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Re-engineering Compensation and Rewards for ambition driven employees
Shounak Deshmukh3rd December 2011
Advent of trade & barter system……Age old way to transact
Trade : At a glance
- 3000 BC: Barter system prevails
- 1800 BC : standardized weights & measures ; beginning
of long distance trade; extant records of loan made by
priests to merchants found in Babylon
- 600 BC: beginning of coinage
- 200 BC - AD 200 : Mercantile activity flourishes, trade
via silk route and sea; guilds play a major role
- 1100 : Intercontinental trade via Egypt and red-sea
became prominent
- 1500 : Sea-borne trade routes to Europe open up
- 1550 : Sher shah’s copper and silver currency and
Akbar’s standard weights and measures boost
commerce
- 1565 : London Royal Exchange commenced
- 1600 – 1800 : Tussle for control of Indian trade between
European powers, British emerge supreme
- 1700 – 1800 : General bank of India, presidency banks,
bank of Bengal formed
- 1950 – 2000 (early) : Agriculture exports remained
mainstay
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A look at what was happening to the Indian Economy
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1770 : Crop failure, ad-hoc revenue
policies of EIC lead to disastrous
famine in Bengal, Bihar and Orissa
1825 : Indian opium used by
British to pay for Chinese
products (silk & tea)
1855 : The first Jute mill set up
in Bengal
1931 : Census, 37.8%- landless laborers, 24.3% -
tenants at will, 9% - small farmers, 25%
- middle farmers, 3% - Zamindars
1896-1900 : Recurrent famines, food grain production declines,
commercial crops increase
1854-55 : First cotton & Jute
mills established 1903 : First Five
star hotel “Taj Mahal” opened
1907 : Tata Iron and steel co.
founded 1918 : Trade union
movement begins
1936-39 : TU’s and strikes
increase
1991 : “Param” India’s 1st
supercomputer built by C-DAC
New age Economy, moving from “Wages to Total Rewards”
Old Economy New Economy
Wages/Salaries Compensation Rewards Total Rewards
Myopic perspective Long Term view
Fairness/Amelioration Competitive Edge
Personnel manager Business leaders
Narrowly-defined jobs and job standards
Broad, generic roles -emphasis on competence and continuous development
Hierarchical and rigid pay structures - only way to get on, is to move up. Focus on next promotion
Broad-banded and job family pay structures emphasising flexibility, career development pay and continuous improvement
Consolidation of rewards into base pay More emphasis on ‘at risk’ pay
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Reward strategy a part of business strategy
Business ResultsBusiness Results
Business StrategyBusiness Strategy
People RequirementsPeople Requirements
HR StrategyHR Strategy
Employee NeedsEmployee Needs
HR Programs
Organizing (the right jobs)
Performing(the right outcomes)
Developing(the right skills)
Rewarding(the right incentives)
Staffing (the right people)
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Changing workforce leads to changing needs
Dimensions Traditionalists Baby-boomers Gen X Gen Y
Age 55 to 65 45 to 55 30 to 45 20 to 30
Roles • Nr Retirement •Sr ‘Partners’•Support Staff
•Sr Management roles •Provide thought leadership
• Mid-management roles•Diversity of thought
• New entrants to the workforce• Fastest growing segment
Traits •Hard Working•Loyal•Submissive,•Tech Challenged
•Work-centric•Independent•Goal oriented•Competitive
•Individualistic•Adept at tech•Emergence of the women workforce•Hands-off style•Dislike micro-management
•Ambitious and confident•Tech Savvy•Family centric•Team orientation•Need attention•Not afraid to question authority
Wants •Traditional Morals•Security needs•Consistent rewards
•Position and Prestige Needs•Perks defining hierarchy
•‘Work hard : play hard mentality’• Matters of life style are important,•‘Fast track’
•Fast track has lost value• Flexibility is important•Technology as a game changer
The motivations, aspirations and expectations of the Gen Y ers will be significantly different than ever before!!
