Structure of the presentation1 Scope and role of C&B Professionals2 C&B in different industries Relationship with stakeholders – CXOs; Business Leaders and their3 group employees; Finance; Market4 Retaining and attracting talent - external equity & internal parity5 Policy design and large program roll outs6 Case Study – I Employee benefits portfolio – health and wellness; changing macro7 environment around EB portfolio8 Case Study - II
What are we supposed to do facilitate and partner in: the decision making of what values, behaviors and skills (either in isolation or in combination) should the organization reward identifying who should be rewarded structuring rewards such that it works best determining how to fund those rewards enable and monitor effective execution evaluate effectiveness and re-do the above five as and when needed define a reward strategy that provides monetary, beneficial, motivational and developmental rewards to employees, and more importantly, stick to the strategy, once definedmyth – people go in to hr because they like people. new reality – hr departments are not designed to provide corporate therapy or act as social or health-happiness retreats. hr professionals must create the practices that make employees more competitive, not more comfortable – source – Dave Ulrich; Michael Losey; Gerry Lake article, tomorrow’s hr management
Compensation and Benefits – Manpower/ Labor cost in different sample industries Conglomerate Petroleum & Oil Infra Services Automotive 13 1 Consumption Consumption of Raw Operation Raw of Raw 4 Material Expense 24 Materials1 Material 8 5 Employee Other 7 Overlay 4 Employee cost expenditure Expense 50 Cost Employee 8 Other 45 Employee Others Cost expenditure Cost 68 81 80 Others Others Others Pharma Banking Infrastructure - IT manufacturing Admin Consumption Material of Raw Expense Expense Material 25 Employee 28 Research 31 Other 36 Cost Expense Employee Expenditure 45 Cost 43 Employee Travel Cost Expense 59 13 Employee 54 7 Selling Direct 13 cost Others Expense Marketing 20 12 3 Others 8 Others Others 2
Who does one work with CXOs – conceptualize strategy; design program; execute; monitor. reward strategy must be anchored to the business strategy business leaders and employees – understand and customize finance accruals budgeting utilization Payroll market benchmarking vendors other organizations – one-on-one myth – hr deals with soft side of the business and therefore not accountable. new reality – the impact of hr practices on business results can and must be measured. hr professional must learn to translate their work in to financial performance – source – Dave Ulrich; Michael Losey; Gerry Lake article, tomorrow’s hr management
Attracting and retaining talent – base and variable pay; external equity vs. internal parity variable pay Classifications Gain sharing Profit sharing proportion of cost saving achieving particular level of profitability Operating Margin Net Income Win sharing proportion of new business profit Goal sharing meeting targets aligned with business plan Client Addition Task Basedkey - alignment with goals; impact; simplicity; predictability; fairness; repeatability; communication & communication old vs. new is there a problem how to resolve it stop it from happening going forward – engaging recruitment myth – hr focuses on costs and therefore cannot be controlled. new reality – hr practices must create value by increasing intellectual capital of the firm. hr professionals must add value and not reduce costs – source – Dave Ulrich; Michael Losey; Gerry Lake article, tomorrow’s hr management
Policy design and programs policy design when to institutionalize a practice – once, twice, thrice, more? conceptualize; design and analyse financial impact revisiting a policy programs remuneration philosophies merit and promotion exercises – once, twice, anniversary, random bonus payouts mergers and acquisitions
Case Study – I. Compensation and BenefitsOverall scenario:This year, across industries, organizations have adopted an optimistic yet cautious strategy for 2011-12. There are signs of slowdown in some sectors (particularly domestic sector) and some are in a consolidation phase. Chemicals/ Telecom/ Pharma sectors have reported early double digit revenue growth. However, Hi Tech industry sector seems to be going through a slow growth phase and growth is limited to early single digits, if at all. Consequently, higher focus has returned to employee productivity, consciously allocated compensation budgets with the intent of creating a high performance organization. Pools available for increases are restricted.With the above background please review the following situation:Company X is a Business Process Outsourcing Services organization with a global presence. It currently has 10,000 full-time employees. Its current year revenue is a billion dollars and manpower cost is at 40% of its revenue. Manpower cost split by region is as follows:APAC (including India) – 35%; Latin America – 20%; North America – 45%Inflation rate; averaged out for the region is 8%, 4% and 3% respectively. Attrition has come down from 20% last year to 14% this year however APAC continues to witness highest relative attrition at 19% followed by 3% in NA and 4% in Latin America. Market is talking about a 15%, 8% and 3.5% salary increases in these regions respectively (broad range). The Company has very niche clients and is a market leader in one segment where smaller competitors are propping up. Hence, retaining employees with special skills is becoming a challenge. Also, recruiting from the market has shown that recent hires end up getting more salaries when compared with existing employees. This is creating an internal disparity.In discussion with the leadership team, an overall pool of 5.5% increase of manpower cost was approved for merit and promotion increases this year, globally.
