changing The reward - Hay Group · The Changing Face of Reward is the first in the ... required to do in order to meet their side of ... Decisions based on assessment of merit using

In the same way that citizens are demanding from their governments; greater transparency, an end to endemic corruption, a right to be heard, better conditions, education and prospects; so employees are increasingly beginning to seek a new deal from their employers. This ongoing change has potentially profound implications for the psychological contract of employment in the Middle East >>

Thechangingface of

reward

The changing face of reward

©2013 Hay Group. All rights reserved

2

Tawaqquat is a series of publications from Hay Group about the changing expectations of employers and employees in the Middle East. Through this regular series of articles we will explore the challenges facing organisations in attracting, leading, rewarding and engaging their people in the post financial-crisis world.

In the dynamic markets of the Middle East, the organisations that can respond to the region’s social and demographic challenges will win the day. Through Tawaqquat we will offer Hay Group’s viewpoint on how business leaders can meet these challenges with practical action.

The Changing Face of Reward is the first in the series and explores the how employee expectations of reward have evolved as a result of the wider societal change, triggered by the financial crisis and regional political unrest.



1

Introduction

During our consulting projects in recent years, Hay Group has also witnessed similar and dramatic shifts in attitudes amongst employees with their employing organisations. In the same way that citizens are demanding from their governments; greater transparency, an end to endemic corruption, a right to be heard, better conditions, education and prospects; so employees are increasingly beginning to seek a new deal from their employers.

For the purposes of this article Hay Group refers to the Arab Spring not in terms of the overt civil protests that have been evidenced in some Middle East countries (which could be argued to be the symptom of deeper changes) but in terms of the shifting attitudes and expectations of citizens (and also expatriates) living and working in the region. It is this underlying change in attitudes that we see reflected in the workplace.

Our observations are suggesting that employees are prioritising change in both the harder and softer aspects of their employment deal. This includes; recognised two way channels of communication, transparent policies and procedures, contracts that stick, bonus payments and other aspects of reward not solely at Board discretion (or in the gift of the CEO), governance with teeth, meritocratic career and salary progression, demonstrably fair deployment of HR policy and procedure, relationships with their managers based on trust

and respect, more sophisticated leadership styles, an end to influence thorough favouritism or networks, and long term career development opportunities based on jobs that are designed to empower real contribution to organisational success. In summary, changes to culture, systems and processes backed up by meaningful change in leadership behaviour and HR practices.

Indeed anecdotal evidence gathered through a multitude of Hay Group client engagements suggests that this microcosm of societal change does not stop in the workplace but that the same socio-attitudinal change can be seen in true microcosm at the family level between teenagers (generation Z) and their parents!

This ongoing change has potentially profound implications for the psychological contract of employment in the Middle East: for the way employers attract precious talent, how employees are motivated, how engagement is driven, and whether talented or high potential employees are retained.

The new contract will rely less on a contractor relationship where loyalty is effectively seen as something that is bought and sold (and rewarded at discretion) based on obedience to authority or positional power and acceptance of coercive leadership styles and functional silos. Instead it will shift towards a relationship built >>

Since (or perhaps prior to) the commencement of what has become known as the Arab Spring, we have witnessed, and are continuing to witness, profound changes in citizens’ attitudes to, and expectations of, their governments.



2

1Hay Group. Success through trust. Hay Group: http://www.haygroup.com/uae/downloads/details.aspx?id=32263 [last accessed 01/12/2012]2 Schoer, W. Generations X,Y, Z and the Others, The Social Librarian: http://www.socialmarketing.org/newsletter/features/generation3.htm [last accessed 15/11/2012]3 Franze, L, Schofield, C. Great expectations: managing Generation Y: http://www.i-l-m.com/downloads/research_rpt_generation_y_july2011.pdf [last accessed 28/11/2012]

around factors including transparency of communication, new leadership styles and behaviours, collaborative working and participative leadership, fairness based on objective differentiation of contribution (against openly declared criteria) and longer term career horizons.

