This article was updated on July 3, 2018.
A pay for talent compensation model is a growing business reality. What an organization needed yesterday may not be what it needs tomorrow. Therefore, managing talent must be as dynamic and flexible as markets. Paying employees for past performance makes sense, but maintaining talent for evolving needs requires something different — a compensation model that anticipates strategic direction.
Pay for Talent Is Forward-Thinking
Trends in technology and globalization are changing the skill sets organizations need to stay competitive. Imagine an organization expanding into Asia. A "good" manager who speaks Chinese is more critical for success than a "very good" manager who does not speak Chinese. It's obvious where to place your retention efforts. As employees with future-oriented skills become more valuable, businesses must do more to retain them than merely paying for past performance.
When it comes to the skills needed for future business growth, organizations struggle to recruit and retain qualified employees. Here's where a pay for talent compensation model can work better than pay for performance, which rewards past accomplishments but doesn't engage your most important employees for future success. As Forbes states, "Paying more for A+ talent at your company is worth the investment many times over."
Recognizing Future-Oriented Skills
The effectiveness of any pay for talent strategy depends heavily on your organization's ability to anticipate the critical skills it needs both now and in the future, as well as its ability to accurately assess existing talent. Once you know what skills are needed for future growth, and who has those skills within your organization, you can use pay for talent to engage that essential human capital. Pay for talent recognizes individual talent and potential in light of your strategic needs and better retains critical skills through a more holistic approach to compensation. Forbes explains, "While it's easy to tally up your 'savings' by settling for a B- or C-level person, the upside that an A+ team member can bring will far exceed the near term cost difference." So it's imperative that you establish clear parameters for helping you find your most effective employees.
Implementing Pay for Talent
Pay for talent integrates a number of talent management processes, which your organization will need to have in place as a foundation. You'll need talent assessment, performance management and succession planning; however, every organization will need to develop a system that caters to their specific needs when adopting a pay for talent model.
Financial leaders should lean heavily on their HR counterparts and ask them for any data from their time and labor management systems that will help develop the criteria for identifying the most critical roles for your growth plans. Additionally, this collaboration with HR should extend to conversations about how to best foster a culture that openly discusses skills and needs and where feedback and coaching are valued as catalysts for individual and organizational growth. As for the time frame of implementing pay for talent, it will depend largely on the urgency of your talent needs weighed against any budgetary constraints you may be facing.
In today's dynamic business climate, you should proactively engage and reward the superior talent that you have today, so you'll be certain that you can count on them tomorrow.