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India Story – More about India’s Gen Y ers
Source:Generation Y and the Workplace Annual Report 2010
1.In India they make-up more than half of the working population
2.Not all employment ready, hence talent in short supply
3.Ambitious, optimistic, have a clear sense of where they are headed
4.Entrepreneurial mind-set, business savvy, technologically capable and connected
5.Highly competitive, seeking higher education,
6.Plenty of opportunities therefore they are job-hopping
7.Expect challenging work assignments, accelerated career growth, socially responsible work place, flexi-work and freedom, innovation in their jobs
8.Willing to work in shifts to support global operations
9.Opportunities to learn, Quality of Life, Compensation are the top three reasons for “choosing a Company”
10.An office setting in the urban area is most sought after – ease of access, transportation are crucial needs.
11.Five star on-site services – reception, catering, medical, gymnasium are a big draw
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Source : Dr Ichak Adizes book, Corporate Lifecycles
Reward Management – the more inclusive approach
Rewards
Extrinsic
Base Salary PerquisitesIncentives
Intrinsic
Benefits
The reward linked to the
TASK
The reward linked to the POWER the
job may hold
The reward that comes from knowing that the job is part
of a BROADER MISSION
While all 7 components are present in everyone’s perception of their job, the intrinsic elements are easily overlooked by companies as part of a reward system.
The true reasons why an employee stays or quits are often hidden in the intrinsic elements.
Knowing the balance of these components, especially in case of Gen Y ers, is crucial to developing a reward system that goes beyond the purely pecuniary, and, at the same time, engage and retain the talent needed.
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Changing Paradigm
It is well documented that the new workforce generations place high value on quality time, family and freedom. Traditional incentives such as titles, raises and corner offices, while still important, are somewhat less important than the motivation of “relationships” and “experiences”.
Customized reward packages Personalized reward packages
Linked to company and individual performance
Linked to team performance
Low variability based on performance High variability based on performance
Service / Level / Effort oriented Outcome / Value oriented
Fixed costs Variable costs
Base compensation below market median
Base compensation above market median
Incentive compensation below market median
Incentive compensation above market median
Benefits below market median Benefits above market median
Primarily Pecuniary More Inclusive
Defined Schedule More immediate
Periodic evaluation and feedback Continuous evaluation and feedback
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Communicating Rewards
Source: Aon Consulting sponsored round table Conference Board Event New York City 2009
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Rewarding Generation Y - Trends
Lesson Number 1 :
Today, the new reward is balance. Reward Gen Y employees by giving what they want - FLEXIBILITY.
• A junior associate who does a stellar job on a client project could be rewarded with an invitation to attend a dinner with that client. That "reward" may have been well-received by all earlier generations.
• But not so with Gen Y. Gen Y is a generation of employees who value their personal time. Being "asked" to attend a work-related event in addition to their normal work duties is not a reward. Flexi time, paid holiday is the real bonus
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Rewarding Generation Y - Trends
Lesson Number 2 :
Rewards will have to be FREQUENT – else risk loosing the employee because they don’t “feel appreciated”
• For many leading employers, “year-end” is the time to reflect and reward employees for their hard work and dedication throughout the year
• However in the new world how recurring is the reward is as important as what the reward is – Online Gift Cards as an incentive for Gen Y is catching-on. That they can be delivered and redeemed all the time are attractive options
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Rewarding Generation Y - Trends
Lesson Number 3 :
The old paradigm of ‘pay your dues, work hard, you will be rewarded’ is fast changing. Reward me EARLIER - and I will work hard
•Question : ‘If you had seen your parents right-sized and down-sized, even when they dedicated their life to the corporation, would you be prepared to make the same sacrifices for the same promises?
•Long Service Awards / Loyalty, which many organizations have used successfully has clearly limited value.
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Rewarding Generation Y - Trends
Lesson Number 4 :
More value on whether or not the job is ACCOMPLISHED than on how long or the amount of effort it takes
• A strong desire to work on their own terms• Generation Y employees typically focus more on actually accomplishing the task as opposed to "how" the task is to be accomplished• Rewarding ‘whats’ is therefore important
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Rewarding Generation Y - Trends
Lesson Number 5 :
The Reward spectrum will consistently evolve to include benefits that help you remain socially active. An EXPERIENCE to share with friends or family. If Gen Y ers could choose their own rewards their first preference would be experience based
•Dinner, day trip, holiday•Experiential gift of your choice. E.g. flying, driving, •Time off work •Retail gift voucher, Fuel vouchers, Movie tickets, Merchandise E.g. desk accessories, pens•Donation to a charity of your choice•Among the most popular benefits are those that extend family-friendly programs e. g. Paid paternity leave is one example
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Thank You.
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