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Integrating Performance And
CompensationWebinar Slides – February 2012
Mitch Stephens
Agenda 1: Pay-For-Performance background
Market conditions and trends 2: Products overview
Jobs, Performance, Compensation 3: Performance Review Drill Down
Role-based perspective 4: Compensation
Integrated Compensation Modeling and Calibration
5: Wrap up
Part 1 – the case for Pay-For-Performance
What is Pay-for-Performance?
Pay for performance:sometimes abbreviated "P4P", is a motivation concept in human resources, in which employees receive increased compensation for their work if their team, department or company reaches certain targets.
At least 75 percent of all U.S. companies connect at least part of an employee's pay to measures of performance.
Current trendsCourtesy of Towers Watson 2011 Talent
Management and Rewards Survey
The market: Economic uncertainty continuesMerit pay remains relatively flat
The market: Economic volatility continuesShort-term incentive funding expected to drop
from 2010 to 2011
Funding exceeded 100% last year, but is expected to drop this year
Changing conditions and working hours 65% of employers think employees have been
working more hours than normal over the past three years
53% expect this to continue over the next three years
This is especially true for senior managers and professionals
What factors attract employees?
Top Performer Employees rank base pay base pay more highly than their prospective employers.
What factors retain employees?
Employers do not completely understand what would cause employees to leave —especially the best employee
Merit pay differentiation
Successful organizations recognize the importance of segmenting the high-performing employees
Short-term incentive differentiation
Although organizations target payouts so that top performers will receive 120% more than employees who only partially meet expectations, they typically only get about 70% more.
Did you know?
Fewer than half of all employees report that high-performing employees are rewarded for their performance
Source: Towers Watson 2011 Talent Management and Rewards Survey.
Pay-for-Performance Strategy Identify top and bottom performers
Decide on the balance between objective and subjective Set clear, achievable, measurable goals and measure against them
Create a comp plan that strikes the optimal balance: Reward the best people Pay the average performers the median amount Apply real metrics to the process, not just a blanket one-size-fits-all
Clearly communicate your compensation philosophy to both managers and employees
Part 2 – HRTMS Product overview
HRTMS Product Suite Overview
• HRTMS Jobs • Job Description management tool• Manage competencies for Performance Reviews
• HRTMS Performance • Performance Review System
• HRTMS Compensation• Integrated Compensation system
Screen shot of TMS Performance
Screen shot of TMS Compensation
Part 3 – TMS Performance Drill-
DownWe will show several roles: Employee, Corporate manager, District Manager,
Executive
Corporate Employee Home Page
Edit Performance Review
Cover Page
Corporate Objectives – Self Evaluation
Skills Assessment (Self)
Summary Page showing Scores
Employee Submits Review to Manager
Email Message to Manager
Return to Home Page
Corporate Manager Perspective
The next series of slides show the corporate manager perspective
The Manager receives an e-mail when the employee “submits”
Corporate Manager: Mike Biehl
Corporate Manager Home Page
View/Edit Employee PR
Corporate Objectives Tab
Spell Check Comments
Spell Check Complete…
Set Competency Scores
Scores Update as you select values
Summary Page
Training Completion for Employee
Submit Performance Review (Approve)
Edit Email to Administrator
Home page (one less action item)
Store ManagementThe next series of slides show the District
Manager’s perspective (store managers, assistant managers).
Storeline reviews are 70% based on actual results
Storeline District Manager: Conrad Enslow
DM Reviews Store Personnel…
Customized instructions for each role…
Store Managers Objectives
District Manager’s self review
District Manager’s Sales Objectives
Blended results simplified and explained
Storeline Executive Perspective
Seeing your organization
Storeline Regional Manager: Cleo Lehew
View All Regional Storeline Employees
Sort by Store Sales Score
Drill into Details for selected employee
AnalyticsProviding actionable analytics for managers and
executives without requiring any technical talent.
Storeline District Manager: Conrad Enslow
Analytics…
Overall Rating Distribution…
Top and Bottom Performers… With drill down
Objectives, Distribution, top/bottom & rankings
Competency Rankings
HRTMS Performance: Feature Summary Simple user interface Powerful form designer Competencies, integrated with Job description module Full Goals management, including cascading and organization
goals Comments by all roles Validations and required fields Link to spreadsheets and other attachments Powerful conditional workflow process E-mail notifications Role-based access control Full integration with Job Descriptions and Compensation
Now let’s switch to compensation..
Part 4 - Compensation
Excel-based Merit/STI Compensation Module
What does TMS Compensation do?
Allows authorized managers to recommend and approve annual increases, including merit, STI, LTI, lump sum and adjustments.
Allows you to model and budget expenditures based on actual performance data
How does TMS Compensation work?• TMS Compensation is driven by YOUR Excel
workbooks
• Formulas, validations, conditional formatting, business rules are all preserved.
• Your data is stored in a secure SQL database
• Our unique web interface lets you work online without having to download the workbook• Note that download is still available
• We harness the power of Excel as our calculation engine without the downside of distributing workbooks
How do we do it?We then complete the Excel Mapping Process
We start with your Excel workbook
Almost any comp workbook can be used as the template,
including Excel 2007 format.
TMS Excel Map
Heading Cells
SubTotals
Column Profiles
Col A• Name
Col B• Manager
Col C• Incr Amt
Data BindingsFormulas,Security settingsBusiness Rules
Note that we never actually store the workbooks – we are just
leveraging the power of Excel!
Sample Excel Templates
This workbook incorporates
Merit, MICP and LTIP
Sample Excel Templates
This workbook has three main budgets:
Merit, Equity and Bonus.
Sample Excel Templates
This workbook allows for Merit %, Market Adjustment% and
Promotion%
Screen Shot – Sheet edit mode
Web demoLet’s look at the compensation system in a
browser
Typical Pay-for-Performance Process
Start performance review process
Performance Reviews reach the
compensation holding step
Calibration and Modeling
Compensation process –
Managers submit compensation
recommendations
Compensation is finalized
Employee Meetings
Calibration and Modeling phase This phase usually happens AFTER the
performances reviews are completed, but BEFORE the compensation process begins
The modeling is done using the SAME Excel Workbooks as the main process
Sample Excel Modeling workbookObjective is to determine the optimal increase
recommendations based on the ACTUAL performance review scores and available budget
Employee Performance Ratings Most companies arrive at a single score for
employee reviews (e.g., 1-5 rating) Score may be mixture of objective and subjective
elements E.g., sales results plus manager’s assessment of employee’s goals, work
behaviors, etc.
The performance rating is the key element used in the merit system, but..
Does this really capture the full picture?
The fully integrated performance review The single PR score is important, but the compensation
manager should have access to the full picture Determining this year’s merit for key players should factor
in other elements, such as: Progress towards goals Employee and manager’s comments Extenuating circumstances such as leave of absence, special projects,
unfavorable business conditions, changing trends, staff shortages, reorganizations, one-time events, and so on.
Can a single score capture these elements?
View All Employee details from Compensation
HRTMS Offers a 360⁰ perspective
Popup window shows the Employee’s Performance Review
Salary History Popup
Part 5: Summary and wrap-up
HRTMS Pay-for-Performance Summary Lowest Cost of ownership Easy to use, consistent user interface Fully integrated data structures, workflows,
authentication System of record (multiple cycles) Gives managers a compelling line of sight to
historical data that allows them to determine an employee’s long-term value and contribution
Allows you to calibrate and model based on actual data
Synchronize the PR/Comp workflow processes
