Role and use of grading in Reward - presentation for 5th Annual Global Compensation & Benefits event - London September 19/20

1. Grading in contextA Story on Grapes, Horses and Veils Ralph Leyssens Reward Director Ideal Standard International

2. INTRO

3. Grading System to rank roles WHAT “Objective” way of comparing roles across the organisation using criteria based on (internal) values and relativities that are accepted and recognised by all parties involved. AIM As a starting-point and platform for: - Reward Framework - Career Planning - Performance Management - Market data - ... USE Company-specific? Administrative Ease Underpin other HR programs Acceptation / buy-in Time- and Cost Efficiency Fit-for-purpose … NEEDS

4. A career in pictures

5. A corporate Smurf role is not a corporate role

6. 20 years in HR/Reward and I believe: There will always be a need for some sort/type of grading or leveling Selecting / developing the appropriate “method” has never been easy and if anything is getting more difficult The need for perceived and demonstrable objectivity will increase with “maturing” of workforce

7. “Philosophy” Grapes, Horses & Veils

8. GRAPES … of Labor

9. Social Inequality Aversion

10. INTRINSIC INDIRECT DIRECT Job Content Impact on business Level of responsibility Meaningful work Feedback Personal Needs Development Career opportunities Security Pride Relationships Quality of life Environment Leadership Management style Working conditions Recognition Culture Status Compensation Base salary Incentives short term long term Equity ownership Benefits Traditional awards Non-traditional awards Support programmes EXTRINSIC Why do people work for an Organisation?

12. CONCLUSION Human nature in general and Social Inequality Aversion in particular dictate the need for an objective and “communicatable” method for making decisions on distribution of cucumbers and grapes.

13. HORSES … for Courses

14. Jockeys for courses?

15. Horses for courses

16. Philosophical/cultural courses

17. Hierarchicalcourses 2008 Walmart Board of Directors

18. Corporate Lifecycle courses Rejuvenation Maturity Shake out Growth Start-up

19. Characteristics of Each Stage Start-up Growth Few systems / no policies Entrepreneurial Cash is short / shares Return on Investment - strong focus Creating Vision Highly Optimistic Fire Fighting Communication Issues Sales Emphasis Diversification / International Under-staffed administration Demands on mgmt. / professional mgrs Service delivery issues Focus on staff retention / career opport. Systems and skills Maturity Shake out Focus oncore capabilities Profit Oriented -’cash cow’ Cost focus (cut, cut, cut) Innovation Communications Structural Change Out-placement, out-sourcing, alliances innovation is critical performance focus cultural change / transformation Rejuvenation Radical ‘step’ change i.o. incremental Cultural issues Transformation leadership Vision, mission, purpose People practice review

20. CONCLUSION(S) There is no one-size-fits-all as the most appropriate method depends on the why, where, what, how, when… of the organization. “Organizations” are differentiated and subject to change so methods (and the way they’re applied) should be flexible and capable of serving different needs.

21. VEIL … of Ignorance

22. Veil of Ignorance In theoretical economics (e.g. Vickrey 1947; Harsanyi 1955; Cremer and Pestieau 1998), political science (e.g. Frohlich and Oppenheimer 1992) and in moral philosophy. Choosing between societies without knowing where you will be placed or what characteristics you will have in each society, to reflect goodness or fairness of societies. Only then can one truly consider the morality of an issue. Introduced by John Harsanyi, later appropriated by John Rawls in “A Theory of Justice”

23. Veil in Grading: Objectivity Role not the person Consistent application of the “method” Procedures: agreeing/explaining the process, method and information used, rather than the outcome (grade) Perceived and demonstrable Smoke-filled rooms or discretionary decisions are not always acceptable

24. CONCLUSION The best way of improving credibility and acceptance of the outcome is ensuring the method and its application is objectively applied and maintained.

25. And so…

26. Clarify Roles / Establish Relative Size Establish Market Value for Each Role Recognise Individual Contribution Grading has a place in a Simple Salary Management Model

27. Courses & Jockeys determine which Horse The Race Purpose The Course Compensation environment US HQ vs Local company Engineering vs M&S Unionized? The Jockey Need for guidance Quality of management

28. Types of horses Judgement Ranking Levelling Market Pricing Factor Comparison Point Factor Few Bands Broad “Scientific” Many Grades Detailed Generic Company-Specific Off-the-shelf Tailor-made

29. Similar horses… Although the methodologies differ, most systems use similar criteria for weighing Q&D comparison between Towers Wyatt, Mercer & Hay:

30. Grapes & Veils Social Inequality Aversion puts emphasis on communication What to communicate Grading Structure Grading Method Grades of Roles Consequences - Reward management philosophy / programs Careful for unintended consequences

31. The New World

32. Are jobs dead…? AWAY FROM TOWARDS Hierarchical approach Single career track Constrictive structures Flexibility Self management Alternative career paths Skill development Alignment of people and processes HR 15 March 2001 Hierarchical approach Single career track One size fits all Emphasis on status and tenure Short term tactical reactions A strategic approach Alignment of corporate and cultural objectives Focus on performance Greater flexibility Self management Alternative career paths Skill development REWARD

33. Example Career Paths(Benin & Associates)

34. Generations and The Corporate Lattice From Ladder to Lattice From Linear to Varied paths The Corporate Lattice Cathleen Benko / Molly Anderson

35. The Corporate Lattice Cathleen Benko / Molly Anderson

36. Ideal Standard International

37. An (over-)simplified model…

38. Is it time for another “consideration”? YES, some employee expectations change (career, work-life…) YES, some company structures and ways-of-working change (globalization, projects…) NO, not everything has changed for everyone Need for recognition, clear accountabilities, responsibilities… Need for a different, yet integrated way of dealing with different “types” of employees, allowing management of and clarity for both “Traditional” and “Individual Growth” type roles

39. ?