By Ray Naylor, GDF SUEZ
The year 2014 is at last upon us. Like every year-end, it presents an opportunity to reflect upon what has gone and to try to anticipate what the year ahead may bring.
If we are to believe some economic analysts, signs of the beginning of economic recovery have been observed. In the last quarter of 2013, press reports indicated (inter alia) that productivity rose for the first time in two years, that significant retail growth has clearly been observed, and that house prices are once more increasing. Whilst I tend to be a little sceptical when broad conclusions are drawn from limited data (chicken entrails and leaves in a teacup come to mind), I would very much like to believe that a recovery has at least the potential to arrive. On balance, my impression is that the situation in the UK seems to be less depressing than it was a year ago, and optimism seems to be more present (in France, where I live and work, the inverse is sadly the case).
If these pieces of information are accepted as advance symptoms of a recovery, then reward practitioners perhaps need to be asking themselves some questions, to ensure that in the event of a genuine recovery, contingency plans are in place enabling their companies, their managers and their HR teams to be able to respond appropriately to potentially changing reward contexts.
A review of the last two or three years of the business cycle is an excellent starting point. What has happened in the world in which we operate and compete (business sector, local and international markets, fiscal, regulatory, labour supply, etc.)? How did our company respond? What people impacts arose from the business response? What reward decisions did we make, and are any of them still "in the pipe"? Looking forward, we need to consider which contextual changes are already anticipated or known. In the event of a recovery, is our existing reward approach still appropriate, and to what degree might we need to adjust it? No vanilla approach exists, and the areas of relevant focus will naturally depend on the specific background and context of each organisation.
Next, a shared understanding of potentially new situations can be developed through frank and open discussions with general management and other key support functions, discussions where the process of constructively challenging current assumptions must be accepted and encouraged. Finally, a series of "what if" scenarii can be constructed ("high-mid-low", for example) to which different responses can be modelled and costed.
For many companies the last four years of falling markets and recession have called for a focus on short-term survival and rapid, corrective (and often defensive) responses. A period of recovery calls for a different perspective and almost certainly a paradigm shift.
One thing is certain. The world is a faster-moving place today than when the last major economic recovery occurred, some 30 years ago. Agility and speed of response are two of the key levers for creating and retaining competitive advantage. Without anticipating and modelling, our agility and response times will be sub-optimal and competitive opportunities could be lost.
Is it perhaps time to put our thinking caps on, or am I being over-optimistic?
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