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STRATEGY										§										ORGANIZATION										§										TALENT	
Annual Salary Increases:
Is the Juice Worth the Sque...
PAGE	2		|		Annual	Salary	Increases:	Is	the	Juice	Worth	the	Squeeze?	
Juan	Pablo	Gonzalez	
Partner,	Axiom	ConsulDng	Partner...
PAGE	3		|		Annual	Salary	Increases:	Is	the	Juice	Worth	the	Squeeze?	
Ineffective pay practices are making headlines!
Wall ...
PAGE	4		|		Annual	Salary	Increases:	Is	the	Juice	Worth	the	Squeeze?	
What do most annual compensation-related processes lo...
PAGE	5		|		Annual	Salary	Increases:	Is	the	Juice	Worth	the	Squeeze?	
Session Objectives
Learn	a	new	approach	that	addresse...
PAGE	6		|		Annual	Salary	Increases:	Is	the	Juice	Worth	the	Squeeze?	
Eliminate	duplica1on	
and	non-value	add		
micro-manag...
PAGE	7		|		Annual	Salary	Increases:	Is	the	Juice	Worth	the	Squeeze?	
People & Process Perspective
PEOPLE	&	PROCESS	PERSPEC...
PAGE	8		|		Annual	Salary	Increases:	Is	the	Juice	Worth	the	Squeeze?	
A holistic Total People Strategy drives employee beha...
PAGE	9		|		Annual	Salary	Increases:	Is	the	Juice	Worth	the	Squeeze?	
Performance Management Transformation
KEY	TRANSFORMAT...
PAGE	10		|		Annual	Salary	Increases:	Is	the	Juice	Worth	the	Squeeze?	
You’ve made it this far…
Now	what?!?!	
Once	your	org...
PAGE	11		|		Annual	Salary	Increases:	Is	the	Juice	Worth	the	Squeeze?	
Should you consider Achievement-Based Compensation?
...
PAGE	12		|		Annual	Salary	Increases:	Is	the	Juice	Worth	the	Squeeze?	
The typical approach to paying for performance:
Aver...
PAGE	13		|		Annual	Salary	Increases:	Is	the	Juice	Worth	the	Squeeze?	
Should you change how you pay? Three considerations:...
PAGE	14		|		Annual	Salary	Increases:	Is	the	Juice	Worth	the	Squeeze?	
What is the achievement that is being rewarded?
Demo...
PAGE	15		|		Annual	Salary	Increases:	Is	the	Juice	Worth	the	Squeeze?	
Bringing it all together: Achievement-Based Compensa...
PAGE	16		|		Annual	Salary	Increases:	Is	the	Juice	Worth	the	Squeeze?	
Are we ready to break loose?
Some	will	see	the	degre...
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An alternative to annual salary increases axiom consulting partners

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Delivered at the 2016 World@Work Total Rewards Conference, this presentation offers an alternative to annual salary increases while increasing the meaningfulness of rewards, aligning rewards with performance, and making better use of the time of both employees and managers. Presented by Juan Pablo Gonzalez, partner at Axiom Consulting Partners and Bruce O'Neel, VP-HR at CSG International.

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An alternative to annual salary increases axiom consulting partners

  1. 1. STRATEGY § ORGANIZATION § TALENT Annual Salary Increases: Is the Juice Worth the Squeeze? Juan Pablo Gonzalez Partner Axiom Consul1ng Partners jgonzalez@axiomcp.com Bruce O’Neel VP—Human Resources CSG Interna1onal bruce.oneel@csgi.com
  2. 2. PAGE 2 | Annual Salary Increases: Is the Juice Worth the Squeeze? Juan Pablo Gonzalez Partner, Axiom ConsulDng Partners §  +25 years experience in Total Rewards, increasing Human Capital ROI, Strategy & Organiza1on Transforma1on §  Partner at Axiom Consul1ng Partners §  Senior corporate HR roles at Constella1on Energy, BaaN Co., Aon, Philip Morris §  Co-author of Shockproof: How to Hardwire Your Business for LasAng Success Bruce O’Neel Vice President—Total Rewards & HR OperaDons, CSG InternaDonal §  +20 years experience in HR Strategy, Compensa1on & Benefits, Performance Management, Training & Development §  Senior corporate HR roles at T-Mobile, Safeco Insurance, and Verizon One of the world’s largest and most established providers of business support solu1ons, primarily serving the communica1ons industry. Consul1ng firm helping clients succeed by aligning strategy, organiza1on and talent.
