Employee Differentiation In Successful Rewards Management - ABF Compensation and Benefits Seminar

EMPLOYEE DIFFERENTIATION IN SUCCESSFUL REWARDS MANAGEMENTCase Study, Concepts and Debatable Ideas

Kenny OngCNI Holdings Berhad

www.myCNI.com.my www.OOBEY.com

Background & Philosophy

The anchor for all decisions

About: CNI

1. 19 years old

2. Core Business: MLM

3. Others: Contract Manufacturing, Export/Trading, eCommerce, F&B Cafés

4. Malaysia, Singapore, Brunei, Indonesia, India, China, Hong Kong, Philippines, Italy, Taiwan, Oman, United States

5. Staff force: ± 500

6. Distributors: 250,000

7. Products: Consumer Goods and Services

Background: The Four Desperates

1. Desperate Competition

2. Desperate Consumer

3. Desperate Achievers

4. Desperate Changes

The 51.28% Theory

• Resign = Push + Pull > 51.28%

• If staff is Happy:=> 0 + Pull > 51.28%

Philosophy

Ultimate Objective of Marketing: “Get more people, to buy more things, more frequently, at higher prices.”

Sergio Zyman

“Retention and Loyalty are useless if No Conversion is happening.”

Philosophy

“Retention and Loyalty are useless if No Conversion is happening.”

“Retention and Loyalty are useless if No Performance is happening.”

Philosophy

Loyalty is misleading…

• Heavy Consumption ≠ Loyalty

• Loyalty ≠ Heavy Consumption

• Good Performance ≠ Retention

• Retention ≠ Good Performance

A. Background & Philosophy

Principles HR Philosophy

1.Equal / Fair

2.Happy / Productive

3.Hire Low, Train High

4.Performance vs Potential

5.Retention / Engagement

How “Differentiation” got started

Succession Planning (Business Continuity)

Talent Management

Differentiation

Performance Management System

Budgeting + Planning

Business Model

Targeting: Identify and Attract

• Who are your Talents?

: A Talent for others does not mean a Talent for you

Group I

(Talent Pool)

2 3 4 5

POTENTIAL• Identify

Group I

(Talent Pool)

Group II

( Potential)

Group III

( Performance)

Group IV

(Counseling)

2 3 4 5

**Additional Categories

Definition of ‘Premium’ staff

1. Specially selected from the TP.

2. They have in addition, the following attributes:

a. High-profile in the field or industry

b. Loyalty proven

c. Proven high work-rate and great attitude

d. Undeniable contribution and efforts

e. Highly looked upon and respected by most staff

f. Ability to multi-task and assist in various areas

g. Key people in CNI’s Succession Plans

**Additional Categories

Definition of ‘Specialist’ Staff

1. Has competencies (skills & knowledge) in a particular professional field of work.

2. A staff is deemed to be a Specialist when all the following occurs:

a. The particular Competency (Skills or Knowledge or both) is highly required by CNI

b. Supply for the competency in the market is low but demand is high

c. The competency is difficult to learn, transfer and/or duplicate

Retention

Experience Swing Ex

Oppose

Retention 1: Experience

Loyalty = Experience vs. Expectations

Solution Strategy: Talent Management Plan

Loyalty 1: Experience

• Talent Management Plan

PhilosophyOJT, Mentoring, Big-5, LP, PDP, SDP, Projects,

P/P Grid, SP Table, PDP, Premium,

Q12, C&B, ACDP, SCL, Transfers, Events, Recognition

P/P Grid, Q12, PA, SDP, SP

Development

Motivation

Selection

Evaluation

Loyalty 2: Swing

Loyalty = Best alternative at the current moment until I find another alternative

Solution Strategy: Improve your Talent Management Plan, Try Your Best, or Live with It

Loyalty 2: Swing

Swing Talents are “loyal” because:• Individual Relationships• Convenience (at that point in time)• Contractually tied-up• Direct Incentives*• No better alternative• Subordinates• No known alternative• CV friendly

Dangers of Direct Incentives

1. lessen internal motivation, 2. switch to mercenary mode, 3. do something and do not do something else, 4. bribe and fraud culture, 5. easier for competitors to recruit, 6. lessen teamwork & helpful culture, 7. less and less impact for same value, 8. mockery of base salary and employment

contract, 9. rebellion from non-incentivised staff, 10.end up incentivising everyone for everything?,

What drives Reward?

