The Capability Gap in Modern Reward

Karen Clark shares her thoughts on “Why Learning Matters More Than Ever in Reward”

I have spent a lot of time recently thinking about what the reward function needs to look like over the next few years. I think the gap, in fact the opportunity, between where many teams are now and where they need to be is wider than most organisations realise.

That's not a criticism of the people working in reward. It's a reflection of how quickly the demands on the function have changed, and how little the development infrastructure and investment around it have kept pace.

The reward function has outgrown its job description

There was a time when being good at reward meant being technically competent. You understood grading structures, benchmarking, incentive mechanics, benefits administration. You could build a spreadsheet, interpret survey data, and keep the annual pay review on the rails. That was enough.

But it isn't any more.

The reward function now sits at the intersection of business strategy, governance, stakeholder management, talent, sustainability, and, increasingly, technology. RemCo Chairs expect their reward advisors to think strategically about how compensation drives organisational performance and how to take account of retaining, motivating and doing the right thing by the whole workforce. Boards want people who can hold their own in a room with Directors and other stakeholders. Investors want confidence that pay structures reflect genuine value creation, not just market convention. Regulators want transparency, rigour, and defensibility.

And yet, some reward professionals were never formally developed for any of this. They learned their craft on the job, accumulated technical knowledge, and worked hard to achieve promotion to senior roles where the questions being asked of them bore very little resemblance to the work that got them there, or the job descriptions and KPIs they may have been assessed against.

Technical skills are necessary but nowhere near sufficient

I'm not suggesting technical reward knowledge doesn't matter. Of course it does. You can't design effective incentive arrangements if you don't understand the mechanics. You can't advise a RemCo if you can't interpret the data. The technical foundations are non-negotiable.

But the conversations I have with reward leaders about their teams, and some of the executives that reward leaders report to, show some consistency. The capability gaps that matter most now are not technical. They're human, commercial and strategic. They're about the ability to connect reward to business performance, not in a theoretical sense, but in a grounded, evidenced way that starts with the business model and works forward. They're about governance literacy, stakeholder credibility, and the confidence to challenge as well as advise.

When RemCo Chairs and senior executives talk about what they want to see in the next generation of reward leaders, they describe people who can think commercially, communicate with authority, and navigate complexity. People who understand that reward strategy isn't about fixing complaints or showing technical prowess, but about driving performance and ensuring leaders and colleagues feel well communicated to and on side with the thinking behind the strategy and the intended outcomes.

That combination of strategic thinking, governance understanding, and stakeholder capability doesn't develop by accident. It requires deliberate investment and focus. Perhaps with more deliberation and intent in the context of hybrid working.

Technology has raised the stakes, not lowered them

There's a temptation to think that AI and automation will solve the capability challenge by taking care of the routine work and freeing people up to be more strategic. There's some truth in that; AI can handle data processing, draft communications, surface patterns in compensation data, and reduce the time spent on mechanical tasks. Reward professionals who can use these tools effectively will likely be more productive.

But as many commentators are saying: technology is a tool, not a strategy. Organisations that bolt AI onto existing structures, roles, and reward frameworks without rethinking the fundamentals will get expensive complexity, rather than transformation. We've seen this pattern before; the technology-productivity paradox has been with us since the 1980s, and it's only deepened. Companies invest more than ever in digital tools, yet measurable productivity gains remain elusive. The reasons are organisational, not technological, and they have presence in the territory that reward professionals occupy.

The technology conversation for reward can’t just be about learning to use new tools; though that does matter and too many teams are behind on it. It's about understanding how technology reshapes roles, performance models, and the way value is created. It's about being able to ask the right questions when someone tells you AI is going to transform the function: which parts, based on what evidence, and what does it mean for how we measure contribution and structure pay?

That requires a level of technological awareness that most reward professionals haven't been asked to develop before. Not deep technical expertise, but enough literacy to evaluate what's real, what's hype, and what it means for the decisions you're making about reward architecture.

