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

Slide 1: EMPLOYEE DIFFERENTIATION IN SUCCESSFUL REWARDS MANAGEMENT Case Study, Concepts and Debatable Ideas Kenny Ong CNI Holdings Berhad www.myCNI.com.my www.OOBEY.com

Slide 2: Background & Philosophy The anchor for all decisions www.myCNI.com.my www.OOBEY.com

Slide 3: About: CNI 1. 19 years old 2. Core Business: MLM 3. Others: Contract Manufacturing, Export/Trading, eCommerce, F&B Cafés 4. Malaysia, Singapore, Brunei, Indonesia, India, China, Hong Kong, Philippines, Italy, Taiwan, Oman, United States 5. Staff force: ± 500 6. Distributors: 250,000 7. Products: Consumer Goods and Services www.myCNI.com.my www.OOBEY.com

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

Slide 5: The 51.28% Theory • Resign = Push + Pull > 51.28% • If staff is Happy: => 0 + Pull > 51.28% www.myCNI.com.my www.OOBEY.com

Slide 6: Philosophy Ultimate Objective of Marketing: “Get more people, to buy more things, more frequently, at higher prices.” “Retention and Loyalty are useless if No Conversion is happening.” Sergio Zyman www.myCNI.com.my www.OOBEY.com

Slide 7: 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

Slide 8: Philosophy Loyalty is misleading… • Heavy Consumption ≠ Loyalty • Loyalty ≠ Heavy Consumption • Good Performance ≠ Retention • Retention ≠ Good Performance www.myCNI.com.my www.OOBEY.com

Slide 9: A. Background & Philosophy Principles HR Philosophy 1. Equal / Fair 2. Happy / Productive 3. Hire Low, Train High 4. Performance vs Potential 5. Retention / Engagement www.myCNI.com.my www.OOBEY.com

Slide 10: How “Differentiation” got started Business Model BSC KPIs Budgeting + Planning Performance Management System Differentiation Talent Management Succession Planning (Business Continuity)

Slide 11: 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

Slide 12: Targeting: Identify and Attract • Identify POTENTIAL 2 3 4 5 PERFORMANCE Group I 5 (Talent Pool) 4 3 2 www.myCNI.com.my www.OOBEY.com

Slide 13: Targeting: Identify and Attract • Identify POTENTIAL 2 3 4 5 PERFORMANCE Group II Group I 5 ( Potential) (Talent Pool) 4 Group IV Group III 3 (Counseling) ( Performance) 2 www.myCNI.com.my www.OOBEY.com

Slide 14: **Additional Categories Definition of ‘Premium’ staff 2. Specially selected from the TP. 3. They have in addition, the following attributes: a. High-profile in the field or industry b. Loyalty proven c. Proven high work-rate and great attitude d. Undeniable contribution and efforts e. Highly looked upon and respected by most staff f. Ability to multi-task and assist in various areas g. Key people in CNI’s Succession Plans www.myCNI.com.my www.OOBEY.com

Slide 15: **Additional Categories Definition of ‘Specialist’ Staff 2. Has competencies (skills & knowledge) in a particular professional field of work. 3. A staff is deemed to be a Specialist when all the following occurs: a. The particular Competency (Skills or Knowledge or both) is highly required by CNI b. Supply for the competency in the market is low but demand is high c. The competency is difficult to learn, transfer and/or duplicate www.myCNI.com.my www.OOBEY.com

Slide 16: Targeting: Identify and Attract Retention Experience Swing Ex Oppose www.myCNI.com.my www.OOBEY.com

Slide 17: Retention 1: Experience Loyalty = Experience vs. Expectations Solution Strategy: Talent Management Plan www.myCNI.com.my www.OOBEY.com

Slide 18: Loyalty 1: Experience • Talent Management Plan P/P Grid, SP Table, PDP, Premium, Selection P/P Grid, Q12, PA, SDP, SP Evaluation Philosophy Development OJT, Mentoring, Big-5, LP, PDP, Motivation SDP, Projects, Q12, C&B, ACDP, SCL, Transfers, Events, Recognition www.myCNI.com.my www.OOBEY.com

