Simple Reward Practices for Better Business Results

Transcription

1 Simple Reward Practices for Better Business Results Tim Silvera Vice President, Ultimate Rewards Practice Leader 1

2 Topics What is Important to Today s Workforce? Pay-for-Success Compensation Philosophy & Strategies Simple Compensation and Performance Practices for Better Business Results Success Studies and Results 2

3 What is Important to Today s Workforce? The Millennial Influence 3

4 Key Findings: What is Important to Millennials? 1. Top motivating factor: Competitive base pay. 2. Tie competitive base pay to the value and results they bring to the company. 3. Strong motivators: Career opportunity and interesting/challenging work. 4. Least motivating factor: traditional merit increases % expect to change jobs within the next six months due to a lack of competitive base pay, career opportunity or interesting work. 6. Seeing a connection between individual results and company s success. 7. Transparent communication on how compensation and performance programs work. 8. Over 50% want feedback on a continuous, real-time basis. 4

5 Key Findings: What is Important to Millennials? Competitive base pay stands out! > 60% Over 60% of millennials ranked competitive base pay as #1 factor for staying with current employer (over 80% ranked it 1 st, 2 nd, or 3 rd ) Survey respondents ranked merit increases as least important. 5

6 Key Findings: What is Important to Millennials? Very important: competitive pay for value and results It is important to me that my company pays me competitively for the value and results I bring to the company. Strongly Agree 68% 24% Somewhat Agree > 60% 92% Link incentive opportunity to individual results Does the program use your individual performance results to calculate your incentive compensation? No 75% 25% Yes 6 > 60%

7 Key Findings: What is Important to Millennials? Directly impacting company success How important is it to you to understand how your job (current position) directly impacts the success of your company? Very Important 56% 34% Important > 60% 90% Career Advancement It is important to me that I see a clear path to advancement in my career. Strongly Agree 62% 30% Somewhat Agree 7 > 60% 92%

8 Key Findings: What is Important to Millennials? Real-time feedback from direct manager Most Valued Feedback Desired Feedback Frequency Direct Manager 69% Continuous/Real-time 46% Professional Peers 19% Weekly Monthly 23% 15% Mentors at Work 6% Quarterly 10% Internal/External Customers 6% Annually 6% 8

9 Pay-for-Success Compensation Philosophy & Strategies 9

10 Compensation Philosophy & Strategies Pay-for-Success Compensation Strategies Guiding Principles Compensation Strategies Engage employees with transparency Use rewards to create a win-win partnership Integrate rewards and performance practices Use a market-driven total rewards approach Reward individuals for their success and value Reward individuals and teams for their results 10

11 Performance Optimization 11

12 Simple Compensation and Performance Practices Performance Optimization FROM Manager driven TO Employee/manager collaboration Annual performance reviews Real-time, continuous process Cascading goals Goals and metric alignment HR process Business process 12

13 Simple Compensation and Performance Practices Performance Optimization Value Results Base Pay Consistent results and demonstration of required competencies Performance Optimization Tools Variable Pay Results and impact on business success Align performance management program to measure consistent results and demonstration of competencies. Align incentive plans to measure and reward results and impact on business success. Together, these programs engage employees to drive business results and build a success-driven culture. 13

14 Simple Compensation and Performance Practices Performance Optimization Create a Positive Performance & Reward Experience Values Core Competencies Leadership Competencies Guiding principles Desired behaviors that drive superior results across the company Behaviors that foster a high-performance, results-driven culture that distinguish the company s leaders Core Competencies (ICs) Manager Competencies Sr. Leadership Competencies Results driven Customer focus Communication Expertise and knowledge Shift to Positive Performance Ratings Values employees Builds teams Manages for results Strategic leadership Talent management Change management TRADITIONAL Outstanding Exceeds Meets Improvement Needed POSITIVE Role Model Highly Successful Successful Progressing 14

15 Base Pay & Base Pay Guidelines 15

16 STOP THE INSANITY! Traditional pay practices DON T WORK Merit pay Equity adjustment Grades and bands Compensable factors SMART goals Internal equity Pay-for-performance

17 Simple Compensation and Performance Practices Base Pay A market-based reward for an employee s value FROM TO Grades or bands Career tracks External and internal equity Market competitive Annual merit increases Base pay increases based on individual value Secretive Manager and employee conversation about pay and value HR controlled Business controlled with HR guidelines 17

