THE MOST IMPORTANT COMPENSATION PLANNING …€¦ · ECONOMIC AND MARKET CONTEXT The US economy is...

© 2014 MERCER. ALL RIGHTS RESERVED.

THE MOST IMPORTANT COMPENSATIONPLANNING CONSIDERATIONS FOR 2015SEPTEMBER 23, 2014

1© 2014 MERCER. ALL RIGHTS RESERVED.

TODAY’S SPEAKERS

ILENE SISCOVICKNorth America TalentInternational Leader

MARY ANN SARDONENorth America Practice

Leader Workforce Rewards


Context forPlanning

MercerResearchInsights

Trends for2015 andBeyond

Call to Action

CONTENTS FOR OUR DISCUSSION TODAY


CONTEXT FOR PLANNING


ECONOMIC AND MARKET CONTEXT

The US economy is positioned to experience strong growth in the second half of 2014.

Salary freezesexpected to drop to

0.7% by end of 2014.

Economic recovery continues to be slow, but is expectedto accelerate.

GDP contraction in Q1 2014, but projected to perform wellfor rest of year.

More signs of economic improvement:

• Unemployment steadily declining, back to pre-recession levelat 6.1%.

• Consumer Confidence Index at its highest sinceJanuary 2008.

• Households paying off their debt.

• Salary freezes down from 2012 and projected to declinefurther in 2014.

• Housing market recovering with 11% year over year growth inApril.

The world economy is growing slowly due to weakening trendsin emerging economies.


GDP growth is expected to slowly rebound, after drops at the end of 2012 and 2013.

0.0%

0.5%

1.0%

1.5%

2.0%

2.5%

3.0%

3.5%

4.0%

Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2* Q3* Q4*

Quarterly % Growth in GDP

2011 2012 2013 2014

Feb to Mar 2014 –

Best hiring stretchin two years!

2014 – Q1

Consumerconfidence at itshighest since 2008.

ECONOMIC AND MARKET CONTEXT

Source: Economist Intelligence Unit*Quarter Forecast – Economist Intelligence Unit


BASE SALARY INCREASES VS. CONSUMER PRICE INDEX

2014 CPI by U.S. Department of Labor is current ofMay, 2014, estimate for 2015 is unavailable.

2014/2015 CPI by Economic Forecast Center ofGeorgia State University is current as of May, 2014.

Salary increase percentage includes zeros.

Avg. salary increasesabout 1% above CPI


COMPANIES CONTINUE TO INCREASE FOCUS ON THEBROADER DEFINITION OF TOTAL REWARDS

EMPLOYER PERSPECTIVE…

MONEY CAREERS WORK/LIFE

PAY BENEFITS Performance andaccountabilityCareer opportunity andpathingMobilityLeadershipExperiential rewardsTalent development

Time offWellness programsDependent careWorkplace flexibilityNon-financial andstatus recognitionCommuter programsWorkplace facilities andperquisites

Base payShort-term incentivesLong-term incentivesAllowancesFinancial recognitionprogramsDeferred compensation

Retirement SavingsMedical/Dental/Vision/Prescription Drug, etc.Life insuranceShort- and long-termdisabilityAccident coverage

EMPLOYEE PERSPECTIVE…

My value today My financial securityand protection

My future value My quality of life

“EMPLOYEE EXPERIENCE”


Source: Mercer 2014 North American Total Rewards Survey of 355 Organizations

INVESTMENTS IN CAREER DEVELOPMENT AND TRAININGARE KEY IN MATURE MARKETS LIKE THE US

8%

8%

9%

23%

26%

28%

12%

16%

11%

28%

35%

27%

0% 5% 10% 15% 20% 25% 30% 35% 40%

Work Environment

Non-Cash Recognition

S/T Incentives

Training Opportunities

Career Development/Management Programs

Base Salary Increases

Mature MarketsEmerging Markets



IT AND ENGINEERING CONTINUE TO BE VIEWED AS“HOT” IN MATURE MARKETS

8%

15%

42%

41%

38%

44%

44%

11%

17%

36%

41%

42%

53%

62%

0% 10% 20% 30% 40% 50% 60% 70%

Customer Service

Legal/Compliance

Sales

Executives

Research & Development

Engineering

Information Technology

Mature MarketsEmerging Markets


CRITICAL TALENT INFOGRAPHIC

UNDERSTANDING AND FOCUSING PROGRAMS ON CRITICALTALENT IS KEY


MERCER RESEARCH INSIGHTS


MERCER RESEARCH

YOUThe More Informed

CompensationProfessional!


