In redesigning the pay structure, we started from strategy. Combined with an impact analysis, this created support among all stakeholders. The capstone was the successful conclusion of 8 collective bargaining agreements.
Working from business and pay strategy, the company (rightly) prioritized effective solutions over mere efficiency. This resulted in a reward strategy statement, an explicitly formulated wage strategy that explained the choices and why those choices were made.
Combined with a financial impact analysis, this created support among the board of directors, the unions and the blue and white collar workers themselves. The legal finale of this exercise was the conclusion of eight collective bargaining agreements that we helped negotiate.
Traditional HR legal consultants and lawyers could only add value when writing the collective agreements.
At the time we came in with hukaroi, the company in question was doing job weighting and job classification. A proposal of wage house had also already been formulated. This exercise was to provide a more thorough and consistent basic pay structure.
The new wage structure was estimated to involve an overall increase in payroll costs. For those who would earn too little under the new wage structure would receive a pay raise. Those workers who would earn too much under the new wage structure would remain at their levels.
And so we were asked the question of how to optimize payroll, which is in itself an exercise in efficiency.
Another important thing to know is that the company is (largely) located within the production sector and that the company employs both blue-collar and white-collar workers. There is social consultation within the company, including a trade union delegation.
Finally, this exercise has already been initiated twice. Neither attempt was successful.
Discussions with management revealed that an exercise in payroll optimization was necessary to ensure the company's financial position for the long(er) term.
Now, the optimization of payroll costs as is often done by granting fringe benefits, cafeteria plans, etc. does not in practice imply much long-term vision. But that is exactly what was important for the company (and in fact for almost all companies).
Its needs can be summarized by the following questions:
In practice, we see that making the financial translation of strategic policy choices in the area of HR and payroll policy is not an easy task in many cases. Nevertheless, the budget is the crucial framework within which the strategy must be shaped.
Together with the company, we started at the beginning, which is the business strategy.
Business strategy is about making fundamental choices to differentiate yourself from the competition in the business field. You cannot be better than the competition in everything. Difficult choices will have to be made. There must be a pervasive focus on those aspects that make a customer choose the company and not a competitor.
To test whether a company has a clear business strategy, we developed a questionnaire that essentially polls for consistency among members of strategic management. Consistency indicates (a) a clear strategy definition and (b) an aligned strategic management team.
The outcome of our questionnaire confirmed that the business strategy was clear - at least implicitly - and that the members of strategic management were on the same page.
So what was the added value to strategic management?
First of all, the confirmation in itself that the strategy was clear and that people were on the same page was already interesting. In addition, the workshop on business strategy made it explicitly clear to the strategic management what their business strategy is and where they should concretely put their focus.
From there, we worked with the company to shape the payroll strategy.
Pay strategy follows from business strategy (not the other way around) and deals with the fundamental choices to be made in terms of HR and pay policies. How a company differentiates itself from its business competitors must be translated into how it differentiates itself from its labor market competitors.
Even more than making the choices an sich, a well-written reward strategy (the reward strategy statement) also makes it suddenly clear why certain choices are being made.
For example, should gross wages be higher or lower than competitors (and who is our competition in the labor market)? How should we handle automatic wage increases? How transparent should we be about our wage policies?
The wage strategy paper brings a story.
And it is this "story" that enabled the company to take union members and convince them of the urgency that something had to change and provided direction for possible solutions. It is this story that convinced the employees, even if not everyone won (equally).
This journey culminated in the conclusion of eight collective bargaining agreements, which completely rethought the basic wage structure.
Strategy is often dismissed as a buzzword, a flou artistique. Unfortunately, this often comes from consultants who don't know what strategy means, who call everything strategic or who take an overly pompous approach to it.
Business and pay strategy is really nothing more or less than making fundamental choices consistently. Inseparable from that is also (consistently) making the why of those choices explicit. Business and pay strategy may be abstract. Yetthey can always be perfectly translated into concrete, tangible terms.
One such issue is the financial impact of (wage) strategic policy choices.
In fact, many companies we talk to are not sufficiently in touch with this. Yet this is so crucial. After all, budget space is the playing field within which companies can make HR and payroll policy choices.
Saying that you want to be the best-paying company (because that follows from the pay strategy) is gratuitous and implausible when in reality that company is at percentile 25 and there is virtually no budget space.
In parallel with the policy choices one want to make, we must provide insight into the financial implications of these and thus the policy choices that one can make.
After all, trees do not grow to the sky. And even if they did, as a business one will want financial resources to always be used economically efficiently, namely where those resources pay off.
To help the company understand the financial impact of its choices, we highlighted essentially two issues:
Under equal assumptions (e.g., predicting the index is not possible, but that is irrelevant in this case because the assumptions of the two scenarios are the same), each scenario showed that the cost would increase in the short term, but that the effects in the long(er) term would be within budget and that there would be potential payback effects (e.g., because of the dynamics between outflow (upon e.g., retirement) and inflow of less experienced employees with a lower wage cost).
Based on those insights, the management team was able to work on this with confidence, and management got the necessary buy-in from the board that this was the way to go.
Traditional HR legal consultants you find at the big four & cons (KPMG, EY, Deloitte, PwC, BDO, Grant Thornton, ...) and law firms (Claeys & Engels, Younity, ...) do not have the multidisciplinarity and the capabilities to make the bridge between HR legal on the one hand and strategy and finance on the other.
Traditional HR legal consultants and lawyers could only add value when writing collective bargaining agreements. Honestly? That doesn't make us happy. A CBA (or any legal translation) is the capstone of an essentially strategic and/or business exercise, but never the essence or solution.
As the only player in Belgium (and beyond), we have a helicopter view on payroll strategy and can offer an integrated route from business strategy over payroll strategy to implementation. It is only during the implementation phase that the legal, fiscal and parafiscal aspects are fully addressed.
We have written out our methodology around reward strategy in our reward strategy playbook - a manual so to speak on how to get started with reward strategy.
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