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March 22, 2023
In 2023, retaining top talent will be a key priority for CEOs and executive teams in organizations worldwide, along with effectively navigating current challenges such as the future of work, skills gaps and difficulty in finding and hiring talent.
What is Total Rewards?
“Total Rewards” (TR) refers to the different methods by which an organization rewards its employees, including cash compensation, benefits, employee recognition and status, advancement opportunities, employee care programs (wellness, family programs, time off), and challenging work.
Total Rewards leaders are tasked with developing a comprehensive TR strategy that can support recruitment efforts, employee retention and engagement, and organizational growth and transformation, all while ensuring the company maintains and increases its competitive advantage. They’re also tasked with meeting these objectives within a budget limitation. These leaders are numerate, highly analytical, tech-savvy and data driven. With their expertise in designing and implementing total reward strategies, TR leaders are uniquely positioned to help shape the human resources (HR) and overall business strategy of an organization, and help address the most pressing concerns of CEOs and c-suite leaders now.
As companies deal with the threats of inflation, talent shortage and changing employee expectations, HR is playing an increasingly important role in organizations. Within HR, the Total Rewards leader is uniquely positioned to help the CEO and leadership team understand and plan for these trends. These HR leaders possess the skillset and experience to develop a strategic and comprehensive Total Rewards package, which can increase and maintain an organization’s competitive advantage, especially during a time of increasing turnover and a war for talent. In order to remain competitive, organizations must develop a creative Total Rewards strategy that goes beyond a cash-only focus.
Retaining Talent – Top Priority for Executives in 2023
According to the Conference Board, retaining top talent will be a key priority for executives in 2023, despite economic conditions. The transition to remote and hybrid work has highlighted new challenges in hiring, engaging, and retaining top talent. To address these challenges, companies need to hire for skills instead of roles, and they need to be strategic about how they attract and retain talent.
According to Fast Company, although the “Great Resignation” is no longer a trending topic, employees are continuing to resign in record numbers, with two open positions for every job seeker in the U.S. This means that finding talent will continue to be a top concern for executives in 2023 as more professionals look for remote or hybrid work opportunities.
While fighting for talent is a big concern, business leaders are also worried about inflation and the impact it will have on cash flow, and how this will affect customers’ spending habits. According to a survey by the Conference Board, executives in the U.S. and globally are worried about a recession, expecting 2023 to be a difficult year, with economies picking up by late 2023 or in 2024. CEOs in the U.S. and globally ranked inflation as their second biggest concern for 2023, with the recession ranking at number one.
Labor and skills shortage is also a top-of-mind concern for CEOs this year. A Deloitte survey revealed that labor costs account for roughly 50% to 60% of all company expenses. The pandemic caused many workers to feel overworked, burned out, and undervalued. This has led to an unprecedented number of resignations, but also more aggressive salary negotiations and a desire for greater pay and benefits.
Decline of Employee Engagement
As a result of feeling undervalued, among other factors, employee engagement has declined in the past year. A recent Gallup survey reveals that employee engagement in the U.S. saw its first decline in a decade, dropping to 32%. The survey revealed that the elements that declined most include clarity of expectations, connections to the mission or purpose of a company, opportunities to learn and grow, and the ability for each employee to do what they individually do best and to feel cared about at work. Gallup further found a 6-point decline in the number of employees who are extremely satisfied with their place of work. The engagement of younger workers was impacted more heavily than older workers.
With these challenges and concerns at hand, organizations must design attractive rewards programs to fill the skills gap, as well as to recruit and retain talent.
How does the Total Rewards Leader Help?
In this turbulent environment, as companies around the world deal with the challenges of inflation, talent shortage and changing employee expectations, Total Rewards leaders have the opportunity to shine. These leaders are uniquely positioned to help the CEO understand and plan for the current trends. TR leaders are skilled at designing an effective Total Rewards strategy that can meet the needs of a continually changing work environment.
Key Takeaways on the Total Rewards Role
Research conducted by the HR Policy Association (HRPA) Centre on Executive Compensation reveals critical takeaways on the important role of TR leaders in addressing present day concerns and future workforce trends.
CPOs with a Total Rewards Background
As the lines blur between Total Rewards and the overall HR function, now is the time for CEOs to consider bringing HR leaders with deep TR experience into top HR leadership positions. While the pathway to becoming a Chief Human Resources Officer, or Chief People Officer, from a Total Rewards background can be unconventional, the trend is starting to shift. Frederickson Partners has placed multiple leaders from a compensation and benefits background into CPO positions. For example, Frederickson successfully placed a CPO at a fraud prevention company who came from a compensation background. This leader had worked as a compensation consultant and served in Director of Compensation roles. We also recently placed a CPO who had previously served in Compensation and Benefits and in Director of Global Compensation roles. Our team placed this leader as a Chief People Officer at a leading cloud computing company.
These examples of TR leaders moving into the prominent and powerful role of CPO or CHRO show that many organizations are increasingly realizing the importance of the TR function and unique expertise of the Total Rewards leader. In order for companies to gain the skill set, strategies and positioning that will help them to address their present concerns of acquiring, retaining and engaging talent who will take them into the future, they must pay close attention to the TR leader and give them a seat at the table.
As uncertainty becomes the norm and with the increasing shift towards a data, analytics, technology and AI-driven workforce, CEOs and c-suite executives must empower these leaders to serve the organization as critical advisors and consultants who not only shape the company’s overall reward strategy, but also the business strategy.
Does your organization need strategic Total Rewards advisors? Maybe your Total Rewards program is in need of an overhaul. Frederickson Partners can help. Our experienced executive search experts can help you find the best candidates for your next Total Rewards leader. To learn more about our executive search services, contact us today!
Frederickson Partners, a Gallagher company is a market leader in retained executive search since 1995. As one of the top-rated HR executive search and C-suite recruiting firms, we have expertise in placing Chief People Officers, Chief Human Resources Officers, Chief Diversity Officers, Chief Financial Officers, Chief Legal Officers and many other senior leaders. We draw on a broad network of rising and established executives and leaders, and a 28-year reputation as a talent acquisition and HR Advisory provider.