Total Compensation for Successful Retention Innovate, Inspire and Retain

October 23rd and 24th, 2012

Today’s Agenda  

Economic Overview – how did we get here

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The total rewards framework Diagnosing your organization type Connecting the hard and the soft

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Innovate Inspire and retain Question time

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Economic Overview

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Provincial Net Debt

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Know where herd is..... but go your own way

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An innovative Total Compensation program

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Tangibles Intangibles Long term Short term Base Benefits

Total rewards

Attitude to Compe nsation

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Join the “hard and the soft” Flexibility and Imagination Build on past practices but don’t be restricted by them Push back the boundaries!

The sector and position in sector market        

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Sector and profitability, Understand your market Understand your organization Have solutions that are authentic 6

Total Rewards Framework

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Total Rewards Framework

Element Base Salary

Functionality

Purpose

Reflects the value of the role, skills, competencies and subsequent performance of the incumbent

Attraction, Retention: (for higher payers)

Reflects the achievement and exceeding of business plan

Attraction and Motivation

Rewards long-term achievement of strategic development plans

Attraction, Retention and Motivation:

Retirement Plan, Benefits & Perquisites

Creates financial security

Retention

Intangible Rewards

Can help create positive work climate engagement, commitment and additional discretionary effort

Short Term Incentive

Long Term Incentive

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Rewarding consistent achievement of job and personal objectives that are linked to business plan

Rewarding achievement of annual business plan and individual objectives

Rewarding achievement on a three or more year business cycle basis

Defends against competition

Attraction and Retention These can enhance the reputation of your organization to aid attraction

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Base Salary  

Compete in your sector

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But if your sector is a low pay sector there are challenges in the current employment market

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But a low pay policy line does not mean everyone must be low paid

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Ensure that valuable high performing employees can still be highly paid and retained

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This can be achieved by having an effective performance management process that effectively identifies and rewards the highest performers through performance based asymmetric salary ranges

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Where you have to be cost conscious on base salary the emphasis can be on incentive bonus and also the intangibles of the total reward package

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Analysis of external competitiveness COMPENSATION OVERVIEW

P75 Maximum Practice

Pay $

P25 Control point P10 minimum

SMALLER © 2012 Hay Group. All rights reserved

Job size

LARGER 10

Asymmetric Base Salary Ranges COMPENSATION OVERVIEW  

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Lower portion of range is typical for newly promoted or new hires with limited experience in that grade Middle portion of range represents the targeted market value for positions in that grade. This portion is typical for fully proficient employees with consistently solid performance Upper portion of the range provides a premium over market is typical for employees with outstanding performance over an extended period of time Maximum or market p75

PERFORMANCE (WHAT/HOW)

EXCELLING

$ LEARNING

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Control Point or market reference (e.g. P25)

Minimum or market P10 11

A word about Short Term Incentive Plans Three principles: 1. Incentive plans are never in neutral position…………… they are either pushing you forward or holding you back in terms of rewarding the right behaviors and underlying activities. 2. Incentive plans work like power washers ……………….   to move stubborn and ingrained habits or make significant change then the incentive plan power must be fully concentrated on one point.   if you have no particularly critical issues then you need to spread the effects as concentrating on one issue will put unnecessary focus on it. 3. The cell phone principle……….. © 2012 Hay Group. All rights reserved

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Your incentive plan is due for an upgrade

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Short term incentive plans The prime way of linking this year’s business plans to employees priorities, behaviours and achievements Common issues what to look for in your STI: ‐  Out of date and out of business alignment ‐  Key measures are no longer the real drivers of the organization ‐  ‐  ‐ 

Insufficient performance differentiation Paying for base performance again Poor processes - measures, calibration of performance

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LTI - questions to ask yourself 1. If your organization does not currently have an LTI……. ‐  ‐  ‐ 

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Is my organization’s current reward program structured as if the long term future does not matter? Does my organization have projects strategies or objectives that will take longer than this operating year to achieve? Does my organization require a level of investment in key future initiatives that must not be sacrificed for this year’s business plan achievement? Is it a risk for this organization to have senior executives reward wholly biased towards the short term?

2. If your organization does have an LTI the questions concerning design and measures for the STI also apply to the LTI. © 2012 Hay Group. All rights reserved

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Table talk – Where are your opportunities for innovation in your tangible rewards? Talk briefly about your organization’s tangible rewards, Base, Short and Long term incentive plans and where you can see areas for innovation to support retention.

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An innovative Total Compensation program            

Tangibles Intangibles Long term Short term Base Benefits

 

Total rewards

Attitude to Compensation

 

 

Join the “hard and the soft” Flexibility and Imagination Build on past practices but don’t be restricted by them Push back the boundaries!

The sector and position in sector market        

© 2012 Hay Group. All rights reserved

Sector and profitability, Understand your market Understand your organization Have solutions that are authentic

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What is our organization type?  

