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Saratoga review: January 2013


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The fairness of executive pay. New metrics and measurement areas for 2013. An expanded list of courses available from our training academy. Get the latest on these topics and more. PwC Saratoga is one …

The fairness of executive pay. New metrics and measurement areas for 2013. An expanded list of courses available from our training academy. Get the latest on these topics and more. PwC Saratoga is one of the world's leading sources of workforce measurement, using technology and metrics to help organizations maximize return on HR investment.

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  • 1. Saratoga Review / January 2013 Recent events p1 / Other items of interest p2 / Sector news p2 / Making pay fairer p3 / Metric of the month – New PwC Saratoga metrics and measurement areas for 2013 p4 / Saratoga Training Academy 2013 p5 This January 2013 edition of the Saratoga Review highlights key points about the fairness of executive pay, additions and improvements to the Saratoga 2013 Metrics List, and the new introductions to the Saratoga Training Academy curriculum in the 2013 calendar year. Recent events  January  PwC Saratoga has launched the 2013 US Human Capital Effectiveness Survey. Benchmarks will be available in April 2013. This year’s survey will include a series of questions to help assess the HR service delivery model and maturity of participant’s HR function and talent management practices.  PwC Saratoga will launch our Latin American survey. This year’s survey will include Brazil. A Brazilian-specific benchmark report and the full Latin American Report are expected in the summer. PwC Saratoga has a series of workshops that will be delivered throughout the U.S. this year. Please see this month’s Saratoga Training Academy 2013 article and to learn more or register, please click here.
  • 2. Other items of interest PwC Saratoga benchmarks available PwC Saratoga recently released our 2012/2013 US Human Capital Effectiveness Report. The report consists of more than 200 workforce and HR metrics, including 50 new metrics, and is based on data submissions from more than 300 organizations. Our new US benchmarks will be available in April 2013. This year’s report also includes benchmarks for nine items from employee engagement surveys, with details about the percentage of employees who agree or strongly agree with each item. Access the whitepaper. PwC Saratoga also released global and regional benchmarks for Asia, Canada, Latin America, and Europe. Updated regional benchmarks will be available starting in the second quarter of 2013. G&A benchmarks In addition to HR measurement and benchmarks, PwC has comprehensive benchmarking and assessment capabilities across several organizational functions, including finance and accounting, supply chain, product innovation/R&D, and IT. To learn more, contact Ranjan Dutta at (703) 918-3009 or Glenn Heywood at or by phone at (617) 530-6103. Look for a feature article on PwC’s G&A benchmarking capabilities in a future newsletter. Talent maturity assessment What is the current state of your talent management practices? PwC Saratoga invites you to take our free 30-minute survey, which will allow you to compare how your talent management practices stack up with those of other leading organizations. Take the survey. Talent management: Delivering the workforce of the future PwC Saratoga recently held a webcast where subject matter specialists discussed the CEO talent agenda and strategic workforce planning to develop talent strategies that deliver the desired business outcomes. Launch the presentation. Developing and automating HR dashboards PwC Saratoga recently hosted a webcast focused on taking the next step in Workforce Intelligence by developing dashboards. Access an archive of the webcast. PwC HR-related webcasts View PwC webcasts addressing HR issues and trends. Sector news PwC regularly produces thought leadership articles for a variety of industries. A summary of recent thought leadership appears below. If you would like to learn more about workforce metrics, benchmarks, and engagement survey results for these industries, please see the last page of this newsletter for PwC Saratoga contacts. Aerospace and defense A &D Insights 2012: A new intensity – Programs under pressure. Read key findings. 2 PwC
  • 3. Banking Rebooting the branch: Reinventing branch banking in a multi-channel, global environment. Read key findings. Consumer finance Inside the Valuation Nexus: Strengthening your valuation program to help limit losses, reduce costs, and deliver a positive customer experience. Read key findings. Healthcare Top health industry issues of 2013. Read key findings. Manufacturing Manufacturing resurgence in the US: Implications and opportunities. Read key findings. Making pay fairer In the August 2012 Saratoga Review, we highlighted key points from the PwC report ‘Making executive pay work,’ suggesting that executives tend to be broadly happy with their pay package as long as they consider it to be fair in comparison with others. In this month’s review, we will summarize the important points from PwC’s Hourglass thought leadership journal that seeks to understand and explain what is ‘fair’ pay? To access the full Hourglass thought leadership article, please click here. The link between executive pay and that of the wider workforce has so far been largely ignored by compensation committees, but is now firmly set on the agenda. “There’s a growing realization around what it looks like if the organization isn’t doing well, the employees have had a pay freeze, and you then give these top