2nd Annual Remuneration & Reward Summit
24-26 June - Premier Hotel OR Tambo
Hosted by Smart Linkwww.smart-link.co.za
Presented by
derek hendrikz
Copyright © 2015
Derek Hendrikz Consulting
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RemunerationStrategy
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Copyright © 2005 - 2011 Derek Hendrikz Consulting
process vs. projects
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the paradox of strategy…
do what you did yesterday perfectly today…
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• process induces repetition• repetition induces perfection• perfection induces performance
boldly do what has never been done before…
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• projects bring about change• change brings about transformation• transformation brings about relevance
Process vs. Projects
Process Projects• Cyclic in nature
• Evolutionary
• Performance-based
• Driven by managers
• Results divided by action = 1
• Puts bread on the table
• Clear beginning and definite end
• Revolutionary
• Relevance-based
• Inspired by leaders
• Results divided by action > 1
• Puts possibility of bread on the table
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Process Environment
Team Opportunities
Customers
Risks
Relationships
Suppliers
Competitors
Stakeholders
PESTLE
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Process Inputs
Task Activity People
Money
Assets
Authority
Behaviour
Task Functionality
Time
Location
Creating the Strategic Frame…
• Develop mission as a process• Analyse the environment• Develop projects• Create process structure• Develop a strategic scorecard• Create a behavioural frame
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the Context / Problem PMS Ratio
Context
Complexity
(Project-
based)
Problem Complexity
(Process-based)
Project-based
Perception-based
Process-based
Integrative
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2500 BC Agricultural Age
1800 Industrial Age
1980 Information Age
1990 Machine Intelligence Age
20?? Nanotech Age
The velocity of change
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The Point of Irrelevance
Point of Irrelevance
Mind-Set
Timewww.derekhendrikz.com
Job Evaluation is a methodology of appraising the value or worth of one job in relation to others within organisational context.
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Steps for carrying out Job Grading....
• Train departmental representatives in the use of the method.
• Extract job descriptions from processes.
• Create Job Evaluation Committee – mix of line management, HR and experts to decide on plotting of jobs.
• Organization map and banding proposal – HR & senior management puts together a proposal for banding (scales expressed in points) or grading staff and describes the benefits that each band attracts.
• Board Review – once jobs are rated and the organization map completed, the relevant authority will review the summary, the banding proposals and cost if any.
• Assuming the above are approved, the overall project manager will then move to implementation.
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A job is evaluated by looking at the knowledge required to do the job, the experience needed for the job, the problem complexity inherent to the job, the context complexity in which the work is performed and the accountability assigned.
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Knowledge
Context Complexity
AccountabilityExperience
Problem Complexity 5 Factors
for Job Grading....
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Hay Evaluation....
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Job Content
Know How(knowledge & experience)
Inputs
Problem complexity
Process
Accountability
Output
Context Complexity
Environment
Risks
Opportunities
Know How....
• Knowledge Level• Experience Level
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Level
A. Basic
B. Elementary
C. Intermediate Knowledge
D. Extended Knowledge
E. Diverse or Specialized
F. Diverse or Specialized
G. Broad or Specialized Mastery
H. Externally recognized expertise
Knowledge
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Level Explanation
I Performance of a task(s) highly specific as to objective and content, and not involving the leadership of others.
IIPerformance or direction of activities, which are similar as to content and objectives with appropriate awareness of other activities.
IIIDirection of an important unit with varied activities and objectives OR guidance of an important sub function(s) or several important elements across several units.
IVDirection of a major unit with noticeable functional diversity OR guidance of a function(s) which significantly affects all or most of the organization.
V Management of all units and functions within the organization.
Experience
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Applying the Grades....
• Combining selected codes will then give a
know-how grading.
• E.g. a seasoned supervisor to whom
interpersonal skills are important will be
graded FI2
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Problem Complexity....
• Thinking
Environment
• Thinking Challenge
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Level
A. Highly Structured
B. Routine
C. Semi-Routine
D. Standardized
E. Clearly Defined
F. Generally Defined
G. Broadly Defined
H. Abstract
Thinking Environment
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Level
1. Repetitive
2. Patterned
3. Varied
4. Adaptive
5. Unchartered
Thinking Challenge
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Applying the Grades....
