Re-engineering Compensation and Rewards for ambition driven employees Shounak Deshmukh 3 rd December 2011.

Re-engineering Compensation and Rewards for ambition driven employees

Shounak Deshmukh3rd December 2011

Advent of trade & barter system……Age old way to transact

Trade : At a glance

- 3000 BC: Barter system prevails

- 1800 BC : standardized weights & measures ; beginning

of long distance trade; extant records of loan made by

priests to merchants found in Babylon

- 600 BC: beginning of coinage

- 200 BC - AD 200 : Mercantile activity flourishes, trade

via silk route and sea; guilds play a major role

- 1100 : Intercontinental trade via Egypt and red-sea

became prominent

- 1500 : Sea-borne trade routes to Europe open up

- 1550 : Sher shah’s copper and silver currency and

Akbar’s standard weights and measures boost

commerce

- 1565 : London Royal Exchange commenced

- 1600 – 1800 : Tussle for control of Indian trade between

European powers, British emerge supreme

- 1700 – 1800 : General bank of India, presidency banks,

bank of Bengal formed

- 1950 – 2000 (early) : Agriculture exports remained

mainstay

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A look at what was happening to the Indian Economy

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1770 : Crop failure, ad-hoc revenue

policies of EIC lead to disastrous

famine in Bengal, Bihar and Orissa

1825 : Indian opium used by

British to pay for Chinese

products (silk & tea)

1855 : The first Jute mill set up

in Bengal

1931 : Census, 37.8%- landless laborers, 24.3% -

tenants at will, 9% - small farmers, 25%

- middle farmers, 3% - Zamindars

1896-1900 : Recurrent famines, food grain production declines,

commercial crops increase

1854-55 : First cotton & Jute

mills established 1903 : First Five

star hotel “Taj Mahal” opened

1907 : Tata Iron and steel co.

founded 1918 : Trade union

movement begins

1936-39 : TU’s and strikes

increase

1991 : “Param” India’s 1st

supercomputer built by C-DAC

New age Economy, moving from “Wages to Total Rewards”

Old Economy New Economy

Wages/Salaries Compensation Rewards Total Rewards

Myopic perspective Long Term view

Fairness/Amelioration Competitive Edge

Personnel manager Business leaders

Narrowly-defined jobs and job standards

Broad, generic roles -emphasis on competence and continuous development

Hierarchical and rigid pay structures - only way to get on, is to move up. Focus on next promotion

Broad-banded and job family pay structures emphasising flexibility, career development pay and continuous improvement

Consolidation of rewards into base pay More emphasis on ‘at risk’ pay

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Reward strategy a part of business strategy

Business ResultsBusiness Results

Business StrategyBusiness Strategy

People RequirementsPeople Requirements

HR StrategyHR Strategy

Employee NeedsEmployee Needs

HR Programs

Organizing (the right jobs)

Performing(the right outcomes)

Developing(the right skills)

Rewarding(the right incentives)

Staffing (the right people)

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Changing workforce leads to changing needs

Dimensions Traditionalists Baby-boomers Gen X Gen Y

Age 55 to 65 45 to 55 30 to 45 20 to 30

Roles • Nr Retirement •Sr ‘Partners’•Support Staff

•Sr Management roles •Provide thought leadership

• Mid-management roles•Diversity of thought

• New entrants to the workforce• Fastest growing segment

Traits •Hard Working•Loyal•Submissive,•Tech Challenged

•Work-centric•Independent•Goal oriented•Competitive

•Individualistic•Adept at tech•Emergence of the women workforce•Hands-off style•Dislike micro-management

•Ambitious and confident•Tech Savvy•Family centric•Team orientation•Need attention•Not afraid to question authority

Wants •Traditional Morals•Security needs•Consistent rewards

•Position and Prestige Needs•Perks defining hierarchy

•‘Work hard : play hard mentality’• Matters of life style are important,•‘Fast track’

•Fast track has lost value• Flexibility is important•Technology as a game changer

The motivations, aspirations and expectations of the Gen Y ers will be significantly different than ever before!!