The driving force behind compensation and benefits strategies

What drives our Reward?

Compensation & Benefits

ValuesStrategy

Alignment & Consistency

• Mamak stall

Alignment & Consistency

"They are the most innovative"

"Constantly renewing and creative"

"Always on the leading edge"

"A great deal!"

Excellent/attractive price

Minimal acquisition cost and hassle

Lowest overall cost of ownership

"A no-hassles firm"

Convenience and speed

Reliable product and service

"Exactly what I need"

Customized products

Personalized communications

"They're very responsive"

Preferential service and flexibility

Recommends what I need

"I'm very loyal to them"

Helps us to be a success

Product Leadership

OperationalExcellence

CustomerIntimacy

Operational Excellence(low cost producer)

Ref: The Discipline of Market Leaders, Michael Treacy & Fred Wiersema; 1995

Product Leadership(best product)

Customer Intimacy(best total solution)

Alignment & Consistency: Market Disciplines

The McPlaybook*

Make it easy to eat• 50% drive-thru• Meals held in one

Make it easy to prepare• High Turnover• Tasks simple to learn

& repeat

Make it quick• “Fast Food”• Tests new products

for Cooking Times

Make what customers want• Prowls market for new

products• Monitored field tests

*Adapted from: Businessweek , Februrary 5th 2007

Operational Excellence

• Competitive price

• Error free, reliable

• Fast (on demand)

• Simple

• Responsive

• Consistent information for all

• Transactional

• 'Once and Done'

Operational Excellence

• Competitive price

• Error free, reliable

• Fast (on demand)

• Simple

• Responsive

• Consistent information for all

• Transactional

• 'Once and Done'

Customer Intimacy

• Management by Fact

• Easy to do business with

• Have it your way (customization)

• Market segments of one

• Proactive, flexible

• Relationship and consultative selling

• Cross selling

Customer Intimacy

• Management by Fact

• Easy to do business with

• Have it your way (customization)

• Market segments of one

• Proactive, flexible

• Relationship and consultative selling

• Cross selling

Product Leadership

• New, state of the art products or services

• Risk takers

• Meet volatile customer needs

• Fast concept-to- counter

• Never satisfied - obsolete own and competitors' products

• Learning organization

Product Leadership

• New, state of the art products or services

• Risk takers

• Meet volatile customer needs

• Fast concept-to- counter

• Never satisfied - obsolete own and competitors' products

• Learning organization

Alignment & Consistency: Disciplines, Priorities, and KPIs

• Operational Excellence• Move know-how from top performing

units to others• Benchmark against best in class• Ensure operations training for all

employees• Use disciplines like TQM for continuous

learning to reduce costs and improve quality

• Customer Intimacy• Capture knowledge about customers• Understand customer needs• Empower front line employees• Ensure that everyone knows the

customer• Make company knowledge available to

customers

• Product Leadership• Reduce time to market• Commercialize new products fast• Ensure that ideas flow• Reuse what other parts of the company

