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Making total rewards work


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This is the presentation I made at NHRD Dec meet.

Published in: Business

Making total rewards work

  1. 1. Making Total Rewards Work18 DECEMBER 2012Girish KohliConsultantEmail: off- , personal – girishkohli@gmail.comMobile - +91- 9971092805India - Gurgaon - Infinity Towers
  2. 2. PrefaceDear All,It was a pleasure interacting with everyone yesterday. Please find in the followingslides the discussion point of yesterday. Some of the points in the slide I couldn’t takeup because of paucity of time. There are other sub-topics related to comp whichcouldn’t be included this time.Please feel free to reach out to me for any aspect that you’d like to discuss related tocomp, organization design, employee engagement, etc. My contact details (personaland professional) are shared on the cover slide and my profile on the following slide.Additionally am attaching the in the annexure slides which introduce Mercer and itsservice offerings. You may find something of interest to your organization there.Again thank you for the opportunity and for being a wonderful Audience- GirishMERCER 1
  3. 3. About Girish Present Responsibilities Girish Kohli is a consultant at Mercer’s Gurgaon office and part of the Human Capital Advisory Services (HCAS) business. His role encompasses project delivery and business development across industry segments Experience Details Within Mercer, Girish’s latest project has been with an Indian automobile major where they have helped the client redefine their compensation philosophy, restructure compensation and redesign the annual variable pay program as part of its initiatives to retain its preferred employer branding. He has been part of and led a number of organization structure redesign initiatives for firms inKey Work Areas: the FMCG and Automobile sector.• Organization He has also worked on an assignment with a German luxury automobile company wherein Design the team evaluated the roles within the organization based on the role profiles developed by• Total Rewards them and used the evaluations as an input for compensation benchmarking and related Design advisory.• PMS Design He has worked on various projects on HR diagnostics like Employee Engagement surveys, HR Audit and HR process redesign. He has also worked on role clarification and position• Employee evaluation, organization design and long term incentive design. Engagement Girish’s experience on these projects have been spread over diverse industries like Auto,• HR Process FMCG, NGOs and Financial, Logistics, and others. Design He has worked with clients like Hero MotoCorp, BMW India, Hindustan Coco Cola Bottling,• Job Evaluation Tata Motors, SOS Children’s Villages, ONGC, New Holland Tractors, GRFL and others. Academic Qualifications Girish has an MBA in Marketing and Human Resources from NMIMS, Mumbai. He also holds a B.E. in Computer Engineering from the Army Institute of Technology, Pune. MERCER 2
  4. 4. Total Rewards Redesign – Large Multi-location Manufacturing Co. A large manufacturing co. that prided itself about being employee centred saw extremely low scores on its employee engagement scores on the area of compensation• Partnered with organization to redesign its rewards framework – Compensation Philosophy – Compensation Structure Simplification - Benefits Design – Pay Range Design – Transition of Salaries to New Pay Ranges – Redesign of Comp Processes - Governance - Empowerment of Line ManagersMERCER 3
  5. 5. Contents• Total Rewards – What’s ‘Total’ Rewards – Building a Compensation Philosophy – Implementing the Philosophy • Some challenges/ opportunities for – Tracking Success of your Rewards organizations Design – Internal Parity – Location Differences – Employee Wellness – Rising Medical CostsMERCER 4
  6. 6. What constitutes Total RewardsWhat would I like to “earn” from my work… Salary Benefits Careers Work/Life Basic Retirement Quality of role Quality of role Time off Time off Allowances (HRA, CDA Medical Job Stability Job Stability Workplace facilities Workplace facilities etc) Learning and skills Workplace flexibility Life and accident Learning and skills Workplace flexibility Performance Pay insurance Development Development Status and recognition Status and recognition Car Career growth Career growth Housing Employer Brand Employer Brand My value today My lifestyle, financial My future value My quality of life security and protection …What employees across companies have told usMERCER 5
