Compensation Design Tips to Attract and Motivate Employees · Compensation Design Tips to Attract...
Transcript of Compensation Design Tips to Attract and Motivate Employees · Compensation Design Tips to Attract...
Compensation Design Tips to Attract and
Motivate Employees
Presented By:
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mail: P.O. Box 509 Eau Claire, WI 54702-0509 • telephone: 866-352-9539 • fax: 715-833-3953email: [email protected] • website: www.lorman.com • seminar id: 400369
Sam Reeve, CCP, GRPPerformensation
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Compensation Design Tips to Attract and
Motivate Employees
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mail: P.O. Box 509 Eau Claire, WI 54702-0509 • telephone: 866-352-9539 • fax: 715-833-3953email: [email protected] • website: www.lorman.com • seminar id: 400369
Prepared By:Sam Reeve, CCP, GRPPerformensation
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Compensation Design Tips to Attract and Motivate Employees
©2017 Performensation
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Presenting
©2017 Performensation
Sam Reeve is a global certified compensation consultant (CCP, GRP) with 15 years of experience in Total Reward Strategies. He is an expert in broad‐based compensation and focuses his talents on enhancing performance through the effective use of incentive and recognition programs.
Prior to joining the firm, Sam has worked in the corporate compensation functions of notable firms such as BlackRock, McKesson and Automatic Data Processing (ADP).
Sam currently lives in Colorado and aside from his professional life, enjoys numerous outdoor activities with his 4 children and wife, Jessica.
Sam has a degree in Finance and Economics from California State University, Sacramento.
SAM REEVE, CCP, GRPExecutive Vice President
TF 1 877 803 9255 ext 702Office 1 415 625 3088Mobile 1 970 403 5775
[email protected]: SamReeveTwitter: @SamReeve3
Agenda
The Role of Pay
Fixed Pay Incentives
Variable Pay Incentives
Understanding Motivation
How to Design an Incentive Plan
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The Role of Pay
Life
Fixed Pay
Pay for Knowledge Skills and Abilities
Often not the best pay element to reward performance
Short Term Variable Pay
Pay for Short Term Performance (STI)
A period of a year or less
Long Term Variable Pay
Pay for Long Term Performance (LTI)
A period of more than a year
Woohoo!
Incentive Plans can be designed for Fixed, Short Term and Long Term Variable Pay
OR
Non‐Cash Rewards (Recognition)
Recognition
©2017 Performensation
Fixed Pay Incentives (aka Merit Pay)
Advantages Disadvantages
• Easier to Administer if no other incentive programs exist for participants
• Not a permanent driver of productivity
• Merit Pay can lead to entitlement behavior.
• Many regions suggest budgets that are too small to reward performance
• Base pay increases are a permanent, compounding cost to the company. It is difficult to reduce pay once it has been awarded.
3%
23%
3%
5%
7% 11%
7%4%
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Variable Pay Incentives
Advantages Disadvantages
• Can be very effective if administered correctly
• Awards may increase or decrease with performance and budget
When business results are good, the variable awards can be significant and when business is bad the awards can be smaller therefore reducing costs and improving the bottom line.
• Employees are motivated to re‐earn variable pay each cycle
• Performance must be measured and the plan administered
Many companies have a hard time doing this correctly and efficiently
• The variable pay plan will need to change over time with the business
©2017 Performensation
Understanding Motivation
Extrinsic Motivation
– Money, Prizes, Awards
– Best when linked to or communicated in tandem with intrinsic motivators
– Successful technique to focus behavior
The External Drivers and Results of Success
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Understanding Motivation
Intrinsic Motivation
– Prestige, Respect, Sense of Accomplishment, Culture, Emotion
– Foundational and long‐remembered
– Skill Improvement
– Talent and Effort Validation
– Recognition amongst peers, industry or company leaders
The Internal Desire to Succeed
©2017 Performensation
How to Design and Incentive Plan ‐ Approach
Discover what you truly need, thoughtfully design a solution, execute effectively with strong communication and modify as your business changes
Diagnose | Design | Execute | Adapt
©2017 Performensation
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How to Design and Incentive Plan ‐ Approach
Diagnose | Design | Execute | Adapt
Start Here
©2017 Performensation
How to Design and Incentive Plan ‐ Approach
Diagnose | Design | Execute | Adapt
©2017 Performensation
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How to Design and Incentive Plan ‐ Approach
Diagnose | Design | Execute | Adapt
©2017 Performensation
How to Design and Incentive Plan ‐ Approach
Diagnose | Design | Execute | Adapt
©2017 Performensation
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DIAGNOSISPHASE!