have already learned• Ensure there are multiple sources of

funding

Business Situations vs. HRM and their impact on C&B

Upturn Flat Downturn

Fight Complacency

Sharpen Edge

Keep Momentum

Conquer

‘Change’ mgmt

Reduce Fat

Continuity

Everyone Happy

Innovation

Acquire

Profits

Build momentum

Cash Flow

Talent Mgmt

Stack R&D

Early wins

Slow Down HR Costs

Top Talent focus

Stack Sales

Increase attrition

Values Driven C&B

1. Performance

2. Differentiation

3. Teamwork

4. Caring

Managing Performance through C&B

Values Driven C&B

1. Performance

2. Differentiation

3. Teamwork

4. Caring

• Beating a Dead Horse

Most Common Desperate Performance Improvement methods

1. Send for more Training

2. Enforce more Incentives (positive/negative)

Mager and Pipe

• Analyzing Performance Discrepancies

Alignment: 4-Wheels Model

Philosophies

Corporate

ObjectivePerformance Objectives

StructureResources

Leadership

Person

Incentive Problems

Problem with C&B in managing performance:• Most people are confused or unsure about

compensation tools• Some people misuse compensation tools

What to Pay?

• Pay for Service

• Pay for Job

• Pay for Competency

• Pay for Performance

•Competency- Knowledge

- Skills - Experience

•Problem solving - Complex

- Type of problems - Special Problems

•Responsibility - Authority

- Success/Failure - Freedom to act

Pay for Job

Performance and Incentives

1. Internal Equity1. Internal Job Rates

2. Performance differentials

2. External Competitiveness1. External Job Rates - Benchmarking

2. Demand & Supply

What’s the Difference?

• Increment

• Bonus

• Promotion

Compa Ratio Table

Use this if your company: • Pays for Performance, and • Pays for Job rates

Mid-Point = Mid Point of Pay Grade

Grade E2

Min RM2,000

MID RM2,500

Max RM3,000

Compa Ratio Table

< 0.7 ≥0.7 - ≤0.9

>0.9 - <1.1

≥1.1 - ≤1.3

Compa Ratio Table

< 0.7 ≥0.7 - ≤0.9

>0.9 - <1.1

≥1.1 - ≤1.3

Compa Ratio Table

< 0.7 ≥0.7 - ≤0.9

>0.9 - <1.1

≥1.1 - ≤1.3

3 9 7 5% 4 3

Compa Ratio Table

< 0.7 ≥0.7 - ≤0.9

>0.9 - <1.1

≥1.1 - ≤1.3

5 15 12 9 8 7

4 12 9 7 5 3

3 9 7 5% 4 3

2 6 4 2 1 0

1 4 2 0 0 0

Employee Differentiation through Relative Performance and Talent Management

Values Driven C&B

1. Performance

2. Differentiation

3. Teamwork

4. Caring

Employee Distinction?

< 0.7 ≥0.7 - ≤0.9

>0.9 - <1.1

≥1.1 - ≤1.3

5 9 8 7 6 5

4 8 7 6 5 4

3 7 6 5% 4 3

2 6 5 4 3 2

1 5 4 3 2 1

Employee Distinction?

< 0.7 ≥0.7 - ≤0.9

>0.9 - <1.1

≥1.1 - ≤1.3

5 20 15 12 8 5

4 18 12 9 5 3

3 9 7 5% 4 3

2 1 1 1 0 0

1 0 0 0 0 0

Employee Distinction

Group I

(Talent Pool)

Group II

( Potential)

Group III

( Performance)

Group IV

(Counseling)

2 3 4 5

SCL: Specialist Career Ladder

Associate Specialist (2)

Specialist (4)

Consultant (4)

Principal Consultant (1)

SCL: Specialist Career Ladder

General incentives & privileges:

a. Extra monetary incentive

b. Official Specialist / Consultant job title.

c. Higher external training subsidy limit by company.

d. Tie-pin or pin

e. Certificate

f. Additional benefits

General qualifying/re-qualifying criteria:a. Meet the competency criteriab. Performance min B, PEDc. Min. 40 training hr/yeard. Physical contribution: i Mentoring ii Write-up iii Speaking iv Multimedia recording v R&D publication / Thesis