Slide 19: 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

Slide 20: 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 www.myCNI.com.my www.OOBEY.com

Slide 21: Dangers of Direct Incentives 1. lessen internal motivation, 2. switch to mercenary mode, 3. do something and do not do something else, 4. bribe and fraud culture, 5. easier for competitors to recruit, 6. lessen teamwork & helpful culture, 7. less and less impact for same value, 8. mockery of base salary and employment contract, 9. rebellion from non-incentivised staff, 10. end up incentivising everyone for everything?, www.myCNI.com.my www.OOBEY.com

Slide 22: What drives Reward? The driving force behind compensation and benefits strategies www.myCNI.com.my www.OOBEY.com

Slide 23: What drives our Reward? Strategy Values Compensation & Benefits www.myCNI.com.my www.OOBEY.com

Slide 24: Alignment & Consistency • Mamak stall www.myCNI.com.my www.OOBEY.com

Slide 25: Alignment & Consistency Product "They are the most innovative" Leadership "Constantly renewing and creative" "Always on the leading edge" Customer Intimacy Operational Excellence "Exactly what I need" "A great deal!" Customized products Excellent/attractive price Personalized communications Minimal acquisition cost and "They're very responsive" hassle Preferential service and Lowest overall cost of flexibility ownership Recommends what I need "A no-hassles firm" "I'm very loyal to them" Convenience and speed Helps us to be a success Reliable product and service www.myCNI.com.my www.OOBEY.com

Slide 26: Alignment & Consistency: Market Disciplines Product Leadership (best product) Operational Excellence Customer Intimacy (low cost producer) (best total solution) www.myCNI.com.my Leaders, Michael Treacy & Fred Wiersema; 1995 Ref: The Discipline of Market www.OOBEY.com

Slide 27: The McPlaybook* Make it easy to eat Make it easy to prepare • 50% drive-thru • High Turnover • Meals held in one • Tasks simple to learn hand & repeat Make it quick Make what customers want • “Fast Food” • Prowls market for new • Tests new products products for Cooking Times • Monitored field tests *Adapted from: Businessweek , Februrary 5th 2007 www.myCNI.com.my www.OOBEY.com

Slide 28: Alignment & Consistency: Disciplines, Priorities, and KPIs Operational Excellence Product Leadership Customer Intimacy • Competitive price • New, state of the • Management by art products or Fact • Error free, reliable services • Easy to do business • Fast (on demand) with • Risk takers • Simple • Have it your way • Responsive • Meet volatile (customization) customer needs • Consistent • Market segments of information for all • Fast concept-to- one counter • Transactional • Proactive, flexible • Never satisfied - • Relationship and • 'Once and Done' obsolete own and consultative selling competitors' products • Cross selling • Learning organization www.myCNI.com.my www.OOBEY.com

Slide 29: Alignment & Consistency: Market Disciplines • 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 www.myCNI.com.my www.OOBEY.com

Slide 30: 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 www.myCNI.com.my www.OOBEY.com

Slide 31: Alignment & Consistency: Market Disciplines • 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 www.myCNI.com.my www.OOBEY.com

Slide 34: Business Situations vs. HRM and their impact on C&B Upturn Flat Downturn Fight Complacency Innovation Sales Sharpen Edge Acquire Cash Flow Keep Momentum Profits Conquer Build momentum ‘Change’ mgmt Talent Mgmt Top Talent focus Reduce Fat Stack R&D Stack Sales Continuity Early wins Increase attrition Everyone Happy Slow Down HR Costs

Slide 35: Values Driven C&B 1. Performance 2. Differentiation 3. Teamwork 4. Caring www.myCNI.com.my www.OOBEY.com

Slide 36: Managing Performance through C&B www.myCNI.com.my www.OOBEY.com

Slide 38: • Beating a Dead Horse www.myCNI.com.my www.OOBEY.com

Slide 39: Most Common Desperate Performance Improvement methods 1. Send for more Training 2. Enforce more Incentives (positive/negative) www.myCNI.com.my www.OOBEY.com

Slide 40: Mager and Pipe • Analyzing Performance Discrepancies www.myCNI.com.my www.OOBEY.com