START WITH THE
©2017 Performensation
DIAGNOSE STEPS
STEP 1 Establish a Cross Functional Team
STEP 2 Reaffirm Rewards Philosophy
STEP 3 Determine Guiding Principles
STEP 4 Diagnose Internal / External Influences
STEP 5 Create a Compelling Value Proposition
STEP 6 Gain Approval and Executive Sponsorship
Identify objectives, issues and describe solutions
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DIAGNOSE
STEP 1: Establish a Cross Functional Team
Team to include:
Human Resources (HR Consultants, Training, Rewards)
Finance
Information Systems (HRIS, etc.)
Operations
STEP 2: Reaffirm Rewards Philosophy
How does your company view talent?
Are all roles critical to the companies strategic advantage?
STEP 3: Determine Pay for Performance Guiding Principles
What is the purpose of the incentive plan and what principles will keep us on track during the design and administration of the plan?
©2017 Performensation
DIAGNOSE
STEP 4: Diagnose Internal / External Influences
Internal Influences: Understand factors within your company that have an impact on your business
Goals(KPI’s) / Business Strategy / Mission / Vision
Talent Strategy (strategic or tactical resource)
Talent Infrastructure (management structure, policies and practices)
Systems and Support (information, transparency and manager support)
HR Service Delivery Model
Take Inventory of Talent Sentiment and Rewards Programs
12 Pillars: Cultural Fit & Readiness
Radar Graph: Program Gaps
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DIAGNOSE – Strategic Approach
12 Pillars Analysis
Interview key stakeholders in your business to provide a detailed evaluation of factors that impact your company's ability to attract, retain and reward talent.
Total Reward Radar Analysis
Provide and assessment of the Current State versus the Ideal State.
The analysis shows the potential of the company’s current talent programs.
Holes are discussed, prioritized and corrected.
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DIAGNOSE
12 Pillars Analysis
Foundation for Success
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DIAGNOSE
12 Pillars Analysis
Motivate
Foundation for Success
How we empowereach other to
succeed
©2017 Performensation
DIAGNOSE
12 Pillars Analysis
Motivate
Vis
ion
Foundation for Success
Lead
ersh
ip
Dire
ctio
n
Tea
mw
ork
©2017 Performensation
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DIAGNOSE
12 Pillars Analysis
Motivate
Vis
ion
Foundation for Success
Lead
ersh
ip
Dire
ctio
n
Tea
mw
ork
Engage
How we work together for
success
©2017 Performensation
DIAGNOSE
12 Pillars Analysis
EngageMotivate
Vis
ion
Foundation for Success
Lead
ersh
ip
Dire
ctio
n
Tea
mw
ork
Em
pow
erm
ent
Impa
ct
Per
sona
l Val
ue
Ful
fillm
ent
©2017 Performensation
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DIAGNOSE
12 Pillars Analysis
EngageMotivate
Vis
ion
Foundation for Success
Lead
ersh
ip
Dire
ctio
n
Tea
mw
ork
Em
pow
erm
ent
Impa
ct
Per
sona
l Val
ue
Ful
fillm
ent
Reward
How a company, customers and
coworkers share in success
©2017 Performensation
DIAGNOSE
12 Pillars Analysis
Engage RewardMotivate
Vis
ion
Foundation for Success
Lead
ersh
ip
Dire
ctio
n
Tea
mw
ork
Em
pow
erm
ent
Impa
ct
Per
sona
l Val
ue
Ful
fillm
ent
Cul
ture
Dev
elop
men
t
Rec
ogni
tion
Com
p/B
enef
its
©2017 Performensation
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DIAGNOSE
12 Pillars Analysis
Engage Reward
Empowered Workforce
Motivate
Vis
ion
Foundation for Success
Lead
ersh
ip
Dire
ctio
n
Tea
mw
ork
Em
pow
erm
ent
Impa
ct
Per
sona
l Val
ue
Ful
fillm
ent
Cul
ture
Dev
elop
men
t
Rec
ogni
tion
Com
p/B
enef
its
©2017 Performensation
DIAGNOSE
Total Reward Radar Analysis
Perform a GAP analysis to shows the strengths and weaknesses of the current reward programs
Ideal State
Opportunities
Strengths
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DIAGNOSE
STEP 4: Diagnose Internal / External Influences
External Influences: Understand factors outside the company that have an impact on your business
Regulatory / Political / Tax
Geographic / Cultural Practices
Economic / Labor
©2017 Performensation
DIAGNOSE
STEP 5: Create a Compelling Value Proposition
Will the costs of development and administration of the plan be offset by the savings it will deliver?
