Joining Forces: Forging an HR/Finance Partnership to Shape Employee Rewards for the Future (Towers Watson)


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Research results show HR and Finance executives see eye-to-eye on critical issues such as Total Rewards and Health Care Reform. With enhanced collaboration, companies have more opportunity to balance their cost and talent objectives.

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Joining Forces: Forging an HR/Finance Partnership to Shape Employee Rewards for the Future (Towers Watson)

  1. 1. Joining ForcesForging an HR/Finance Partnershipto Shape Rewards for the Future
  2. 2. Finance and HR see eye-to-eyeon critical issues related to rewardsand health care reform. This isimportant not only because ofthe impact of health care reformdecisions on cost and talent, butalso because the experience of thelast few years of corporate belt-tightening has shown companiesthe risks of making workforceinvestment decisions in a vacuum.
  3. 3. Joining ForcesForging an HR/Finance Partnershipto Shape Rewards for the Future Table of Contents Executive Summary 2 The Role of Rewards 6 Preparing for Health Care Reform 10 Driving Reward Decisions: Today and Tomorrow 13 Bottom Line 14 Joining Forces: Forging an HR/Finance Partnership to Shape Rewards for the Future 1
  4. 4. Executive Summary Against the backdrop of a tough economy, tight labor budgets and continued escalation of health care costs, concerns about the impact of health care reform have the potential to expose sharp differences in views from the two organizational functions closest to cost and talent issues. Yet a new Towers Watson-Forbes Insights survey of more than 300 finance and HR executives at organizations across the U.S. reveals far more agreement on cost and talent objectives than many might expect.2
  5. 5. This is welcome news for companies grappling changes fundamentally in the current legislation,with the complex set of decisions triggered by the its implementation will reshape the roles andnew health care legislation (see sidebar below). responsibilities of all the players in health careRegardless of whether and to what extent they delivery, from providers, to employers, to consumers.revise or even terminate their health care plans, This, in turn, is likely to bring about a systemictheir decisions will have a direct impact on their change in the employment relationship and, inbroader set of employee rewards. And changes to many cases, the employer’s total investment in thatrewards will, in turn, have immediate and longer-term relationship.consequences for both cost and talent management. Organizations that plan ahead by anticipatingOrganizations that base their choices purely on business risks, modeling the broad range ofcost could end up at a competitive disadvantage in potential responses to reform and evaluating thethe labor market, potentially impeding their growth impact on their total rewards program — fromgoals, especially when the job market heats up both a cost and talent perspective — will be betteragain. But those moving aggressively to acquire positioned to make good decisions as aspectsand retain talent face other risks in the form of an of the Patient Protection and Affordable Care Actuncompetitive cost structure. The right decisions (PPACA) begin to take effect. And that planning needsneed to reflect an appropriate balance — between to occur with both finance and HR at the table.investment in the workforce and return on that Our survey results show there are numerousinvestment in performance and productivity. areas of confluence to serve as the foundation forAchieving that balance depends to a great extent on closer collaboration in the planning process. Somea mutually beneficial HR-finance partnership. differences emerged as well, suggesting eachThe pressures brought about by health care function can gain better insight from working morereform heighten the stakes for close collaboration closely with the other. What follows is a summary ofbetween the two functions. Assuming nothing these findings in four broad areas. A Spectrum of Responses to Reform Health care reform presents unique challenges and their own costs in 2014 and beyond, while at the same opportunities for employers that sponsor health benefit time directing employees to advantageous coverage options plans for their employees and retirees. In particular, the — either within the employer’s plan or in Health Insurance prospect of an individual coverage mandate, the opening of Exchanges. Insurance Exchanges and the availability of federal premium Employers need to select the approach that aligns with subsidies for low-income workers in 2014 require employers their total rewards philosophy and strategy, and provides to decide whether to play (sponsor a health benefit plan that optimal value in terms of both cost and talent. Other factors meets specific minimum requirements) or pay (forgo plan to consider include the demographic composition of their