Employee Differentiation In Successful Rewards Management - ABF Compensation and Benefits Seminar

EMPLOYEE DIFFERENTIATION IN SUCCESSFUL REWARDS MANAGEMENT Case Study, Concepts and Debatable Ideas Kenny Ong CNI Holdings Berhad www.myCNI.com.my www.OOBEY.com

Background & Philosophy The anchor for all decisions www.myCNI.com.my www.OOBEY.com

About: CNI

19 years old

Core Business: MLM

Others: Contract Manufacturing, Export/Trading, eCommerce, F&B Cafés

Malaysia, Singapore, Brunei, Indonesia, India, China, Hong Kong, Philippines, Italy, Taiwan, Oman, United States

Staff force: ± 500

Distributors: 250,000

Products: Consumer Goods and Services

www.myCNI.com.my www.OOBEY.com

Background: The Four Desperates 1. Desperate Competition 2. Desperate Consumer 3. Desperate Achievers 4. Desperate Changes www.myCNI.com.my www.OOBEY.com

The 51.28% Theory

Resign = Push + Pull > 51.28%

If staff is Happy:

=> 0 + Pull > 51.28%

Philosophy Ultimate Objective of Marketing: “ Get more people, to buy more things, more frequently, at higher prices.” Sergio Zyman “ Retention and Loyalty are useless if No Conversion is happening.” www.myCNI.com.my www.OOBEY.com

Philosophy “ Retention and Loyalty are useless if No Conversion is happening.” “ Retention and Loyalty are useless if No Performance is happening.” www.myCNI.com.my www.OOBEY.com

Philosophy

Loyalty is misleading…

Heavy Consumption ≠ Loyalty

Loyalty ≠ Heavy Consumption

Good Performance ≠ Retention

Retention ≠ Good Performance

A. Background & Philosophy Principles HR Philosophy

Equal / Fair

Happy / Productive

Hire Low, Train High

Performance vs Potential

Retention / Engagement

How “Differentiation” got started Succession Planning (Business Continuity) Talent Management Differentiation Performance Management System Budgeting + Planning KPIs BSC Business Model

Targeting: Identify and Attract

Who are your Talents?

 : A Talent for others does not mean a Talent for you www.myCNI.com.my www.OOBEY.com

Targeting: Identify and Attract Group I (Talent Pool)

Identify

www.myCNI.com.my www.OOBEY.com 2 3 4 5 PERFORMANCE 2 3 4 5 POTENTIAL

Targeting: Identify and Attract Group I (Talent Pool) Group II (  Potential) Group III (  Performance) Group IV (Counseling) 2 3 4 5 2 3 4 5 PERFORMANCE POTENTIAL

Identify

**Additional Categories

Definition of ‘Premium’ staff

Specially selected from the TP.

They have in addition, the following attributes:

High-profile in the field or industry

Loyalty proven

Proven high work-rate and great attitude

Undeniable contribution and efforts

Highly looked upon and respected by most staff

Ability to multi-task and assist in various areas

Key people in CNI’s Succession Plans

**Additional Categories

Definition of ‘Specialist’ Staff

Has competencies (skills & knowledge) in a particular professional field of work.

A staff is deemed to be a Specialist when all the following occurs:

The particular Competency (Skills or Knowledge or both) is highly required by CNI

Supply for the competency in the market is low but demand is high

The competency is difficult to learn, transfer and/or duplicate

Targeting: Identify and Attract Retention Experience Swing Ex Oppose www.myCNI.com.my www.OOBEY.com

Retention 1: Experience

Loyalty = Experience vs. Expectations

Solution Strategy: Talent Management Plan www.myCNI.com.my www.OOBEY.com

Loyalty 1: Experience

Talent Management Plan

Philosophy OJT, Mentoring, Big-5, LP, PDP, SDP, Projects, P/P Grid, SP Table, PDP, Premium, Q12, C&B , ACDP, SCL, Transfers, Events, Recognition P/P Grid, Q12, PA, SDP, SP Selection www.myCNI.com.my www.OOBEY.com Development Motivation Evaluation

Loyalty 2: Swing

Loyalty = Best alternative at the current moment until I find another alternative

Solution Strategy: Improve your Talent Management Plan, Try Your Best, or Live with It www.myCNI.com.my www.OOBEY.com