1,500 PARTICIPANTS

Services(Non-Financial)

ConsumerGoods

2014/2015 US COMPENSATION PLANNING SURVEYPARTICIPANT PROFILE

High Tech

FinancialServices

6%

5%24%

Energy

11%

LifeSciences

5%

Insurance

9%

Retail andWholesale

7%

OtherNon-Manufacturing

11%

OtherDurable GoodsManufacturing

6% 10%

Source: Mercer 2014/2015 US Compensation Planning Survey Report


2014/2015 US COMPENSATION PLANNINGPARTICIPANT PROFILE

%4Fewer than 100 employees100–299

%4 300–499

1 %1

1,000–2,9992 %2%13

500–999

3,000–4,999

3 %95,000 or more

%7

NUMBER OFEMPLOYEES



SALARY FREEZES ARE LARGELY A THING OF THE PAST



YEAR ALL EMPLOYEES EXEC MGMT PROFESSIONAL CLERICAL TRADES/PRODUCTION

2015 3.0% 3.0% 3.0% 3.0% 3.0% 3.0%

2014(actual) 3.0% 3.0% 3.0% 3.0% 3.0% 3.0%

2013(actual) 2.9% 3.0% 2.9% 2.9% 2.9% 2.9%

2012(actual) 2.9% 3.0% 2.9% 2.9% 2.9% 2.8%

2011(actual) 2.9% 3.0% 2.9% 2.8% 2.8% 2.8%

UNITED STATES(all industries, all locations, excluding zeros)

2015 SALARY INCREASE PROJECTIONS CONSISTENTWITH PRIOR YEARS



THE ENERGY INDUSTRY CONTINUES TO LEAD THE WAY3.

5

3.1

3 3 3 3 3 3 2.9

2.9

2.9

2.8

2.8

2015 average all-employee increase

3.5

3.1 3.0 3.0 3.0 3.0 3.0 3.0 2.9 2.9 2.9 2.8 2.8

EN

ER

GY

Tran

spor

tatio

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quip

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t

Hig

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Min

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&M

etal

s

Insu

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Life

Sci

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s

Ret

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2015 average all-employee increase



AVERAGE MERIT BUDGETS AT NOT FOR PROFITS ARESLIGHTLY LOWER THAN OTHER OWNERSHIP TYPES


2.70%

2.80%

2.90%

3.00%

3.10%

3.20%

3.30%

Publicly Traded Privately Held Public Sector Joint Venture Not for Profit

Per

cent

age

mer

itbu

dget


14%

19%

56%

11%

# OF PERFORMANCE RATINGS

Three

Four

Five

Other

MORE THAN HALF OF ORGANIZATIONS USE A 5-LEVELRATING SYSTEM



PERFORMANCE DISTRIBUTION HAS NOT CHANGED MUCH

Per

cent

age

ofth

ew

orkf

orce

0.0%

10.0%

20.0%

30.0%

40.0%

50.0%

60.0%

Lowest Low Middle Next Highest Highest

Salary Differentiation by Performance Rating

Actual 2012 % of Workforce



Projected 2015 % of Workforce



3%

8%

25%

8%

0.1%0.9%

2.7% 3.7%

4.8%

Lowest Low Middle Next highest Highest

PERCENTAGE OF WORKFORCE

2014 Actual Performance Rating

57%

Average salary increase

LIMITED DIFFERENTIATION IN PERFORMANCE AND REWARDS



INCENTIVE PAYOUTS FOR TOP PERFORMERS AREEXPECTED TO BE HIGHER THAN FOR AVERAGEPERFORMERS ACROSS EMPLOYEE LEVELS


12%

52%

93%

115%

139%

10%

54%

99%

121%

147%

9%

53%

97%

119%

146%

11%

52%

96%

122%

152%

0%

20%

40%

60%

80%

100%

120%

140%

160%

Lowest Low Middle Next Highest Highest

%O

FTA

RG

ET

AS

AFU

NC

TIO

NO

FP

ER

FOR

MA

NC

E

Executive Management Professional(Non-Sales)

Professional(Sales)