Know your data
internal costs
competitive pressures
Anticipate the concerns
Tie to the pay philosophy and company objectives
STEP 6: Gain Approval and Executive Sponsorship
An Executive sponsor is critical to the programs success
Ensures strategic alignment
Will remove potential roadblocks (resistance from others)
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The DESIGNPHASE!
©2017 Performensation
DESIGN STEPS
STEP 1 Define Plan Participants and Objectives
STEP 2 Identify Metrics
STEP 3 Select Incentive Plan Type
STEP 4 Define the Plan Mechanics and Administration
STEP 5 Model the Plan and Transition Phase
STEP 6 Design Execution and Communication Strategy
STEP 7 Gain Approval
Draft plan, test design and finalize details
©2017 Performensation
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DESIGN
STEP 1: Define Plan Participants and Objectives
What areas of the business would benefit from an incentive plan?
Determine the Objectives that need to be Aligned to Achieve Overall Business Results
Consider a holistic approach
Cascade goals
Be aware of other department dependency and conflict
©2017 Performensation
DESIGN
STEP 2: Identify Metrics
Identify Metrics/KPI’s that Correlate with Performance on Objectives
SMART Goal Framework
S pecific
Well Defined
Employees need to understand how to accomplish
M easurable
Goal can be measured accurately with progression
It is known when the goal is achieved
A greed Upon and Attainable
Participants agree the goal is attainable and important
Other stakeholders (departments, coworkers) understand goal and agree it is important
R ealistic
Recommended distribution for goal setting and attainment
T ime Based
Have a start and end date
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DESIGN
STEP 2: Identify Metrics (continued)
Identify Metrics/KPI’s that Correlate with Performance on Objectives
Common Metric Types:
Financial
Productivity
Quality
It is often best to use quality metrics in addition to productivity metrics
©2017 Performensation
STEP 3: Select Incentive Plan Type
Motivational (Carrot)
Incentives (STI and LTI)
Plan mechanics, metrics/goals and determined and communicated in advance
Payout varies with performance achieved
Bonuses
Reinforcement
Recognition
Cash (i.e.. Spot Bonus)
Non‐Cash
Sharing Plans
Profit Sharing
Gain Sharing
Goal Sharing
DESIGN
Compensation is Communication.
What are you trying to say?
Recognition
Life
Woohoo!
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DESIGN
STEP 4: Define the Plan Mechanics and Administration
Performance Period
Consider your business cycle, objectives and performance metrics
Timing of Award Payout
Increase Line of Sight with frequent payouts
Pay as Soon as Possible
©2017 Performensation
DESIGN
STEP 4: Define the Plan Mechanics and Administration (continued)Award Delivery
Cash
Stock
Non‐Cash Recognition ‐ Thank You (Public/Non‐Public)
Visit/email/Lunch from Senior Leader
News Article
Highlight at a Team Meeting
Trophy/Product
Perks Special Parking
Casual Dress Day
Massage/Yoga
Events (sports, golf, etc.)
Flex Time
Opportunity Training/Coaching
Coveted Role or Duties
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DESIGN
STEP 4: Define the Plan Mechanics and Administration (continued)
Determine Award Levels at Target
External Job Value ‐ Conduct a benchmark analysis
Internal Job Value ‐ Consider the job’s value to the company
Pay Mix – Amount of fixed versus variable pay of total compensation
©2017 Performensation
DESIGN
STEP 4: Define the Plan Mechanics and Administration (continued)
Determine Award Levels at Different Levels of Attainment
Trigger
Threshold Performance
Excellence / Maximum Award (cap)
Upside/Leverage – A multiple of target payout
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DESIGN
STEP 4: Define the Plan Mechanics and Administration (continued)
Determine Award Levels at Different Levels of Attainment
Position in the Range
% of EEs in Each Quartile 20% 45% 30% 5%
Performance Rating (PR)PR
Distribution1st
Quartile2nd
Quartile3rd
Quartile4th
Quartile
5 Outstanding 10% 8% ‐ 9% 7% ‐ 8% 6% ‐ 7% 5% ‐ 6%
4 Exceeded Expectations 25% 6% ‐ 7% 5% ‐ 6% 4% ‐ 5% 3% ‐ 4%
3 Expected Improvement 40% 4% ‐ 5% 3% ‐ 4% 2% ‐ 3% 0% ‐ 2%
2 Some Improvement 20% 2% ‐ 3% 0% ‐ 2% 0% 0%
1 No advancement in KSAs 5% 0% 0% 0% 0%
Example: Merit Program for a Company without a Variable Pay Program
EE Current Quartile
Salary PR Increase Percentage
New Salary
1 Q1 $55,000 5 9% $59,950
2 Q4 $70,000 3 2% $71,400
3 Q3 $75,000 4 4% $78,000
4 Q2 $100,000 1 0% $100,000
©2017 Performensation
DESIGN
STEP 4: Define the Plan Mechanics and Administration (continued)
Reward Program Administration
Human Assets
Technology, and
Related Costs
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DESIGN
STEP 5: Model the Plan and Transition PhaseDetermine Plan Costs
Minimize unexpected results by calculating costs given various levels of performance
Best Case
Expected Case
Worst Case
Include costs associated with a transition to the new plan,
training and communication
Use numbers from the company’s financial forecast
Obtain Employee Feedback
Supplement your financial modeling with qualitative feedback from a high performing focus group
©2017 Performensation
DESIGN
Compensation Design Tips to Attract and Motivate
Employees
©2017 Performensation
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DESIGN
STEP 6: Design Execution and Communication Strategy
Plan Execution Strategy
Immediate or Scheduled
Phased
Pilot Program
Training Strategy
Communication Strategy
Initial and Ongoing
Plan document
Consider channels preferred by demographic
STEP 7: Gain Approval
The EXECUTION
PHASE!©2017 Performensation
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EXECUTE STEPS
STEP 1 Build Administrative Infrastructure
STEP 2 Train Managers and Support Team
STEP 3Rollout Initial Messaging and Schedule Ongoing Communication Plan
STEP 4 Obtain Initial Feedback
Implement, communicate, motivate and manage
©2017 Performensation
Culture and Strategy
Systems
Plan Execution
EXECUTE
STEP 1: Build an Administrative Infrastructure
Talent
Ensure you have the right number of trained administrators to successfully run the program
Systems and Procedures
Integrate or enhance existing systems
Establish process flows and policy
Reporting
STEP 2: Train Managers and Support Team
Train the Trainer sessions for Senior Leaders of plan participants
Cascade training to lower level management
HR support and supplementary training to ensure message consistency
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EXECUTE
STEP 3: Rollout Initial Messaging and Schedule Ongoing Communication Plan
Initial Messaging
Coordinate messaging through multiple channels
Ongoing Communication
Establish annual budget
Create communication calendar
Integrate training and communication to new employee onboarding
STEP 4: Obtain Initial Feedback
Seek manager and employee feedback to gauge if additional efforts are needed
©2017 Performensation
The ADAPTPHASE!