Curse of the Bell Curve

‘A’ Staff

‘B’ Staff

‘D’ Staff

‘E’ Staff

‘C’ Staff

Swing Loyalty: Try Your Best…

1. Over Promote

2. Loans

3. Spot Bonuses

4. Block recruiters

5. The Spouse

6. Toys

7. Glorified Titles

8. Forced Ambassador

9. “Position” the competition

10.Sell the Dream

11.Give them a Best Friend

12.Internal Trainer

Managing Team performance – collaboration, innovation

Values Driven C&B

1. Performance

2. Differentiation

3. Teamwork

4. Caring

Managing TEAMS

1. Identify the right ‘levers’

2. Set KPIs for the right ‘levers’

3. Manage the ‘levers’ through performance systems

4. Balance Individual vs. Team priorities

5. Manage conflicting KPIs, but don’t eliminate them

TEAM levers

C.O.R.E.

Possible TEAM-type KPIs and incentives

Team Type Possible Incentive Type

Functional •Recognition for exceptional success (usually not in cash)•Individual role considered in normal merit increase process

Process •Team competencies recognised in pay for proficiency approach•Gainsharing or operational progress incentives

Project/ Time-based

•Recognition for exceptional individual contributions in spot wards or salary increases•Project / programme Phantom Stock or Profit Sharing

Network/ Partnerships

•Recognition for exceptional individual or team successes in spot awards or share increases•Venture profit sharing

Team Incentive Models

1. Fixed Salary Proportion (Fixed Personal, Variable Team)

Performance Incentive = Fixed Quantum + (Balance Sum In Bonus Pool ÷ Headcount)

2. Two-tier Multiplier (Variable Personal, Variable Team)

Performance Incentive = Personal Target Achievement + (Personal Target Achievement x Team Performance Multiplier)

3. Team Ratio Plan (Variable Personal, Fixed Team)

Performance Incentive = Team Ratio x Personal Target Multiplier

Values Driven C&B

1. Performance

2. Differentiation

3. Teamwork

4. Caring

What Next?

Many things to be improved

The Wish List

1. Health and Wellness

2. Work/Life Balance

3. Mobility

4. Innovation

• Product Leadership• Reduce time to market• Commercialize new products fast• Ensure that ideas flow• Reuse what other parts of the company

have already learned• Ensure there are multiple sources of

funding

Possible Innovation levers

Innovation Levers?

1. Add 10 value increasing properties to each product or service every 90 days

2. Reduce jointly held inventories and lead time required by 90% in 24 months

3. Reduce new-product/service development cycle time by 75% in next 2 years

4. Copy 10 ideas every 60 days form competitors and noncompetitors

5. Target % Revenue from New Products (previous 24 months) - start with 50%

Source: The Innovation Challenge, “Thriving on Chaos”, by Tom Peters; Alfred A. Knopf Inc.

Start Up & End Notes

The end of the Beginning

For Starting Up…

1. Get the Business Strategy right

2. Link C&B to Strategy (e.g. BSC)

3. Clarify the C&B Philosophy

4. Strengthen Performance Management System

5. Redirect Funds ($$)

6. Design simple processes

7. Develop and Reward focused on Talent groups

8. Communicate throughout

Problem with C&B…

“Good news for stockholders can be bad news for other

stakeholders.” Gregory Miller, Assoc. Prof., Harvard Business School.

In the end…

• Great Wall of China– humans are the weakest link– bad treatment of staff will lead to weak link i.e.

easier to bribe, easier to con, etc; – bad treatment examples: insulting, lose face,

broken promises, no dignity, public criticism, restructure without communication

Other thoughts…

1. Big matters/Small Matters

2. Differentiate of Die

3. Define “Talent”

4. No “Jerk” rule

5. Flat Structure?

6. The Jerk Boss

7. All aspects

8. Hire Strict

Summary

Segmented & Targeted

Attraction, Retention and Succession

STARS™

Thank You.

soft copy of slides: http://totallyunrelatedrandomanddebatable.

blogspot.com/

Employee Differentiation In Successful Rewards Management - ABF Compensation and Benefits Seminar

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