PERFORMANCE RATING


PROFESSIONAL, OFFICE, AND CLERICAL ROLES AREINCENTIVE ELIGBILE IN A NUMBER OF INDUSTRIES

-

10

20

30

40

50

60

70

80

90

100Fi

nanc

ialS

ervi

ces

Con

sum

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oods

Ene

rgy

Life

Scie

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Min

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&M

etal

s

Insu

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Tran

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s(N

on-F

inan

cial

)

Oth

erN

on-D

urab

leG

oods

Man

ufac

turin

g

Professional (Non-Sales)

Office/Clerical

INDUSTRY DETAIL — % WITH INCENTIVE PROGRAM

Per

cent

(%)


5.0%

5.5%

6.0%

6.5%

7.0%

7.5%

8.0%

8.5%

5.0%

5.5%

6.0%

6.5%

7.0%

7.5%

8.0%

8.5%

All

Em

ploy

eeG

roup

s

Exe

cutiv

e

Man

agem

ent

Pro

fess

iona

l

Offi

ce/C

leric

al/

Tech

nici

an

Trad

es/P

rodu

cti

on/S

ervi

ces

Typical award as % of base salary % of group promoted

EXECUTIVES AND MANAGEMENT RECEIVE THE LARGESTPROMOTIONAL INCREASE

Mostorganizationsbudget about

1% of payroll forpromotions


TREND #1: THE INTEGRATION OF TALENT ANDREWARD PROGRAMS — CAREER FRAMEWORKS


THE EMPLOYER PERSPECTIVE

“We need to buildour talentfrom withinby identifying the rightskills and creatingcareer paths.”

“Employees are asking

for clarity onexpectations at each step

of the careerjourney as theymove up and laterally.”

“There is too

much ad hocand discretionarydeal-making —leading tomanager angstand

employeemistrust.”


THE EMPLOYEE PERSPECTIVE

“I would love to

navigatefuturepossibilitiesstarting from my current joband company.”

“I don’t see a

clear pathto progress in thisorganization.”

“There is no

consistencyin job level or

pay, making mequestion the organization’spromise to me.”


FUTURE OPPORTUNITIES

FUTUREROLE?

CURRENTROLE

FUTUREROLE?

SALES R&D OPS MARKETING HR IT FINANCE …

EMPLOYEES WANT TO EXPLORE OPPORTUNITIES TO MOVEVERTICALLY AND HORIZONTALLY WITHIN THEIR ORGANIZATION


WHAT IS A CAREER FRAMEWORK?


E3

E2

E1

M4

M3

M2

M1

P6

P5

P4

P3

P2

P1

S3

S2

S1

S4

Support

Professional

Management

Executive

CAREER STREAMS

CAREER LEVELS

E

D

C

B

A

CAREER STAGES

CAREER FRAMEWORKS ANCHOR JOBS TO A COMMONVERTICAL AND HORIZONTAL STRUCTURE


JOB FAMILIES / SUB-FAMILIESGenerally recognized major professional area, often

requiring a unique set of technical competencies

Learning & Dev. Network Architecture Applications Development ..….

ITHR

E3

E2

E1

M4

M3

M2

M1

P6

P5

P4

P3

P2

P1

S3

S2

S1

S4

AND THE VERTICAL CAREER LEVEL STRUCTURE APPLIESTO ALL FAMILIES WITHIN AN ORGANIZATION


CAREER LEVELS CAN BE DEFINED FOR EACH TYPE OF ROLE

MANAGERIALOrganizationalimpact

Complexityof work Knowledge Team

interaction

Job factor expectations Job factor expectations Job factor expectations Job factor expectations




EXECUTIVEOrganizationalimpact


interactionJob factor expectations Job factor expectations Job factor expectations Job factor expectations



PROFESSIONALOrganizationalimpact


interaction







SUPPORTOrganizationalimpact


interaction





Note: Can be customized on a company basis

E3

E2

E1

M4

M3

M2

M1

P6

P5

P4

P3

P2

P1

S3

S2

S1

S4


CORE COMPETENCIES DESCRIBE BEHAVIORALEXPECTATIONS AT EACH STAGE AND ARE COMMON FORTHE ENTERPRISE

Career Stage DeliveringStrategy Driving Results Fostering

InnovationMaintaining

Customer FocusBuilding

RelationshipsCoaching &Developing

• Creates long-term and viablevision and business plan toensure the organization isstrategically aligned withevolving market needs• Anticipates and evaluatescontingencies; adapts andimplements plans quickly tochanging and/or ambiguoussituations• Expertly navigates throughcomplexity and ambiguity andoptimizes utilization ofresources and investmentsacross regions/ functions

