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This document discusses total reward systems and compensation. It provides an overview of compensation components including base salary, annual bonuses, and incentives. It discusses building sound cash compensation programs and focusing on cash incentives. It emphasizes that the most important reward component is spending quality time with family.
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- 1. Total Reward Systems Ideasfor Today and Tomorrow COLE2877@BELLSOUTH.NET
- 2. Vitae CLIFFORD F. COLE Heis the principal in the CLIFF COLE HR ALLIANCE. It is a team of experienced professionals dedicated to providing high quality HR solutions in compensation and organizational effectiveness through value-added outsourced human resource alternatives! He is is past Chairman of Food Distribution’s Human Resource Executive committee. He is a former Group Vice President of Human Resources for Sara Lee Corporation and Vice President of Human Resources for PYA/Monarch Food Service Distributors with over 29 years of experience with Sara Lee at the corporate & operating level in food, food distribution, consumer personal apparel, printing and manufacturing. He has in depth know how and experience in Compensation, Executive Coaching, Organization and Human Development, Succession Planning, Performance Management, Search, Recruitment and Selection, Employee & Labor Relations, Acquisition, Merger, and Start-Up Initiatives. He is a speaker at management seminars for the food industry, human resource & productivity conferences, along with college & university development programs. He also has served on the Clemson University Board of Continuing Education. He is a former Board Member of the South Carolina Special Olympics. The team services Fortune 100 companies along with small, medium and large businesses located globally and through out the United States. Representative clients both internally and externally are Frosty Acres, Centennial Foods, PYA/Monarch, Sara Lee, Sky Brothers, Sandler Foods, Coastal Foods, Schloss & Kahn, Capital Foods, Brooks Food Group, Earth Fare, Booth Fisheries, Idaho Frozen Foods, Bali, Hanes, Lexington & Bassett Furniture and Russell Corporation! CLIFF COLE HR ALLIANCE 124 Kingshead Road Travelers Rest, SC 29690 Phone 864.430.0630 Email cole2877@bellsouth.net Fax 864.836.4935 ALIGNING PEOPLE FOR RESULTS
- 3. The most importantReward component! Have you HUGGED your kid today? Why not? How are you spending your time? What could be more fun?
- 4. Where are wegoing today? Due North? COLE2877@BELLSOUTH.NET
- 5. Where are wereally going today? Overview of a Total Reward System Specifics on: Building a sound cash compensation program Focus on cash incentives
- 6. Why Do WeReward People?
- 7. There are notenough qualified kids!
- 8. What works inReward Systems? CERTAINLY NOT A PROGRAM OF THE DAY! X
- 9. Rewards for Performance Total Direct Compensation Benefits Health & Welfare Base salary Retirement - 401(k) Rewards & Recognition Time off Annual bonus Business knowledge Career development Organization climate Learning experiences Leadership Performance management Team spirit Training Tools to perform job High potential & succession Work/life balance Learning and Development Work Environment
- 10. Total Direct Compensation Focus on long-term strategic member value creation Needed Winning Incentive to focus on To short-term tactical Win team objectives Immediate, cash / Performance- non-cash, Based on-the-spot recognition Annual Bonus Rewards Market & competitive Recognition salary level Needed To Play Base Salary
- 11. FAB Work Environment “FIERCE”- is at the heart of our work environment and our success. Fighters: People who commit to a passion for excellence, integrity, trust and a winning culture . Innovation: Create our future. Empowerment: Provide freedom to take ownership, accountability and behave “FIERCELY” in all you do.
- 12. FAB Work Environment “FIERCE”- is at the heart of our work environment and our success. Relationships: Build relationships that improve the quality of people’s lives and their environment. Communications: Develop a fair and equitable culture that respects everyone’s ideas, opinions and experiences. Education: Take personal ownership and accountability for building know how, skills and ability.
- 13. Learning and Development People Teamwork + = Equipped with proper Working together Company tools to develop their to achieve common Success leadership potential business goals Assessment High Potential & Succession Planning Personal Development Educational Assistance Program
- 14. A bit ofRewards History The 40’s/50’s A hungry worker is the best worker Not much in the way of rewards The 60’s/70’s $ started to shake loose Benefits too Tricky Dick and Wage/Price controls The 80’s % increases made for bigger pieces of the pie $ and benefits kept rolling The 90’s to Tomorrow The $ slowed down Benefit cost shifting in vogue Benefits more costly
- 15. A word aboutRewards Philosophy! Total Direct Compensation Our focus for today’s session! Benefits Learning & Development Work Environment
- 16. What do youwant and need to be? Quality of Player Competitive Market To find, get and keep players who perform? Business competitors and cost issues? So where and how will you spend your money? What will you get for it?
