Pay Attention to Compensation Strategy
August 02, 2018
Healthcare executives spend a lot of time talking about and seeking to improve employee engagement. Employment compensation? Not so much.
That’s largely because compensation is seen as a part of employee recruitment, retention and satisfaction, but not as a comprehensive, multifaceted driver of organizational goals. And unless an organization is sizeable, there’s unlikely to be a compensation director; these duties fall somewhere between HR and accounting, where spreadsheets rule the day.
“Several years ago, HR professionals started having very real conversations with their executives around compensation. Specifically they started to change the way leaders looked at compensation from a mandatory budgetary process, to a proactive tool to recruit, retain, and drive performance,” says Trisha Holbert, MA, SPHR, Associate Vice President, Talent Solutions, at HealthStream. “We realized that a planning tool would, if developed properly, affect the bottom line in many ways. If you’re improving retention, and paying for performance vs. just presence, you’re an employer who’s going to solve a lot of internal performance problems while also controlling costs.”
Those problems are specific—and are hardly a secret. According to Deloitte’s 2018 Global Human Capital Trends report, there are three areas where rewards, or compensation strategies, are out of line with employee desires:
- Annual vs. ongoing rewards programs
- Focus on traditional workers and traditional benefits
- Not seen as “fair”
Put all together, it’s a recipe for early exits, especially in healthcare where there is intense competition for qualified employees, especially nurses. A Colosi PayScale BenchMark Report found that:
- Healthcare turnover rate has increased 27 percent in the past 5 years.
- 63 percent of healthcare firms surveyed cited retention of top performers as the top compensation objective.
- RN turnover costs, on average for hospitals, is $4.9 – 7.6M per year.
To be fair, many healthcare organizations are trying to be proactive. Many are embracing more frequent reviews, such as rounding practices, but they are not tying compensation to those. According to Deloitte, 20 percent of companies are giving workers performance ratings more than once a year, but only 9 percent are adjusting salary at that pace. And even when they do review compensation, they are using programs aligned with the strategies Holbert referenced, ones built in a rigid manner to only focus on experience and tenure, vs. satisfaction and other intangibles that might be part of the review process.
Swap spreadsheets for a sound strategy
To address this multifaceted and often thorny issue, HealthStream has begun to study compensation’s many pain points from the administrative perspective, and identified barriers to a sound compensation strategy.
From the study, crucial components of any compensation strategy must include outcomes that improve budget adherence, provide individualized recognition, boost transparency and compliance, empower managers and, most importantly, create happy employees.
“Technology can now drive this process,” says Holbert, responsible for creating tools to support compensation strategies across a variety of healthcare organizations. “The result, a predictive solution that allows users to manage many different merit, bonus and equity plans alongside their specific rules and budgets.”
Compensation is key to achieving critical business outcomes: engagement, retention, increased performance. More frequent conversations around compensation, coupled with actual compensation strategy that occurs outside the annual review process, will be a major driver in reducing turnover in all positions, but particularly in RN and other positions where onboarding and training are very costly.
Learn more about HealthStream Compensation Management Solutions.