Case Study I contd…With the above details in mind, please prepare a proposal towards: Assume a rating scale and bell curve distribution Implementation of merit and promotion increase – what % by each region. Reasoning behind the decision and total pool available by region for C&B to monitor How will you address the special skill retention concern How would you approach determining if there is any old vs new employee salary disparity. If there is one, how would you address the same Any change in variable plan if the pool you seem to have received is not sufficient Any other details
Employee Benefits Portfolio define what your organizations’ view on benefit: graded or flat company provided or employee paid to what extent portfolio: wellness group medi-claim policy group term life group personal accident what do you do with the benefits data? claims analysis future projections tweaks in the policy/ insurance carrier basis data ever looked at preventive care pattern?
Employee Benefits Portfolio contd… what can be done within wellness decision making: hr, finance and management team who really understand before taking a decision co-pay or deductible co-pay on premium or claim maternity benefit COMMUNICATION: check video
Case Study IIIndia traditionally has been a rural, agrarian economy. As of 2004, an estimated 27.5% were living below the national poverty line. Some 300 million people lived on less than a dollar a day and more than 50% of all children were malnourished. However, our country has seen some astonishing growth since then. Per Capita income has tripled from Rs 19,000 in 2002-03 to Rs 54,000 in 2010-11, averaging 14.4% growth in eight years. The “Middle Class” has grown from a mere 44% of total population in 1998-99 to 63% in 2009-10. This growth is creating the expanding middle class, with more disposable income to spend on healthcare. More women are entering the workforce, further boosting the purchasing power of Indian households. Thanks to rising income, more Indians can afford better healthcare today. While the trend is good, this of course impacts how employee benefits portfolio is positioned and seen in an organization context. While an organization must continue to strive for providing the best healthcare for its employees, choices it makes on “HOW” is possibly of greatest importance. Healthcare cost, and with it insurance cost towards healthcare, are and would continue to rise. It is expected to grow at double digits while manpower cost growth would be in middle single digits. So, sooner than later, healthcare cost would catch up!Keeping the above scenario in mind, review the following Group Mediclaim policy and come up with recommendations:Company Y has 50,000 employees. It has two large plants, one in Gurgaon (Plant A) and the other in Bhubaneshwar (Plant B). Group Mediclaim policies are different for both the plants. Common policy details are as follows: All employees and immediate family members (up to a total of 4) are covered Parents are excluded from the policy Insurance premium is paid for by the Company Lives covered under both policies are 40,000 each No of cases exceeding INR 3L as costs were 10 in each plant for the full year Average maternity cost for both plants is at INR 25,000
Case Study II contd…Differences in the policies:Plant A provides for a uniform cover Individuals lives are covered for Rs 1L each Families are covered under a floater of 4L each Premium paid for the year was INR 20Cr Claim ratio is 110% Maternity is covered up to INR 50K Has a corporate buffer of INR 50L Year on year increase in premium cost is 15%Plant B provides for a level wise cover Cover increases as one goes up the job levels. At entry levels, cover is 1L. At middle level cover is 3L and at Senior levels cover is 8L Premium paid for the year was INR 28Cr Claim ratio is 100% Maternity is covered up to 30K per year There is no corporate buffer Year on year increase in premium cost is 14%Task: Compare the two policies and highlight merits and de-merits Come up with a new policy, which is a combination of the above two – pick up what suits best. Highlight rationale.