Whilst we have observed this shift in attitude across all age ranges, the group that appears most affected is the younger members of the working age society, generation Y. This group has become the demographic most heavily targeted by many employers, especially in the context of the demands of ambitious nationalisation programmes. However it also remains the case that the greatest share of most organisations total spend on employment goes to the older generations X and the Baby Boomers who between them still dominate the middle and senior ranks. This represents something of a conundrum in that any major change to total reward strategy should enhance the appeal to generation Y as well as meeting the demands of older employee demographics. Consequently it is useful to take

account of how the psychology of motivation and reward can help in developing an effective total reward strategy. Especially when trying to motivate and engage a workforce, some of whom “are most interested in working for companies that offer work-life balance, inspiring colleagues, and good references for their next job.” (Hay Group, 2012)1

It is worth recapping some of the attributes of the generation Y workforce. A demographic that was raised through a period of rapid transformation in communication technologies, “they are tech savvy, sophisticated, and typically resistant to traditional marketing approaches and sales pitches”2. Generation Y are “less brand loyal, highly flexible, and change their communications media and habits frequently. They expect; autonomy and empowerment in their work environment, rapid reward and status advancement, a coaching relationship with their manager, good work-life balance and are open to frequent changes of employer”3. This is the new generation of National graduates that employers must reach out to whilst continuing to engage their existing workforce.



3

The greatest share of most organisations total spend on employment goes to the older generations X and the Baby Boomers who between them still dominate the middle and senior ranks.

“”

The psychological contract in the Middle East

The psychological contract can be defined as the expectations between two parties, employee and employer, of what their mutual obligations are to each other.

Many of these obligations will be informal and imprecise: they may be inferred from actions or from what has happened in the past, as well as from statements made by the employer, for example during the recruitment process or in performance appraisals. Some obligations may be seen as ‘promises’ and others as ‘expectations’. The important thing is that they are believed by the employee to be part of the relationship with the employer.

The psychological contract can be distinguished from the legal contract of employment. The latter will, in many cases, offer only a limited and uncertain representation of the reality of the employment relationship. The employee may have contributed little to its terms beyond accepting them.

The psychological contract on the other hand looks at the reality of the situation as perceived by the parties, and may be more influential than the formal contract in affecting how employees behave from day to day. It is the psychological contract that effectively tells employees what they are required to do in order to meet their side of the bargain and what, in return, they can expect from their job.

It is in the nature of this inferred contract that we have seen significant change in the region in recent years. In the context of the above, the ‘expectations’ of employees are changing and to an extent (see 5 below) the ‘promises’ that employees offer are also changing, partly as a direct response to the changing expectations of employees, and partly due to other factors impacting the proposition that employers have found it necessary to offer.



4

Implications of change for human resources management

4 Hay Group, World’s Most Admired Companies: http://www.haygroup.com/uk/best_companies/index.aspx?id=2368 [last accessed 22/10/2012]5 Hay Group, Standing Out: https://www.haygroup.com/uae/register/index.aspx?p=%2fuae%2fdownloads%2fdetails.aspx%3fid%3d28941 [last accessed 07/12/2012]

TransparencyThe availability of information and effective communication channels that can be used in an environment of trust. “That which is not understood cannot add value”.

FairnessDecisions based on assessment of merit using openly declared criteria (often including a combination of; contribution, performance, potential and loyalty).

Consistency The systematic, objective, openly defensible application of policies, processes and procedures.

VoiceThe opportunity to make an active contribution to decision making, to contribute to shaping the nature of the workplace and to the development of the organisation’s vision, values and goals.

Longer term relationship

Infrastructure to enable and encourage a longer term career based relationship.

Empowerment and job design

A positive climate that makes optimal use of everyone’s abilities and jobs designed to enable every employee to contribute, and where appropriate leadership styles are deployed in different situations.