individuals an increase or a bonus,” said Charles Cotton, Performance and Reward Adviser to the Chartered Institute of Personnel and Development. There’s been a move in recent years toward what some would argue are excessive pay packages where the spoils of success are shared by an elite few. The huge pay gap between the top and bottom of the company can have a devastating effect on morale. Stock options “rarely go down to middle management level, but they’re the people actually doing the work,” Cary Cooper, Distinguished Professor of Organizational Psychology and Health at Lancaster University Management School, pointed out. “The whole system we’ve set up around pay and incentives isn’t incentivizing anything; all it’s doing is creating a gulf. If you go to any middle manager, or even a junior senior manager, they’ll be appalled at what the people at the top have been paid.” Any attempt to reform the system will need to start with a more transparent approach to what executives receive in their overall package, suggests Harry Dunlevy, Director at the HR consultancy Independent. “Annual reports are all over the place when it comes to reward,” he said. Louise Tibbert is Head of HR and Organizational Design at Hertfordshire County Council and Lead Officer on Pay and Reward for the Public Sector People Managers’ Association. She believes the public sector has a much more transparent — and defensible — set-up when it comes to pay in general and executive reward in particular; something that has been particularly important in helping public sector organizations get through the current difficult times. “At Hertfordshire County Council we’ve changed our terms and conditions, but we were very careful to make the same changes for senior managers before we did that for the rest of the workforce,” she said. “We knew we needed the senior managers to turn around and front the workforce and be able to look into their eyes.” She 3 PwC
  • 4. admitted, though, that a restricted set-up like this wouldn’t work so well in a commercial environment. In the private sector, any solution needs to be based on performance-related pay and the sharing of profits, suggests Cooper. “You need all the stakeholders in the business to make a decision about what would be a fair way of sharing the growth benefits, rather than doing it idiosyncratically for the chief executive, chief operating officer, and finance director, where ultimately you can give them so much money that it actually demotivates people further down the system,” he said. The UK retail partnership John Lewis provides partners with an annual bonus in proportion to their base pay that aims to be roughly in line with dividends paid to shareholders in FTSE 100 companies. The retailer has also written into its constitution that the highest-paid partner will receive no more than 75 times the average basic pay of non-management staff. “The benefits we get include increased productivity, greater staff motivation, high levels of staff engagement with management decision making, low levels of staff absenteeism, and high levels of individual staff wellbeing,” said a spokesperson. Mark Szypko, Managing Director of Compensation at Kenexa, though, questions whether having a direct link between executive pay and the wider workforce necessarily results in a fairer system. “There’s been a lot of talk in the US about chief executive salaries as a multiple of the average employee, and the question I have is whether that in some way conveys fairness,” he said. “I don’t necessarily believe it does. We have to realize that chief executives get paid a lot of money because they have a lot of responsibility and take a lot of risk.” In the current climate, HR has a prominent role in at least making sure this kind of discussion is on the agenda, warned Cotton. “It’s a case of saying it as they see it, so pointing out that chief executives will have to go round the organization and explain why they got a bonus or a pay raise while lower-level employees didn’t, and that if they’re not prepared to do that it’s going to make it even harder to be an effective leader,” he said. Metric of the month –New PwC Saratoga metrics and measurement areas for 2013 PwC Saratoga’s 2013 annual US Human Capital Effectiveness Survey launched in early January. This survey covers the 2012 calendar year and consists of 185 crossindustry metrics focused on the return on workforce investment, span of control, succession planning, recruiting costs and efficiency, quality of hire, labor costs, turnover, and human resources cost and structure. The survey also contains more than 150 role-based metrics unique to the asset management, banking, federal contractor, hospital, health insurer, insurer, pharmaceutical, and utility industries. Each year, the PwC Saratoga team reviews our list of metrics and compares with suggestions we receive from clients and projects to ensure our continued thought leadership in the workforce measurement arena. The 2013 survey is fairly consistent with the 2012 survey. We added four new metrics to our cross-industry survey, including:    4 Workforce Intelligence/Workforce Analytics FTE Ratio (to respond to requests to better understand this growing area of HR) Workforce Intelligence/Workforce Analytics Functional Cost per Employee Served (to respond to requests regarding the functional costs associated to each individual employee) High-Performer Voluntary Separation Rate (to assess turnover rates for this key workforce group) PwC