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India Story – More about India’s Gen Y ers

Source:Generation Y and the Workplace Annual Report 2010

1.In India they make-up more than half of the working population

2.Not all employment ready, hence talent in short supply

3.Ambitious, optimistic, have a clear sense of where they are headed

4.Entrepreneurial mind-set, business savvy, technologically capable and connected

5.Highly competitive, seeking higher education,

6.Plenty of opportunities therefore they are job-hopping

7.Expect challenging work assignments, accelerated career growth, socially responsible work place, flexi-work and freedom, innovation in their jobs

8.Willing to work in shifts to support global operations

9.Opportunities to learn, Quality of Life, Compensation are the top three reasons for “choosing a Company”

10.An office setting in the urban area is most sought after – ease of access, transportation are crucial needs.

11.Five star on-site services – reception, catering, medical, gymnasium are a big draw

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Source : Dr Ichak Adizes book, Corporate Lifecycles

Reward Management – the more inclusive approach

Rewards

Extrinsic

Base Salary PerquisitesIncentives

Intrinsic

Benefits

The reward linked to the

TASK

The reward linked to the POWER the

job may hold

The reward that comes from knowing that the job is part

of a BROADER MISSION

While all 7 components are present in everyone’s perception of their job, the intrinsic elements are easily overlooked by companies as part of a reward system.

The true reasons why an employee stays or quits are often hidden in the intrinsic elements.

Knowing the balance of these components, especially in case of Gen Y ers, is crucial to developing a reward system that goes beyond the purely pecuniary, and, at the same time, engage and retain the talent needed.

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Changing Paradigm

It is well documented that the new workforce generations place high value on quality time, family and freedom. Traditional incentives such as titles, raises and corner offices, while still important, are somewhat less important than the motivation of “relationships” and “experiences”.

Customized reward packages Personalized reward packages

Linked to company and individual performance

Linked to team performance

Low variability based on performance High variability based on performance

Service / Level / Effort oriented Outcome / Value oriented

Fixed costs Variable costs

Base compensation below market median

Base compensation above market median

Incentive compensation below market median

Incentive compensation above market median

Benefits below market median Benefits above market median

Primarily Pecuniary More Inclusive

Defined Schedule More immediate

Periodic evaluation and feedback Continuous evaluation and feedback

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Communicating Rewards

Source: Aon Consulting sponsored round table Conference Board Event New York City 2009

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Rewarding Generation Y - Trends

Lesson Number 1 :

Today, the new reward is balance. Reward Gen Y employees by giving what they want - FLEXIBILITY.

• A junior associate who does a stellar job on a client project could be rewarded with an invitation to attend a dinner with that client. That "reward" may have been well-received by all earlier generations.

• But not so with Gen Y. Gen Y is a generation of employees who value their personal time.  Being "asked" to attend a work-related event in addition to their normal work duties is not a reward.  Flexi time, paid holiday is the real bonus

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Rewarding Generation Y - Trends

Lesson Number 2 :

Rewards will have to be FREQUENT – else risk loosing the employee because they don’t “feel appreciated”

• For many leading employers, “year-end” is the time to reflect and reward employees for their hard work and dedication throughout the year

• However in the new world how recurring is the reward is as important as what the reward is – Online Gift Cards as an incentive for Gen Y is catching-on. That they can be delivered and redeemed all the time are attractive options

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Rewarding Generation Y - Trends

Lesson Number 3 :

The old paradigm of ‘pay your dues, work hard, you will be rewarded’ is fast changing. Reward me EARLIER - and I will work hard  

•Question : ‘If you had seen your parents right-sized and down-sized, even when they dedicated their life to the corporation, would you be prepared to make the same sacrifices for the same promises?

•Long Service Awards / Loyalty, which many organizations have used successfully has clearly limited value.

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Rewarding Generation Y - Trends

Lesson Number 4 :

More value on whether or not the job is ACCOMPLISHED than on how long or the amount of effort it takes

• A strong desire to work on their own terms• Generation Y employees typically focus more on actually accomplishing the task as opposed to "how" the task is to be accomplished• Rewarding ‘whats’ is therefore important

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Rewarding Generation Y - Trends

Lesson Number 5 :

The Reward spectrum will consistently evolve to include benefits that help you remain socially active. An EXPERIENCE to share with friends or family. If Gen Y ers could choose their own rewards their first preference would be experience based

•Dinner, day trip, holiday•Experiential gift of your choice. E.g. flying, driving, •Time off work •Retail gift voucher, Fuel vouchers, Movie tickets, Merchandise E.g. desk accessories, pens•Donation to a charity of your choice•Among the most popular benefits are those that extend family-friendly programs e. g. Paid paternity leave is one example

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Thank You.

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