18 Methodology: Identify Functions, Job Families and Career Tracks Marketing Product Management Consumer Marketing Human Resources Finance & Accounting Legal & Compliance Information Technology Sales Operations Product Management Product Management Product Design SEO Content Product Design Director, Consumer Product Sr. Product Designer Product Designer UX Designer Jr. UX/UI Designer 18

19 Methodology: Market Pricing Process Product Design Director, Consumer Product Sr. Product Designer Product Designer UX Designer Jr. UX/UI Designer Competitive Pay $ Analyze jobs by reviewing job description, organizational chart, and census. Find the job match in salary survey by comparing responsibilities, scope, skills, experience required, etc. of each job. Create competitive base pay ranges and target incentives for each job. 19

20 Sample Career Tracks Client X Before After Digital Analytics Digital Analytics Director, Digital Analytics Manager, Digital Analytics Digital Strategist Digital Analyst Associate Digital Analyst Digital Analytics Intern Sr. Director, Digital Analytics Director, Digital Analytics Sr. Manager, Digital Analytics Manager, Digital Analytics Sr. Digital Strategist Digital Strategist Sr. Digital Analyst Digital Analyst Associate Digital Analyst Digital Analytics Coordinator Digital Analytics Intern 20

21 Sample Base Pay Ranges & Target Incentive Client X Base Pay Range Level Digital Analytics Target Incentive Entry Market Top Sr. Director, Digital Analytics $20,000 $129,400 $152,200 $175,000 Management Director, Digital Analytics $20,000 $118,400 $139,300 $160,200 Sr. Manager, Digital Analytics $6,000 $106,000 $124,700 $143,400 Manager, Digital Analytics $6,000 $84,200 $99,000 $113,900 Sr. Digital Strategist $6,000 $92,700 $109,100 $125,500 Digital Strategist $5,000 $79,400 $93,400 $107,400 Individual Contributor Sr. Digital Analyst $4,000 $71,800 $84,500 $97,200 Digital Analyst $4,000 $49,300 $58,000 $66,700 Associate Digital Analyst $3,000 $45,600 $53,600 $61,600 Digital Analytics Coordinator $2,000 $42,500 $47,200 $51,900 Digital Analytics Intern $0 $34,100 $37,900 $41,700 21

22 Merit Pay is Dead!

23 Competitive Base Pay Simple Compensation and Performance Practices Base Pay Guidelines Base Pay Value Model Top $ V < Pay Market $ V = Pay Overpaid compared to value Paid right based on value Underpaid compared to value Entry $ V > Pay Progressing Successful Highly Successful Value 23

24 Simple Compensation and Performance Practices Base Pay Guidelines 1 $40,000 $50,000 $60,000 Entry Market Top Progressing Successful Highly Successful 2 Entry Market Top Progressing Successful Highly Successful 1 $40,000 $50,000 $60,000 $40,000 $50,000 $60,000 Entry Market Top Progressing Successful Highly Successful $40,000 $50,000 $60,000 Entry Market Top Progressing Successful Highly Successful Employee 1 and 2 should receive base pay increases until pay matches performance (over time) Employee 3 should be commended for performance and told pay is appropriate based on performance Employee 4 should be told performance falls below pay level and needs to improve performance to maintain pay over time 24

25 Simple Compensation and Performance Practices Base Pay Guidelines Assess market variances for each function Assess market variances for each employee Review each employee's market variance vs employee s value Create budget based on each employee s market variance and value Establish a base pay increase plan for each employee Execute the base pay increase plan for each employee 25

26 Short-term Incentive Plans 26

27 Simple Compensation and Performance Practices Short-term Incentive Plan Design Fact Finding Administration Assessment & Alignment Implementation & Communication Plan Design Approval! Automation Modeling & Costing 27

28 Simple Compensation and Performance Practices Short-term Incentive Plan A performance-based reward practice to reinforce/drive achievement of goals and metrics FROM TO One size fits all incentive plans Custom incentive plans MBOs Goals and metrics Weight metrics Modifier approach to metrics Similar payouts based on level and base pay Differentiated payouts based on team or individual impact on business results 28