  • 5.  Executive Assistant/Executive Headcount Ratio (to respond to client requests to better understand back-office workforce structure) Additionally, we added approximately ten role-based metrics to our industry surveys, including Assets Under Management per FTE, Adjusted Admissions per FTE, Labor Cost per Adjusted Admission, Unscheduled Absence Rate, Cost per Hire for Bedside Nurses, Bedside Nurse Turnover Rate, Percent of Physicians Currently Eligible for Retirement, and Actuary FTE Ratio, Labor Cost, and Voluntary Separation Rate. Recognizing that the definition of “engagement” varies vendor to vendor and organization to organization, PwC Saratoga has added a series of employeeengagement-related questions grouped by category (e.g., leadership, immediate supervisor). Consistent with 2012, clients who provide data will receive benchmarks for each question where five or more organizations furnish data. Finally, in an effort to better understand and describe the nature of clients’ HR functions and the types/maturity of programs being offered, we have added a series of questions to our annual survey designed to assess the maturity of HR and talent management programs. We plan to provide benchmark results to clients for questions where five or more organizations furnish data. To learn more about PwC Saratoga’s measurement programs, including our industryspecific or global programs, please see the final page of this newsletter for contact information. PwC Saratoga Training Academy 2013 PwC Saratoga, the leader in workforce analytics has expanded its PwC Saratoga Training Academy course offerings. In addition to the popular Metrics 101 and 200 workshops, new courses in 2013 will include Workforce Planning 101, Workforce Planning 200, and Finance 101 for the HR Practitioner. These sessions are hands-on/interactive courses that allow participants to practice the concepts and walk out of the session ready to implement the learnings. Each course is limited to 25 individuals, allowing for individual attention while also enabling robust discussion and networking with the other participants. To find a session location near you, please visit Here is a brief description of our 2013 courses: Metrics 101 workshop introduces to participants to the fundamentals of developing an HR dashboard that can be shared with HR leadership and executives. Activities in this workshop focus on establishing dashboard parameters, selecting metrics that link to HR strategies, and analyzing results from the dashboard. Metrics 200 is a continuation course to Metrics 101 and is highly favored by business partners, generalists, and analytic teams interested in using the dashboard to “tell the story” and answer the “so what” behind dashboard results. Workforce Planning 101 will assist organizations that are building an internal capability to conduct workforce planning and looking to start the process. The class focuses on developing a sustainable, disciplined approach to delivering the right talent to achieve strategic goals by incorporating the workforce into key business planning activities. Workforce Planning 200 is a continuation of Workforce Planning 101 and is designed to help organizations move past pilots and ad hoc processes to build an internal function. It introduces more sophisticated modeling techniques for 5 PwC
  • 6. organizations to consider as they increase maturity, address technology enablement, and help in the execution of a business process for workforce planning. Finance 101 for the HR Practitioner has been designed for individuals who want to increase their literacy in financial human capital metrics. Additionally, this class teaches participants to demonstrate the value of HR as well as the ROI of the workforce, including calculating productivity for individual job roles. All of our courses are activity-driven, enabling participants to implement what they’ve learned. To learn more about the courses or to sign up for one of our sessions, please click on the link below or cut and paste it into your URL browser: 6 PwC
  • 7. Let’s talk For a deeper discussion of how this issue might affect your business, please contact: East Nik Shah, McLean, VA +1 (703) 918-1208 Midwest Patrick Meyer, Chicago, IL +1 (312) 298-6229 West Scott Pollak, San Jose, CA +1 (408) 817-7446 About PwC Saratgoa As part of PwC’s Human Resource Services, PwC Saratoga is the world’s leading source of workforce measurement, teaming with hundreds of executives and HR departments each year to apply a more vigorous, evidence-based approach to decision making around their workforce. PwC Saratoga has leveraged technology and meaningful metrics to help organizations maximize return on HR investment for more than 30 years. About PwC Human Resources Services As a leading provider of HR consulting services, PwC’s Human Resource Services’ global network of 6,000 HR practitioners in over 150 countries brings together a broad range of professionals working in the human resource arena—including retirement, health and welfare, total compensation, HR strategy and operations, regulatory compliance, workforce planning, talent management, and global mobility—affording our clients a tremendous breadth and depth of expertise, both locally and globally, to address effectively the issues they face. PwC is differentiated from its competitors by its ability to combine top-tier HR consulting expertise with expertise in the tax, accounting, and financial analytics that have become critical aspects of HR programs. PwC’s Human Resource Services practice can assist you in improving your performance across all aspects of the HR and human capital spectrum through technical excellence, thought leadership, and innovation around five core critical HR issues: reward effectiveness and efficiency; risk management, regulatory and compliance; HR and workforce effectiveness; transaction effectiveness; and global mobility. For more information, please visit: 7 PwC