Loyalty 2: Swing

Swing Talents are “loyal” because:

Individual Relationships

Convenience (at that point in time)

Contractually tied-up

Direct Incentives*

No better alternative

Subordinates

No known alternative

CV friendly

Dangers of Direct Incentives

lessen internal motivation,

switch to mercenary mode,

do something and do not do something else,

bribe and fraud culture,

easier for competitors to recruit,

lessen teamwork & helpful culture,

less and less impact for same value,

mockery of base salary and employment contract,

rebellion from non-incentivised staff,

end up incentivising everyone for everything?,

What drives Reward? The driving force behind compensation and benefits strategies www.myCNI.com.my www.OOBEY.com

What drives our Reward? Compensation & Benefits Values Strategy www.myCNI.com.my www.OOBEY.com

Alignment & Consistency

Mamak stall

Alignment & Consistency

"Exactly what I need"

Customized products

Personalized communications

"They're very responsive"

Preferential service and flexibility

Recommends what I need

"I'm very loyal to them"

Helps us to be a success

"They are the most innovative" "Constantly renewing and creative" "Always on the leading edge" "A great deal!" Excellent/attractive price Minimal acquisition cost and hassle Lowest overall cost of ownership "A no-hassles firm" Convenience and speed Reliable product and service Product Leadership Operational Excellence Customer Intimacy www.myCNI.com.my www.OOBEY.com

Alignment & Consistency: Market Disciplines Operational Excellence (low cost producer) Ref: The Discipline of Market Leaders , Michael Treacy & Fred Wiersema; 1995 Product Leadership (best product) Customer Intimacy (best total solution) www.myCNI.com.my www.OOBEY.com

The McPlaybook*

Make it easy to eat

50% drive-thru

Meals held in one hand

Make it easy to prepare

High Turnover

Tasks simple to learn & repeat

Make it quick

“ Fast Food”

Tests new products for Cooking Times

Make what customers want

Prowls market for new products

Monitored field tests

*Adapted from: Businessweek , Februrary 5 th 2007 www.myCNI.com.my www.OOBEY.com

Product Leadership

New, state of the art products or services

Risk takers

Meet volatile customer needs

Fast concept-to- counter

Never satisfied - obsolete own and competitors' products

Learning organization

Alignment & Consistency: Disciplines, Priorities, and KPIs

Operational Excellence

Competitive price

Error free, reliable

Fast (on demand)

Simple

Responsive

Consistent information for all

Transactional

'Once and Done'

Customer Intimacy

Management by Fact

Easy to do business with

Have it your way (customization)

Market segments of one

Proactive, flexible

Relationship and consultative selling

Cross selling

Operational Excellence

Move know-how from top performing units to others

Benchmark against best in class

Ensure operations training for all employees

Use disciplines like TQM for continuous learning to reduce costs and improve quality

Alignment & Consistency: Market Disciplines www.myCNI.com.my www.OOBEY.com

Alignment & Consistency: Market Disciplines

Customer Intimacy

Capture knowledge about customers

Understand customer needs

Empower front line employees

Ensure that everyone knows the customer

Make company knowledge available to customers

Product Leadership

Reduce time to market

Commercialize new products fast

Ensure that ideas flow

Reuse what other parts of the company have already learned

Ensure there are multiple sources of funding

Alignment & Consistency: Market Disciplines www.myCNI.com.my www.OOBEY.com

Alignment & Consistency: Market Disciplines Operational Excellence (low cost producer) Ref: The Discipline of Market Leaders , Michael Treacy & Fred Wiersema; 1995 Product Leadership (best product) Customer Intimacy (best total solution) www.myCNI.com.my www.OOBEY.com

Business Situations vs. HRM and their impact on C&B Upturn Flat Downturn Fight Complacency Sharpen Edge Keep Momentum Conquer ‘ Change’ mgmt Reduce Fat Continuity Everyone Happy Innovation Acquire Profits Build momentum Sales Cash Flow Talent Mgmt Stack R&D Early wins Slow Down HR Costs Top Talent focus Stack Sales Increase attrition

Values Driven C&B

Performance

Differentiation

Teamwork

Caring

Managing Performance through C&B www.myCNI.com.my www.OOBEY.com

Values Driven C&B

Performance

Differentiation

Teamwork

Caring

Beating a Dead Horse

Most Common Desperate Performance Improvement methods

Send for more Training

Enforce more Incentives (positive/negative)

Mager and Pipe

Analyzing Performance Discrepancies

Alignment: 4-Wheels Model Philosophies Corporate Objective Performance Objectives www.myCNI.com.my www.OOBEY.com Structure Resources Leadership Person

Incentive Problems

Problem with C&B in managing performance:

Most people are confused or unsure about compensation tools

Some people misuse compensation tools

What to Pay?

