests, however, that there may be a few other reasons as well.

Rewards in the future must be flexible. Or not

Perhaps one reason for Finance’s interest/intent to play a larger role in reward strategy is the group’s collective opinion that rewards must be made more flexible in the future — in response to business priorities, workforce composition, the economic environment, etc.

Over half (56 percent) of Finance respondents noted the expectation that reward philosophy will/must change in a manner that increases flexibility, where only 37 percent of HR respondents agreed with this imperative. In fact, over one in five (21 percent) of HR respondents believe reward flexibility will/must be reduced.

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Overrewarded or underrewarded?

A reasonably large segment of Finance respondents believe there may now be over investment in rewards – including in compensation, training and development, career and health care benefits, and flexible work arrangements. HR respondents disagree, sometimes quite significantly.

Why the disconnect? Does HR have its fingers more firmly on the pulse of competitive practice than Finance — or is HR too immersed in benchmarking and overlooking opportunities to better align reward structure and spending with business needs and priorities?

Towers Watson analysts are touting this research in a positive light, as evidence of our progress toward greater HR/Finance collaboration. I find myself more in alignment with John Hollon, TLNT’s Vice President for Editorial, who covers the research here and suggests that the HR/Finance tension captured in the research is signaling potential problems that deserve our care and attention.

What’s your take?

Come see Ann Bares talk about A Look at How We Reward the Work of  Today — and Tomorrow at TLNT’s Transform conference in Austin, TX Feb. 26-28, 2012. Click here for more information on attending this event. 

This was originally published on Ann Bares’ Compensation Force blog.

Ann Bares is the Managing Partner of Altura Consulting Group. She has over 20 years of experience consulting in compensation and performance management and has worked with a variety of organizations in auditing, designing and implementing executive compensation plans, base salary structures, variable and incentive compensation programs, sales compensation programs, and performance management systems.

Her clients have included public and privately held businesses, both for-profit and not-for-profit organizations, early stage entrepreneurial organizations and larger established companies. Ann also teaches at the University of Minnesota and Concordia University.

Contact her at abares@alturaconsultinggroup.com.

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