The Impact and Potential of AI in Compensation & Benefits

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Artificial intelligence (AI) is covering up every aspect of our personal and professional life. At any organization, all functions are trying to make the best utilization of AI for optimum effectiveness and efficiency. Human Resources function is also not left behind in this race.

“AI is already helping the organizations in finding, attracting, hiring, and onboarding talent by predicting and matching individuals’ needs and their alignment with organizational needs”

AI is also helping organizations in retaining their employees by studying and analyzing their unique behaviors and past patterns of attrition. It is also helping in tailoring the learning modules and delivering them just in time.

Compensation and Benefits which is one of the most important aspects of creating employee satisfaction and thus impacting employee engagement. Artificial Intelligence can help to automate the operational activities to provide an improved employee experience, combined with machine learning. AI can recognize patterns, predict performance and understand drivers and influencers leading to optimization of compensation models and programs, and resultantly increasing employee performance and retention.

Compensation and Benefits professionals have already started to tap the possibilities of this technology, according to speakers at WorldatWork’s 2018 Total Rewards Conference, held near Dallas.

What will Artificial Intelligence bring in C&B?

As AI will be used not only to automate the transactional work but, to analyze and predict employee needs and expectations, it will bring in below changes in the C&B world;

  • Fairness
  • Personalization
  • Agile Programs
  • Cost Reduction
  • Enhanced Employee Experience

Fairness

Upon surveying more than 4,000 workers at the 10 biggest technology companies, Blind found that only 45 percent of those highly compensated employees felt they were “fairly paid.” (Josh Bersin, conversations with Blind executives.)

With the help of good, historical, and up-to-date rewards and performance data, the behaviours of high performers can be identified using algorithms to find patterns and correlations between past compensation programs, the desired behaviors, and outcomes that define a high performer. These factors will help in taking away the human bias, whether conscious or unconscious and the employees can be rewarded based on evidence and merit.

Personalization

“If you want to scale the individual talent in your company, embrace the idea that you’ll need to reward that talent in new and customized ways,” (Charan, Barton, and Carey 2018).

Professor Charles Scherbaum states that “These better decision models mean higher personalization and better timing and what’s nice about that is, as we get more information about people’s preferences we can personalize incentives and rewards even more,” (Scherbaum 2018). The organization can use big data with predictive analytics to examine how the compensation and benefits program should be designed and to assess the balance between fixed and variable pay across different levels and set of employees.

AI can collect and analyze information about how we think and feel and, can predict how we may behave in our personal and professional lives. By analyzing individual motivations it is possible to customize pay and reward programs helping employees to best match their desires and abilities with the organizational needs. Rewarding employees by connecting them to their passions and by allowing them the flexibility in choosing the program will keep them highly engaged at work.

Agile Programs

As per one of the research by Deloitte, 20% of companies do performance review more than once in a year however, only 9% change the compensation at that pace. (Bersin, Deloitte Consulting LLP, High-impact total rewards research, 2018). A study by Globoforce found that employees who receive regular small rewards, in the form of money, points, or thanks, are a staggering eight times more engaged than those who receive compensation and bonus increases once a year. (SHRM/Globoforce employee recognition report, 2018)

Many organizations are moving from rewarding their employees once in a year to doing it in bits and pieces. This may help in increased engagement of employees and they need not to wait till the completion of the full year to get their rewards for the work they have done. The new generation expects quick rewards and flexibility in choosing them which can be achieved through AI.

Cost Reduction

There is always an operational cost to run any C&B program. Also, there has to be an RoI in terms of effectiveness and increased engagement. While there will be an investment in AI technology, it will reduce the operational cost drastically and it will be easy to deploy and run various customized programs simultaneously covering any geography. The increased effectiveness of the programs using AI will result in higher RoI in terms of reduced turnover, engaged employees and talent retention. This will make the investment more cost-effective to the organization.

Enhanced Employee Experience

Tailored C&B programs, customized rewards, seamless execution and easy access to information will lead to enhanced employee experience. Using chatbots in operational activities will reduce the dissatisfaction of employees towards the execution of total rewards and quick resolution of queries. Focused and customized communication for content, style, language and medium e.g. text, e-mail, phone, chatbot, or pictures will lead to higher engagement and increased effectiveness of programs. Natural-language processing can help with employees’ sentiment detection and react quickly to retain and engage employees.

(The views and opinions expressed in this article are those of the author and do not reflect the official policy or position of the organization he is working for)

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