  7. 7. Building a Compensation Philosophy One Population Separate Groups Segmentation Business Peers Talent Competitors Market Definition First Quartile Fourth Quartile Market Competitiveness One vehicle Multiple Vehicles Reward Elements and Roles Fixed Variable Compensation Mix Homogenous Differentiated Internal EquityMERCER 6
  8. 8. Articulating a Reward Philosophy for TMLTo be effective, a reward philosophy must include these elementsTotal Rewards Philosophy must define the role of monetary rewards, career opportunities, employee welfare in the overall compensation philosophy1. Workforce segmentation – One size does not fit all. Rewards need to be targeted and managed based on different workforce segments in order to optimize spending.2. Market definition – Selecting a comparator group(s) that represents companies from which TML sources talent or to which the company may lose talent assures that the target set is relevant.3. Market Competitiveness – An assessment of how competitive TML needs to be considering intensity of competition, growth plans, availability of talent, hiring and attrition costs.4. Reward Elements and Roles – Different elements of total rewards can be used to play various roles, such as hygiene factor, attracter, retainer, performance driver and should be designed accordingly.5. Compensation Mix and Differentiation– Ensure that the mix of compensation - fixed, short-term incentive, long-term incentive – is reasonable and consistent with market practice6. Internal Equity– How much differentiation are we comfortable with?MERCER 7
  9. 9. Sample Total Rewards Philosophy – Company ABC• ABC’s total reward philosophy is simple: our employees deserve to be compensated fairly and competitively in return for their contribution to ABC’s success.• The company benchmarks its competitive position in the relevant labor markets in establishing competitive pay and benefits programs.• ABC strives to be an employer of choice around the world. Wherever practical, ABC believes in emphasizing a strong pay for performance perspective in each employee’s total rewards package through merit based pay increases and variable bonus programs based upon company, business unit and individual performance.• In many ABC locations around the globe, considerable workplace flexibility has been employed on a local level to provide employees and management with the ability to adapt company-wide programs to fit local environments. – For instance, our ABC Hours program provides for compressed work schedules at the beginning of the work week that allow for half work days on Fridays and alternative work schedules to accommodate family commitments. – ABC’s unit in Renton, WA, U.S. offers an on-site child care facility. – Other locations, including both Rhode Island locations, offer on-site exercise facilities. Source: Data shared in public domainMERCER 8
  10. 10. Implementing the Philosophy - Salary• Basis of salary• Define Job equivalence - Develop work levels• Develop pay bands• Develop compensation process and guidelines• Track ParityMERCER 9
  11. 11. Implementing The PhilosophySalary
  12. 12. Basis for salary: 3 P Model Person premium, typically based on • Competency assessment • Skill/ qualification/ credentials • Market worth (e.g. Demand-supply) PAY FOR PERSON Mixed on the basisPosition Pay typically of multiple factors like TOTALbased on PAY FOR COMPENSATION • Nature of industry/sector POSITION OF AN EMPLOYEE• Position evaluation • Work profile• Market pay level for position • Organizational philosophy PAY FOR PERFORMANCE Performance award, typically based on • Individual performance • Organization performanceMERCER 11
  13. 13. Defining Job Equivalence – Define Work Levels Prior to the Position Evaluation Post the Position Evaluation exercise exercise L L L-1 Band 1 L-2 L-1 L-1 L-1 L-1 L-1 L-1 L-2 L-2 L-2 L-2 L-2 L-2 L-2 L-2 L-2 Band 2 L-2 L-2 L-1 L-3 L-3 L-3 L-2 L-2 L-2 Band 3 it L-2 L-3 hib x EMERCER 12
  14. 14. Developing Pay Bands • Key Design Parameters • Number of Structures Range Spread • Number of Ranges • Range Spread • Mid Point Progression 4 • Parameters Impact • Range Overlap (extent 3 of overlap between Mid Point Progression values across ranges) • Headspace (number of 2 years it will take an employee to reach from range min to max)Range 1 Number of rangesMERCER 13
  15. 15. Developing compensation process and guidelines • Qualified with significant experience Pay Ranges assist in monitoring and Premium • Exceeding expected contribution comparing employee compensation • Hiring zone for hot skills and help guide the decision making in the following processes: Market Pay • Qualified with a fair bit of experience • Fully contributing to the role • Recruitment • Hiring zone for specialized skills Developing • Increment • Qualified but relatively inexperienced • Not yet fully contributing to the role • Hiring zone for regular new hires • Promotion Three Zones in a Pay RangeMERCER 14