sponsorship, pay a penalty and require employees to secure workforce, the consequences of alternate approaches (e.g., coverage for themselves through the Exchanges). federal penalties and/or subsidies) and the choices made by But the decision is more complex than simply play versus pay. other employers in their industry. There is a spectrum of approaches to help employers optimize Play Spectrum of Opportunity Pay Optimal play Play and redirect Selective play Pay and redeploy Pay and exit Continue as a plan Restructure contributions Limit eligibility to Discontinue plan Discontinue plan sponsor for all to qualify low-paid employer-sponsored plan, sponsorship and provide sponsorship with no employees. employees for federal and direct ineligibles to some financial top-up for financial accommodation subsidies. Exchanges. employees. for employees. Joining Forces: Forging an HR/Finance Partnership to Shape Rewards for the Future 3
  6. 6. “The right decisions need to reflect an appropriate balance — between investment in the workforce and return on that investment in performance and productivity.” Role of rewards: Critical in managing talent Factors driving reform decisions: Cost and a competitive asset predominates, with competitor actions • The vast majority of both sets of respondents second agree their reward programs are important • Both groups cited cost as the most important to their organizations. Interestingly, finance factor in determining their organization’s response ascribed greater importance to virtually all the to health care reform, with competitor actions a rewards tested, with roughly two-thirds (62%) somewhat distant, but still important, second. citing compensation (pay plus bonus) as most The competitive issue was far more important important, followed by training and development to HR respondents, given concerns about their (58%). For HR, by contrast, the order was flipped, ability to attract and retain talent if they fall out with training topping the list and just edging out of step with major labor market competitors. compensation (51% versus 49%), perhaps in In a sign that each group has already begun to recognition of the need for a more diverse array of influence the other, the HR respondents put more skills in the future. emphasis on cost than the finance respondents • Overwhelmingly, both groups agree their reward did (82% versus 69%), while conversely, finance program gives their organization a competitive emphasized workforce productivity to a greater edge in recruiting and retaining talent and, to a extent than HR (29% versus 15%). lesser extent, engaging employees. • The viability of the health care Exchanges didn’t • Their confidence in their competitive position rank strongly as a factor in decision making about may stem from their belief they are investing reform, perhaps because there’s insufficient at least as much as, and often more than, information available to focus attention on it now. others in their industry on reward programs, It barely registered with finance, but ranked higher presumably strengthening their position as an with the HR respondents, who may be skeptical employer of choice. Between 30% and 40% of that the Exchanges will provide a viable alternative finance respondents believe they are outspending to employer-sponsored plans. competitors on most reward programs, especially The post-reform picture: For most, a in compensation and retirement benefits. At commitment to health care coverage in some the same time, their equally strong belief in the form — and the expectation of higher costs importance of these rewards suggests many see • In one of the survey’s most surprising findings, a positive value-to-cost ratio. HR respondents, a majority of finance respondents (two-thirds) by contrast, were more likely to view their reward anticipated maintaining coverage for active spend as on par with competitors. employees in some form once the PPACA takes • Both groups also agreed on some common areas full effect — matching the responses of their of underinvestment. These clustered around HR colleagues. Finance respondents did rally so-called career and environmental rewards, to a greater extent than HR around other “play” and included training, career management and, options, including structuring contributions to notably, flexible work arrangements, where roughly move low-wage earners into the Exchanges a third of the HR respondents and a fifth of the and maintaining coverage until the excise tax is finance respondents indicated that their costs fell triggered. But only 15% of finance respondents below competitive norms in these areas. and 13% of HR respondents expected their4
