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MERCER
Contents
Page
Adapting reward to reflect the increasing complexity of public services 2
Using reward to support workforce transformation 6
The role of performance management and reward in engagement 9
Conclusions 14
MERCER 4
Large delivery organisations Smaller commissioning organisations
Jobs designed around professional groups Jobs designed around business needs
Reward for job size Reward for contribution
Unconnected with talent management Integrated with talent management
Emphasis on equal pay compliance Achieving equal pay compliance alongside flexibility
Each term and condition of employment dealt with in isolation
An integrated “Total Reward” approach to all terms and conditions
Complex and inflexible processes Pay decision making based on business needs, rather than process
The changing public service landscapeHow reward needs to change as local government adapts
Reward is central to the transformation journey
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Alternative talent and reward modelsThe characteristics of each model are summarised below
Specialist skills need to be developed within the organisation and long-term loyalty is required
Skills are readily available in the external market and long-term career opportunities within the organisation may be limited
Long-term career opportunities are available for those who develop within a defined career path
The job is flexible and broadly defined and the capabilities of the job holder are critical to the value created in the role
Talent characteristics
Incremental pay spine, with pay starting behind market and moving ahead of market with service
A single rate of pay for the job, aligned with the external market
A pay system that fits with the defined career path, supporting the development of the individual through that career path
Pay is varied by reference to the capabilities of the individual
Reward approach
5
1. Loyalty model
2. Market model
3. Career model
4. Dynamicmodel
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How the dynamic model operatesNew operating models require more focus on individual capability
6
Minimum Salary
High Performing – Non-Consolidated
50
55
60
65
70
Bas
e sa
lary
£'0
00 High Performing – Consolidated
Developing Range
Additional salary paid to consistently strong performers
Paid to exceptional performers, and not
consolidated into Base Salary
Individuals who are still developing into
their role will be paid in this range
The Rate for the Job paid for the
expected standard of performance
The illustration shows a Rate for the Job of £60,000. There is the potential to earn a further 15% of salary based on performance, of which 5% of salary may be consolidated into salary and the rest may be withdrawn if performance subsequently declines.
Below the Rate for the Job there is a developing range of around 10% of base salary.
MERCER 8
How simplified job design can support transformationThe benefits of improved job design Simplified job design:
- Supports with the shift from measuring job content (job evaluation) towards measuring individual capabilities and performance;
– Enables future changes and restructurings to be carried out more efficiently through the use of generic job descriptions, including using a job catalogue;
– Facilitates the process of transformation by enabling the move towards new employment contracts.
How changes to job design can support a transformation journey:
Initial changes to reward to bring this into line with the needs of the organisation
1 New roles and new appointments made on the basis of the new job design and reward approach
2 Changes made to existing roles to fit with the new organisation in line with transformation
3 New simplified organisational
design and reward structure
in place
4
MERCER 9
How to link reward directly with transformationAll employee “Gainsharing” plan
March April March June
On an annual basis the plan is set up to pay a target amount at the end of the performance year, subject to the achievement of a set of clear measurable Council-wide performance targets.
Actual payment varies depending on achievement against target.
Payment made based on an assessment of achievement of Council-wide targets following the end of the year, as agreed by a Remuneration Committee (or equivalent).
Payment could also be subject to a minimum standard of individual performance.
During the year there should be ongoing
communication of performance against
objectives to support the creation of a
performance culture
1
2
3
Start of performance period
End of performance period
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EvaluationDevelopment Performance Evaluation
PeopleDevelopment
Differentiates performance
11
Provides coaching and support for
personal development
The performance management debatePurpose paradox: development versus evaluation
11
Good performance management achieves the right balance between people development and performance evaluation
MERCER 12
Performance managementWhat should performance management do for you?
Improve performance – Individuals and organisation
Identify top talent – individuals and teams
Help people succeed – individually and collectively
Performance management should also be used to engage employees in:
Issues relating to organisational performance, and
How each individual contributes to that performance.
MERCER
Mercer research - 2013Management capability has the biggest impact on overall success?
13Mercer 2013 Global Performance Management Survey Report Copyright © 2013.
MERCER 14
Using performance management and reward in engagementWhat is needed to engage employees and enhance performance?
Clear objectives and expectations
Regular dialogue on actual performance and on progress made
RewardTraining and development
Performance measuremen
t
Career discussions
Integrated performance management, reward and engagement model
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Making changes to reward and performance managementComponents of the business case for change
16
Benefits/savings Risks A workforce engaged with the
performance agenda
Stronger long-term talent management and career development
Reduced future costs, moving away from the “one size fits all” approach
Increased capacity to recruit and retain high performing staff
An enabler for transformation supporting change and flexibility
Adverse employee relations impact
Costs of transition, including use of resources and relating to pay protection
MERCER 17
Questions for discussion
1. Which of the four talent models are most suitable for your workforce?
2. Should the same talent model be applied across the workforce?
3. Is there the capability to manage a different type of reward and performance model?
4. How should the reward system be adapted to support the transformation journey?
5. Can performance management be used as a positive engagement tool?
6. How strong is the business case for making changes and should this be a priority?
MERCER
Daniel Hibbert PrincipalMercer Tower PlaceLondon, EC3R 5BU
+44 (0) 20 7178 5520 +44 (0) 7557 031371
Contact details
© 2014 Mercer LLC. All rights reserved. The information and data obtained through the report are for information purposes only and are not intended nor implied to be a substitute for professional advice. In no event will Mercer be liable to you or to any third party for any decision made or action taken in reliance of the results obtained through the use of the information and/or data contained or provided herein.