Transforming HR: Why a Target Interaction Model (TIM) Is the Key to Unlocking the Employee Experience

As the future of work arcs toward enhancing the employee experience, it’s time for HR to shift gears.

Here’s a quick guide to Mercer’s point of view on transforming HR from the standard target operating model to a target interaction model.

What do we know?

Organizations are increasingly investing in the employee experience — and for good reason. A positive employee experience improves the customer experience, supports attraction and retention, increases trust in the firm and drives productivity.

The HR model prevalent over the past few decades was primarily designed around the function itself, with HR processes outsourced to achieve savings. Over time, this created a fractured candidate and employee experience, and the cost benefit was never achieved. These HR silos don’t align with today’s business and workforce needs.

 

How can you move forward?

HR can play a strategic role in improving the employee experience by transforming from a target operations model (TOM) to a target interaction model (TIM). In the TIM, HR becomes a more people-centered function that places a premium on employee interactions, with employee satisfaction as the key success metric.

What does the perfect blue-sky HR model look like? What service portfolio will help achieve business objectives while elevating the employee experience? Design-thinking workshops, design sprints and rapid prototyping will help create a progressive TIM that guides HR transformation efforts.

Today, HR spends more time on the operational aspects at the bottom of the pyramid. The way forward is to turn this into a diamond, transforming the focus from transactional to strategic.

Where can you start?

Process should follow purpose. HR needs to understand where it’s coming from before it can articulate a new people-first proposition. This demands an honest evaluation of today’s HR service portfolio and user experience along with tomorrow’s business needs. The key is balancing economics with empathy.

Unravelling existing processes and moving to an interaction perspective requires significant change management, combining communication, reskilling and HR’s participation in shaping this new world.

Download Mercer’s report to learn more about how to transform your HR function using the target interaction model, or contact us to speak to a consultant.

Why Pay Transparency Matters

First, it matters to business. A lack of equitable pay hinders achieving the workforce diversity needed for businesses to thrive in today's economy. Pay transparency goes a long way to holding companies accountable to pay decisions made.

Second, it matters to employees. Only 19% of employees in the US — compared to 22% globally — give their company an "A" grade for equity in pay and promotion, according to our 2019 Global Talent Trends study. In addition, during the past five years, employee perception of fair pay has declined from 57% to 52%, according to our analysis of employee satisfaction data.

Third, compensation information isn't something your company's compensation department controls anymore. Phrases like "the survey data says" are no longer the end of the story. The digitization and democratization of compensation and career information have made it exceptionally easy for employees to develop their own perceptions about compensation for their jobs. Therefore, a story emerges about pay transparency whether you like it or not.

In the end, your employees and prospective hires are already talking about your organization's pay philosophy. They are making decisions about whether or not to consider working at your company and, if so, which job to apply for or which career move to make based on what they know about your pay levels. Accordingly, managing that narrative requires some proactive steps in this new transparent reality.

Get Started on Your Pay Transparency Journey

Adapting to the new world of pay transparency has more upsides than downsides for employers. But it requires that business and people leaders accept the reality of this new world, letting go of traditional views and long-held beliefs of what employees need to know and what employers can control.

Here are six questions to consider as your company continues its journey to pay transparency:

1. Where Are You on the Journey?

Start by looking at how much you communicate today and the rationale behind why the people in your organization are paid the way they are. Do your practices vary state to state or department to department?

2. What Is the Pay Story You Want to Tell?

How does your pay reflect your brand? What information are you going to share, and why? Do you want to be able to talk with employees about career paths? Are you doing this for employee retention purposes, to be an employer of choice for new hires or both?

Perhaps it's all of the above. How transparent do you want to be? You might only want to share pay ranges for job families or specific jobs or choose whether to share information primarily internally or purposefully externally.

3. Do You Have Solid Foundations?

Take a closer look at your company's jobs and salary structures. Do you have jobs defined by the skills required and up-to-date salary structures to support paying competitively? Then, conduct robust statistical analysis to understand whether or not people are being paid equitably within expected norms and account for relevant factors, such as different locations, job families and years of experience.

4. What Changes Do You Need to Make?

There are a few options for what your transparency strategy might look like (these strategies are not mutually exclusive):

  • Career-focused pay transparency: Enables career conversations between managers and current employees by helping people understand pay positioning and pay ranges for what's ahead of them on their career path.
  • Skills-focused pay transparency: Supports learning and development by helping people understand the pay ranges for jobs within the organization, so they can acquire the skills to move along the pay range and/or qualify for other jobs within or across departments.
  • Externally focused: Uses compensation information to create an externally facing value proposition for attracting and retaining talent.

5. How Will You Tell Your Story?

Proactively communicate changes to your pay practices and policies on your journey. Connect it to your brand through external messaging and success stories around pay equity, recruiting communications and everyday support for managers communicating with employees in performance reviews and career conversations.

Digital technology platforms are essential to helping employees look up salary ranges and explore careers and would be the single source of truth for communicating pay data.

6. How Will You Test and Measure Impact?

HR leaders can use a range of metrics to gauge effectiveness. On the simple end, you can use measures of employee sentiment from employee engagement surveys. On the more reliable end, statistical modeling of whether or not the employee's perception of being paid fairly was predictive of turnover will enable more accurate dialogue.

Ask yourself why candidates are interested in working for your organization, why employees decide to stay and if there are other connections between compensation transparency and high-level outcomes.

Enter the New Reality of Pay Transparency

Being transparent about pay can help your organization build trust and strengthen its relationship with your employees in a way that enhances your brand and, ultimately, your business success. Transparency also equips managers with the knowledge that helps them have more constructive career development conversations with their employees, a critical step in retaining top talent.

If your organization is not taking proactive steps now to become more transparent about pay, you risk falling behind and having the message created for you. Our 2019 Global Talent Trends study found that 20% of U.S. employees say they would leave their current company because of competitive compensation yet only 6% of HR leaders say competitive pay is why employees leave. Now is the time to make sure you tell your story.

Adapting to the new world of pay transparency has more upsides than downsides for employers. Business and people leaders must accept the reality of this new world and work to change mindsets and shift culture.
Interested to learn more? Download the Transforming HR paper: