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- 1. BUS5033W Reward Management and TalentRetention Dr Anton F. SchlechterDr Anton F. Schlechter
- 2. Reward Management and TalentRetention Welcome Lecturer Course outline Course materials Lectures Assignments Assignment due-dates Course administration
- 3. Background to theCourse Compensating employees represents a critical human resource practice. Without sound compensation systems, companies cannot attract, motivate and retain the best-qualified employees. Compensation systems can promote a companies’ competitive advantage when properly (strategically) aligned with strategic goals.
- 4. Background to theCourse The aim of this course is to provide students with the required knowledge of the art of strategic compensation practice so that they, as strategic partners, may play a role in ensuring an organisations’ competitive advantage. One of the greatest challenges facing companies today is retaining top talent. The expense to an organisation of replacing an employee (including separation, replacement, training and lost performance costs) can be as much as that employee’s salary for a year. Turnover further erodes morale among those who stay and harms customer retention.
- 5. Course Learning Outcomes Aftercompletion of this module, students should have a good understanding of: what an equitable reward programme is; when reward discrimination is justified and how to design models for rewarding special groups; how to deal with inequitable rewards; retention strategies that organisations can make use of to retain top talent.
- 6. Course Content Week 1-3:Strategic Compensation Management Reward analyses as strategic interventions. Factors influencing reward management decisions. The strategic role of compensation in ensuring competitive advantage. Fixed and variable compensation – base pay, commission and share options. Legally required and discretionary employee benefits. Total annual reward.
- 7. Course Content Week 4:Fair Discrimination Practices in Reward Management Reward equity analyses Reward disparities and how to deal with them Rewarding special groups as fair discrimination practice BEE share schemes Week 5-9: Talent Retention: The psychological and motivational processes the leads up to job withdrawal and the decision to separate or not to separate. Integrating compensation with strategic talent management. Talent retention strategies for competitive advantage.
- 8. Introduction: Strategic Reward Management •Where and how does reward management and talent retention feature in strategic planning? • How does a human resource manager’s expertise in reward management and talent retention add value to strategic planning in the organisation? • The concept of total reward • The components of reward management • Factors affecting rewards
- 9. Historical Development Traditionalapproaches (60s – 70s) to managing pay Salary administration: emphasised need to attract, motivate and retain employees; focus on competitive attributes rather than strategic/tactical issues – reflected on how (rigidly) organisations were structured and managed. The advent of “reward management” – late 80s Emphasis on performance of all employees contributing to success of the organisation. Dynamic: more than just money. Non-financial rewards provide intrinsic and extrinsic motivation.
- 10. Historical Development … The “new pay” (Lawler, 1990) Need to understand the goals, values and culture of an organisation and challenges of a competitive global economy – people-based rather than job-based pay – paying people for the value they add to the organisation Going into the future… Contribution-related pay, broad-banding, job family structures and team based pay
- 11. Reward Trends From… Narrowly-defined jobs and job standards Inflexible job-evaluation systems sizing tasks, rewarding non-adaptive behaviour and empire- building, encouraging point-grabbing To … Broad, generic roles -emphasis on competence and continuous development Flexible job evaluation processes assessing the value added by people in roles, often within job families
- 12. Reward Trends (cont.)… From … Hierarchical and rigid pay structures - only way to get on, is to move up. Focus on next promotion. Emphasis on individual performance-related pay (PRP) Consolidation of rewards into base pay To … Broad-banded and job family pay structures emphasising flexibility, career development pay and continuous improvement. Focus on next challenge. More focus on team performance, team-based pay; contribution-related pay More emphasis on ‘at risk’ pay
- 13. Reward Management Definition:RM is concerned with the formulation and implementation of strategies and policies that aim to reward employees fairly, equitably and consistently in accordance with their value to the organisation (Armstrong, 2003). Strategic aims: to develop and implement the reward policies, processes and practices required to support the achievement of the organisation’s goals by helping to ensure that it has the skilled, competent, well motivated and committed people it needs.
- 14. Reward Strategy Whatthe organisation intends to do in the longer term to develop and implement reward policies, practices and processes that will further the achievement of business goals: Clearly defined goals and linked to business objectives Well designed pay and reward programmes, tailored to the organisation and its people, consistent and integrated with one another Need to be effective and supportive HR and reward processes in place
- 16. What are the keypay issues right now?
- 17. What are thekey pay issues right now? According to Zingheim & Schuster (2007): Individual vs. collective performance Absolute or relative performance Team based pay Short or long term performance Differentiating performance and paying for performance
- 18. The Top5 “wants” expressed by employees: Quality of work Opportunity for Training and Development Work/life balance Climate, Reputation and Values of the Organisation Leadership, Feedback and Recognition/Reward “Reward is no longer just about money.”