The holistic reward leader

What I'm really describing is a shift in what it means to be a complete reward professional. The best reward leaders operate across multiple dimensions simultaneously. They understand the technical mechanics of pay. They can construct a grounded reward strategy that flows from business strategy through talent strategy. They're confident in governance settings. They engage credibly with finance, legal, and investor stakeholders. They're aware of the sustainability and ESG agenda and how it connects to incentive design. They understand how technology is changing their operating environment.

No one starts their career with all of that. And very few organisations invest deliberately in developing it. Instead, there's an assumption that people will pick it up as they go: through experience, through exposure, through osmosis. Some do. Many don't. And the consequence is a profession that is technically capable but strategically underpowered at exactly the moment when organisations need the opposite.

This isn't limited to reward specialists either. The people sitting around the reward conversation have expanded significantly. HR generalists need to understand reward well enough to have credible conversations with their business partners. Finance professionals need to understand incentive design and its relationship to business performance. Legal colleagues need to navigate governance frameworks and disclosure requirements. NEDs and RemCo members need enough reward literacy to challenge and support effectively. The learning need extends well beyond the reward team itself.

Learning as a strategic investment, not a perk

One of the frustrations I see repeatedly is organisations treating learning and development for reward as discretionary:  nice to have when budgets allow, first to be cut when they don't.

I have some interest in claiming that’s a false economy and a mistake, but aside from my role in PARC I have a genuine belief that the right learning, development and challenge is a great investment in any colleague who shows the appetite to remain agile, flexible and curious in what is a dynamic and evolving work context.

If the reward function's value lies in its ability to connect pay to performance, to advise on governance, to engage with senior stakeholders, and to navigate an increasingly technology-driven landscape, then the capability to do those things is a strategic asset. Under developing it has a cost: in weaker governance, in poorly aligned incentive structures, in missed opportunities to use reward as a genuine lever for organisational performance.

The organisations that take this seriously are the ones whose reward functions operate as strategic partners rather than administrative units. That doesn't happen because someone read an article about strategic reward. It happens because people were given the space, the frameworks, and the development to build those capabilities properly.

What practical investment looks like

If I were advising a Head of Reward or an HR Director on where to focus development for their team right now, I'd suggest thinking across three dimensions.

First, strategic foundations. Make sure your colleagues, and your successor candidates in particular, can articulate how reward connects to business performance. Not in platitudes but grounded in the specific business model and the specific performance outcomes that matter in your organisation. Can they build a reward strategy from business strategy? Can they hold their own in a conversation with the CFO about value creation? If not, that should be a priority area for development.

Second, governance and stakeholder capability. The governance environment is only getting more demanding. Your team needs to understand how a RemCo operates, what investors and proxy advisors are looking for, how disclosure requirements are evolving, and how to communicate reward decisions to diverse audiences. These aren't theoretical exercises; they require practice, simulation, and exposure to the real dynamics of stakeholder engagement.

Third, technology and change awareness. This doesn't mean everyone needs to become an AI expert. But everyone in your function should understand what AI can and can't do for reward, how to evaluate the tools that are being pitched to you, and, critically, how technology is reshaping the broader context in which reward operates. If your team can't engage intelligently in a conversation about how AI might change role design, performance measurement, or the way work is structured, they're going to find themselves increasingly marginalised as those conversations accelerate.

And across all three, don't overlook the value of learning alongside peers from other organisations. Some of the most powerful development happens not in a classroom but in a conversation with someone facing similar challenges in a different context. That kind of peer exchange is difficult to manufacture internally and enormously valuable when you find it.

The reward function deserves better

I'll finish with something I feel strongly about. Reward is one of the most strategically significant functions in any organisation. It touches every employee, every business unit, every governance conversation. It connects directly to how organisations attract talent, define and measure performance, create value, and distribute it. Done well, it's a powerful lever. 

The people in these roles deserve investment that reflects the importance of what they do. And the organisations that employ them deserve reward professionals who have been developed to operate at the level the role now demands.

That's why learning matters. Not as a box-ticking exercise or perk, or to guard future budget, but as a strategic imperative for a function that still has an important role to play in an organisation. Wherever you choose to get your learning, insights and challenge from, just do make some room for it in your budgets.