Why is he worth £14 million per year?
Photo by Jon Large
I am
Ian Davidson B.Sc. MBA
FCIPD MCIM
Reward Specialist
More than twenty years in
reward management – 7 years
as Head of ...
We are going to talk about
What is reward in relation to employment?
Thinking about terminology
The labour market
PracticeFrameworksThink
What is reward?
Why is it important?
• Key to successful execution of business strategy
• Key to competitive advantage
• Key to an engaged...
Philosophy of reward vs. compensation
Reward for contribution
• More positive
Compensation for time
• Less positive
What does success in reward
Look like?
A word about risk
0
10
20
30
40
50
60
70
80
90
Lack of understanding by senior
management of the reward process
Issues wit...
Is high pay £50,000 pa
Or, £500,000pa?
In the beginning was
supply and demand
The labour market
What is supply and demand?
In microeconomics, supply and demand is an economic model of price
determination in a market. I...
4 Basic laws of supply and demand
The four basic laws of supply and demand
are:[1]
If demand increases and supply remains
...
Perfect and imperfect markets
Labour markets are very imperfect!
Who are the market players?
Supply and demand in each segment and sub-segment are quite different
Segmentation
Permanent & non permanent
Skilled & uns...
Geographic
Travel to work
• In walking
distance
• Global
commuter
The flexible firm
Contract part-
time
Contract full
time
Core permanent
part time
Core
Permanent
Full time
Zero
hours
Agen...
Case study – Investment banking
Sectors
Desks
A generic
title
Trader
Exotic
derivatives
Soft
commodity
derivatives
Credit
...
Sources of supply
Unemployed
University/School leavers
Job movers
Immigrants
Armed forces leavers
Returners to the labour ...
Reward strategy follows
HR strategy which follows
Business strategy
• Reward strategy follows what the
business wants to achieve
• So, reward strategy is shaped
around the business strategy
...
Motor car manufacture – competes on IT Company i.e. Microsoft
Product Innovation
Creativity
Integration with other softwar...
Motor car manufacturer IT company
Rewarding creativity and innovation
Reward for high quality output
Reward for individual...
• Total Reward Management
• Quantitative Methods
• Job Analysis, Documentation and Evaluation
• Base Pay Administration an...
Lies, dammed lies and statistics
Challenge of
Big data
Job
Analysis, Documen
tation and
Evaluation
Reward training 1
Reward training 1
Reward training 1
Reward training 1
Reward training 1
Reward training 1
Reward training 1
Reward training 1
Reward training 1
Reward training 1
Reward training 1
Reward training 1
Reward training 1
Reward training 1
Reward training 1
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Reward training 1

  1. 1. Why is he worth £14 million per year? Photo by Jon Large
  2. 2. I am Ian Davidson B.Sc. MBA FCIPD MCIM Reward Specialist More than twenty years in reward management – 7 years as Head of Reward at the investment banking arm of Commerzbank in London. I write an influential reward blog at http://iandavidson.me And a popular reward podcast at www.idavidson.podbean.com Introduction
  3. 3. We are going to talk about What is reward in relation to employment? Thinking about terminology The labour market
  4. 4. PracticeFrameworksThink
  5. 5. What is reward?
  6. 6. Why is it important? • Key to successful execution of business strategy • Key to competitive advantage • Key to an engaged workforce • Key to cost control
  7. 7. Philosophy of reward vs. compensation Reward for contribution • More positive Compensation for time • Less positive
  8. 8. What does success in reward Look like?
