PPMA 2013 Annual Seminar - Segmenting Talent and Reward - Daniel Hibbert


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  • PPMA 2013 Annual Seminar - Segmenting Talent and Reward - Daniel Hibbert

    1. 1. Segmenting talent and rewardPPMA Conference - 2013Daniel Hibbert
    2. 2. MERCERAgendaPageWhy are new reward models needed? 2Segmentation of talent and reward 7Getting value from reward 10Four practical ideas for changes 15Questions and discussion 21
    3. 3. MERCERWhy are new reward models needed?3
    4. 4. MERCERCharacteristics of local government rewardStrengths• Equal pay compliance• A high degree oftransparency• Strong governance andprocessesWeaknesses• Too many job titles and grades• Negotiated, not designed• No link between pay andperformance• Little connection between payand talent management• Poor and inconsistentcommunication• These findings are based on PPMA Sponsored research at HertfordshireCounty Council and the Wigan Metropolitan Borough Council4
    5. 5. MERCERThe role of equal pay in reward management• Gender pay gaps in local government relate to:– Large numbers of women in lower paid jobs– In places limited numbers of women in senior roles• Equal pay compliance is a baseline: it should not be the sole objective of any reward system• Varying reward solely by job evaluation and tenure is:– Incompatible with developing a flexible, responsive and high-performing organisation, and– May be just as risky as alternative approaches to managing pay“It is a truism, better repeated than left unsaid, that not every difference in pay between men andwomen is proof of unlawful sex discrimination.”Lord Justice Mummery – Haq v the Audit Commission - December 20125
    6. 6. MERCER 6Pay is negotiated, not designedThis is typical local authority pay and grading structure:0%2%4%6%8%10%12%14%16%18%20%Grade1Grade2Grade3Grade4Grade5Grade6Grade7Grade8Grade9Grade10Grade11Grade12Grade13Grade14SeniorManager5SeniorManager4SeniorManager3SeniorManager2SeniorManager1Green Book Grades%PayRange050100150200250300NumberofNJC/HayPoints% Pay RangeNJC/Hay points
    7. 7. MERCERWhy “one size fits all” cannot work7• Local authorities increasingly have to deal with different:– Service delivery models– Types of jobs– Employee aspirations (including generational differences)– Employment markets and talent flows• New models are needed to ensure that local authorities get valuefor money for their expenditure on reward• These models will be different for different local authorities and fordifferent segments of the workforce within the same authority
    8. 8. MERCERSegmentation of talent and reward8
    9. 9. MERCERAlternative talent and reward modelsLoyaltymodelMarketmodelCareermodelDynamicmodelSpecialist skills need to bedeveloped internally and long-termloyalty is required by the employerSkills are readily available in theexternal market and long-termcareer opportunities with theemployer are limitedLong-term career opportunities areavailable for those who developwithin the career pathThe job is flexible/ broadly definedand the capabilities of theindividual job holder are critical tothe value created in the roleTalent characteristics9Incremental pay spine, with payback-loaded so higher levels of paybecome available with serviceA single rate of pay aligned with theexternal marketA pay system that fits with thecareer path to support thedevelopment of individual throughthe career pathPay reflects both the externalmarket and is varied by reference tothe capabilities of the individualReward approach
    10. 10. MERCERThe Market ModelContrasting the market model with a career modelThe Dynamic ModelMinimumsalaryDevelopingRangeHighPerforming -ConsolidatedHighPerforming -Non-Consolidated5055606570Basesalary£00010Additional salarypaid to consistentlystrong performersIndividuals who arestill developing intotheir role may bepaid in this rangePaid to exceptionalperformers, and notconsolidated intoBase SalaryMinimumsalaryDevelopingRange2122232425Basesalary£000The Rate forthe Job paidfor theexpectedstandard ofperformanceIndividuals whoare developingmay be paid in thislower rangeThe Rate for theJob paid for theexpectedstandard ofperformance
    11. 11. MERCERGetting value from reward11
    12. 12. MERCERElement of Employment ValuePropositionOverall market positioningLag Compete DifferentiatePay andbenefitsBase payProfit sharing andincentivesPensionOther benefitsWellbeing policiesand practicesDevelopment opportunitiesThe nature of work (workingenvironment, job satisfaction,etc.)PrivateSectorLocalGovernmentPrivateSectorPrivateSectorLocalGovernmentPrivateSectorPrivateSectorPrivateSectorPrivateSector12LocalGovernmentLocalGovernmentLocalGovernmentLocalGovernmentLocalGovernmentA Total Reward approach