Pay for Service

Pay for Job

Pay for Competency

Pay for Performance

Pay for Job www.myCNI.com.my www.OOBEY.com

Competency

- Knowledge

- Skills

- Experience

Problem solving

- Complex

- Type of problems

- Special Problems

Responsibility

- Authority

- Success/Failure

- Freedom to act

Performance and Incentives

Internal Equity

Internal Job Rates

Performance differentials

External Competitiveness

External Job Rates - Benchmarking

Demand & Supply

What’s the Difference?

Increment

Bonus

Promotion

Compa Ratio Table

Use this if your company:

Pays for Performance , and

Pays for Job rates

Def:

Mid-Point = Mid Point of Pay Grade

Grade E2 Min RM2,000 MID RM2,500 Max RM3,000 www.myCNI.com.my www.OOBEY.com

Compa Ratio Table www.myCNI.com.my www.OOBEY.com 1 2 3 4 5 > 1.3 ≥ 1.1 - ≤1.3 >0.9 - <1.1 ≥ 0.7 - ≤0.9 < 0.7

Compa Ratio Table www.myCNI.com.my www.OOBEY.com 1 2 5% 3 4 5 > 1.3 ≥ 1.1 - ≤1.3 >0.9 - <1.1 ≥ 0.7 - ≤0.9 < 0.7

Compa Ratio Table www.myCNI.com.my www.OOBEY.com 0 1 2 2 3 4 5% 7 9 3 7 4 9 5 > 1.3 ≥ 1.1 - ≤1.3 >0.9 - <1.1 ≥ 0.7 - ≤0.9 < 0.7

Compa Ratio Table www.myCNI.com.my www.OOBEY.com 0 0 0 2 4 1 0 1 2 4 6 2 3 4 5% 7 9 3 3 5 7 9 12 4 7 8 9 12 15 5 > 1.3 ≥ 1.1 - ≤1.3 >0.9 - <1.1 ≥ 0.7 - ≤0.9 < 0.7

Employee Differentiation through Relative Performance and Talent Management www.myCNI.com.my www.OOBEY.com

Values Driven C&B

Performance

Differentiation

Teamwork

Caring

Employee Distinction? www.myCNI.com.my www.OOBEY.com 1 2 3 4 5 1 2 3 4 5 6 2 3 4 5% 6 7 3 4 5 6 7 8 4 5 6 7 8 9 5 > 1.3 ≥ 1.1 - ≤1.3 >0.9 - <1.1 ≥ 0.7 - ≤0.9 < 0.7

Employee Distinction? www.myCNI.com.my www.OOBEY.com 0 0 0 0 0 1 0 0 1 1 1 2 3 4 5% 7 9 3 3 5 9 12 18 4 5 8 12 15 20 5 > 1.3 ≥ 1.1 - ≤1.3 >0.9 - <1.1 ≥ 0.7 - ≤0.9 < 0.7

Employee Distinction Group I (Talent Pool) Group II (  Potential) Group III (  Performance) Group IV (Counseling) 2 3 4 5 2 3 4 5 PERFORMANCE POTENTIAL

Identify

SCL: Specialist Career Ladder www.myCNI.com.my www.OOBEY.com Associate Specialist (2) Specialist (4) Consultant (4) Principal Consultant (1)

SCL: Specialist Career Ladder

General incentives & privileges :

a. Extra monetary incentive

b. Official Specialist / Consultant job title.

c. Higher external training subsidy limit by company.

d. Tie-pin or pin

e. Certificate

f. Additional benefits

General qualifying/re-qualifying criteria: a. Meet the competency criteria b. Performance min B, PED c. Min. 40 training hr/year d. Physical contribution: i Mentoring ii Write-up iii Speaking iv Multimedia recording v R&D publication / Thesis www.myCNI.com.my www.OOBEY.com

