The Skill is Not Enough
Traditional Rewards Management: Why it Won't Work?
Traditionally, organizations have used the pay range to position skills with a demand supply mismatch at the higher end of the range. With technology cycles panning over considerable time frames, this let organizations hire, and manage talent towards the max of the range while allowing for gradual deceleration as the technologies cooled down. Organizations that were innovators would train resources on the emerging technologies and accelerate their positioning in the range through disproportionate funding of base pay increases as skill proficiency and business demand increased. Organizations that looked to buy talent would position talent in the higher end of the range and continue to increase exit barriers through higher than average increases to these groups. Given range spreads of greater than 100% from commoditized skills to super hot skills in the market and the long gestation period of technologies in the past, the approach of increasing base pay has worked to a fairly ,mlarge extent in the past. However, now with technology Evaluation Criteria cycles becoming much shorter, positioning employees at the higher end of the spectrum just on the basis of skill and skill proficiency will lead to organizations not being able to gradually reduce the cost of skills which are cooling down and ramp up costs for skills which are heating up.
Citius Altius Fortius
Given the below dichotomies
1. Hot skills in the market have significant premiums
2. Rate at which skills become hot and cool down is increasing dramatically
3. Technology lifecycles will not allow you to ramp up/ ramp down employee costs over a period of time The need of the hour is to look at more "non-traditional" rewards delivery practices which can infuse funds in the right pockets of the employee population while giving
the organization the flexibility and agility to move its investments from one area to the other based on market demand and supply of skills. Some early adopters of this thought have moved towards incorporating skill-based compensation programs which are based on the demand and supply of skills and are over and above the base compensation of the employee. Essentially organizations are designing a STI program for employees with niche skills that reward the employee as long as the market is willing to pay a premium for the skills. From a pure affordability and expense perspective, it allows the organizations to be fairly agile in determining which pockets of the employee population need differentiated investments while at the same time not increasing the carry forward costs for employee groups. However, it is not as simple as it sounds, organizations need to embark on a significant change management journey to ensure that employees do not perceive it as an entitlement and organization can retain the right and the ability to remove the skill bonuses at their discretion.
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