  16. 16. Employee’s Pay PremiumTracking Parity (Compa-Ratio 1.15) Market Pay Developing Compa Compa Compa Compa Compa Performance Rating <80% 80-95% 96-105% 106-120% >121% Does Not Meet Expectations 0% 0% 0% 0% 0% Inconsistently meets Expectations 12% 10% 8% 6% 4% Consistently Meets Expectations 19% 17% 15% 13% 11% Often Exceeds Expectations 21% 19% 17% 15% 13% Consistently Exceeds Expectations 23% 21% 19% 17% 15%MERCER 15
  17. 17. Implementing The PhilosophyCareers
  18. 18. Why are Career Frameworks Important? • Employees value and look for career advancement over and above base pay* PAY CAREER • Pay and benefits are replicable; Career and Work-Life policies provide competitive advantage • In uncertain times companies need to look at more cost effective BENEFITS WORK-LIFE and sustainable ways to build the employee value proposition • Given the employability gap, career frameworks would facilitate identifying, developing and deploying in-house talent to bridge capability gapsMERCER 17 Source: Mercer’s What’s Working research
  19. 19. Mercer’s Point of ViewWhat are Career Frameworks? Role family career progression iv t rat Illus eCareer Frameworks Employees Organization Understand Capabilities Transparency opportunities visibility Control Career direction Best talent Velocity Right speed Fill talent pipelineMERCER 18
  20. 20. Implementing The PhilosophyBenefits & Work-Life Balance
  21. 21. Benefits – Work Life BalanceFocus: Medical costs, Employee Wellness, Employee Productivity Across the Asia Pacific Region, 35% of the 899 companies that participated in a the Mercer Marsh Benefits survey spent over 6% of their annual payroll on health benefits in 2011, with 10% of those spending in excess of 15%• According to the American Journal of Health Promotion’s in-depth analysis, employers with work site health promotion programs see on average:• a 27% reduction in sick leave absenteeism• 26% reduction in health costs, and• 32% decrease in workers’ compensation and disability claims.• But the most important finding has to do with all-around wellness ROI. For every dollar invested in wellness, employers saw an average savings of $5.81 due to improved employee health and reduced medical claims. Source: 20
  22. 22. Tracking Success of Your Rewards Design
  23. 23. Tracking the Success of your Rewards Program SAY DO What employees and employers How employees and employers say as measured through actually behave as measured through Management interviews Individual employee records of Recruiter interviews performance, retention, etc. Employee surveys Organization performance Focus groups Exit interview feedback Company policies Complete, verifiable understanding of the interplay between perceptions, behavior and retentionMERCER 22
  24. 24. About Us
  25. 25. Marsh & McLennan Companies Who We Are One of world’s elite business enterprises — the preeminent provider of professional services Who We Are Risk and Insurance Services One of world’s elite business enterprises — billion in revenue the • $10.6 • Marsh preeminent provider of professional services • Guy Carpenter • 140 year history • Clients in more than Consulting Services 100 countries • Mercer • Oliver Wyman • 51,000+ colleaguesMERCER 24
  26. 26. Marsh & McLennan Companies What We Do Provide advice and solutions in the areas of risk, strategy and human capitalMarsh Mercer• Services 87% of Fortune Global 500 • #1 health & benefits consultant/broker• Manage 3+ lines of coverage for 92% of • #1 investment consultant Fortune 100 • Leader in retirement, risk & finance consultingGuy Carpenter Oliver Wyman• #2 global reinsurance intermediary • #1 financial services strategy consultant• Fastest growing global reinsurance • Fastest growing strategy consultant intermediaryMERCER 25
  27. 27. Mercer Who We Are The global leader in human resource consulting, outsourcing and investment services Who We Are • $3.5 billion in revenue The global leader in human resource consulting, • 65-year history outsourcing and investment services • 8 lines of business • 27,000+ clients • Offices in over 40 countries • 20,000+ colleaguesMERCER 26
  28. 28. Mercer What We Do Help clients optimise the value of their human and financial resources What We Do Mercer’s Services Mercer’s Clients Help clients optimize the value of their US • 80% of the 500 largest Consult human and financialpublic companies resources • 70% of FTSE 100 companies Invest Design • 70% of CAC 40 companies • 65% of Nikkei 225 companies • 80% of clients <5000 employees Administer ImplementMERCER 27