Before we can devise polices that will make a difference we need to understand our own organization type and culture in order that our solutions are relevant to our organization, its sector and its challenges

 

Only in that way can we make sure that we retain the majority of our people that are making a great contribution and especially those who are making an exceptional contribution

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Diagnosing Your Business High

Taskmaster

Peak Performer

Human Cap Productivity

Resort Destination

Street Fighter Low

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Well Being Source : Nick Bishop, Wynford Group 2007

High 19

Diagnosing Your Business  

While every organization is unique ….. in pressure times organizations natural behaviors are exaggerated

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Changing our ways of working when under pressure is extremely difficult

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But we have to change to survive and prosper in the market because if we are losing valuable people and we do not change ….. we will just lose more

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If you can’t change your Key Employees will High

Taskmaster

Peak Performer

Human Cap Productivity

Resort Destination

Street Fighters Low

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Well Being Source : Nick Bishop, Wynford Group 2007

High 21

Core areas to improve High

Taskmaster

Involvement

Human Cap Productivity

Performance Measurement and Management! Street Fighters

Low

Peak Performer

Recognition! Well Being

© 2012 Hay Group. All rights reserved

Source : Nick Bishop, Wynford Group 2007

Resort Destination High 22

Table talk – What‘s your organization type?  

What type is your organization?

 

Talk briefly about your organization, how does its type show through in policies and behaviours?

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How will understanding your organization type affect your choice of initiatives, innovation and evolution in rewards in order that you can retain key employees?

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Total Rewards for successful retention – Connecting the hard and the soft

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Connecting the hard and the soft  

The most effective and most admired companies and the most attractive organizations find a way to connect the hard and the soft

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Intangibles seem to have more value in the tangible based organizations

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They manage performance and effectiveness and… ‐  Invest in recognition ‐  ‐  ‐ 

Create a positive work climate Develop their people Look after the welfare of those employees that earn that right

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Performance Management  

Effective performance management systems are one of the keys to a more flexible and innovative base pay and incentive plan rewards system

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They have their foundation in understanding the size and value of each position in your organization

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The ability to effectively identify excellence in performance provides the ability to reward the highest performers differently and encourage others to reach for that position

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Performance management: the four elements

Metrics •  Translating the strategy into individual performance plans •  through hard and soft measures

Process •  The cycle of meetings, the forms and calibration •  The link to development and talent management

Successful Implementation

Managerial Capability •  Developing managers to manage performance •  The focus on climate and leadership style

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Reward Architecture

Integrates and balances the elements

•  Linking performance to reward •  Reward packages

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Differentiation in pay Difference in pay increases for TOP performers vs. average (all companies)

But Most Admired’s find a way (Companies w/ a 2X differential)

Source: Hay Group, Loyola University Chicago, WorldatWork

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Holding people accountable Accountabilities are consistently reinforced and poor performance is tackled. Most Admired

Leaders follow through consistently to ensure that people do the things they commit to doing.

Peer Group

89 76

Performance measures are directly tied to business strategy.

92 79

If an people are not effectively implementing company strategy, corrective action would be taken.

83 59 0

10

20

30

40

50

60

70

80

90

100

% Agree © 2012 Hay Group. All rights reserved

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Recognition “Money talks but recognition sings.............”  

Company to employee

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Employee to employee through a corporate scheme

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Employee directly to employee

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Working climate really matters

Individual motives and competencies

Job requirements

Business performance Organizational climate

Leadership styles

30% impact

70% impact © 2012 Hay Group. All rights reserved

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Climate makes a difference to effective performance Hay Group did a research with 17 teams in a single call centre of a major UK financial services organization – all engaged in the same work using identical systems and processes  

The teams were first differentiated between high and low performers by measuring and ranking the climate and without reference to performance data.

 

This was then matched with a ranking of performance provided by our client.

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 

The performance factors that were looked at included sales performance, absence rates and staff turnover

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Developing and managing talent Talent development is a core leadership task. Most Admired Peer Group Leaders devote a significant amount of time to hiring and developing talent.

Leaders coach employees and provide them with performance feedback on an ongoing basis.

% Agree © 2012 Hay Group. All rights reserved

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Succession Planning  

Succession planning is vital to reduce the risk in your organization of critical positions having no cover or successor

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Also, it is vital to ensure that those employees at all levels that are the highest performers are able to be tracked and moved through the organization to a position where they can have the optimum effect

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Employees who know that their talents are being recognized are more likely to stay with you

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In this market employers cannot afford to lose high performing staff because the employee did not feel their talents were appreciated

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Table talk – What inspires you to innovate and evolve? Most employees that I speak to want to be proud of who they work for and the rewards and HR policies that they use. Particularly the intangibles.  

Talk briefly about what you can do from here to innovative your policies and make them talked about positively by your employees

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Inspire, Innovate and Retain ?  

How do we get inspired and how do we harness this to innovate and retain our employees............?

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Set the agenda, be pro-active because it gives you more time to think and design, when working reactively you have little or no time to think and you have to take the pre-canned solution

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Enable ideas to come forward, all ideas count and bad ideas are just a stepping stone to good ideas

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Have a process of review and filtering from people with good judgment

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Take critical input, if not, you will not be able to innovate anything or rise above the herd

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This is no way to be …………………

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Total Compensation for successful retention, Innovate, Inspire and Retain …….

Thank you! Any Questions?

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