- 19. A New EmploymentContract: The Modern Organisation Employers want: Employees want: A “just in time” workforce • An entrepreneurial environment Creativity with speed • Strong skill development opportunities High productivity and morale • High visibility in the organisation To retain and motivate the best • Career mentoring - more and the brightest discretion in job development To pay only for performance • Flexibility and work/life balance Adaptability and change • Competitive compensation and benefits & recognition for their contribution A low promise of job security
- 20. From ‘Working to live’ To Workis a means to allow my self development and self actualisation Safety Needs Physical needs Social Needs Me-Needs Self- Develop ment (Maslow) Implications for employment – the new employment contract
- 21. High Incentive Low Short Long Duration Base salaryCulture, Values, Brand Bonus Leadership & Coaching Incentives Feedback & Development Benefits Career Recognition Can commitment & loyalty be bought?
- 22. TOTAL HOLISTIC REWARDS TOTAL HOLISTIC REWARDS Work Content Work Environment Direct Financial Indirect Financial Career • Base Salary •Incentives • Ownership/Shares • Cash recognition • Premium pay • Organisation commitment • Organisation support • Work environment • Organisation citizenship • Benefits • Non-cash recognition • Creative Rewards • Advancement • Personal Growth • Training • Employment security • Variety • Challenge • Autonomy • Meaningfulness • Feedback A Total Rewards Approach
- 23. Total Reward Model Pay basepay annual bonuses long-term incentives shares profit sharing Benefits pensions health care holidays perks flexibility Learning and development workplace learning training performance management career development/- progression Work environment organisation core values leadership employee voice work-life balance job/work design Individual Transactional (tangible) Communal Relational (intangible)
- 24. A Typical TotalReward Strategy Model
- 25. No interest in customers Customers astarget View customers as old friends Customers as potential relationship FocusonFinancialPerformance Focus on Customers Apathy for our people and our business What people want People as Commodity People as an Asset FocusonFinancialPerformance Focus on People HRStrategy MarketingStrategy Mirror employer and customer brands People as an Asset: Much more than financial rewards
- 26. Developing a RewardStrategy Business strategy • Satisfy needs and expectations of stakeholders • Provide added value to customers HR strategy • Obtain, develop and retain skilled, motivated and committed people to the organisation’s needs Reward strategy • Define what the organisation wants and is prepared to pay for • Encourage and support desired behaviour • Develop and maintain competitive pay policies which will attract and retain high quality people • Adopt a total rewards approach which includes a mix of rewards that best meets business and individual needs
- 27. Business StrategyHR Strategy Working Environment Org Values& Culture Management Style Employee Well-being Recognition & Creative Rewards Reward Environment Performance Management & People Development Performance Management Training & development Career Management Reward Strategy & Philosophy Shares Remuneration & Benefits Pension & Medical Other (Leave, etc.) IncentivesSalary FIXED VARIABLE A Total Reward Strategy
- 28. Reward Strategy &Philosophy Reward Strategy & Philosophy Performance Management Remuneration & Benefits Culture Development
- 29. Reward Strategy & Philosophy Performance Management Remuneration & Benefits Culture Development Business Strategy & Values HR Strategy Programmes & Practices Programmes & Practices Programmes & Practices RewardStrategy & Philosophy The reward strategy and philosophy forms the bridge/link between the business strategy and values. It facilitates and directs the desired reward behaviour, reward decisions, reward communication and reward programmes. Reward Strategy consist of: Strategic Reward Objectives Reward Philosophy (Reward Values/Principles)
- 30. What is aReward Philosophy? Provides the guiding principles and sets out the beliefs and values upon which: reward strategies, reward policies, reward procedures are based.
- 31. What is aReward Philosophy? The basic beliefs and values expressed in a reward philosophy relate to issues such as: The role reward plays in achieving performance goals Achieving fairness, equity and consistency The importance attached to team as distinct from individual rewards The extent to which employees should be regarded as partners, sharing in success The extent to which emphasis should be placed on achieving internal equity or external competitiveness How much flexibility, if any, should be allowed in administering the reward system
- 32. Creating an effective RewardEnvironment Working Environment Org Values & Culture Management Style Employee Well-being Recognition & Creative Rewards Reward Environment
- 33. Creating an effectiveReward Environment 1. Does the organisation’s reward and recognition policies and habits support the development of the desired culture? 2. Is their a balance between the formal and informal reward and recognition initiatives? 3. Is the working environment inspiring and does it make employees feel at home/special? 4. Is it a caring environment/culture and does the organisation carry the employee’s well-being at heart? 5. Is the management style promoting/facilitating development and growth? 6. Do people believe in the organisation and it’s leadership? 7. Does the organisation have formal recognition/award plans in place?