• Combining selected codes will then give a
know-how grading.
• E.g. a hotel bell-boy who applies routine
thinking and does repetitive process-
based work will be graded B1
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Accountability....
• Freedom to Act
• Magnitude
• Impact
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Level Explanation
R These jobs are subject to explicit, detailed instructions AND/OR constant personal or procedural supervision.
A These jobs are subject to direct and detailed instructions AND/OR very close supervision.
B These jobs are subject to instruction and established work routines AND/OR close supervision.
C These jobs are subject, wholly or in part, to standardized practices and procedures, general work instructions and supervision or progress and results.
D These jobs are subject, wholly or in part, to practices and procedures covered by precedents or well-defined policies, and supervisory review.
E These jobs, by their nature and size, are subject to broad practices and procedures covered by functional precedents and policies, achievement of a circumscribed operational activity, and to managerial direction.
F These jobs, by their nature or size, are broadly subject to functional policies and goals and to managerial direction of a general nature.
G Subject to the guidance of broad organization policies, community or legislative limits, and the mandate of the organization.
Freedom to Act
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Level Explanation
R These jobs are subject to explicit, detailed instructions AND/OR constant personal or procedural supervision.
A These jobs are subject to direct and detailed instructions AND/OR very close supervision.
B These jobs are subject to instruction and established work routines AND/OR close supervision.
C These jobs are subject, wholly or in part, to standardized practices and procedures, general work instructions and supervision or progress and results.
D These jobs are subject, wholly or in part, to practices and procedures covered by precedents or well-defined policies, and supervisory review.
E These jobs, by their nature and size, are subject to broad practices and procedures covered by functional precedents and policies, achievement of a circumscribed operational activity, and to managerial direction.
F These jobs, by their nature or size, are broadly subject to functional policies and goals and to managerial direction of a general nature.
G Subject to the guidance of broad organization policies, community or legislative limits, and the mandate of the organization.
Level M (Minimal)1 (Very Small) 2 (Small) 3 (Medium) 4 (Large)5 (Very Large)
Magnitude (scope)
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Level Explanation A Ancillary
C Contributory
S Shared
P Primary
Impact
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Applying the Grades....
• Combining selected codes will then give a
know-how grading.
• E.g. a CEO who's freedom of decision making
is only restricted by the Board, organisational
policies and strategy; who's accountability
scope and impact is large will be graded G3P
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Context Complexity....
• Physical
Environment
• Psychological
Environment
• Sensory Attention
Needed
• Risk www.derekhendrikz.com
Code Description (low) SCALE (high)
P Physical Environment 1 2 3 4 5 6 7 8 9 10
E Psychological Environment 1 2 3 4 5 6 7 8 9 10
H Risks 1 2 3 4 5 6 7 8 9 10
S Sensory Attention 1 2 3 4 5 6 7 8 9 10
Assigning points for special conditions…
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Evaluation needs to match 3 Variable's....
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Target match between three
Process
People
Compensation/ Grade
Evaluation Methodology
Process give reason of
existence to the job
To achieve the desired result change must
take place and problems must
be solved
Knowledge and Experience is
needed to solve problems and achieve results
Know How+
Problem Complexity+
Accountability
Context Complexity; +Accountability
Accountability
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Webbers Law....
the 15% rule
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when the physical
weight of two objects
differed by more than
15%, people could
distinguish between
their weights just by
lifting them
the 15% RULE…
Steps…
50
57
66
76
87…
1 x 15% step = Perceptional Difference2 x 15% step = Noticeable Difference3 x 15% step = Clear Difference
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Internal Logic behind Webbers Law....
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Hay Evaluation & Succession Planning....
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Developing a Pay Grade Structure....
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Internal Analysis…
• Analyse extent to which similar jobs receive similar pay.
• Analyse existing pay and compensation philosophy.
External Analysis…
• Benchmark pay structure with market.
the Ability / Motivation ratio
Motivation
(Attitude)
Ability(Knowledge & Skill)
Team Player
Wrong Appointment
Hostage Taker
Super Star
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Basic Performance Continuum
1 5 10 10+
Wrong Appointment
Develop Reward
Motivate
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The PMS Process....
