Manager – HR
Need for greater innovation in building Compensation and Benefits Programs
Most compensation and benefits professionals are heavily focused today in ensuring that budgets are balanced, surveys are collected and ‘uploaded’ into their ERP systems and that the entire compensation review and delivery program is effected at the appropriate time( ‘Just In Time’) to prevent attrition. Many companies even go the distance in timing their increments to perfection, ensuring that the ‘worthy’ remain to gain.
However, with the advent of ‘big data’, which is yet another rather ‘jazzy term’ for the simple analysis of data made possible by a computerized system it now becomes imperative in using operational analytics and predictive analytics, that can drive relevant compensation reviews and reward programs. Big data only means that statistics is made more relevant by plugging in multiple variables to analyse the data.
Having worked as a compensation and benefits manager, I have closely observed experts can do more to innovate. For example, in early 2004, one of the companies I had worked for was struggling with retaining the ‘tenured’ employees. So ‘under pressure’ we looked to innovate.
And so customized ‘longevity bonus’ packages were launched for employees who had completed 3, 5 and 7 years, respectively. This innovation was not ‘patented’ by us, but was rather ‘shared’ as an experience to the industry tacitly by our leaders.
Soon enough, many big players jumped in and called it their own. And that was perfectly fine with us, so long as they did not poach our employees.
We then went a step ahead and ensured that the ‘gratuity component’ on all offer letters went clearly below the Gross CTC line. Yes, we put that out of the ‘salary break-up’. It worked well as the gross CTC now looked different. Want to know why we did this? We realized that not everyone who joins us gets ‘gratuity’.
A few years down the line, we realized that the game plan needed changing and so we came up with one more innovation, we brought back ‘Gratuity’ into the ‘salary break-up’ and this time, for those who did not complete the defined ‘5 year period’ as per the Gratuity Act 1932, we ‘pro-rated’ the amount and gave it to them for the employment period completed. This was considered imaginative by most of the leading ‘comp & ben’ experts.
Today, there lies a clear line of business opportunity to link a specialized competency or skill to a ‘skill based incentive’. Most of the experts feel that unless the skill when applied converts to profits, it makes no sense in rewarding it. I beg to differ. Most companies need competencies and skills to deliver results. It’s clearly the other way round. The best way is to have ‘phased incentive plans’. And so the skill or competency gets rewarded at various stages of ‘effort-to-profit’.
It’s also important to link degrees of competency or skill to the reward system. However, the maturity level of the competency library of a company and the testing mechanisms also need to be assessed for this to happen.
Hence I am suggesting a more ‘intuitive’ approach to rewarding employees.
Structuring these incentives can be quite a challenge. Hence,reward programs must be targeted at specific groups of people. How? Think of a ‘rewards system’ as a ‘tree’ built around people and the business.
So here is the tree structure:
- Roots –the founders of a company form this group. They need water, healthy soil and nutrients to ensure that the food reaches the tree – the whole tree! Water is regular rewards, healthy soil is the structured rewards like bigger bonuses and nutrients are the healthy rewards for body, mind and soul – think of this as ‘vacation’ with family. The founders of the company need not only be the ones who provided capital and infrastructure. They can be the lone technician, who was the first engineer to work on the shop floor.
- Trunk – The working half of the tree where the food travels to all parts of the plant and growth is a derived aspect. The on-going employee workforce who make the various functions deliver the mission of the organization to customers, to society and to the industry come into this group. Note that those who make up this group are clearly business focused and aim to make the ‘tree’ stronger and healthier. Rewards can be incentive plans, bonuses or competitive salary packages.
- Leaves – The working elements wherein they are actually doing or playing out the act where the service of product of the company is delivered. They require support based incentives – think of this monthly reward systems. They will require competitive pay structures first before rolling out incentive programs. They eventually drop off. So retention is often not possible. However they are the ‘big chefs’ of the kitchen.
- Flowers – The groups that speak of the company, market the products or services, who will eventually fade away and who will smell good for the company are the ones who need promotions. They lead into creators of the fruits (profits) of the company. They need creative rewards and it must be customized continuously to make it relevant.
Each company needs to create these 4 groups to become creative. While it’s almost sure that most companies are aware of the ‘tree’ model, they have all not created the groups of employees in a logical manner to make it relevant to their business and industry.
Rewards are not relevant if there is no ‘respect’ for the individual. Hence, first focus on creating a respectful environment before you reward or recognize.In conclusion, build reward systems based on the ‘tree’ relevant to your workforce and align it to the business and industry in which your business operate.