GovernanceA powerful and effective monitoring and control process able to intervene as necessary to ensure the appropriate deployment of policy and practice. A key instrument in establishing confidence in the organisation.

Employers that do not recognise and respond to the changes discussed above risk losing the race to hire, develop and retain talent; especially given the relatively small pools of well qualified nationals available in many Middle East countries.

Adapting to changing employee expectations will require a transformation involving genuine recognition of the need for change from employers and their ownership boards, and careful planning of a roadmap forward with the understanding that

successful response involves serious, long term commitment to change management, not merely window dressing.

From our experience in the region and our recent research including, “Most Admired Companies”4 and “Standing Out – what differentiates the best leaders?”5 we can begin to identify some principles that should steer organisations’ responses to attitudinal change.



5

These principles have important implications for Human Capital Management, not only in terms of the design of policy and process but also in its deployment. However in the past Hay Group has

seen an imbalance of emphasis on design over implementation. Just some examples of how these principles might apply to HR would include;

Talent management

•Designing structures that maximise the opportunity for individual jobholders to make a meaningful contribution to the organisation

•Developing long term career planning processes for both employer and employee in partnership and translating them into practice

•Targeting the allocation of training and development resources based on clearly understood criteria i.e. merit, developing leaders abilities to deploy a range of styles appropriate to the prevailing situation

•Creating a coaching culture where feedback is freely offered and received

Resourcing•Presenting the employer brand proposition to candidates •Ensuring that contracts are clearly and unambiguously spelt out • Implementing objective selection and promotion criteria

Organisational development

•Communicating the organisation’s vision values and culture•Developing effective, trusted two way communication channels •Ensuring that leadership behaviours are consistent so as to encourage a

climate of trust in the workplace

Performance management

•Ensuring that the nature of target and objective setting is fair and consistent •Encouraging review processes•Managing the quality, consistency and justifiability of the year end

appraisals and the feedback and communication process

Reward (arguably the area of HR most heavily impacted by the changes discussed)

•Developing a reward philosophy and governance structure that is effectively deployed

•Placing emphasis on a total reward approach•Developing merit based salary review and progression systems•Ensuring robust and fair links to performance• Introducing bonus schemes that are open and transparent•Developing long term incentive plans that are consistent with the

organisations goals and which are trusted by executives



6

Motivation and reward in the current context

Psychological motivation theories can be helpful in our appreciation of the impact on employees of the way we approach the design and implementation of reward strategy and practice.

The early theories of Maslow (hierarchy of needs) and Herzberg (two factor theory) have long suggested that a competitive level of fixed cash reward is a hygiene factor that is essential to meet basic needs and that if reward is mismanaged at this level it has the potential to demotivate and disengage employees (to act as a dissatisfier). This is not limited only to the level of guaranteed cash provided, but potentially to the way this aspect of reward is managed i.e. the deployment of the pay policy. This includes; how new joiner salary levels are set, how annual merit reviews are undertaken, how promotion related salary increases are determined, and how overall internal equity is managed.

However if we consider these early theories in the light of total reward, they also highlight the potential for such an approach to address many of the higher levels of motivation e.g. performance recognition and esteem, or career development opportunity and self actualisation. Herzberg suggests that these factors can act as positive motivators (satisfiers) and that therefore if we wish to maximise employee engagement we need

to pay attention to both the hygiene factors and the motivators – a total reward approach.

Later theories have more to tell us about how individuals develop an innate sense of fairness and how they respond to performance related or differential reward. Essentially, how they calibrate reward with performance (or any other objective criteria).

Equity theory6 proposes that an individual will consider that he is treated fairly if he perceives the ratio of his inputs to his outcomes to be equivalent to those around him (against whom he will benchmark this concept of ratio). Thus, all else being equal, it would be acceptable for a more senior colleague or one who is clearly a high contributor to receive higher compensation, since the value of his experience/contribution i.e. his input, is higher and he is therefore deserving of a higher outcome. The ratio however would be broadly similar. However, if an employee notices that another person is receiving more recognition and/or reward for their contributions when both have done a similar amount and quality of work, this has the potential to cause dissatisfaction. Similarly, if an employee perceives that another person is contributing less but is receiving broadly similar reward this too has the same potential to dissatisfy. In both cases the ratio between input and

6 Adams, J.S. 1965. Inequity in social exchange. Adv. Exp. Soc. Psychol. 62:335-343.7 Vroom, Victor H. (1964). Work and motivation. John Wiley & Sons, Inc.