• Encourages team members toseek opportunities to take on bigchallenges or problems aboveand beyond currentcommitments to grow thebusiness and resolve customerissues• Challenges teams toconsistently seek higherstandards of performance;models behavior that continuallyraises the performance bar• Willingly takes majorcalculated business or personalrisks to fundamentally changethe organization to create

• Creates a working environmentand culture where breakthroughideas and opportunities areencouraged, cultivated, andutilized• Commits significantinvestment to reap majorrewards based on in-depthassessment, judgment, and on-going leadership throughout theprocess• Creates a learning culture andchampions on-going review ofprograms/ processes to protectthe core and identifytransformational approaches

• Acts in the best interest of thekey customers regardless ofwhether it has a short termimpact on the business• Consistently uses goodjudgment and effectivelybalances the best interest ofboth the business as well as thecustomer• Foresees future trends in theglobal market and identifiesunique business opportunities

• Acts as a role model in creatingan open, transparent andcollaborative culture• Establishes organization'simage by building high-impactstrategic relationships with keystakeholders• Inspires teams across ourcompany to build broad anddeep networks internally andexternally

• Creates an open and energizingenvironment that motivatespeople to engage in candiddialogue and give their personalbest• Creates a developmentmindset across the business,personally taking accountabilityfor building organizationalcapability• Personally invests time toassess the bench strengthagainst future talent needs, anddevelops and retains talentacross the organization

• Leverages clear understandingof Company's strategy toestablish aligned functionalgoals and objectives andbusiness processes• Critically evaluates complexdata and information andidentifies trends/risks to makerecommendations to improveexisting processes• Proactively engages the rightresources from across theorganization. Focuses on thecritical few projects that havelonger-term business impact

• Engages team(s) in settingchallenging goals and targets andinstills sense of ownership toimprove performance; rolemodels responsiveness by actingimmediately on mission- criticalissues• Assesses how results wereachieved and providesrecognition for outstandingefforts, and provides candid andconstructive feedback toindividuals and teams toimprove performance• Demonstrates good judgmentand takes full accountability for

• Develops new concepts thatare unique to the industry and tothe market• Proactively looks outsidetraditional processes/channels/products to anticipatefuture needs and identifyopportunities to enhancecompetitive advantage• Routinely draws upon valuablelearning from others, pastexperiences, and newinformation to determine keybusiness opportunities

• Emphasizes the contribution ofthe business in the value chain inorder to be seen as a trustedpartner and not just a vendor• Maintains deep and farreaching relationships with keycustomers• Anticipates emergingmarketplace issues andleverages experiences to resolvecomplex business issues

• Identifies experts or thirdparties that could be influentialin specific situations based onexpertise or relationships andenlists their support andassistance• Spends time with keyindividuals to build relationshipsthat can be used in the future forsupport• Develops internal and externalalliances in the short term foruse in the longer term

• Provides constructive feedbackand frequent developmentdiscussions to motivate andsupport team members to reachhigher levels of performance• Initiates strategies to developinternal talent, balancing themwith external hires• Spots talent gaps anddetermines the right mix andlevel of talent required tosupport current and futureobjectives

E

D

Core Competencies

are defined by stage

Note: Can be customized on a company basis


Short-term Incentive Targets

CAREER FRAMEWORK

5%

8%

10%

12%

15%

5%

5%

30%

28%

25%

20%

18%

Compensation Program

E3

E2

E1

M4

M3

M2

M1

P6

P5

P4

P3

P2

P1

S3

S2

S1

S4

Base Salary Ranges

CareerStages

E

D

C

B

A

FRAMEWORKS CAN CONNECT TALENT MANAGEMENT,CAREERS, AND COMPENSATION MANAGEMENT


CAREER FRAMEWORKS ARE BECOMING MORE COMMON

Don't have a careerframework, but planning

to implement one

Have a careerframework3 %8

3 %2

Don't have a careerframework andnot planning toimplement one

3 %0CAREER

FRAMEWORKS


40% Core and TechnicalCompetencies

Core Competencies

Job Evaluation /Job Leveling

%5 Other2%Market

28%

UNDERPINNINGCAREER

FRAMEWORKS

%25

COMPETENCIES AND JOB EVALUATION MOST OFTEN USEDTO UNDERPIN CAREER FRAMEWORKS


MANY ORGANIZATIONS ARE ALREADY CONNECTING THEIRFRAMEWORKS TO OTHER TALENT MANAGEMENT PROCESSES— BUT THERE’S STILL ROOM FOR IMPROVEMENT

