Health reform alters roles for finance, HR executives

There could be a stronger connection between corporate finance and human resources executives as U.S. companies start to focus on the implications health care reform could have on their reward programs and talent management strategies, according to a new survey by global professional services company Towers Watson and Forbes Insights.

The survey, which includes responses from more than 300 HR and finance executives, also reveals that both respondent groups expect more increases to their health care and other reward budgets over the next years; however, neither believes there will be a change in the mix nor cost allocation for their overall reward programs. Eighty-one percent of HR respondents and 55 percent of finance respondents say establishing a reward program strategy is mostly driven by HR, but when budgeting for a rewards program, 53 percent of finance respondents say they are more involved, as opposed to 47 percent of HR respondents who say they lead the effort.

Another 38 percent of finance respondents say strategy development will become a more shared role. That compares with just 24% of HR respondents while 24 percent of HR respondents say they will continue to lead the process with little participation from finance executives. Regarding budgeting, 53 percent of finance respondents believe they will have primary responsibility, but 40 percent of HR respondents expect budgeting to remain a shared role.

“Companies are just beginning to grapple with the complex set of decisions triggered by the new health care reform law – decisions that will have a direct impact on their broader set of employee rewards,” says Randall Abbott, senior health and group benefits consultant at Towers Watson. “The fact that both finance and HR leaders see a role for the other in developing reward strategy and budgets in the future suggests a powerful joining of forces at a time when collaboration is becoming more critical.”

Cost is the most important factor for both respondents groups when it comes to health care reform decisions, the survey finds. At 82 percent, HR respondents place greater emphasis on cost than finance respondents at 69 percent, and 67 percent of both HR and finance respondents anticipate maintaining health care benefits for their active employees, regardless of their agreement that costs will continue to increase. However, both respondent groups do not expect health care costs to consume a much larger share of total rewards programs.

“Health care reform is a significant business issue that has the potential to test the relationship between HR and finance executives,” Abbott says. “And, with so much change ahead, it highlights the need for both groups to start working more closely to leverage their respective expertise and knowledge. A strong HR-finance partnership can be mutually beneficial in facing the demands – or taking advantage of the opportunities – of reform while at the same time balancing an organization’s cost objectives and talent and employee engagement needs.”

Other survey findings include 56 percent of finance respondents and 37 percent of HR respondents say their reward programs should provide greater flexibility in the coming years. Each respondent group thinks their organization is trailing behind competitors regarding reward program investment, and approximately one-third of HR respondents and one-fifth of finance respondents say their costs for training, career management and flexible work arrangements dropped under competitive standards.

Still, finance respondents are more than three times as likely as HR respondents to agree that their organizations outspend competitors in the areas of career management at 29 percent versus 9 percent and flexible work arrangements at 31 percent versus 9 percent. 

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