7

output would be seen as unfairly differentiated. This dissatisfaction would result in the employee feeling underappreciated and could result in disengagement.

This theory has a strong relevance to our understanding of the potential causes of the success or failure of the implementation of performance cultures. Recently it has also been widely applied to the concept of total reward since the outcomes that contribute to a sense of fairness can include both cash and benefits but also intangible reward. In this context inputs are taken by Adams to include both traits (e.g. flexibility, determination, enthusiasm, creativity) and contribution (e.g. effort, hard work, service and loyalty). In a sense “perspiration and inspiration”!

Expectancy theory 7 proposes that employees believe that their efforts at work will result in the attainment of desired performance goals and that the employee will receive an anticipated level of reward if the performance goal is achieved. This reward may come in the form of a pay increase, bonus, promotion, recognition or other recognition of accomplishment. If the relationship between effort, achievement and reward is unclear, inconsistently applied and differentiated then the motivation effect is reduced or can even become negative.

This theory has direct relevance to the concept of the differentiation of reward based on performance and to evaluate attempts to introduce performance management processes and in particular the effectiveness of such processes in deployment. If a performance management process does not result in either;

i. The consistent discrimination of performance ratings based on fair criteria, objectively evaluated.

ii. The consistent generation of inputs that drive consistently discriminating reward decisions then employees’ expectations will be thwarted.

In such situations of inconsistent and therefore unfair performance management deployment, the impact on motivation can quickly become negative.

These and other prevailing theories of motivation have always offered much to our understanding of the relationships between motivation and reward. However, these ideas become particularly important in the context set out above, where we see significant attitudinal change occurring across every generation in Arab society and particularly amongst a generation of employees (generation Y) whose expectations already differed from the previous generation’s even before the broader all-generation changes in attitude that we have seen in recent years.



8

Trends from the Hay Group Engagement survey database

In order to better understand and to seek to validate the trends in employee attitudes that we have described above we have reviewed the Hay Group employee engagement and research data gathered between 2007 and 2011 within the GCC.

This database includes 22 organisations and 20,102 participant responses for the earliest point (2007) increasing to 88 organisations and 64,425 participants for 2011 in the GCC.

Each year in our database is a three year average, so our 2007 data is the average of 2005-2007 and so forth to 2011 (2009-2011). This has a smoothing effect on trends, however it also ensures that the

impact of national, regional or indeed global events or confounding variables have less impact on the year on year gaps.

Using this database we have conducted a thematic analysis clustering individual questions into themes that address some of the key issues described in this article and in particular the principles described in section 2*.

The results are interesting and suggest some progress by employers in addressing the need for change but also some areas where there has been no discernable improvement.

Female employees are 4% more critical towards senior leaders compared to their male counterparts.“ ”

*The psychological contract in the Middle East - page 4



9

The theme reveals an improvement year on year both overall and for each of the five individual questions. It explores employees’ attitudes towards performance assessment and the links between performance and reward (financial or career progression). The theme’s primary function is not the assessment of the performance management system, but the execution from day to day coaching, guidance, setting clear performance standards and rewarding performance.

The chart to the right shows the average percentage of positive responses to all questions relating to this theme over the period analysed. The gap between 2007 and 2011 show an 8.7 per cent increase in positive response, significantly we see that more than half the increase occurs between 2008-09 and 2009-10, where a 5.9 per cent increase occurs in the two year period.

These questions shown to the left are listed in terms of how positive the trend was for each individual question with the 2007 to 2011 trend gap listed following each question.