- 34. Creating an effectiveReward Environment 1. Recognition Plans: Celebrate objective and/or goal achievement Reinforce extraordinary performance, normally outside of job expectations. Recognise activities/ events/ milestones Peer-to-peer, managerial recognition 2. Award Schemes: Cash awards (Once off bonus payment, vouchers, car-hire, etc.) Non-cash awards (Development programmes, overseas tours, trophies, certificates, etc.) Spot awards Risk prevention awards
- 35. Creating an effectiveReward Environment Organisation taking care of personal needs (Dry cleaning, shopping, etc.) Grocery delivery service Creche facilities Hiring of Executive Cars for Employees (Ferrari’s, Porsche, Chauffeur-driven, etc.) Overseas tours Health, golf, country club membership Virtual offices Secure working environment Flexible working hours/output based performance contracts Rewarding/involving spouses/family members
- 36. Structuring of payaccording to function value Development of pay according to job fulfilment and role behaviour Development of pay according to personal performance and business result Performance / Result Competencies Positioning of pay structure in the market • Product Market Competition • Labour Market Competition Business strategy Creating of pay structure according to business requirements Variable pay JOB GRADE REMUNERATION 5 4 3 2 1 Reward Strategy Function Base pay Employee fringe benefits Market What drives the Remuneration & Benefits Strategy?
- 37. What drives theRemuneration & Benefits Strategy? Husain & Huysamen The top 5 factors that drive change to remuneration policy: retention of key staff, financial results, strategic thrust, surveys/benchmarking, and Internal advisers.
- 38. the top5 changes in order of extent of change were in: Fringe benefits policy Total package policy Merit pay/performance related pay policy Short term incentives policy Long term incentives policy In public sector / parastatals, the top 5 changes in order of extent of change were in: Job evaluation / broadbanding policy Short term incentives policy Competency based pay policy Market position policy Merit pay/performance related pay policy What drives the Remuneration & Benefits Strategy? Husain & Huysamen
- 39. The greatestpositive impact in the private sector in order of strength for the top 5 was in the following areas: Total package policy Merit/Performance related pay policy Retention strategy policy Short term incentives policy Competence base pay policy For the public sector / parastatals, the greatest positive impact in order of strength for the top 5 was in the following areas: Competency based pay policy Long term incentives policy International remuneration policy Total package policy Market position policy What drives the Remuneration & Benefits Strategy? Husain & Huysamen
- 40. Base Incentives Benefits Equity FIXED VARIABLE• Bonuses • Incentives •Commissions • Share Options • Share Purchase • Share Grant Baisc + “Add Ons” Or Cost-to- Company Approach 13th Cheque *Attracting and retaining key skills will require the “right mix”at the right levels and for various groups of people in the Organisation. *Attracting and retaining key skills will require the “right mix”at the right levels and for various groups of people in the Organisation. Total Remuneration & Benefit Mix *See Gerhart & Milkovich
- 41. Pay Reward MacroModel Board Compensation Committee (BCC) Line Managers Decides what the Overall Increase Budget is Grant Salary Increases to Individual Employees Job Evaluation Performance Management Salary Surveys and Market Anchors Salary Equity Model Actual vs. Target Salary Distribution Internal Equity Audit Checklist Employee Perception of Salary Fairness Tools Decisions Measure Role Players Guidance From HR
- 42. Benefits of totalreward approach Increased flexibility Recruitment and retention Reduced costs Heightened visibility in a tight labour market Enhanced profitability
- 43. Strategy and CompensationMix Strategies (Porter) Cost Leadership / Cost reduction Differentiation / Quality Improvement Innovation Class discussion In groups discuss the strategic role of compensation given each of the above organisational strategies.
- 44. Matching Strategy to OperatingStrategy Pay Strategy Dimension Business Unit Strategy Defenders Prospectors Risk Sharing (variable pay) Time Orientation Pay level (short run) Pay level (long run) Benefits Level Where Pay Decision Made Pay Unit of Analysis Low Short-term Above market Above market Above market Centralized Job High Long-term Below market Above market Below market Decentralized Skills
- 45. Remuneration strategy basedon the business life cycle Stage Base Pay Start-up Low Depends on resources Very high – key people Low Growth Increasing High Very high – wider group Increasing Maturity High High Decreasing High Decline Frozen / cut High potential / low payoff May be used to motivate Frozen / cut Renewal Depends on strategy Depends on strategy Depends on strategy Depends on strategy VARIABLE Short term Incentives Long term Incentives Indirect Rewards FIXED OTHER
Editor's Notes
- #3 Discuss the various points. Outline important dates in the course framework, as well as the way marks are allocated and computed for the course. Discuss the manner in which assessment is dealt with and answer any questions in this regard.