- 17. Cash Compensation Components Total Cash = Base + Variable (Bonus and/or other cash incentives)
- 18. How do youbuild a sound program? Job Content Current Pay Practices Plan Design Compensation Strategy Salary Grades and Ranges Pricing Philosophy Base Salary Annual Incentive Plan Administration
- 19. How do youlook for example? XXX’S compensation appears to be: Base Salaries - Below Market Annual Incentives - Incentive opportunities calculated as a % of existing base salary are Below Market Total Annual Cash Compensation - Below Market Annual Incentive Payout is High vs. Actual Performance as a company
- 20. How do youlook for example?? Employees see hurdle rate Feel it is not attainable! Thus bonus opportunity does not: motivate employees does not help attract or retain
- 22. What do youdo? Create new pay policy Develop strategy for moving to it Develop strategy for rewarding your: Stars High Pots At risk
- 24. What do youdo administratively?? Pool for: Stars High Potentials At Risk Performance Increases Promotion/Demotion Treatment
- 25. KEEPING PLANS SIMPLE The incentive pool should: Be visible to the employee participants as it accumulates. Have a corporate performance component Be accumulated based on goals and measures which best reflect employee influence on results Include a personal performance improvement target for each employee
- 26. KEEPING PLANS SIMPLE The best plans: Are supported by a flow of relevant management information in time for corrective action. Also have a component allowing corporate leaders to spontaneously issue special recognition of employees in cash,
- 27. KEEPING PLANS SIMPLE A general rule exists: “when salaries are kept low, incentives are paid easily and early”. The higher the salary competitively, the higher the standards to become eligible for incentives.
- 28. Incentive Measures (MajorCategories) Sales Volume Profit Return On Equity or Sales or Investment Products Procurement Distribution
- 29. Incentive Measures (Sales) Sales Volume Profit $ and/or % - Gross - Net - Margin Accounts - Target - New Products – Mix – New – Push Volume Personal Team District Region Department Division Company Customers All - New - Existing
- 30. Incentive Measures (Distribution) Performance to Budget Total Operations Department Dollar performance Through-put performance inbound / outbound cases per hour or use tonnage per man hour cases unloaded by drivers per delivery hour average cases per outbound load Total Distribution Center Service Level On time departure On Time delivery Total Distribution Center Product Damage damage and Loss write off by warehousing damage and loss write off by transportation
- 31. Incentive Measures (Procurement) Performance to Budget Total Department Merchandising allowances Marketing revenue Gross Profit $ and/or % Inventory Turns Sales Growth Product cost
- 32. Measurement Units Percent of Quota Dollar Amount Number Achieved Points Subjective Evaluation Percent
- 33. Incentive Payouts forPerformance Threshold The beginning point, usually at least last years performance Competent Performer Compensation Amount paid for achieving planned results. Outstanding Performer Compensation Amount paid for significantly exceeding planned expectations.
- 34. Incentive Measures Weights Communicate to the Person how important each measure is relative to the total job. Sales Volume: 70% Product Mix: 20% Target Accounts: 10% Total: 100%
- 35. Incentive Linkages Internal External Sales Distribution Finance Procurement FAB Member
- 36. The most importantReward component! Have you HUGGED your kid today? Why not? How are you spending your time? What could be more fun?
Editor's Notes
- #5 Bob, I get everyone to stand up, close there eyes, point “due north”, keep there hands up, open their eyes, and look at everyone pointing in different directions. The point being without having data or plan to know where they are going, they will never get there.
- #7 In Its most simplest form Find Get Keep Players & get them to play Today’s Game, EVERY DAY !
- #10 Players today, Good players want and expect to get a holistic reward system. Russell Story –Change and move from Alex City to Atlanta. Had to completely change compensation approach!
- #12 I t’s more fun to play on a team that truly believes they can win, and does, than one that doesn’t believe and loses We need to be at the forefront of new ideas, generating competitive advantages; if we don’t someone else will decide our destiny. Em powered employees see themselves as owners of the Company who feel responsible for not only saying what’s wrong but taking action to fix it. FIERCELY is not a “program” or a set of materials to be distributed. It is the guide for the way we live at FAB. It is because of our core VALUES that we will be successful in achieving our business mission.
- #13 Taking time to really understand the needs and motivations of our fellow employees, our members, and suppliers. Taking time to really understand the needs and motivations of our fellow employees, our members, and suppliers. If we don’t have and respect the perspectives of individuals of a different race, nationality, gender, age, background, experience or style, we put our Company at a competitive disadvantage. Educated employees build personal and company security because they can play the game well FROSTY ACRES will work hard to create an environment that demonstrates our “FIERCE” values and reputation. Now more than ever, we want to use our values in a way that allows us to continually achieve extraordinary results. By making these values a part of our everyday culture, we create a foundation of strength and internal trust that will enable FAB to become a foodservice coop of choice. To our members, suppliers, and employees “FIERCE” clearly states what we stand for and is the compass for all of us on what is expected for all of us to do business.