Not only are line managers getting better at developing people and coaching them towards improved performance, they are also getting better at handling poor performance. On a question asking employees the extent to which their employer deals with poor performance, we see an 11 per cent positive increase between 2007 and 2011.The impact is noticeable, and when asked to what extent employees are being motivated to contribute more than is required – go the extra mile – we see a 3 per cent positive increase between 2007 and 2011.

I. Performance management GCC organisations are getting better at managing performance and linking it with reward

Questions included (gap between 2007 and 2011)

The better my performance, the better my opportunity for career advancement +15%

Employees are held accountable for results (meeting commitments, quality of work, deadlines, etc.)

+10%

My line manager provides me with clear and regular feedback on my performance +7%

The better my performance, the better my pay will be +4%

58%

2007 2008 2009 2010 2011

59.8%

63.2%

65.7%66.7%



10

II. Management relationships Line managers within the GCC are building stronger trust relationships with staff

This theme explores attitudes towards the relationship between employee and their manager. Again we see a positive trend (+5.8 per cent). However if we segmented the data by gender it was interesting to note that this trend was only positive for men. For female respondents there was no positive trend.

It is however worth noting that we year on year see a decline in the trust relationship between senior leaders/executives and staff within the GCC, where the trend show a 2 per cent drop between 2007 and 2011. Female employees are 4 per cent more critical towards senior leaders compared to their male counterparts.

III. Transparency Employees are looking for a greater ‘meaning’ in work and to have a better and deeper understanding of their role and how it fits into the big picture

For this theme, which explores availability of information and line of sight to organisational goals, the trend was negative, the percentage of positive employee responses has actually declined consistently year on year. This suggests that staff within the GCC have an increasing need (to which employers are not responding) for a transparent and open management style, where they understand their part in delivering business success and how they can contribute.


Being accessible/available when you need him/her +8%

My immediate supervisor encourages teamwork and collaboration +8%

I can trust my immediate supervisor +4%

My immediate supervisor provides me with recognition or praise for good work +4%


I have a good understanding of my department’s, or function’s, goals and objectives

-7%

Keeping employees informed about the state of business (business results, plans, etc.)

-6%

I have the information I need to do my job well -4%

I understand the relationship between my job and this company’s strategy and goals

-3%

58%

2007 2008 2009 2010 2011

59.8%

63.2%

65.7%66.7%

74%

2007 2008 2009 2010 2011

71.4%

68.8%68.3% 68.2%



11

IV. Job design Employees are looking for greater challenge and more interesting work

The data and some of the key findings from the year on year GCC employee engagement and research data, suggests that organisations are taking nepotism or favouritism seriously, and are focused on creating a fairer workplace where employees are rewarded for their effort and performance. Line managers have understood the importance of building trust relationships with staff, and how it fosters engagement and improves the extent to which their teams are willing to go the extra mile.

However, not surprisingly, with a more secure and stable work-place, where it matters less who you are, and more how you perform - people are looking for ‘more’. GCC employees are increasingly looking towards a clear direction and future from their senior leaders. They are looking to understand their own job in the context of the business performance, and grow into more challenging and interesting roles. In a

Maslowian sense, GCC employees are moving up the ladder and increasingly looking for self-actualisation and meaningful experience in their workplace.

In some areas organisations are making good progress, in others the trend is less positive. It is unlikely that organisation’s policies and practices are getting worse but in the context of a more demanding workforce it is not sufficient to stand still, in such a context to stand still is to go backwards.

From this research and our experience in a wide variety of client engagements, it is very plain to us that it will be those organisations seeking to address change across all of the principles identified in section 2* (even the most intractable) and through this create a robust employee value proposition, which will win the race to attract, engage and retain talent.

This theme explores the extent to which employees feel their job is meaningful and provides satisfaction and preparation for personal development. Again, a negative trend albeit there are signs that this may have reached a plateau in 2011.

