Critical challenges facing human resources

As the end of the year prompts human resource professionals to examine HR priorities for 2007, several key issues call for consideration.

To be effective, strategic HR planning must occur within the context of the organization’s overall business plan. Business strategies and objectives – both short- and long-term – will dictate what human resources will be needed, in what areas, with what job responsibilities and performing at what level. These strategies and objectives will shape HR decisions on organizational design, selection, retention, training and development, performance management and rewards.

Further, proactive organizations will be looking at fresh ways in 2007 to elicit optimal performance from employees, integrate new technology to streamline the HR function, leverage new pension legislation to support HR and organizational goals, control benefit costs – and, of course, communicate effectively with employees about these and other changes.

Attracting, motivating and retaining top performers

Compensation forecasts for 2007 suggest that salaries may rise by approximately 3.5 percent. The market continues to favor the employee, particularly those with critical skills and in key positions. Employers must begin now to re-examine their compensation strategies and programs to ensure they can compete for and keep the best talent, while managing the costs to do so.

Top performers are always in demand. Too often, however, employers focus on trying to improve poor performance at the expense of developing, motivating and rewarding top talent. To attract, motivate and retain high performers, an employer must create and reinforce a culture that rewards effort and results. The employer also must align performance management with business goals to ensure that rewards drive the types of behavior and results critical to the organization’s success.

To attract, motivate and retain the kinds of people that will make the difference in your organization, consider:

  • Implementing a strong performance management system that helps managers and employees define goals and expectations, and encourages continuous feedback.
  • Identifying employees who contribute the highest value and determining their key motivators and development goals.
  • Allocating limited salary increase dollars toward top performers and away from poor performers.
  • Differentiating between high contributors and other employees through an incentive-based or variable-compensation program that’s tied to the achievement of collective and/or individual goals.
  • Developing a reward and recognition system that provides immediate, specific, customized rewards to employees who go above and beyond.
  • Saying thank you.

Technology

For small to mid-size organizations that have resisted adopting HR technology, now is the time to take a serious look at new offerings. The benefits of automating and streamlining more of the HR function are substantial, and programs have become accessible and affordable even for small employers. If your competitors have not adopted HR technology yet, they likely will soon, improving their organizational effectiveness and cost structure, and positioning themselves to seize a greater share of the market.

Customizable, web-based software programs now allow managers with internet access to move effectively through payroll processing, benefits administration and HRIS functions. Easy-to-implement software solutions create a central repository for employee information, allowing an HR department to collect, display and analyze data on individuals’ skills, training, compensation and work history. Self-service tools allow both employees and managers the opportunity to view and update personnel records. Programs also allow easy tracking of recruitment efforts, job applicant data and correspondence, and discipline and separation records.

Web-based software systems that fully integrate HRIS and payroll data also offer value by:

  • Providing a cost-effective means to connect a remote workforce.
  • Supporting consistent workforce management processes that promote employment law compliance.
  • Allowing for the capture and analysis of workforce metrics for strategic decision making.
  • Encouraging stronger employee-employer communication.
Companies that leverage technology optimally will increase efficiencies in practice, reduce costs and offer more effective, accurate and accessible services to employees.

401(k) plans and employee education

The Pension Protection Act of 2006 passed in August has drawn headlines for its treatment of traditional pension plans. Less noticed, however, are the provisions that encourage employers to help their employees generate more benefit from their 401(k) plans.

Key to retaining top performers may include maximizing the opportunities the law provides to boost 401(k) participation among lower-paid employees, which presents the added benefit of allowing highly compensated people to shelter more income. Research suggests that more than half of eligible employees either contribute too little to their 401(k) plans to receive the full company match, or they fail to participate at all.

The new law supports greater 401(k) participation in at least two ways:

  • It encourages employers to automatically enroll employees in the company 401(k) plan. While auto-enrollment has been available for some time, only a minority of employers have chosen this option – often because employers feared repercussions if they invested auto-enrolled employees’ funds in anything but the most conservative choices. The new law shelters employers from liability for all investment decisions that follow new Department of Labor guidelines. With a longer list of approved investment options available to employers, auto-enrolled employees’ account balances may grow faster.
  • It allows providers of 401(k) plans to offer personalized investment advice and/or advice based on computer models, provided that any fees or commissions received by the fiduciary adviser do not vary based on the investment chosen.

Precisely how employers will make use of this feature remains to be seen. While bringing on an independent financial consultant to work with employees represents a new cost, employers may find that it enhances the company’s ability to attract and retain employees at all levels.

As always, the perceived value of a 401(k) plan and its new wrinkles – or any company benefit, for that matter – increases when the employer communicates effectively with employees about why the plan is being offered and how best to use it.

Benefit costs

As rising health care premiums continue to claim an increasingly excessive share of resources, most employers wonder whether any strategies remain for mitigating some impact of the costs.

Some actions to consider:

  • Implement and communicate about flexible spending accounts.
  • Educate employees about plan options and preventive care.
  • Talk with employees about what benefits matter most to them and adjust program offerings or features to deliver the most perceived value.
  • Review plan design and benchmark benefits to determine the best methods to contain benefit cost increases while offering acceptable coverage.

Conclusion

While circumstances may change each year, one imperative remains: HR priorities must flow from the organization’s short- and long-term strategic plans. Effective HR programs are those that align with business goals, are designed to position and develop high-performing employees, and support the behaviors and outcomes that are critical to driving organizational success.

 

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