    13. 13. MERCERWhy communication matters% of employeessatisfied with their rewardsSource: Mercer’s ‘What’s Working’ studyNational NormCommunicationrated goodHow satisfactionchanges if:Communicationrated poor61%71%33% 27%61%52%% of employeescommitted to theirorganisation• Mercer research shows a clear correlation between– Communication and employees’ satisfaction with reward, and– Communication and commitment13
    14. 14. MERCERPerformance must be part of that communicationBusiness performanceexpectationsPoor individualperformancePerformanceTime• A candid performance discussion must take place prior to the cross-overpoint where individual performance moving from “Strong” to “Poor”• Individual performance must keep pace with increasing and changingbusiness performance expectationsStrong individualperformance14
    15. 15. MERCERWhat is good practice in communication?1. Total Reward statements3. A “talent conversation”:– In which the line manager providesfeedback on both in-year performance andlong-term development, and– Can relate this to the reward system2. A reward system that is clearly linked to talentdevelopment and performance• This conversation cannot take place if the pay system has noconnection with talent management and performance• Without this reward systems cannot provide value for money• Communication is not just aboutTotal Reward statements andpolicies. There are three criticalcomponents:15
    16. 16. MERCERFour practical ideas for changes16
    17. 17. MERCER 17Four practical ideas for changes that can be made• We have identified four practical and easily implementable actionsthat can be taken• These are:1. Rationalising grading structures to enable efficiencies and de-layering;2. Making performance a part of reward communications3. Useing the Career Model for jobs in clear career paths4. Adopting the Dynamic Model of reward for Senior Manager pay• These changes are a first step towards moving to modern andmore flexible reward structures
    18. 18. MERCER 181. Rationalising grading structures• Existing gradescombined intobroader Levels• Current gradesbecome Pay Zoneswithin these Levelsto retain control ofcosts• A standardised JobCatalogue used tolimited the numberof different jobs10,00015,00020,00025,00030,00035,00040,00045,00050,000Level 1(Grades 1and2)Level 2(Grades 3to5)Level 3(Grades 6to8)Level 4(Grades 9to11)Level 5(Grades 12to16)£BaseSalaryZone 5Zone 4Zone 3Zone 2Zone 1Min
    19. 19. MERCER 192. Making performance a part of reward communications• Ensure thatperformance haspotential payconsequences forall employees• Rewardemployees at thetop of pay rangeswith non-consolidated payProgressingthrough payrangesAt the top ofthe payranges4 Outstanding1% Non-consolidated3Above requiredstandard2 Required standard1 Needs improvementUnsatisfactoryPerformance OutcomeNo additionalpaymentsNo incrementIncrement
    20. 20. MERCER 203. Aligning pay with career developmentNewly definedCapability LevelsSCPPoint£35 29,23636 30,01137 30,85138 31,75439 32,80040 33,66141 34,54942 35,43043 36,31344 37,206SeniorSocialWorker(Grade10)CurrentapproachAdvanced 21% Non-consolidated1% Non-consolidatedSocialWorker(Grade9)Advanced 1EstablishedDeveloping• Create linked grades toenable employees toprogress based on theirpersonal development• Movement between levelswithin linked grades shouldbe based on individualcompetence, assessedagainst role-specificcriteria• At higher levelsprogression should also bebased on business needCareerdevelopment
    21. 21. MERCER4. Adopting the Dynamic Model of reward for senior managers21SeniorManagerroles circa2005High jobcomplexity/flexibilityLow jobcomplexity/flexibilityPaydeterminedby job sizePaydeterminedby individualcapabilitySeniorManagerroles circa2015SeniorManagerroles 2013• Individual capabilityneeds to becomepart of paydetermination formore flexible andcomplex roles• This requires aDynamic Modelof talentmanagementand reward whichvaries pay fordifferent levels ofindividual capability
    22. 22. MERCERQuestions and discussion22
    23. 23. MERCERDaniel HibbertPrincipalMercerTower PlaceLondon, EC3R 5BU+44 (0) 20 7178 5520+44 (0) 7557 031371daniel.hibbert@mercer.comContact details© 2013 Mercer LLC. All rights reserved. The information and data obtained through the report are for information purposes only andare not intended nor implied to be a substitute for professional advice. In no event will Mercer be liable to you or to any third partyfor any decision made or action taken in reliance of the results obtained through the use of the information and/or data contained orprovided herein.