In such a context to stand still is to go backwards.“ ”

69.6%

2007 2008 2009 2010 2011

69.4%70.6%

72.4%

75.6%


My job provides me the opportunity to do challenging and interesting work -9%

I am satisfied with the opportunity to learn new skills and develop new talents -6%

Satisfaction with your job - the kind of work you do -4%

*The pyschological contract in the Middle East - page 4



12

What differentiates the successful employers?

In what is a rather mixed picture to date there are exemplars in the region that stand out. They have tackled the low hanging fruit but are also addressing the more difficult themes and principles.

Across-the-board, state sponsored salary increases have done little for the development of organisational performance cultures (where the guaranteed element of pay increases the impact of variable increase based on performance is diminished) and have de-emphasised the importance of total reward whilst having the potential to escalate inflationary pressures in local labour markets. However, given the latest resolution from the Abu Dhabi Government announcing increased controls on state sector salary scales and incentive plans8, we may be seeing an end to headline grabbing salary increases. Consequently Hay Group anticipates a shift of emphasis in the reward agenda for many organisations in the region.

Indeed in our studies of the World’s Most Admired Companies (with FORTUNE magazine) we see that this agenda is already well advanced. These companies generally pay lower base salaries than their peers, yet get more from their people. On average, WMACs pay approximately 5 percent less in base pay for management and professional roles than other organisations. One of the key reasons why WMACs end up paying less than competitors is that they do a much better job of leveraging total rewards. They are better at getting their people to understand their value, linking them to performance and providing their managers with the tools to use them more effectively. WMACs also find a way to make pay increases mean

more, as they typically provide their outstanding performers with an increase that is at least double that of the average performer. This is a far higher level of differentiation than is typical in the region.

In addition to our WMAC study we can reference individual clients with whom we have had long term relationships;

A logistics company client has a clear engagement strategy, putting its human assets on top of its executive agenda, with a philosophy of empowering its’ people to perform at their best. This is solidified through an operating model that is intended to ensure that every job has a clear and valuable contribution to make, where people can see how they and their role fit into the whole. Accountabilities are clear and so are personal objectives, nothing is fudged and ambiguous statements are avoided. Where a job has financial accountability (sales, budgets, cost impact etc.) this is stated and quantified. This structure provides a clear line of sight for each employee to their role and contribution in the organisation, and how each person or unit relies on other people or units to succeed. It makes for ease of performance management since the performance criteria are clear and it ensures that employees have a strong sense of the importance of their roles to collective success of the organisation.

A further example is where UAE bank comprehensively overhauled its total reward strategy and as a result recognised the need to shift from a “cash is king” culture to one where employees will be educated and encouraged through ongoing communications to

8 Resolution number (2) 2012 of the Executive Council President



13

value every component of the total reward offer. In this company performance differentiation now ensures not just that high performers receive appropriate rewards but also that weak performers are identified and their reward reduced accordingly; a shift towards true differentiation across the performance spectrum.

One thing that tends to set these and other similarly successful organisations apart is that they tend to rely less heavily on benchmarks to justify changes to their

HR policies. Instead they recognise that benchmark data is useful intelligence but that to win the race for talent they have to take some initiatives and innovate.

Such clients recognised that, like many of the WMAC’s, they need to be early to market in some aspect of their total reward package if they are to differentiate their EVP. This approach challenges the prevailing paradigm in the region where benchmark data is frequently regarded as essential to justify change.

What typifies the less successful organisations?

In our experience working across the GCC, we often see organisations that fail to leverage their human capital potential.

In a recent case study for a financial institution within the GCC where business performance was suffering in parallel with an increasingly disengaged and frustrated workforce, four key factors stood out as significant. Whilst pay was identified as slightly above market, and overall the organisation was offering strong job security, benefits and clear policies and procedures, employee engagement and loyalty especially at middle grades was below the market norm by over 40 per cent.

The resulting outcome was an organisation, where the trust relationship between leaders and employees’ had broken down – in effect, the leadership had a no confidence vote with nearly 70% of staff not trusting their own senior leaders.