Slide 41: Alignment: 4-Wheels Model Corporate Resources Objective Structure Performance Objectives Philosophies Leadership Person www.myCNI.com.my www.OOBEY.com

Slide 42: Incentive Problems Problem with C&B in managing performance: • Most people are confused or unsure about compensation tools • Some people misuse compensation tools www.myCNI.com.my www.OOBEY.com

Slide 43: What to Pay? • Pay for Service • Pay for Job • Pay for Competency • Pay for Performance www.myCNI.com.my www.OOBEY.com

Slide 44: Pay for Job • Competency • Problem solving - Knowledge - Complex - Skills - Type of problems - Experience - Special Problems • Responsibility - Authority - Success/Failure - Freedom to act www.myCNI.com.my www.OOBEY.com

Slide 45: Performance and Incentives 1. Internal Equity 1. Internal Job Rates 2. Performance differentials 3. External Competitiveness 1. External Job Rates - Benchmarking 2. Demand & Supply www.myCNI.com.my www.OOBEY.com

Slide 46: What’s the Difference? • Increment • Bonus • Promotion www.myCNI.com.my www.OOBEY.com

Slide 47: 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 MID Max RM2,000 RM2,500 RM3,000 www.myCNI.com.my www.OOBEY.com

Slide 48: Compa Ratio Table < 0.7 ≥0.7 - >0.9 - ≥1.1 - > 1.3 ≤0.9 <1.1 ≤1.3 5 4 3 2 1 www.myCNI.com.my www.OOBEY.com

Slide 49: Compa Ratio Table < 0.7 ≥0.7 - >0.9 - ≥1.1 - > 1.3 ≤0.9 <1.1 ≤1.3 5 4 3 5% 2 1 www.myCNI.com.my www.OOBEY.com

Slide 50: Compa Ratio Table < 0.7 ≥0.7 - >0.9 - ≥1.1 - > 1.3 ≤0.9 <1.1 ≤1.3 5 9 4 7 3 9 7 5% 4 3 2 2 1 0 www.myCNI.com.my www.OOBEY.com

Slide 51: Compa Ratio Table < 0.7 ≥0.7 - >0.9 - ≥1.1 - > 1.3 ≤0.9 <1.1 ≤1.3 5 15 12 9 8 7 4 12 9 7 5 3 3 9 7 5% 4 3 2 6 4 2 1 0 1 4 2 0 0 0 www.myCNI.com.my www.OOBEY.com

Slide 52: Employee Differentiation through Relative Performance and Talent Management www.myCNI.com.my www.OOBEY.com

Slide 54: Employee Distinction? < 0.7 ≥0.7 - >0.9 - ≥1.1 - > 1.3 ≤0.9 <1.1 ≤1.3 5 9 8 7 6 5 4 8 7 6 5 4 3 7 6 5% 4 3 2 6 5 4 3 2 1 5 4 3 2 1 www.myCNI.com.my www.OOBEY.com

Slide 55: Employee Distinction? < 0.7 ≥0.7 - >0.9 - ≥1.1 - > 1.3 ≤0.9 <1.1 ≤1.3 5 20 15 12 8 5 4 18 12 9 5 3 3 9 7 5% 4 3 2 1 1 1 0 0 1 0 0 0 0 0 www.myCNI.com.my www.OOBEY.com

Slide 56: Employee Distinction • Identify POTENTIAL 2 3 4 5 PERFORMANCE Group II Group I 5 ( Potential) (Talent Pool) 4 Group IV Group III 3 (Counseling) ( Performance) 2 www.myCNI.com.my www.OOBEY.com

Slide 57: SCL: Specialist Career Ladder Principal Consultant (1) Consultant (4) Specialist (4) Associate Specialist (2) www.myCNI.com.my www.OOBEY.com

Slide 58: SCL: Specialist Career Ladder General incentives & General qualifying/re- privileges: qualifying criteria: a. Extra monetary incentive a. Meet the competency criteria b. Official Specialist / Consultant job title. b. Performance min B, PED c. Min. 40 training hr/year c. Higher external training subsidy limit by company. d. Physical contribution: i Mentoring d. Tie-pin or pin ii Write-up e. Certificate iii Speaking f. Additional benefits iv Multimedia recording v R&D publication / Thesis www.myCNI.com.my www.OOBEY.com

