With costs continuing to rise amid ongoing economic headwinds, organizations are struggling to keep compensation and benefit programs affordable. For example, the cost of healthcare is rising globally, and many employers are dealing with higher compensation costs from paying above average new-hire salaries during a tight labor market. This creates a delicate balance: Companies want to continue to attract and retain talent through robust total rewards while maximizing their investment and making programs cost effective.
Through data and analytics, organizations can optimize their spending to achieve the best possible outcomes. But finding the right data, contextualizing it properly and using it to make better decisions about spending is easier said than done.
There are several types of data that can be used to drive decision making.
- Descriptive and Contextualized — Identify the facts of the current situation and what has already happened within the context of the broader competitive landscape (e.g., benchmarking).
- Predictive or Scenario-Based — Identify what could happen in the future or modeled against certain criteria.
- Prescriptive — Recommend the optimal course of action or strategy moving forward.
When deployed thoughtfully, data and analytics can contribute to better decisions about large-scale structural issues like overall talent strategy, location strategy, reward and benefit programs, organizational design, and diversity, equity and inclusion (DE&I) initiatives. Here are some ways organizations can use internal and external data to gather insights and make more informed decisions that generate significant return on investment.
Determine the Most Impactful Ways to Optimize Your Workforce
Before making any major changes to your total rewards, assess current and future workforce needs to optimize spend. Protecting critical capabilities should be the most important goal. Benchmarking in areas like headcount, location strategy, compensation and benefits can identify where costs are higher than your peers and if you’re achieving target return on investment for the spend.
Using Data and Benchmarking to Inform Location Strategy Decisions
Benchmarking across multiple data points is critical to making informed decisions with optimal impact. We worked with a technology firm on location strategy for skilled technology specialists. In determining the client’s optimal site to hire and retain talent, we assessed several of their active working locations. By scoring five different markets (two different cities in the U.S., two in the UK and Tokyo, Japan) on six different categories, including labor supply, labor cost, expected employee growth and others, the recommendations were narrowed down. The resulting scores showed that Tokyo was the clear choice. This underscores the need to look at multiple data points. Focusing only on general cost of living may have resulted in the incorrect conclusion that Tokyo would be a less attractive option.