Curse of the Bell Curve ‘ A’ Staff ‘ B’ Staff ‘ D’ Staff ‘ E’ Staff ‘ C’ Staff www.myCNI.com.my www.OOBEY.com

Swing Loyalty: Try Your Best…

Over Promote

Loans

Spot Bonuses

Block recruiters

The Spouse

Toys

Glorified Titles

Forced Ambassador

“ Position” the competition

Sell the Dream

Give them a Best Friend

Internal Trainer

Managing Team performance – collaboration, innovation www.myCNI.com.my www.OOBEY.com

Values Driven C&B

Performance

Differentiation

Teamwork

Caring

Managing TEAMS

Identify the right ‘levers’

Set KPIs for the right ‘levers’

Manage the ‘levers’ through performance systems

Balance Individual vs. Team priorities

Manage conflicting KPIs, but don’t eliminate them

TEAM levers C.O.R.E. ÷ W.L. www.myCNI.com.my www.OOBEY.com

Possible TEAM-type KPIs and incentives www.myCNI.com.my www.OOBEY.com

Recognition for exceptional success (usually not in cash)

Individual role considered in normal merit increase process

Functional

Recognition for exceptional individual or team successes in spot awards or share increases

Venture profit sharing

Network/ Partnerships

Recognition for exceptional individual contributions in spot wards or salary increases

Project / programme Phantom Stock or Profit Sharing

Project/ Time-based

Team competencies recognised in pay for proficiency approach

Gainsharing or operational progress incentives

Process Possible Incentive Type Team Type

Team Incentive Models

1. Fixed Salary Proportion (Fixed Personal, Variable Team)

Performance Incentive = Fixed Quantum + (Balance Sum In Bonus Pool ÷ Headcount) www.myCNI.com.my www.OOBEY.com

2. Two-tier Multiplier (Variable Personal, Variable Team)

Performance Incentive = Personal Target Achievement + (Personal Target Achievement x Team Performance Multiplier) www.myCNI.com.my www.OOBEY.com

3. Team Ratio Plan (Variable Personal, Fixed Team)

Performance Incentive = Team Ratio x Personal Target Multiplier www.myCNI.com.my www.OOBEY.com

Values Driven C&B

Performance

Differentiation

Teamwork

Caring

What Next? Many things to be improved www.myCNI.com.my www.OOBEY.com

The Wish List

Health and Wellness

Work/Life Balance

Mobility

Innovation

Product Leadership

Reduce time to market

Commercialize new products fast

Ensure that ideas flow

Reuse what other parts of the company have already learned

Ensure there are multiple sources of funding

Possible Innovation levers www.myCNI.com.my www.OOBEY.com

Innovation Levers?

Add 10 value increasing properties to each product or service every 90 days

Reduce jointly held inventories and lead time required by 90% in 24 months

Reduce new-product/service development cycle time by 75% in next 2 years

Copy 10 ideas every 60 days form competitors and noncompetitors

Target % Revenue from New Products (previous 24 months ) - start with 50%

Source: The Innovation Challenge, “ Thriving on Chaos” , by Tom Peters; Alfred A. Knopf Inc. www.myCNI.com.my www.OOBEY.com

Start Up & End Notes The end of the Beginning www.myCNI.com.my www.OOBEY.com

For Starting Up…

Get the Business Strategy right

Link C&B to Strategy (e.g. BSC)

Clarify the C&B Philosophy

Strengthen Performance Management System

Redirect Funds ($$)

Design simple processes

Develop and Reward focused on Talent groups

Communicate throughout

Problem with C&B…

“ Good news for stockholders can be bad news for other stakeholders.”

Gregory Miller, Assoc. Prof., Harvard Business School.

In the end…

Great Wall of China

humans are the weakest link

bad treatment of staff will lead to weak link i.e. easier to bribe, easier to con, etc;

bad treatment examples: insulting, lose face, broken promises, no dignity, public criticism, restructure without communication

Other thoughts…

Big matters/Small Matters

Differentiate of Die

Define “Talent”

No “Jerk” rule

Flat Structure?

The Jerk Boss

All aspects

Hire Strict

Summary

Segmented & Targeted

Attraction, Retention and Succession

STARS ™

Thank You. soft copy of slides: http://totallyunrelatedrandomanddebatable.blogspot.com/

Employee Differentiation In Successful Rewards Management - ABF Compensation and Benefits Seminar

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