  9. 9. A word about risk 0 10 20 30 40 50 60 70 80 90 Lack of understanding by senior management of the reward process Issues with Regulators over reward Levels of base salary insufficient to recruit Levels of base salary insufficient to retain That X maintains a non-discriminatory reward system Employees do not understand reward offering Loss of reward knowledge Incorrect tax payments Incorrect statutory deductions from pay US benefit structure inappropriate C&B MIS not accurate Communications with employees inaccurate or inappropriate Incorrect payment to employees via payroll Insufficient consideration of global market differences in reward Inappropriate (expensive, non-tax efficient) Pension provision Poor relationship with Compensation Committee Mis match between reward for employees vs. shareholders Reward offering not competitive globally Employee share plans not compliant Insufficient C&B vendor management leading to poor service/expense/duplication Individual executive reward packages not appropriate International assignments not compliant and appropriate Salary benchmarking data not appropriate Accuracy of financial data for C&B modelling and outputs Risk Map Probability (1-10) Impact (1-10) Risk correlation multiplier Risk Score
  10. 10. Is high pay £50,000 pa Or, £500,000pa?
  11. 11. In the beginning was supply and demand The labour market
  12. 12. What is supply and demand? In microeconomics, supply and demand is an economic model of price determination in a market. It concludes that in a competitive market, the unit price for a particular good will vary until it settles at a point where the quantity demanded by consumers (at current price) will equal the quantity supplied by producers (at current price), resulting in an economic equilibrium for price and quantity.
  13. 13. 4 Basic laws of supply and demand The four basic laws of supply and demand are:[1] If demand increases and supply remains unchanged, a shortage occurs, leading to a higher equilibrium price. If demand decreases and supply remains unchanged, a surplus occurs, leading to a lower equilibrium price. If demand remains unchanged and supply increases, a surplus occurs, leading to a lower equilibrium price. If demand remains unchanged and supply decreases, a shortage occurs, leading to a higher equilibrium price
  14. 14. Perfect and imperfect markets Labour markets are very imperfect!
  15. 15. Who are the market players?
  16. 16. Supply and demand in each segment and sub-segment are quite different Segmentation Permanent & non permanent Skilled & unskilled Professional and non- professional North & South East Executive & non- executive Qualified & non qualified
  17. 17. Geographic Travel to work • In walking distance • Global commuter
  18. 18. The flexible firm Contract part- time Contract full time Core permanent part time Core Permanent Full time Zero hours Agency staff Casual staffOutsourced services
  19. 19. Case study – Investment banking Sectors Desks A generic title Trader Exotic derivatives Soft commodity derivatives Credit derivative swaps Emerging market equities Russian equity traders Each of these segments has its own supply and demand characteristics
  20. 20. Sources of supply Unemployed University/School leavers Job movers Immigrants Armed forces leavers Returners to the labour market (maternity etc)
  21. 21. Reward strategy follows HR strategy which follows Business strategy
  22. 22. • Reward strategy follows what the business wants to achieve • So, reward strategy is shaped around the business strategy • Careful thought about what the business wants to achieve with its human resources What it is
  23. 23. Motor car manufacture – competes on IT Company i.e. Microsoft Product Innovation Creativity Integration with other software/hardware Error free coding Time to market Strategic time horizons – short 6 months to a year Quality of build Price of car Features of car Time to market Strategic time horizons – long, three to four years (although reducing) Different business strategies
  24. 24. Motor car manufacturer IT company Rewarding creativity and innovation Reward for high quality output Reward for individuals and teams Reward for collaboration Share in longer term business profitability Reward quality work Reward cost reduction Hourly paid to work standards Breakdown of tasks in to small components (this is changing) Individual and team pay rewarding immediate effort Different Reward strategies Growing similarities between strategy of motor car manufacture and IT company; yet the pay structures are still quite different –WHY?
  25. 25. • Total Reward Management • Quantitative Methods • Job Analysis, Documentation and Evaluation • Base Pay Administration and Pay for Performance • Variable Pay – Improving Performance with Variable Pay • International Remuneration – An Overview of Global Rewards • Strategic Communication in Total Rewards • Market Pricing – Conducting a Competitive Pay Analysis A potential agenda
  26. 26. Lies, dammed lies and statistics Challenge of Big data
  27. 27. Job Analysis, Documen tation and Evaluation

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