Succession planning68%

Training and development65%

Performance management62%

Career pathing (vertical and/or horizontal movement)57%

Rewards (base salary and incentive management)56%

Recruitment and selection46%

Job titling32%


TREND #2: THE TECHNOLOGY ENABLEMENTOF HR AND COMPENSATION’S ROLE


WHAT WE ARE HEARING FROM OUR CLIENTS

“We have a jobtitle andcode for everyperson.”

“We’reimplementing anew HRIS and

our jobdata ishorrible.”

“Our jobcatalog needsto reflect the workof the future”


THE EVOLUTION OF HR TECHNOLOGY

PAYROLL DRIVENAUTOMATE AND COMPLY

AUTOMATION OFPROCESSES

REFINEMENT OFPROCESSES

REPORTING ANDANALYTICS

SUCCESSION, SELECTION,RICH TALENT PROFILES,

WORKFORCEREDEPLOYMENT, PAY FOR

PERFORMANCE

CAREER MOBILITY,WORKFORCE PLANNING,

REDEPLOYMENT,INTEGRATION WITH HRMS

STANDALONE HRSYSTEMS• Payroll, Benefits, HR

Administration• Mainframe or

server based

TALENTMANAGEMENTAPPLICATIONS• Performance appraisal,

LMS, Recruiting,Applicant tracking

• Standalone applications• PC or internet based

INTEGRATED TALENTMANAGEMENT SUITE• Employee profiles,

Performancemanagement, Successionplanning

• HR Talent platforms SaaSbased

PEOPLEMANAGEMENTSYSTEMS• Career development,

Workforcedeployment/planning

• SaaS Based

WHERE IS YOURCOMPANY GOING?


CLOUD COMPUTING AT THE HEART MAKINGEVERYTHING EASIER

DATABASE APP SERVER

PCMOBILE


TECHNOLOGYPLATFORM

JOB AND EMPLOYEE DATA KEY TO ENABLING THETECHNOLOGY PLATFORM AND UNLOCKING DATA INSIGHTS

EMPLOYEEDATA

LEVELINGAND

HIERARCHYJOBDATA

Better Workforce InsightsBetter Information

Mercer’ Internal LaborMarket Analysis (ILM)


COMPENSATION IS AT THE HEART OF BETTER JOB ANDEMPLOYEE INFORMATION

Job title Career levels

Job coding Organized familiesof work

COMPENSATIONPROFESSIONAL

$


TREND #3: PAY FOR PERFORMANCE 2.0


“Are we really payingfor performance or

just saying it?


“Are we retainingour highestperformers?”

“Our employees tell us

performanceis notrecognized intheir pay.”

“Are the rewardprograms getting us

the rightbusinessoutcomes?”


PAY FOR PERFORMANCE 2.0 IS ABOUT MEASURINGEFFECTIVENESS

82%of companies say they are

pay-for-performance

22%measure its

effectiveness.

Only



CONNECTING WHAT WE “SAY” WITH WHAT WE “DO”

• Pay for Performance 2.0 starts when organizations begin to examine theeffectiveness of their pay-for-performance programs though deeper data andinsights.

• Employee survey, HRIS, or business performance data — taken in isolation —provide an incomplete picture.

• Employee perception doesn’t always align with employee behavior … just asemployee perception may not accurately reflect how organizational practicesactually “play out.”

• There are often material differences and trade-offs between “statisticalsignificance” in the information and “psychological significance” toemployees

• By connecting what we “say” with what we “do,” organizations can cut throughpotentially misleading data and focus efforts on the true drivers of employeeengagement and business outcomes.


FOR THIS COMPANY, SURVEY RESULTS WERE UNFAVORABLEWITH RESPECT TO PERFORMANCE MANAGEMENT ISSUES

I am paid fairly given myperformance andcontributions to my line ofbusiness.

Our performance appraisalprocess adequatelydistinguishes poor,average, and goodperformers.