  7. 7. organizations to eliminate coverage and pay Organizations that have begun to use reward required penalties, demonstrating that despite optimization tools (see sidebar below) have found an apparent savings from exiting health plan they can shift the mix from higher- to lower-cost sponsorship, finance executives understand rewards in some areas, with little or no impact the deeper implications on total rewards and on key employee outcomes like retention or employee relations. productivity. More to the point, they can make• Both respondent groups anticipate an increase adjustments to their mix and level of investment in health benefit costs irrespective of the choices in ways that more directly support their business they make under reform. Those planning to pay and talent strategies and improve employees’ versus play, however, see a somewhat rosier view of perceived value. cost picture, with a quarter expecting some to Who owns rewards: Collaborating on setting significant reductions in cost (compared to just 6% strategy and budgets of those maintaining coverage themselves). Their • Both the HR and finance respondents see expectation of higher costs may result from over changes ahead in their own roles in the a decade’s worth of steady cost increases and reward arena from a strategic and budgetary a lack of confidence that reform will change that perspective. Today, both acknowledge strategy trend. Or it may reflect skepticism that reform can belongs largely to HR. But in one of the more actually address some fundamental cost drivers in significant differences to emerge from the survey, the nation’s health care system. finance believes strategy will be much more of• Perhaps the most surprising survey finding, given a shared role in the future, while HR believes it the nearly universal agreement that costs will rise, will continue to drive that element, with minimal is that neither respondent group sees any change finance involvement. in the mix or cost allocation for their overall • In the area of budgeting, views between the two reward programs in the next few years. Both groups differed as well, although neither sees groups also expect an increase in the total budget much change ahead. Finance respondents say now dedicated to rewards. Is that inevitable? they have the predominant role now and will in While current patterns may lead respondents to the near future. HR respondents, however, already think so, there are actually numerous ways to see budget setting as more of a shared role now manage costs through changes to the reward mix and expect that to continue as well. and the way costs are allocated across that mix. Inside Total Rewards Optimization Total rewards optimization (TRO) allows a company to Answers to these questions give decision makers insights to determine the rewards that have the biggest impact on design a reward program that both minimizes organizational employee attitudes and behaviors, and then create reward investment and delivers high perceived value to employees. portfolios that deliver the highest return on investment to the Through the methodology, organizations can: organization. It helps an organization answer three critical • Calculate the ROI of different reward strategies (cost versus questions: the value generated by changes in employee behavior) in a • What is the right level of total investment in rewards? rigorous and reliable way • What is the best way to allocate that investment across • Decide which reward strategies produce the optimal reward elements to maximize the employee behavior we combination of financial cost to the organization and want to drive (for example, retention and engagement)? perceived value to employees • How do these results vary across targeted employee • Communicate about rewards to employees and other segments (for instance, professional group, age, job level, stakeholders in a way that creates understanding and tenure, location and performance level)? supports needed behavior change Joining Forces: Forging an HR/Finance Partnership to Shape Rewards for the Future 5
  8. 8. The Role of RewardsFigure 1. Effectiveness of rewards in supporting talent objectives HR and finance respondents have virtually identical0% 20% 40% 60% 80% 100% views about the effectiveness of their reward programs in attracting and retaining their fair shareRetaining key talent of talent relative to competitors (Figure 1). Their levelFinance of agreement drops slightly when it comes to the 78 9 13 role of rewards in sustaining employee engagementHR and supporting workforce health and productivity, but 75 13 12 even in these areas, affirmation remains quite high.Attracting key talent Small but interesting differences emerged, however,Finance around the relative importance of various elements 77 14 9 in the reward mix. And those differences wereHR also echoed in respondents’ views about the cost of various reward elements relative to their 78 9 13 competitive set.Maintaining a positive public image/reputationFinance Finance respondents, not surprisingly, focused on compensation as the most critical element in 73 18 9 the reward mix. But more unexpectedly, close toHR or slightly over half rated all the reward elements 73 22 5 tested as extremely important — exceedingSustaining strong employee engagement their HR colleagues by considerable margins inFinance some areas (Figure 2). Only a relatively small 67 23 10 percentage of both sets of respondents felt any rewards were unimportant, even those in areasHR like career management, training and flexible work 67 24 9 arrangements. This may be a sign of the extentImproving workforce health and productivity to which companies have come to recognize theFinance shifting needs of the modern, generationally diverse 66 25 9 and geographically dispersed workforce that crossesHR borders, relies increasingly on technology and works 64 24 12 in a 24/7 environment. Strongly agree/Agree Neither agree nor disagree Strongly disagree/Disagree6