  29. 29. Mercer How We Make a Difference Enhance the health, wealth and quality of the global workforce How We Make a Difference Enhance the health, wealth • 27,000+ Mercer clients and quality of the global workforce • 9 million+ benefit plan participants • 110 million+ employees of Mercer clientsMERCER 28
  30. 30. MercerImpact on the MarketplaceMERCER 29
  31. 31. The Mercer Advantage –Brand / Intellectual Capital Mercer Brand Prestige Intellectual Capital • World Economic Forum – Consulting Firm Rankings* Practising Talent Mobility for 2011 2010 Economic Growth study McKinsey & Company 1 1 • Mercer India Monitor Boston Consulting Group 2 2 Bain & Company 3 3 • AIMA Management Capability Booz & Company 4 4 Index Deloitte Consulting LLP 5 5 Mercer 6 8 • NASSCOM Mercer Inclusivity ------------------- Report Towers Watson 17 14 • CII Mercer Talent Survey Aon Consulting 32 35* vault 2011 rankings MERCER 30
  32. 32. Mercer in India Mercer Business Lines Retirement Information Health & Benefits Human Capital Benefits Product Solutions Consulting Consulting Product and Service OfferingsService Offerings Service Offerings Service Offerings Benefit DesignBoard Governance Plan Design Compensation Co- Financial Analysis &Broad Based Funding Sourcing Plan FundingRewards Accounting Compensation Risk CarrierExecutive Standards Surveys SelectionRemuneration Legal Compliance Benefits Surveys Benefits Broking*HR Transformation Vendor Corporate Communication &Leadership Management Benchmarking AdministrationDevelopment Mergers,Performance Employee Mobility Acquisitions andMeasurement Services RestructuringSales Effectiveness Mercer PayMonitor Multinational IssuesWorkforce Strategies Asia Monitor Communication &Employee Global Publications EducationEngagement •In collaboration with Marsh India MERCER 31
  33. 33. Mercer key clients in IndiaMERCER 32
  34. 34. The Mercer advantage1 Experience of working in large complex projects with multiple clients across sectors. Mercer provides support to 50% of the Fortune 100 companies and over 40% of the Fortune 500 companies.2 Experience of working in most industry verticals to deliver solutions suited to their context3 Mercer starts each project with the primary goal of understanding the unique challenges and priorities of the client4 Experienced team with ability to execute and manage assignments of such scale and complexity5 Mercer is strongly positioned in the areas of culture, job evaluation, leadership and rewards6 Mercer follows a consultative and collaborative approach to understand the changing priorities and complexities of client organizations and is flexible, nimble and open to new ideasMERCER 33
  35. 35. Our extensive experience: We have worked with industry leaders, start-ups and the government sector in diverse areasExperience inlarge complex assignmentsExperiencewith start-upassignmentsUnderstandingof thegovernmentsectorMERCER 34
  36. 36. Here is what our clients have to say about us…A few client testimonials "Mercer did a thorough research into the working of our organization, its mission, vision , objectives and existing structure, - Mr. Rajeev Ranjan before coming out with their recommendations. They have been Deputy National Director – Human very systematic and interactive in their approach, obtaining Resources, feedback from staff members across all levels. Their recommendations formed the basis for our new organization SOS Children’s Villages structure, PMS policy, recruitment & selection policy and compensation policy , among others”. - Mr. Rajiv Arora “ The project was managed exceptionally well and was completed within the stipulated timeframe. The Head – People Team, recommendations have been implemented within our organization successfully with adequate support from MercerVirgin Mobile India Pvt. Ltd. Consulting”. Mr. PV Ramana Murthy “I would like to place on record my appreciation for the quality and thorough work done by Mercer”. Head – Human Resources, Hindustan Coca Cola IndiaMERCER 35
  37. 37. Here is what our clients have to say about us…A few client testimonials “It has been an extremely enjoyable and learning experience working with Mercer Team on the assessment of our high potential employees. Dr. Sunil Kumar Singh They bring with them a complete dedication and a sound research experience at each stage of the work and none are given lesser Group GM – HRD importance. The result was amazing as the tool and was extremely Punj Lloyd contextualized and all assesses recognized this fact along with all other stakeholders. Overall, I personally find them never compromising with basic concepts”. - KRN Moorthy “Before our PMS re-design , we were targeting a laundry list of objectives. Consequently, we were losing focus on what we really Dy MD needed to do to achieve more growth and better performance. Mercer Wanbury Ltd. helped us in redesigning the PMS system. The project has been implemented successfully, and we would recommend them as a consulting partner in designing and implementing Human Capital SolutionsMERCER 36