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ADAPT STEPS
STEP 1Determine if Plan is in Alignment with Guiding Principles
STEP 2 Reevaluate Internal / External Influences
STEP 3Measure Employee Understanding and Plan Results
STEP 4 Propose Changes for the Next Cycle
Measure results, adjust to growing business needs
©2017 Performensation
ADAPT
STEP 1: Determine if Plan is in Alignment with Guiding Principles
Revisit guiding principles and determine if the plan is meeting expectations
STEP 2: Reevaluate Internal / External Influences
Determine if plan adjustments need to be made given internal/external influences
Expanding the plan to new participants
Changing objectives and metrics
Enhancing reporting and administration
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ADAPT
STEP 3: Measure Employee Understanding and Plan Results
A plan should be easily communicated and understood by employees
Verify effective onboarding training for new or transferred employees
STEP 4: Propose Changes for the Next Cycle
Business changes at an ever increasing rate
Performance cycles may become shorter
Seek to optimize the employee experience,
Maximize business objectives, and
Minimize administrative burden / costs
©2017 Performensation
QuickSummary
©2017 Performensation
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How to Design and Incentive Plan ‐ Approach
Discover what you truly need, thoughtfully design a solution, execute effectively with strong communication and modify as your business changes
Diagnose | Design | Execute | Adapt
©2017 Performensation
DIAGNOSE
12 Pillars Analysis
Interview key stakeholders in your business to provide a detailed evaluation of factors that impact your company's ability to attract, retain and reward talent.
Total Reward Radar Analysis
Provide and assessment of the Current State versus the Ideal State.
The analysis shows the potential of the company’s current talent programs.
Holes are discussed, prioritized and corrected.
©2017 Performensation
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DESIGN
Compensation is Communication.
What are you trying to say?
Recognition
Life
Woohoo!
©2017 Performensation
EXECUTE
Culture and Strategy
Systems
Plan Execution
Communication and Training
No plan will be successful without effective communication and training
Build and Administrative Infrastructure
Set up your programs to succeed by ensuring proper administration by trained professionals
©2017 Performensation
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ADAPT
Business changes at an increasing rate
Having the right plan at the right time is critical in ongoing business operations.
Evolve your programs to meet objectives
Seek to optimize the employee experience, Maximize business objectives, and Minimize administrative burden / costs
©2017 Performensation
Confidential ‐ DRAFT
How can Performensation Help?
©2015 Performensation 59
Performensation’s team of experts are ready to leverage our extensive knowledge to tailor solutions for your organization’s unique culture and strategy. We focus on designing integrated programs that are unique, effective and cost‐controlled. Well‐designed programs are the most effective drivers of communication between a company, employees, and shareholders.
Performensation is a proven leader in compensation design. We understand that a program will not work if it is cost prohibitive, or cannot be easily communicated or executed. The strength of our work is in understanding your goals and culture and our application of practical yet innovative solutions.
CONTACT US TODAY AND BECOME MORE SUCCESSFUL TOMORROWToll free 877‐803‐9255 | Direct 415‐625‐3406
email: [email protected] | web: www.performensation.com
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Performensation was founded in 2006 in response to the demand for more strategic and effective compensation programs.
Each of our projects incorporates four key elements. Each component must be carefully crafted to your unique goals and culture.
Vision: We understand where you are headed and have the skills to get you there. We are respected throughout the industry for our forward‐thinking perspective and our ability to execute on it.
Foundation: Long‐term solutions are based on evidence, not built on gimmicks or fads. They meet your current needs and allow for adjustments to organizational and market conditions. Your program’s foundation must reflect your company and the goals it is designed to support.
Design: A great program combines creativity with practicality. We utilize our broad and deep understanding of rules, regulations, processes and providers to ensure your program delivers high‐performance results. Our designs are easy to understand, compliant and effective.
Communication: Participants only value what they understand. Communication must be built in to every step of the process. We ensure that all program elements are relevant and make sense to your targeted audience.
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Notes