  9. 9. “Significantly more than half Figure 2. Importance of reward program elements 0% 20% 40% 60% 80% 100% of both groups believe their Compensation (pay plus bonus) level of investment is on Finance 62 34 4 par with, or actually below, HR those of their labor market 49 45 6 competitors.” Training/Development Finance Although views about the cost competitiveness of 58 30 12 their organization’s reward programs were somewhat HR more varied, note that significantly more than half 51 39 10 of both groups believe their level of investment is on par with, or actually below, those of their labor Career management programs Finance market competitors (Figure 3). In fact, in looking 52 32 16 at where respondents think they are below market, we can infer areas ripe for increased investment — HR most particularly in those self-same environmental 39 47 14 rewards highlighted as important in the total mix. Retirement benefits Fully 30% of HR respondents, for instance, feel Finance they’re behind the competitive curve when it comes 50 40 10 to investing in career management and flexible HR work arrangements, and a mere 9% believe they are 36 47 17 ahead of competitors in these increasingly important areas. Health care benefits Finance Of course, cost is also where we can see the largest discrepancy between the functions. Close to a third Bar title 12 49 41 10 of finance respondents believe they’re already ahead HR of the market in areas like career management and 44 54 2 flexible work arrangements, and only roughly a fifth think they’re behind competitors. Flexible work arrangements Finance 46 34 20 HR 28 48 24 Absolutely critical/ Somewhat important Not very important/ Very important Not at all important Joining Forces: Forging an HR/Finance Partnership to Shape Rewards for the Future 7
  10. 10. Figure 3. Relative cost of reward program elements At the same time, a reasonably large segment0% 20% 40% 60% 80% 100% of the finance group sees evidence of potential overinvestment in all reward areas — more soCompensation (pay plus bonus) than HR with the one exception of retirement. AsFinance the keepers of corporate budgets, this perspective 39 48 13 isn’t surprising, and we don’t know whether theirHR perception of their competitive position is accurate 22 67 11 or not.Training/Development Even in today’s economic climate, some companiesFinance choose to reward above market. And more may feel 37 47 16 that pressure as the economy recovers and theHR labor market tightens again, especially for the skills 22 56 22 most critical to growth. That gives rise to another question: What will the reward mix look like in theCareer management programs next few years, especially once health care reformFinance is fully implemented? What shifts are respondents 29 52 19 anticipating?HR Interestingly, some contradictions emerged in 9 61 30 this area as well. On the one hand, none of theRetirement benefits respondents in either function expect any significantFinance shift in their cost allocation now versus the next 39 48 13 few years, indicating little change in the overall mixHR (Figure 4). 43 38 19 On the other hand, both groups, but particularly finance, anticipate some significant shifts in theirHealth care benefits core reward philosophy over the next few yearsFinance (Figure 5). Specifically, more than half of the financeBar title 12 33 57 10 respondents expect reward programs to provideHR more flexibility in the future, presumably to reflect 32 52 16 changes required by health care reform, or shifts in business priorities, the composition of theirFlexible work arrangementsFinance workforce or the economic environment. By contrast, 31 47 22 only slightly more than a third (37%) of the HR respondents anticipate more flexibility in their rewardHR programs, and a fifth actually think flexibility will 9 61 30 decline. Far higher/Higher About the same Far lower/Lower than competitors as others than others “Both groups anticipate some significant shifts in their core reward philosophy over the next few years.”8