29 Simple Compensation and Performance Practices Short-term Incentive Plan Example ABC Company PRE-ULTIMATE REWARDS Company-wide annual profit sharing plan POST-ULTIMATE REWARDS Custom incentive plans: account executives, cross-channel directors Used company-wide financial metric only Modifier approach to revenue and other key metrics All employees received same payouts Payouts declining for 5 years Company revenue and profitability declining year-over-year for 5 years Competitive incentive targets with decelerators and accelerators Individual metrics that affect current and future business results (roadmaps to current and future success) Immediate attention of participants 29

30 Simple Compensation and Performance Practices Short-term Incentive Plan Example Account Manager Target Incentive x Book-of-Business Revenue Metric Modifier x Individual Metric Modifier = Participant Incentive Payout $20,000 0% to 200% 50% to 150% $ Book-of-Business Revenue $M Modifier Individual Metrics* Weight Modifier < Threshold < $1.2M 0% Threshold $1.2M 50% Target $1.4M 100% Stretch $1.6M 200% Gross Margin 50% Customer Satisfaction 30% Forecast 20% 50% - 150% 30

31 Success Studies and Results 31

32 Success Stories High-growth global diagnostics company Issue: Turnover was exceeding 30% and employee population was approaching 70% Millennials, who were looking for career advancement and competitive pay. Solution: Created a career track job structure for all functions with competitive base pay and target incentives for each job. Established a company-wide incentive plan that rewards employees for company, team and individual results. Result: Reduced turnover by over 50% thus saving the company over $10M in lost productivity and training costs. Employee engagement increased by 40% resulting in above target achievement of revenue and EBITDA. 32

33 Success Stories National multi-site physical therapy Issue: Limited availability of qualified physical therapist and retention issues related to work hours. Solution: Created locally competitive base pay ranges for critical talent with special pay practices for night and weekend work hours. Result: 22% reduction in turnover and 40% increase in customer satisfaction while increasing revenue and maintaining profitability. 33

34 Success Stories Global business process outsourcing (BPO) Issue: Company revenue growth strategy at a 4-year stall (profitability eroding) Solution: Review sales incentive plans, which focused on renewals, not growth; redesign plan to reward for organic/new growth Result: 25% revenue growth in 12 months; company stock price rose from $5 to $40 in 18 months 34

35 Success Stories Global medical device company Issue: Spin-off from large East Coast employer; inherited former parent company s traditional compensation and performance practices Solutions: Create a total rewards philosophy and strategies to attract, engage and value employees Built a career track job structure with competitive base pay ranges and target incentives for all jobs Designed an company-wide incentive plan to align and reward employees for company, divisional and individual results. Modified the sales incentive plans to motivate participants to achieve and exceed sales targets. Designed a contemporary performance optimization program to reinforce the company s touchstones Results: Reinforced the company s results-driven culture, Created a environment to attract and engage Millennials. Aligned and rewarded employees for achievements and created a positive work environment 35

36 What s Next! Stop Traditional compensation practices Annual merit increase Grades and bands Company-wide incentive plans Ineffective performance management practices Start Rewarding employees for their value and results Discussing pay and careers in real-time Making compensation practices transparent Having practices that reward success and results Using compensation practices to engage employees 36

37 We Design Simple Compensation and Performance Practices for Better Business Results WHAT WE DO Pay-for-Success Philosophy Results-driven Strategies Executive Compensation Broad-based Compensation Incentive Plan Design Sales Compensation Performance Optimization Career Track Job Structures HOW WE ENGAGE WITH CLIENTS Outsourcing Services Includes Everything in What We Do Replaces In-house Resources Ongoing Consulting and Administration Monitor Competitive Environment Technology Implementation Project Consulting Choose One Or More Projects from What We Do 37

38 Ultimate Rewards Practice Leader Tim is a total rewards expert with over 25 years of corporate and consulting experience in designing and implementing innovative total rewards practices that engage employees to drive business results and build results-driven cultures. Tim Silvera Vice President, Ultimate Rewards Practice Leader Office: Mobile: hubultimaterewards.com Expertise includes executive and broad-based compensation, variable pay design, performance management and sales compensation. Tim s experience spans domestic as well as global compensation in high-tech, life sciences, medical device, real estate, manufacturing, energy, mining, retail, outsourcing, healthcare and many other industries. Graduate of California State University, Hayward with a bachelor's degree in business administration, with an emphasis in HR and finance. Certified Employee Benefits Specialist Certified Compensation Professional Certified Global Professional in Human Resources Master Human Capital Strategist Designation Executive HR Programs from Stanford University 38

39 Thank you. Continued education credits will be ed to you after the seminar. 39