Clear direction

The organisation lacked a shared vision and direction, frustrating staff who felt they lacked context and broader understanding to effectively make day to day decisions – the degree to which they and their teams were empowered to execute strategy.

Transparency

There was a distinct concern from other staff and managers that the organisation was not open and honest in sharing good or bad news with staff.

Two-way communication

An unwillingness to listen to communications from the line, especially if it was bad news – or take on board constructive suggestions or ideas on how to improve things from staff.

Fair use of policies and procedures:

An absence of true commitment towards rewarding performance and offer equal opportunities to all staff.

Key learnings from a financial institution



14

Implications for HR and reward

To meet the changing expectations of National employees and in particular of the generation Y demographic, employers will need to conduct comprehensive reviews of total reward not just at the level of policies and practice, but starting from a strategic perspective.

To address this we propose that;

1 The start point must be to understand the organisational strategy and goals and to identify specifically how the total reward offer needs to be configured to best enable the delivery of those goals.

2 Adopt a clear employee engagement strategy aimed at enhancing the overall employee value proposition

3The organisation must next develop a set of reward principles which encompass each of the main themes that are required to achieve the desired state and then to develop a detailed set of measures (tests) against which to audit the current offer and to conduct a gap analysis.

4 An absence of true commitment towards rewarding performance and offer equal opportunities to all staff.

5

The audit should not ignore issues of affordability, no organisation can afford to be a market leader in every aspect of total reward, it is necessary to make informed choices. However a review of key financial ratios and return on reward against competitor or benchmark organisations can provide valuable insight into the current levels of efficiency of the total spend on reward.

6 From the strategic review a roadmap should be developed, setting out the desired state and the means of achieving it.

7 The review will require sign off at the highest level. This is not just an HR issue but one that needs buy in from the most senior leadership of the organisation.

8 Similarly employees need to understand what to expect, once the strategy review is signed off an employee communications programme should be a key priority.



15

Whilst conducting such a review, in our experience, it is often helpful to be mindful of the following points;

1

The need to ensure a balance between emphasis on cash and other elements of reward, both tangible and intangible.

Segment employee groups by some simple criteria (gender, age, technical/support as appropriate) and review whether the current offer fully addresses the expectations of key employee groups as well as target demographics. Are there gaps in the non cash reward that is offered (benefits, recognition, career development etc,) for any key segment? Are the existing elements of the offer well understood, appreciated and utilised by the intended recipients? What drives overall employee engagement and retention within your organisation?

2

Review reward management policies and their deployment to ensure that they are based on objective assessment of merit.

In this aspect it is very much a case of ‘not what you say but what you do’. Is performance objectively linked to reward and are there further opportunities to strengthen the link e.g. performance linked benefits? How is the salary review process managed and are the criteria consistently applied? How well communicated are reward management policies and do employees have a clear understanding of how contribution is linked to reward? Check how many ‘exceptions’ to the rules exist or whether there is substantial inequity between job size and pay. Ask whether this is an indicator of ineffective reward management.

3Review the performance management process to ensure it is effective and reliable.

Review previous year’s ratings and question how reliable they are. Could key employee decisions be based on these ratings and can they stand up to open scrutiny? Do objectives and KPI’s consistently reflect departmental goals and are they, broadly speaking, equally stretching for all? Do employees buy into their objectives? Is there a well deployed coaching and review process in place? Are final outcomes and ratings discussed and agreed and do they discriminate consistently and sufficiently on the basis of actual performance? Do the ratings link into salary review, succession planning, promotion decisions and recognition of high performers?

4Ensure that appropriate incentive plans are in place and are understood and valued by participants.

It has often been observed that if a component of reward is not understood by the recipient then it cannot be effective. This is particularly true of bonus plans. Is the existing plan entirely discretionary, in which case it is likely to be an ineffective means of incentivising employees. Assuming plans and scheme performance criteria exist, are the criteria and rules widely communicated to participants? Is progress against targets reviewed regularly so that participants know how they are tracking, both at the level of personal and organisational targets.