  11. 11. Figure 4. Current and expected cost allocation for Figure 5. Expected change in reward philosophyrewards over the next two to three yearsCurrent cost allocation (all respondents) Finance 6% 58% Base pay 56% Significantly/ 9% 18% 14% Bonus or Moderately incentive pay increase 13% 13% Health care flexibility benefits 26% No change 56% 58% 9% Retirement 26% 18% Significantly/ 14% benefits Moderately 6% Other monetary reduce rewards flexibilityExpected cost allocation — 2014 and beyond(all respondents) HR 6% 58% Base pay 37% Significantly/ 9% 13% Bonus or 21% Moderately incentive pay increase 37% 14% 14% Health care flexibility benefits 42% No change 58% 9% Retirement 21% Significantly/ benefits Moderately 13% 6% Other monetary 42% reduce rewards flexibility The Changing Face of Total Rewards Just as businesses can’t stand still, neither optimize that combination to ensure it is allocating its can their rewards model, especially in the spend in ways that drive the right behaviors, deliver face of dramatic and ongoing shifts in the high perceived value to employees and improve its global business environment and economy. An return on investment. effective total rewards program must align with ee Value Propos ploy itio Em n business strategy — what the business needs and what’s required from employees — and give l Pe na rf s Rewdatio or Rew shape and dimension to the broader employee Optimize rm war d ar an ds Business Strategy n Business Results Organizational Context Employee Performance value proposition that defines the “give and Fou ce-B get” between employer and employee. Total ased Human Capital Strategy Financial Performance Through the total rewards framework, an Rewards A li iv e organization can identify the right combination gn Dr Brand Promise Customer Engagement of rewards for all or parts of its workforce — from the foundational, like pay or retirement, to En v ir o C a r e e r a n d r d s the performance-based, like incentives, to the n m e n t a l R e wa environmental, like career management — and Joining Forces: Forging an HR/Finance Partnership to Shape Rewards for the Future 9
  12. 12. Preparing for Health Care Reform Cost was by far the most important factor for both“Cost was by far the most important factor in sets of respondents in making decisions for their making decisions for their organization about organization about health care reform (Figure 6). In fact, the HR group put even more emphasis on cost health care reform.” than the finance group did, while finance was almost twice as likely as HR to cite workforce health and productivity as a factor. Figure 6. Critical factors in making decisions about health care reform 0% 20% 40% 60% 80% 100% For the HR respondents, taking note of competitor actions was also important — for obvious reasons. Impact on costs If their organization moves too far ahead of the 69 pack, or falls too far behind, it could face significant 82 consequences in terms of recruiting and retention, Actions of competition in our industry not to mention cost. 30 48 Despite their focus on costs, the vast majority of both HR and finance respondents expect at this Impact on workforce health and productivity stage to maintain health care benefits for their active 29 employees (Figure 7). Roughly a quarter of the finance 15 respondents and more than a third (38%) of the HR Complexity of administering health care benefits respondents were unequivocal on this issue. At the 29 other end of the spectrum — exiting coverage — 28 were merely 15% of finance respondents and 13% of Ability to retain key talent HR respondents. Between the extremes of “full play” 27 or “full pay” were a range of play alternatives, from 31 maintaining coverage while moving low-wage earners Ability to attract key talent into the Exchanges, to providing coverage until 20 triggering the excise tax or another inflection point. 29 Note, too, that a significant minority (18% of both Impact on employee engagement groups) indicated they weren’t yet in a position to 16 know how their organization might respond — no 15 doubt a result of the considerable uncertainty Existing collective-bargaining agreements continuing to surround the PPACA, especially in 14 light of the U.S. Supreme Court’s decision to review 11 the law’s constitutionality and questions about the Organization’s reward philosophy viability of Insurance Exchanges. 12 Regardless of their organization’s decision 10 regarding reform, the majority of the finance and Organization’s public image/Reputation HR respondents expect their health care costs 11 to rise (Figure 8). The players were more likely 8 than the payers to anticipate higher costs — by a Viability of state Health Insurance Exchanges 20-percentage-point margin. And a quarter of the 7 payers actually projected a decrease in health care 21 costs, compared to just 6% of the players. But in Finance HR both scenarios, only roughly one in 10 respondents anticipated costs would stay the same. 10