  3. 3. PAGE 3 | Annual Salary Increases: Is the Juice Worth the Squeeze? Ineffective pay practices are making headlines! Wall Street Journal “ Annual wage growth has been stuck near 2% since the economy began to steadily add jobs in 2010.” Harvard Business Review “ Why More and More Companies Are Ditching Performance RaDngs” Wall Street Journal “ CompensaDon Gains Fail to Break Out for U.S. Workers” New Yorker “ The Push Against Performance Reviews”
  4. 4. PAGE 4 | Annual Salary Increases: Is the Juice Worth the Squeeze? What do most annual compensation-related processes look like? Typical processes are well-understood, if not well-liked. Effec9ve financial controls. “The Devil you know.” GOOD THE BAD THE UGLY ANDTHE Minimal differen9a9on. Poor link to pay. People “game” the system. A growing belief that “it’s not worth it.” Complex processes at the worst 9me. Stagnant, minimal salary increase budgets. Forced ra9ngs distribu9ons. Unclear messages about the value of performance.
  5. 5. PAGE 5 | Annual Salary Increases: Is the Juice Worth the Squeeze? Session Objectives Learn a new approach that addresses long-standing challenges in rewarding performance by: Increasing the meaningfulness of rewards Aligning rewards with the nature of the performance achieved Making beaer use of the Dme of both managers and employees
  6. 6. PAGE 6 | Annual Salary Increases: Is the Juice Worth the Squeeze? Eliminate duplica1on and non-value add micro-management Facilitate communica1on and alignment: improve knowledge of others, one agenda, one cadence More accountability on leaders for agile decision-making Strategy, structure and people alignment enables a more effective organization Top management proximity to customers, suppliers and other stakeholders Empower our people and improve u1liza1on of their skills and competencies
  7. 7. PAGE 7 | Annual Salary Increases: Is the Juice Worth the Squeeze? People & Process Perspective PEOPLE & PROCESS PERSPECTIVE Develop our people to compete in the global market, allowing personal growth Ensure employees have the right skills and talents to deliver on our business objecDves Expand in-depth domain experDse necessary to ensure long-term success Align organizaDon to maximize value delivery— Business Units, DevOps Embrace a culture of strong accountability— delivering on commitments to colleagues and customers Align goals and compensaDon plans to meet our business objecDves
  8. 8. PAGE 8 | Annual Salary Increases: Is the Juice Worth the Squeeze? A holistic Total People Strategy drives employee behaviors to ultimately influence business outcomes LINKAGE MODEL §  Engagement §  Reten1on §  Produc1vity §  Customer service Employee Behavior Customer Behavior §  Customer sa1sfac1on §  Customer a^rac1on §  Customer reten1on Financial Performance §  Labor cost §  Opera1ng costs §  Opera1ng margin §  Revenue growth §  ROIC §  TSR Value ProposiDon Components Performance- Based Rewards Career, Leadership and Environmental Rewards Founda1onal Rewards
  9. 9. PAGE 9 | Annual Salary Increases: Is the Juice Worth the Squeeze? Performance Management Transformation KEY TRANSFORMATION THEMES Agile Goal Se_ng w Coaching for Performance w Effec1ve Con1nuous Feedback Strengths-Based Development w Rewards w Social Recogni1on/Culture of Celebra1on TRANSFORMATION RELIES ON A SHIFT IN PM PRINCIPLES Annual, One Time Ongoing, con1nuous Rigid, fixed Flexible, agile, simple Centralized Local, Real-1me Appraisal focused Development Focused Remedia1on Strengths Corporate mandates/rules Manager accountability ConDnuous feedback vs. scheduled annual salary adjustments and incenDve awards Flexible, agile, simple performance management vs. standard compensaDon plan Development focused performance management vs. outcomes-driven pay programs RESULTING COMPENSATION CHALLENGES
  10. 10. PAGE 10 | Annual Salary Increases: Is the Juice Worth the Squeeze? You’ve made it this far… Now what?!?! Once your organizaDon has risen to the challenge of transforming performance management, employees and their managers will expect appropriate rewards for the performance achieved. Will your compensa9on programs be barriers or enablers in rewarding performance?