  38. 38. Snapshot of some key service offerings
  39. 39. Actuarial valuations and retirement benefits consulting• Actuarial valuation services covering: • Mercer’s strength: – Gratuity – Qualified actuaries with rich experience across – Leave encashment related liabilities different client situations – Ex gratia plan – Strong experience with retirement benefit plans of – Voluntary retirement plan private and public sector organizations in India – Experience with defining financial and demographic – ESOP assumptions – Post retirement medical plans – Support for transition from previous actuary – Provided fun – Global actuarial support – Other long term employee benefits like long service awards• Retirement benefits consulting services – Review of retirement benefit schemes and re- Plan Design & Govt. approvals Support in Fund for trust fund engineering Manager selection Other Labour Law services – Retirement plan design – Government approvals on retirement benefits fund Actuarial trust set ups Valuation – PF registration & obtaining of exemption/relaxation – Analysis support for selection of fund managers for retirement benefits – Labor law support for retirement benefits MERCER 38
  40. 40. Compensation benchmarking and planning• Service offering includes: Position specific – Compensation and benefits benchmarking across 13 compensation data industry segments including Asset Management, IT/ITeS, Consumer, Pharma, Medical Equipment, Chemical, Hospitality, Oil & Gas etc – Customized survey options – Job specific benchmarks – Surveys and data for expatriates moving out of India and expatriates moving into India – Pay range development and compensation planning• Mercer’s strength Detailed benefits benchmarks – Ability to provide off the shelf reports from a database of 500 plus companies across multiple industry segments – Detailed compensation & benefits data available – Ability to provide online access to reports for unlimited generation of benchmarks – Customized survey options MERCER 39
  41. 41. Organization structuring and manpower estimation• Service offering includes: Sample Structuring – Organizational diagnostics to recommend structure Design Criteria Mercer’s Single Frame aligned to business context, objectives and strategy Expert Process – Structure support mechanism development (review forums, permanent/ temporary teams etc.) – Workload analysis and manpower requirement modeling – Implementation planning/ roadmap development to help organizations roll out proposed structures – Communication and change management support for effective deployment• Mercer’s strength – End-to-end value chain offering: from diagnosis to design to implementation support – Structured and robust methodology based on analysis of organizational data like processes, value chain etc. – Strong experience in organization structuring related Process Analysis to projects across diverse sectors like Automotive, Organization Structure FMCG, Manufacturing, Telecom, Hospitality etc MERCER 40
  42. 42. Responsibility mapping and workforce levelling• Service offering includes: Mercer’s 3-P Management Model – Responsibility identification and mapping within an organizations through a structured process and documentation Mercer’s RC document – Role evaluation using Mercer’s International Position Evaluation methodology (IPETM) – Identification of work levels/ bands based on natural progression of roles within the organization• Mercer’s strength Mercer’s IPE system – Structured and robust Role Clarification methodology based organizational business processes – Globally implemented proprietary International Position Evaluation System (Mercer IPETM) – More than 350+ licensed Mercer e-IPETM clients globally Banding Sample – Strong experience in India; conducted 6,000 evaluations in the last 5 years across more than 80 companies – Linkage to Mercer’s strong compensation database – Strong on ground support with trained, certified and experienced consultants MERCER 41