  13. 13. Figure 7. Most likely responses to health care reform Figure 8. Expected change in health care costs0% 10% 20% 30% 40% after implementing the PPACA Organizations likely to “play”“Play” optionsProvide employer-sponsored health coverage for the long term 6% 26 38 11% 83% Significantly Increase/Provide employer-sponsored health coverage, but structure contributions and communication increaseto encourage low-wage earners to qualify for subsidies, and pay penalties for those subsidized 11% No change 20 6% Significantly 8 decrease/ DecreaseProvide employer-sponsored health coverage until the excise tax is triggered 83% 15 10Provide employer-sponsored health coverage until an inflection point other than the excise tax 6 11 Organizations likely to “pay”“Pay” optionsAdopt a defined contribution approach by providing monetized value to employees, 26% 62% Significantlypay penalties and direct employees to Exchanges increase/ 9 Increase 11 12% No change 26% SignificantlyExit employer-sponsored health coverage, pay penalties and direct employees to Exchanges 12% 62% decrease/ 6 Decrease 2Other action0 2 Figure 9. Expected change in per-employeeDon’t know investment after implementing the PPACA 18 Organizations likely to “play” 18 8% Finance HR 72% Significantly 20% increase/It’s no surprise, therefore, that respondents see Increasean equivalent rise in their reward investment on a 20% No changeper-employee basis (Figure 9). If costs for health 8% Significantly decrease/care coverage, especially for the players, continue 72% Decreaseto rise, and respondents expect no change in theirreward mix or allocation, it stands to reason bothtotal and per-employee reward costs will increase.Yet in this set of findings lies what may be thebiggest opportunity for companies to hold the Organizations likely to “pay”line on costs without sacrificing important talentobjectives, chiefly by considering more efficientways to remix rewards. Many companies are already 20% 63% Significantlypursuing this goal, taking a fresh look at their total increase/rewards strategy and approach, and testing the Increaseefficiency and effectiveness of different portfolios on 17% No changecost and employee outcomes. What may ultimately 17% 20% Significantly 63%distinguish those likely to be most successful in decrease/reframing rewards will be an active finance-HR Decreasepartnership that can find the right balance betweencost and talent needs. Joining Forces: Forging an HR/Finance Partnership to Shape Rewards for the Future 11
  14. 14. Figure 10. Impact of implementing the PPACA While uncertainty comes through in many areas0% 20% 40% 60% 80% 100% relating to health care reform, respondents willing to predict their organization’s play-or-pay responseImproving workforce health and productivity also have a fairly clear view of how that response willPlay affect various talent and workforce issues (Figure 35 44 21 10). One-third to one-half of those planning to payPay rather than play anticipate negative consequences 24 38 38 in a range of areas, with retention topping the list, followed by recruitment and engagement. By contrast,Maintaining a positive public image/Reputation at least three-quarters or more of those intendingPlay to maintain coverage generally anticipate positive 33 49 18 outcomes (or no change) in retention, recruiting,Pay engagement, and workforce health and productivity. 25 42 33Retaining key talent “What may ultimatelyPlay 33 45 22 distinguish those likelyPay to be most successful in 18 31 51 reframing rewards willAttracting key talentPlay be an active finance-HR 32 46 22Pay partnership that can find 22 29 49 the right balance betweenSustaining strong employee engagement cost and talent needs.”Play 28 49 23Pay 22 38 40 Significant/Slight No impact Significant/Slight positive impact negative impact12
  15. 15. Driving Reward Decisions: Today and TomorrowCurrently, both respondent groups report that HRplays the dominant role in setting reward program “Organizations that can bring both functions tostrategy. But their perception of dominance the table in determining the right response todiffers a bit (Figure 11). Just over half of thefinance respondents acknowledge that HR has reform will be far better positioned to maintaingreater involvement in strategy, while a quartersee involvement as relatively equal, and a fifth both a competitive labor cost structure and be abelieve they are actually more involved. The HR talent magnet as well.”respondents, by contrast, report very little financeinvolvement right now. Figure 11. Changing roles of HR and financeThe disparity is even greater around budget setting. 