Slide 59: Curse of the Bell Curve ‘A’ ‘B’ ‘C’ ‘D’ ‘E’ Staff Staff Staff Staff Staff www.myCNI.com.my www.OOBEY.com

Slide 60: Swing Loyalty: Try Your Best… 1. Over Promote 1. “Position” the 2. Loans competition 3. Spot Bonuses 2. Sell the Dream 4. Block recruiters 3. Give them a Best 5. The Spouse Friend 6. Toys 4. Internal Trainer 7. Glorified Titles 8. Forced Ambassador www.myCNI.com.my www.OOBEY.com

Slide 61: Managing Team performance – collaboration, innovation www.myCNI.com.my www.OOBEY.com

Slide 63: Managing TEAMS 1. Identify the right ‘levers’ 2. Set KPIs for the right ‘levers’ 3. Manage the ‘levers’ through performance systems 4. Balance Individual vs. Team priorities 5. Manage conflicting KPIs, but don’t eliminate them www.myCNI.com.my www.OOBEY.com

Slide 64: TEAM levers C.O.R.E. ÷ W.L. www.myCNI.com.my www.OOBEY.com

Slide 65: Possible TEAM-type KPIs and incentives Team Type Possible Incentive Type Functional •Recognition for exceptional success (usually not in cash) •Individual role considered in normal merit increase process Process •Team competencies recognised in pay for proficiency approach •Gainsharing or operational progress incentives Project/ Time- •Recognition for exceptional individual contributions in based spot wards or salary increases •Project / programme Phantom Stock or Profit Sharing Network/ •Recognition for exceptional individual or team Partnerships successes in spot awards or share increases •Venture profit sharing www.myCNI.com.my www.OOBEY.com

Slide 66: 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

Slide 67: Team Incentive Models 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

Slide 68: Team Incentive Models 3. Team Ratio Plan (Variable Personal, Fixed Team) Performance Incentive = Team Ratio x Personal Target Multiplier www.myCNI.com.my www.OOBEY.com

Slide 70: What Next? Many things to be improved www.myCNI.com.my www.OOBEY.com

Slide 71: The Wish List 1. Health and Wellness 2. Work/Life Balance 3. Mobility 4. Innovation www.myCNI.com.my www.OOBEY.com

Slide 72: Possible Innovation levers • 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 www.myCNI.com.my www.OOBEY.com

Slide 73: Innovation Levers? 1. Add 10 value increasing properties to each product or service every 90 days 2. Reduce jointly held inventories and lead time required by 90% in 24 months 3. Reduce new-product/service development cycle time by 75% in next 2 years 4. Copy 10 ideas every 60 days form competitors and noncompetitors 5. 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

Slide 74: Start Up & End Notes The end of the Beginning www.myCNI.com.my www.OOBEY.com

Slide 75: For Starting Up… 1. Get the Business Strategy right 2. Link C&B to Strategy (e.g. BSC) 3. Clarify the C&B Philosophy 4. Strengthen Performance Management System 5. Redirect Funds ($$) 6. Design simple processes 7. Develop and Reward focused on Talent groups 8. Communicate throughout www.myCNI.com.my www.OOBEY.com

Slide 76: Problem with C&B… “Good news for stockholders can be bad news for other stakeholders.” Gregory Miller, Assoc. Prof., Harvard Business School. www.myCNI.com.my www.OOBEY.com

Slide 77: 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 www.myCNI.com.my www.OOBEY.com

Slide 78: Other thoughts… 1. Big matters/Small 1. Flat Structure? Matters 2. The Jerk Boss 2. Differentiate of Die 3. All aspects 3. Define “Talent” 4. Hire Strict 4. No “Jerk” rule

Slide 79: Summary Segmented & Targeted Attraction, Retention and Succession STARS™ www.myCNI.com.my www.OOBEY.com

Slide 80: Thank You. soft copy of slides: http://totallyunrelatedrandomanddebatable.b logspot.com/

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