  43. 43. Performance management and rewards plan design Three Pronged Rewards Strategy• Service offering includes: – Rewards strategy and design Total Rewards Strategy Framework – Variable pay and short term incentive plan design – Performance management system aligned with reward programs• Mercer’s strengths – Experienced team of reward experts – Consistent methodologies and frameworks, Incentive Framework – Proprietary tools and global data resources, – Tailored solutions that strategically allocate total reward resources and link employee rewards to business performanceMERCER 42
  44. 44. Competency design and assessment Competency Themeing Process• Service offering includes: – Behavioral competency frameworks design – Technical competency frameworks design – Role profiling – Assessment centers – Creation of feedback reports and individual development plans• Mercer’s strength – Vast experience in designing behavioral and Sample Competency technical competencies across sectors Framework – Strong database in the area of behavioral competencies – Trained and experienced assessors – Conducted approximately 5,000 assessments since 2000 Sample Role Profiling MERCER 43
  45. 45. Career management frameworks Career Management: The Career Joint Venture• Service offering includes: – Career Progression framework: which includes: - Defining Career Streams - Developing integrated Career Paths/ Lattices - Defining Career Progression criteria – Succession Planning framework Career Paths/ Career Progression criteria• Mercer’s strength Lattices – Experienced consultants as a result of deep understanding of business imperatives and linkage with HR – Expertise to integrate career path architecture with other HR systems and processes – Consistent and well defined frameworks – Global data resources and experts Sample Career Maps MERCER 44
  46. 46. Leadership assessment, development and succession Leadership Development Process• Service offering includes: – Success profiles design – 360 degree assessment – Action learning process design and conduct – Coaching and mentoring workshops• Mercer’s strength – Experience of working with diverse clients from Action Learning Process educational institutions to multinational The Learning Journey organizations – Mercer experts are certified leadership trainers with acclaimed degrees from international universities like Harvard University MERCER 45
  47. 47. Executive remuneration Mercer’s four Quadrant Framework• Service offering includes: – Executive remuneration strategy to support business strategy, reward for performance, and attract / retain talent – Long term Incentive plan design and implementation – Equity strategy development, including grant guidelines and management of share reserves – Implications of tax, accounting, and other regulatory developments on executive remuneration programs – Board of director remuneration strategy and design Mercer’s Performance• Mercer’s strength Sensitivity Analysis (PSA) – In-depth knowledge of local market through annual tool compensation and other benchmarking surveys – Significant global and local experience in executive remuneration design and implementation – Analytical tools and data – Depth and breadth of regulatory and technical expertise – Capabilities/credentials of individual consultants and subject matter experts MERCER 46
  48. 48. HR effectiveness Mercer’s HR Design Process• Service offering includes: – Diagnosis of current HR systems and processes – Process redesign and improvement measures – HR policy design – Service delivery model design and implementation – Sourcing strategy development and implementation• Mercer’s strength – End-to-end value chain offering, from diagnosis to design to implementation support – Specific focus on the HR function; expertise and knowledge behind consulting HR Operations Scanner Samples – Global reach and resources Process Manual Sample – Quantitative approach; supported by best-of- breed methodologies MERCER 47
  49. 49. Employee engagement Mercer’s Six Factor Framework and drivers for engagement• Service offering includes: – Mercer’s employee engagement survey based on the ‘Cause-Effect’ model of engagement. (Mercer’s Proprietary Six Factor Framework based on 13 drivers of engagement) – Aimed at gaining a deeper understanding of employee perceptions on various aspects within an organization. Four phases of Mercer’s Employee Engagement Model• Mercer’s strength – End-to end solution provider: survey conduct- analysis- action plan design- implementation assistance – Experience of conducting engagement surveys with large scale as well as small scale organizations – Over 3,000 employees surveyed till date in India – Benchmarking survey results with Mercer’s What’s working database and Mercer BT survey MERCER 48
  50. 50. Registered Office: 70 / 39 B, 2nd Floor, KLJ Complex, Opp. Motinagar Police Station, Najafgarh Road, New Delhi - 110015, India