- #15 A BIT OF INCENTIVE HISTORY The key purpose of incentive plans is to motivate , but over time there has been evolution and much discussion about exactly what is considered motivating. 17/18th century A hungry worker is the best worker Stimulate co-operativeness and increase productivity 19th century $ make people work harder Piece work motivates Best paid worker is the most productive 19/20th century Profit sharing—produce more at less cost Gain-sharing---50/50 split of gain 20th century Bonus for higher output Bonus for exceeding standard Bonus for value of contribution Competitive peer social forces motivate A lean organization creates more opportunity for key performers Now that we are at the beginning of the 21st century what lessons have we to pass on our heirs? “ We now know that for an incentive to work it needs to be easily understood, easily measured and developed with open co-operation between employee and his/her boss”.
- #16 What do you need to be? Competitive Market –employees – competitors? Geographic issues Where and how will you spend your money?
- #18 TOTAL CASH is the amount of total dollars you plan to pay a fully competent performer to achieve planned and expected sales objectives. The total cash plan would include base salary and incentive, variable, cash compensation. It is the amount of cash you have to pay to be competitive in your market, and/or the amount you can afford and budget. The Upside Incentive Opportunity is the amount of incentive compensation that will be paid to a top performer for performance that exceeds planned goals by a defined amount.
- #26 KEEPING PLANS SIMPLE The greatest strength, and the greatest weakness, in successful incentive plans relates to keeping things simple. To be both simple and successful the literature suggests: 1. The incentive pool should be visible to the employee participants as it accumulates. The earlier and greater the level of anticipation the more motivating for the employee and the earlier any negative business trends will be corrected by these employees as they adapt. 2. The incentive pool should be accumulated based on goals and measures which best reflect employee influence on the continuation of corporate health over the long term and meet expectations of the shareholders. Profit, margin, consistency in meeting plan month by month, on-time-delivery and client satisfaction are well documented as good measures everyone understands. 3. The incentive pool accumulation should be based on corporate performance. Corporate performance is the “must have” component in determining pay out from a basic incentive plan. Employees in the divisions must be conscious of their contribution to corporate performance and must be encouraged to work as a team to jointly focus on achieving corporate performance targets. 4. Access to incentive pay out from the incentive pool should be based, at the very least, on meeting team performance targets. Not meeting team targets limits or precludes payment from the incentive pool.
- #27 KEEPING PLANS SIMPLE The greatest strength, and the greatest weakness, in successful incentive plans relates to keeping things simple. To be both simple and successful the literature suggests: 5. The best plans also include a personal performance improvement target for each employee, such as: Employee X must improve personal skill in gathering and using competitive intelligence to support a planned 5% gain in division market share. 6. The best plans are based on management leadership and team member mutual trust, supported by a flow of relevant management information in time for corrective action. 7. There should be an assumption in the plan that goals, measures and funding formula will change and there should be a documented process for addressing change as the corporate plan unfolds, annually and forward. 8. Successful plans also have a component allowing corporate leaders to spontaneously issue special recognition of employees in cash, at the time when an exceptional individual effort, team performance or corporate contribution is identified. These awards are usually small, under $2500.00, and may be in the form of family trips or privileges. 9. A general rule exists: “when salaries are kept low, incentives are paid easily and early”. The higher the salary competitively, the higher the standards to become eligible for incentives.
- #28 KEEPING PLANS SIMPLE The greatest strength, and the greatest weakness, in successful incentive plans relates to keeping things simple. To be both simple and successful the literature suggests: 5. The best plans also include a personal performance improvement target for each employee, such as: Employee X must improve personal skill in gathering and using competitive intelligence to support a planned 5% gain in division market share. 6. The best plans are based on management leadership and team member mutual trust, supported by a flow of relevant management information in time for corrective action. 7. There should be an assumption in the plan that goals, measures and funding formula will change and there should be a documented process for addressing change as the corporate plan unfolds, annually and forward. 8. Successful plans also have a component allowing corporate leaders to spontaneously issue special recognition of employees in cash, at the time when an exceptional individual effort, team performance or corporate contribution is identified. These awards are usually small, under $2500.00, and may be in the form of family trips or privileges. 9. A general rule exists: “when salaries are kept low, incentives are paid easily and early”. The higher the salary competitively, the higher the standards to become eligible for incentives.