1. Create the Strategic Frame
2. Develop Process Families
3. Develop Team Scorecards
4. Extract Individual Performance Indicators
5. Assess Performance
6. Take Remedial Action
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Performance Indicators....
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Indicator: Measurement:
Input indicator linked to checklists
Input indicator linked to procedures
Input indicator linked to quality rules
Output indicator linked to targets
Behavioural indicator linked to values
Real time as project is completed
Periodically as executed
Periodically as executed
Real time as targets are achieved
Periodically (360°)
Measurement Item: Weight: Notes:
Input Indicators: % Direct Assessment
Output Targets: % Direct Assessment
Ability Score: % (Objective calculation)
Demonstration of Values: % 360⁰
Behavioural Score: % (Perception calculation)
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Performance
Willingness
OpportunityCapacity
Capacity to Perform
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The degree to which an individual possesses task-relevant skills, knowledge and experiences.
Aspects inhibiting an employee to perform a task e.g. the equipment needed, time available, quality of decision-making, etc.
Opportunity to Perform
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The degree to which an individual both desires and is willing to exert effort (motivation).
Willingness to Perform
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Defining ‘Total Rewards’:
Total Rewards are all of the tools available to the employer that may be used to attract, motivate and
retain employees. Total rewards include everything the employee
perceives to be of value resulting from the employment relationship.
The concept of total rewards has advanced considerably. The power of total rewards is in leveraging the concept as a whole and the individual elements to
attract, motivate and retain talent.
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Advantages of a total rewards Strategy…
• Drive organizational success through greater talent attraction, engagement and retention
• Guide investment decisions for the employer while enabling informed choices for the employee
• Clarify the employer-employee relationship • Build a distinctive employment brand • Increase the return on rewards and create value
for the enterprise
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Employers View… Employee View…
1 Challenging work 1
Base salary
2 Base salary 2
Job security
3 Career advancement 3 Career advancement opportunities
4 Health/Wellness 4 Organization reputation
5 Organization values 5 Convenient work
6 Organization Reputation 6 Learning opportunities
7 Organization Performance 7 Health/Wellness benefits
Views on all employees…
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Views on high potential employees…
Employers View… Employee View…
1 Challenging work 1 Career advancement
opportunities
2 Ability to impact 2
Base salary
3 Career advancement opportunities
3 Job security
4 Base salary 4
Challenging work
5 Organization values 5 Organization
6 Organization performance 6 Learning opportunities
7 Job autonomy 7 Convenient work location
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Developing the Total rewards Strategy…
1. Understand organisational outcomes and the processes and projects which it must deliver;
2. Develop processes and populate with intelligence;3. Develop a master scorecard;4. Link the master scorecard to human performance;5. Conduct Job Grading Analysis;6. Define the Employee Value exchange (EVE); and7. Develop the Total Rewards Strategy (TRS).
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Practical Exercise (1)…
Company Expectations Employee Rewards
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…an effective total rewards strategy enables organisations to deliver the
right amount of rewards, to the right people, at the right time, for
the right reason...
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Basic Assumptions of a ‘Performance Motivation’ Model…
• Employees believe that good performance will lead to more pay
• Employees want more pay• Employees do not believe that good performance will
lead to negative consequences• Employees see that other desired rewards besides pay
result from good performance• Employees believe that their efforts do lead to
improved performance
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Bonus Plans – Two Basic Rules…
1. Fund the Pool
2. Split the Pool
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Practical Exercise (2)… Master TRS
Total Rewards Strategy Elements Skill Job Risk Performance
H M L H M L H M L
Compensation • Xxx• xxx
Benefits • Xxx• xxx
Work Life • Xxx• xxx
Professional Development • Xxx• xxx
Career Development • Xxx• xxx
Work Environment • Xxx• xxx
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Practical Exercise (3)… Individual TRS
Total Rewards Strategy Elements Weight ValueCompensation • Xxx
• xxxBenefits • Xxx
• xxxWork Life • Xxx
• xxxProfessional Development • Xxx
• xxxCareer Development • Xxx
• xxxWork Environment • Xxx
• xxx
Employee Name:Job Description:Skills Risk: Job Risk: Performance Risk:
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