59

53

43

44

41

43

41

44

0 10 20 30 40 50 60 70 80 90 100

Norm 2003 2004 2005

% Favorable

Year 1 Year 2 Year 3 Norm

Case example: Finance Company


DEEPER DIVE ANALYTICS TELL A DIFFERENT STORY

DATA ANALYSIS SHOWEDSIGNIFICANT DIFFERENCE IN

PAY GROWTH BYPERFORMANCE

TURNOVER ANALYSISSUGGESTS LOWER

PERFORMERS HAVE HIGHERTURNOVER

Zero pay growth


MERCER’S OWN DEEPER DIVE ACROSS PROJECTS SHOWS THATEMPLOYEE RETENTION IS SIGNIFICANTLY MORE RESPONSIVE TOBASE PAY THAN TO VARIABLE COMPENSATION

Pay effects on turnoverAll segments

0

5

10

15

20

25

30

Base Base growth Var-Receipt Var-Amount LTI-Receipt LTI-Amount

Pay component

#of

case

s

Negative - Lower turnoverNo effectPositive - Higher turnover

Evidence where higher base pay isassociated with lower turnover, i.e.,fewer future decisions to quit.

Represents pay-turnover relationships for a total of 60 segments for 34 clients. The models on which theseresults are based are controlled for individual attributes, organizational factors, and external influences.


TREND #4: SEGMENTED APPROACH TO AREWARDS STRATEGY



“Merit pay isnot enough forour hourly workforce.”

“We can’t payat medianfor ourmarketing rolesif we wantsuperstars.”

“The technologygroup wants morefrom their rewards,

pay is notenough — theywant development.”


BUSINESS STRATEGY SHOULD DRIVE YOUR REWARDSSTRATEGY

BUSINESS STRATEGY PEOPLE STRATEGY REWARDS STRATEGY

How will theorganization manageand motivate a workforce thatcan execute thebusiness strategy?


REWARD STRATEGIES ARE BASED ON GUIDING PRINCIPLESAND SEGMENTATION IS KEY

EXAMPLES OF GUIDING PRINCIPLES• Segmentation (degree of differentiation for workforce categories).• Role of compensation element (purpose of each compensation vehicle).• Comparator group (competitive business/labor market).• Competitive positioning (target percentile).• Performance orientation (differentiation, point of measurement, metrics).• Internal equity (importance of the internal relative value of work).• Affordability and sustainability (degree of cost control required).• Governance and accountability (decision-making structure).• Administration (approach and point of management).• Communication and transparency (approach and vehicles for

information sharing).• Success measures (measuring and monitoring results, analytics).


A ONCE-SIZE-FITS-ALL STRATEGY MAY NOT WORK

Blueprint (sample)

COMPENSATION BENEFITS CAREERS

PRINCIPLE Base Pay Annualincentives

Long-termincentives

Groupbenefits

Retirement Perquisites Performancemanagement

Work/lifebalance

Workforceplanning/careerpathing

ROLE OFREWARDELEMENT

Attract andretain;rewardbuildingskills

Rewardindividualbusiness unitandcorporateperformance

Link toshareholdervaluecreation

Personal riskmanagement

Wealthaccumulation

Taxefficiency

Goal setting/accountability

Compellingplace to work

Adequatesupply oftalent

COMPETITIVEPOSITIONING

25th

percentileBase + STI =75th

percentile

Base + STI +LTI = 90th

percentile

Leadingedge design:50th

percentile

50th percentile Marketpractices

Support“build” talentstrategy

Environmentdifficult tomatch bycompetitors

Balance payand benefitswith careeropportunities

IMPACT OFPOSITIONING

Risktolerance

Performanceorientation

Rewardslong-termgrowth

Desirableemployer

Facilitateorderlyretirement

Employment brand

Focusedefforts

Attractionand retentionof qualifiedstaff

Support“build” talentstrategy

METRICS Acceptancerateturnover;appropriateskills

Businessresults

Stock pricegrowth

Cost andvaluedelivered

Retirementincomeadequacy;financialmanagement

Cost:commitmentindex

Scorecardresults

Commitmentindexturnover

Percentageof outsidehires


APPROACHES TO SEGMENTATION CAN DIFFER BASEDON BUSINESS NEEDS

ORGANIZATIONAL KEY TALENT PREFERENCES

LeadershipHigh PerformersHigh PotentialsHot SkillsCritical RolesJob Family

GeographyBusiness UnitBusiness Life CycleBrandJob Level

AgeGenderCultureCareer Aspirations


EXAMPLE OF WORKFORCE SEGMENTATION DRIVEN BYSTRATEGIC IMPORTANCE AND NATURE OF COMPETITIONFOR TALENT

Competition for Talent

EmergingBusinesses

Average/Above

Average

Medium(Enabling

Job Families)

