Remuneration Strategy by Derek Hendrikz

2nd Annual Remuneration & Reward Summit

24-26 June - Premier Hotel OR Tambo

Hosted by Smart Linkwww.smart-link.co.za

Presented by

derek hendrikz

http://www.smart-link.co.za/

http://www.derekhendrikz.com/

Copyright © 2015

Derek Hendrikz Consulting

www.derekhendrikz.com



RemunerationStrategy





Define

Remunerate

Assess

Grade Work


Defining Work




Copyright © 2005 - 2011 Derek Hendrikz Consulting

process vs. projects


the paradox of strategy…


do what you did yesterday perfectly today…


• process induces repetition• repetition induces perfection• perfection induces performance


boldly do what has never been done before…


• projects bring about change• change brings about transformation• transformation brings about relevance


process math…


results action = 1


project math…


results action > 1


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










Process Environment

Team Opportunities

Customers

Risks

Relationships

Suppliers

Competitors

Stakeholders

PESTLE



Inputs Outputs

Process

Team Job Description



Process Inputs

Task Activity People

Money

Assets

Authority

Behaviour

Task Functionality

Time

Location



Process Outputs

Quality

QuantityProfit


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



Grading Work




the Context / Problem PMS Ratio

Context

Complexity

(Project-

based)

Problem Complexity

(Process-based)

Project-based

Perception-based

Process-based

Integrative



2500 BC Agricultural Age

1800 Industrial Age

1980 Information Age

1990 Machine Intelligence Age

20?? Nanotech Age

The velocity of change



The Point of Irrelevance

Point of Irrelevance

Mind-Set

Timewww.derekhendrikz.com


Pace 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.




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.



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.




Knowledge

Context Complexity

AccountabilityExperience

Problem Complexity 5 Factors

for Job Grading....




Job Content

Job Context

vs.


Hay Evaluation....


Job Content

Know How(knowledge & experience)

Inputs

Problem complexity

Process

Accountability

Output

Context Complexity

Environment

Risks

Opportunities


Know How....

• Knowledge Level• Experience Level




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



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



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



Problem Complexity....

• Thinking

Environment

• Thinking Challenge




Level

A. Highly Structured

B. Routine

C. Semi-Routine

D. Standardized

E. Clearly Defined

F. Generally Defined

G. Broadly Defined

H. Abstract

Thinking Environment



Level

1. Repetitive

2. Patterned

3. Varied

4. Adaptive

5. Unchartered

Thinking Challenge





know-how grading.

• E.g. a hotel bell-boy who applies routine

thinking and does repetitive process-

based work will be graded B1



Accountability....

• Freedom to Act

• Magnitude

• Impact




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


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)



Level Explanation A Ancillary

C Contributory

S Shared

P Primary

Impact





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



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…



Evaluation needs to match 3 Variable's....


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



Webbers Law....

the 15% rule


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



Internal Logic behind Webbers Law....




Hay Evaluation & Succession Planning....




Developing a Pay Grade Structure....


Internal Analysis…

• Analyse extent to which similar jobs receive similar pay.

• Analyse existing pay and compensation philosophy.

External Analysis…

• Benchmark pay structure with market.


Assessing Work




the Ability / Motivation ratio

Motivation

(Attitude)

Ability(Knowledge & Skill)

Team Player

Wrong Appointment

Hostage Taker

Super Star




Basic Performance Continuum

1 5 10 10+

Wrong Appointment

Develop Reward

Motivate



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




Performance Indicators....


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)



Performance

Willingness

OpportunityCapacity

Capacity to Perform


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





The degree to which an individual both desires and is willing to exert effort (motivation).

Willingness to Perform





Remunerating Work




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.









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








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…



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









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).



Practical Exercise (1)…

Company Expectations Employee Rewards



…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...



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



Bonus Plans – Two Basic Rules…

1. Fund the Pool

2. Split the Pool



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



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:




Recruiting & HR

Remuneration Strategy by Derek Hendrikz