0% 20% 40% 60% 80% 100%Finance sees itself as the dominant player here,with only about a fifth acknowledging greater HR Developing Strategy Financeinvolvement. By contrast, just under half of the Current roleHR respondents indicate they are more involved 55 25 20in budgeting, while roughly a third see the role as Expected roleshared, and just a fifth cede greater involvement to 37 38 25finance.Looking ahead, both groups think the balance will HR Current roleshift more toward finance to varying degrees. Interms of setting strategy, HR respondents continue 81 16 3to see themselves in the lead, although to a slightly Expected rolelesser extent than today. The finance respondents, 72 24 4however, see a bigger change, with just under two-thirds indicating they would have an equal or greater Setting Budgetsrole than HR in this area. For budget setting, the Finance Current rolefinance respondents see virtually no change ahead.More than half identify their function as primary now 19 28 53and expect that to hold. HR respondents see the Expected rolecurrent situation differently — with far more primary 20 27 53or shared involvement right now — and believe that HRwill hold in the near future, albeit with more of an Current roleemphasis on joint involvement. Bar title 12 47 34 19 Expected role 38 40 22 HR much/Slightly more HR and finance equally Finance much/Slightly more involved than finance involved involved than HR Joining Forces: Forging an HR/Finance Partnership to Shape Rewards for the Future 13
  16. 16. Bottom Line Despite a common presumption that finance and With so much at stake, savvy organizations need HR share little common ground due to fundamental to act now to responsibly assess the business differences in their respective (and sometimes implications, model different scenarios and consider conflicting) areas of focus, data from this survey the impact of each reform option on their entire indicate these functional leaders see eye-to-eye reward program. This is also an important moment on the most critical issues related to rewards in time to revisit their total rewards philosophy and and health care reform. This is important not strategy, and understand what kinds of changes only because of the impact of health care reform may be necessary to meet their business and decisions on cost and talent, but also because the growth goals, their shifting talent requirements, experience of the past few years of corporate belt- and the financial pressures they continue to face. tightening, particularly around rewards, have shown Organizations that are currently conducting this kind companies the risks of making workforce investment of comprehensive analysis — factoring in broader decisions in a vacuum. cost and talent implications — will no doubt have a leg up on their competitors as the economy Organizations that can bring both functions to the improves and the implementation of health care table in determining the right response to reform — reform becomes clearer. and to reward investment more generally — will be far better positioned to maintain both a competitive At the end of the day, our survey findings show that labor cost structure and be a talent magnet as well. both HR and finance see themselves as playing a But that won’t occur without genuine and consistent stronger role than the other in setting strategy and collaboration between finance and HR, each of which budget for their reward program going forward. That has critical insights and perspectives to bring to the tension augurs well, for it is difficult to conceive that process. an organization can face the demands of reform and other business shifts — or take advantage of Health care reform is a total business issue the opportunities — without the input of multiple that influences benefits, the overall reward deal, perspectives, particularly those of HR and finance. workforce planning, administration and finances. HR executives will generally have a greater familiarity with the intricacies of health care reform and the About the Survey potential impact of their various options on their This survey was conducted in partnership with employee value proposition, other reward programs, Forbes Insights and fielded in September 2011. the complexity of benefits administration, and More than 200 finance and more than 100 worker health and productivity. Finance executives HR executives at global (65%) and U.S. (35%) will generally have a fiscal fluency that can create organizations shared their opinions about the impact a viable cost structure to balance financial realities of health care reform on reward costs and risks by with talent pressures and needs — both in the short 2014. Survey respondents represented a broad and long term. cross section of industries. Companies ranged in size from 1,000 employees to 25,000, with a mean of nearly 14,000. “Savvy organizations need to act now to responsibly assess the business implications, model different scenarios and consider the impact of each reform option on their entire reward program.”14
  17. 17. About Forbes InsightsForbes Insights is the custom research practice of Forbes Media.Forbes Insights’ research covers a wide range of vital businessissues, including: talent management; corporate socialresponsibility; financial benchmarking; risk and regulation; anddoing business in emerging markets.About Towers WatsonTowers Watson is a leading global professional servicescompany that helps organizations improve performance througheffective people, risk and financial management. With 14,000associates around the world, we offer solutions in the areasof employee benefits, talent management, rewards, and risk andcapital management.Copyright © 2011 Towers Watson. All rights