High(Driving

Job Families)

Segment 1

Segment 2

Segment 3

Segment4

Segment5

Segment6

CountryB

CountryA

Ret

urn

onIm

prov

edE

mpl

oyee

Per

form

ance

Low(Foundational

Families)

BelowAverage

High and/or Special Requirements


EXAMPLE OF PAY PROGRAM DESIGN SEGMENTED BYJOB FAMILY AND CAREER LEVELPOPULATION TR ELEMENT SEGMENT 1 SEGMENT 2 SEGMENT 3Senior VPs

VPs

Directors

Population Size <1% <1% ~1%

Pay Position 60th %ile 50th %ile 40th %ile

% Fixed 40% 50% 70%

Bonus Leverage 2.5x 2x 1.5x

Bonus Linkage 100% Business Unit

LTI Linkage 50% Business Unit / 50% Parent Company

Manager 1 & 2

Senior IC

Population Size ~5% ~15% ~12%


% Fixed 50% 70% 90%


Bonus Linkage 100% Business Unit

LTI Linkage 50% Business Segment / 50% Parent Company N/A

Junior IC Population Size ~9% ~20% ~15%


% Fixed 85% 90% 95%


Bonus Linkage 25% Business Segment / 75% Group

Non-Exempts Population Size ~23%

Pay Position 40th %ile

% Fixed 100%

LTI & STI Eligible

Only STI Eligible

No Variable Pay


EXAMPLE OF SEGMENTATION BY BUSINESS LIFE CYCLE

LIFE CYCLE: Emerging market Moderate growth Decline/harvest

SEGMENT: Performance drivers Performance enablers Legacy performancedriver

BRAND: Liability Neutral Asset

OPPORTUNITY Premium+ Standard Discount

ROLE OF COMPENSATIONELEMENTS Attract Attract and retain Retain

COMPARATOR GROUP(S) Future businesscompetitors Current labor competitors Current business

competitors

COMPETITIVEPOSITIONING(INCLUDING MIX)

Target:Base pay:

STI:LTI:

P90+P50P75P90+

P50P50P50P50

P25–P50P25P75P25

PERFORMANCEORIENTATION

Differentiation:Time horizon:Measurement

unit:

LessLong-termGroup

StandardBalancedIndividual and enterprise

MoreShort-termIndividual


SEGMENTATION BY LEVEL AND JOB FAMILY AREPREVALENT IN MATURE MARKETS

59%

36%

52%

21%

43%

23%18%

70%

50% 47%

25%32%

26%

13%0%

20%

40%

60%

80%

Mature Markets Emerging Markets



CALL TO ACTION


CALL TO ACTIONWHERE TO FOCUS FOR 2015?

ü Examine segmentation and differentiation but measureyour business outcomes using higher level analytics

• For example, what does pay for performance reallylook like in your organization?

ü Pay attention to base pay… it’s important

• Based on our research it’s a driver of retention

ü Think about changes in technology delivery as anopportunity to refresh your reward and talentinfrastructure

• Opportunity to enhance employer insights toincrease employee engagement and businessoutcomes

ü Create an “ecosystem” to optimize and leverage yourtalent and total reward programs through CareerFrameworks


1 Mercer’s 2015 US Compensation Planning Report UPDATE

1-800-333-3070 or www.imercer.com/cps

2 Mercer’s Incentive Plan Design Survey

1-800-333-3070 or www.imercer.com/ipd

3 Mercer Benchmark Database Survey (MBD)1-800-333-3070 or www.imercer.com/mbd

4 Mercer’s Global Compensation Planning Report1-800-333-3070 or www.imercer.com/gcpr

UPCOMING US BASED RESEARCH

MERCER WEBCAST 64September 23, 2014

Questions

Mary Ann SardoneNorth America Practice Leader Workforce Rewards+1 404 442 [email protected]

Ilene SiscovickNorth America Talent International Leader+1 206 214 [email protected]

QUESTIONSPlease type your questions in the Q&A section of the toolbarand we will do our best to answer as many questions as wehave time for.

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FEEDBACKPlease take the time to fill out thefeedback form at the end of this webcastso we can continue to improve. Thefeedback form will pop-up in a newwindow when the session ends.

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