Oakleaf’s Reward & Analytics team hosted a Senior Reward Interim breakfast last week, discussing the thorny issues of “The Future of the Reward Interim”. We gathered the industries best and brightest on a sunny morning in the city to talk through the market, where experts feel the Reward interim market is heading, and we also put together some advice and guidance to tackle some common themes. Our very own Sam Clark summarises the trends and thoughts below:
The evolving world of Interim Reward Professionals – the game has changed!
The senior Reward interim market has clearly evolved over the last three years and it is something my colleagues and I have been aware of and have discussed with many of you. On further analysis we have some concerning facts – vacancies over £600 per day have dropped by 38% in the last year, in contrast we registered a record number of vacancies last year as a team and received a record number of interim assignments. Whilst there was some interesting project work, there were few positions where clients were willing to go beyond the £1000 per day mark, and functional Reward managers and senior managers were the main order of the day.
Usually we can pinpoint certain themes such as an economic uncertainty which can have a positive or negative effect on the market, or increased direct hiring, or individuals pushing their own networks more and more to land assignments directly, thus reducing the need for clients to reach out to us. However, on further reflection I feel it’s more than that and something that I felt warranted further investigation. There are three key themes that we have picked up so far:
The hiring landscape has altered
The actual landscape has changed regarding senior Reward interim hiring. Think back to 2013; we saw a perfect storm of regulatory change and a Reward surge in hiring post-recession. CRD4 was the first main talking point, accompanied with MIFID where people started really to see systemic changes to Remuneration structures. October 2013 also saw the department of Business Innovation and Skills change the game around the structure of Remuneration Committees and made shareholder votes on Remuneration policies binding. The tier system was being organised within the banking community, confusing many clients as to whether they were a Tier two or three, and in general HR departments started to panic, looking at internal resource and questioning how they were going to get ready for these changes. The Big 4 didn’t have the answers or experts who really knew what to suggest, law firms provided a bunch of maybes as opposed to yes or no and without a future insight on how long this would last and the immediate need for guidance and answers, senior interim hiring in the Reward space went off.
This game now has changed; yes we have seen a raft of new regulations come to the floor and the Government with its war on exec pay continues to suggest and threaten further challenges. However, many departments are used to change being the constant and have allocated resource to deal with this. The Big 4 have developed their offering to something more effective and relevant and the understanding of what you can and can’t do is far greater than it once was. Many firms have now made that transition from Tier 3 to 2, many have well-formed role-based allowance to counter the cap and put in extended deferrals, phantom schemes, clawback and malus provisions. The panic buying mentality has eased and HR directors are more savvy than they were around what is going on. Due to this, we have seen the volume of requirements dip and senior interims in turn have had to develop their market offering accordingly.
What clients want has changed
The client requirement has shifted. Reward consulting has shifted from strategist and analysts to a combination of both. Regulations have quashed innovation in the cash comp landscape, with clients looking to mirror the recognised industry standards wherever possible. With little need for innovation, clients no longer require the senior Reward interim to re-invent their Reward approach or design something to get ahead of the market. Usually they just want support to maintain the status quo, so clients want both the strategist and basic spreadsheet number crunching wizard at the same time. We had many instances of clients landing big rates 3 or 4 years ago, but then hiring two analysts to assist with RemCo prep work and analysis (which makes perfect sense), but now clients expect it in one person. This has been a difficult pill to swallow for many brilliant Reward practitioners whose skills are being undervalued by clients who feel they can get everything at an increasingly lower cost. The market has been told in no uncertain terms to evolve or see a reduction in the need for specialist services.
The sector is increasingly commercial
Reward consulting has developed notably in the last four years and they have got better with a more commercially sustainable offering. Go back six or seven years the consulting houses profited incredibly well out of regulatory uncertainty, with many clients giving them the carte blanche on the budget. We saw partners dusted off for 10-minute phone calls charging £2000 for the pleasure, and reels of consultants wrangling with potential models or explaining how complex it all was and how much more support you therefore needed to purchase. This is no longer case. With the Big 4 facing increased competition from growing houses such as Mercer, Korn Ferry and many others, the Reward offering has had to get more sophisticated and cost effective. Equally, with the surge in the permanent senior Reward hiring of the last 5 years many firms now have an experienced Reward professional at the helm who will use the consulting budget wisely and only for very specific pieces of work. As a result, the quality has had to improve and the costs are now challenged. Increased competition inevitably drives price in one direction, so the consulting firms have had to up the game. This in turn has perhaps led to clients feeling more comfortable engaging external support from a consultancy that they can manage very carefully, as opposed to committing to a Senior Reward Interim.
So what next?
So what to do about all of this? It’s not good enough to just pass this information on and shrug our shoulders, we want to help advise people on how to develop their personal offering to ensure a strong pipeline of future assignments. In short there is no magic wand that will change the market and as such this is about evolving with the industry and developing a new or better individual proposition.
The salesmanship of the Reward interim has never been more important. Reward professionals can no longer rely on their experience and technical attributes, whilst senior interims need to get better at selling themselves and their brand. Interim IV processes are more rigorous and, with the increasing gig economy, clients no longer accept skills over culture fit or compromise on substance and style to get a problem dealt with. Culture and business fit are becoming more critical when hiring, and it’s fair to say that Senior Reward Interims have struggled to adapt to this, needing to develop a more rounded sales approach.
Interim Reward professionals need to become more solutions focused rather than problem focused. Many in the industry have focused their attention on frankly terrifying HR Directors over the last few years with where they may been caught short, rather than positioning an opportunity to develop an effective solution. Equally, this type of scaremongering has led Reward interims to compartmentalise their skills too much, focusing on dealing with the latest reg and selling their wares on this, rather than the fact they are broadly skilled Reward professionals who can turn their hand to more than the immediate problem. People are forgetting to think creatively about what they bring to the table and are far too quick to pipe up about skills that they are lacking. Just because you haven’t dealt with UCITS V doesn’t mean you can’t turn you hand to it! Stop being so honest about what you can’t do and focus on what you can.
Our final point is about compromise. This is not about compromising on your rate, more about working with a client to reach a compromise that works for both parties to secure the assignment. Price point has been one of the key reasons for clients to steer away from senior interims. There is a completely unwarranted stigma around rates above £1000 and this has led to people missing out on roles as negotiations break down. If the rate isn’t right think about how you can make it work for you. Offering your services on a part time basis, a shorter number of hours, or reducing travel costs by agreeing a home-based assignment may help make the numbers work. Think creatively around road blocks with a client rather than focusing on the minutiae.
The Reward interim market has changed and we can’t stop or reverse it. However, it is clear to us that the requirements and the need for interim Reward expertise is still prevalent. Adaptation is surely the key? Looking to the animal kingdom the Chameleon is known best for its ability to adapt. “Colour change in chameleons has functions in camouflage but most commonly seen as social signalling and in reactions to temperature and other external conditions”. Perhaps it’s time for the emergence of the Reward Chameleon?