  11. 11. PAGE 11 | Annual Salary Increases: Is the Juice Worth the Squeeze? Should you consider Achievement-Based Compensation? !  Align rewards with the very nature of performance that is achieved; to provide greater nuance and clarity regarding expecta1ons and consequences? !  Foster be^er communica1on with a focus on progress and growth? !  Increase the meaningfulness of rewards? !  Make be^er use of manager, employee and HR 1me? Are your current compensaDon tools sufficient to:
  12. 12. PAGE 12 | Annual Salary Increases: Is the Juice Worth the Squeeze? The typical approach to paying for performance: Average Performer Top Performer Difference Is $22 a paycheck enough to recognize superior performance? Aker-tax pay period increase ∼$43 ∼$65 $22 Annual Salary $50,000 $50,000 — % Increase 3.0% 4.5% 1.5% Annual increase $1,500 $2,250 $750 Increase per pay period $58 $87 $29
  13. 13. PAGE 13 | Annual Salary Increases: Is the Juice Worth the Squeeze? Should you change how you pay? Three considerations: §  Begin with realis1c assump1ons: •  Performance—and ra1ngs—distribu1on •  Are individual and organiza1on achievement linked? §  Do labor market condi1ons suggest equal movement – up or down—across all jobs? (Or is the merit increase process a COLA in sheep’s clothing?) §  What percent of employees are eligible for incen1ve compensa1on? §  To what degree do incen1ve award payouts vs. target vary from year to year and between employees in similar jobs? §  Time-bounded or ongoing? §  Frequency: Does the achievement align with fixed (twelve-month) calendar year increments? The nature of the achievement to be rewarded Mix of Pay DistribuDon and Funding
  14. 14. PAGE 14 | Annual Salary Increases: Is the Juice Worth the Squeeze? What is the achievement that is being rewarded? Demonstrated Competency Growth §  Learning (e.g. adding, subtrac1ng) §  Cumula1ve: Addi1on and subtrac1on make it possible to learn mul1plica1on and division Performance vs. ExpectaDons §  “Doing” (e.g. balancing a checkbook) §  Point-in-1me: What have you done for me lately? (Is the checkbook balanced this month?) PromoDon-like §  Vehicle: Base pay increase to recognize increase in value, that supports con1nued growth §  Timing: Pay upon achievement of a material increase in competence (not necessarily every 12 months) §  Magnitude: Consistent with the increase in capability (> 3% of base) IncenDve-like §  Vehicle: Short-term cash compensa1on to reward achievement of objec1ves during a defined period §  Timing: Commensurate with the period of performance §  Magnitude: Compe11ve in the labor market and consistent with the value of results delivered NATURE OF ACHIEVEMENT NATURE OF REWARDS
  15. 15. PAGE 15 | Annual Salary Increases: Is the Juice Worth the Squeeze? Bringing it all together: Achievement-Based Compensation Demonstrated Competency Growth Significant Above budget raise No bonus 2x “typical” raise Target bonus 2-3x “typical” raise Above target bonus Meaningful Raise = budget No bonus Raise = budget Target bonus Raise = budget Above target bonus All Others Performance counseling No raise Target bonus No raise Above target bonus Below Meets Exceeds Performance vs. ExpectaDons
  16. 16. PAGE 16 | Annual Salary Increases: Is the Juice Worth the Squeeze? Are we ready to break loose? Some will see the degree of change daunDng. “ How will we deliver on this?” Current rewards infrastructure is entrenched. “ Can our financial and HRIS systems support a new approach? Employees will have to understand and adapt to change. “ We spent years educaAng managers and employees on how our current system works and now we are going to change it?” Do we have the courage to break with conven9on and address the issues we’ve been facing for so long?

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