5Benefits; review the opportunity to introduce employee choice.

One thing is clear from our understanding of demographic and life stage difference, there can be no one size fits all solution to total reward. In some cases design or opportunity can be targeted on a particular group (as in the case of long term incentives for high potentials and key retention targets) but in other cases it is desirable to provide employees with the opportunity to exercise choice. Employee choice is one of the more intractable issues for reward in the Middle East, to date there has been little appetite to tackle the issue. But as a cost effective alternative to throwing ever more money into the reward offer, a gradual introduction of some benefit choice and flexibility should offer employers a chance to build a leading position in the competitive recruitment market and also begin to address the differing needs of various employee segments.

6Communicate a compelling career development offer.

As a key part of total reward it is vital to ensure that there is a career development process in place; career ladders, competency frameworks, targeted training and development opportunity, an objective internal promotion processes. Review how widely communicated and understood this is.



16

Conclusion

Employers have traditionally faced challenges in shaping their reward offer to their key target group, generation Y, whilst also meeting the expectations of existing employees.

Whilst there is a clearly acknowledged priority to compete for young talent, the majority of most organisations continue to have to invest the largest proportion of their actual reward spending on an older employee demographic. This creates a conundrum; how to appeal to the target group whilst still generating the optimum return from expenditure on existing employees. In the context of the far reaching changes in attitudes and expectations for which the Arab Spring has proved to be a catalyst, some employers may increasingly find that their traditional focus on cash dominated reward

propositions fall ever further behind the more sophisticated demands of the brightest and best talent in their target employment demographic whilst also increasingly failing to meet the changing expectations of existing generation X employees.

In response, if employers are to be competitive in attracting and retaining talent, they will need to understand what it is that employees want from their total reward contract (and not be afraid to ask if it is not clear) and in response to develop a holistic proposition based on a total reward approach. In addition they will need to review the deployment and implementation of their reward strategy to ensure that it is understood by all and that the reality genuinely matches the promise.

For further information please contact the authors:

John BranchHead of Reward Strategies - Middle [email protected] +971 (0)4 232 9555

Jan MarsliHead of Employee Engagement - Middle [email protected]+971 (0)4 232 9555

Africa Cape TownJohannesburg Pretoria

Asia Bangkok BeijingHong KongJakarta Kuala LumpurMumbaiNew Delhi SeoulShanghaiShenzhenSingaporeTokyo

Europe Athens BarcelonaBerlin BilbaoBirminghamBratislavaBristolBrusselsBucharestBudapest DublinFrankfurtGlasgow

HelsinkiIstanbulKievLilleLisbonLondon MadridManchesterMilanMoscowOsloParisPrague RomeStockholmStrasbourgViennaVilniusWarsaw ZeistZurich

Middle EastDubaiRiyadh

North America AtlantaBoston CalgaryCharlotteChicagoDallas

EdmontonHalifaxKansas CityLos AngelesMexico CityMontrealNew York MetroOttawaPhiladelphiaReginaSan FranciscoSan José (CR)TorontoVancouverWashington DC Metro

Pacific AucklandBrisbaneCanberraMelbournePerthSydneyWellington

South America BogotaBuenos AiresCaracasLimaSantiagoSao Paulo

Hay Group is a global consulting firm that works with leaders to turn strategies into reality. We develop talent, organise people to be more effective, and motivate them to perform at their best. With 86 offices in 47 countries, we work with over 7000 clients across the world.

With over 20 years experience in the Middle East, our locally based experienced professionals have a first hand knowledge of the Middle Eastern market and business culture which makes us uniquely placed to work with organisations in the region. For more information, please visit www.haygroup.com/uae

Documents

changing The reward - Hay Group · The Changing Face of Reward is the first in the ... required to do in order to meet their side of ... Decisions based on assessment of merit using