Compensation Design Tips to Attract and Motivate Employees · Compensation Design Tips to Attract and Motivate Employees Presented By: This manual was created for online viewing

Compensation Design Tips to Attract and

Motivate Employees

Presented By:

This manual was created for online viewing. State specific information in this manual is used for illustration and is an example only.

mail: P.O. Box 509 Eau Claire, WI 54702-0509 • telephone: 866-352-9539 • fax: 715-833-3953email: [email protected] • website: www.lorman.com • seminar id: 400369

Sam Reeve, CCP, GRPPerformensation

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Compensation Design Tips to Attract and

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mail: P.O. Box 509 Eau Claire, WI 54702-0509 • telephone: 866-352-9539 • fax: 715-833-3953email: [email protected] • website: www.lorman.com • seminar id: 400369

Prepared By:Sam Reeve, CCP, GRPPerformensation

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Compensation Design Tips to Attract and Motivate Employees

©2017 Performensation

1

2

Presenting


Sam Reeve is a global certified compensation consultant (CCP, GRP) with 15 years of experience in Total Reward Strategies. He is an expert in broad‐based compensation and focuses his talents on enhancing performance through the effective use of incentive and recognition programs.

Prior to joining the firm, Sam has worked in the corporate compensation functions of notable firms such as BlackRock, McKesson and Automatic Data Processing (ADP).

Sam currently lives in Colorado and aside from his professional life, enjoys numerous outdoor activities with his 4 children and wife, Jessica.

Sam has a degree in Finance and Economics from California State University, Sacramento.

SAM REEVE, CCP, GRPExecutive Vice President

TF 1 877 803 9255 ext 702Office 1 415 625 3088Mobile 1 970 403 5775

[email protected]: SamReeveTwitter: @SamReeve3

Agenda

The Role of Pay

Fixed Pay Incentives

Variable Pay Incentives

Understanding Motivation

How to Design an Incentive Plan


3

The Role of Pay

Life

Fixed Pay

Pay for Knowledge Skills and Abilities

Often not the best pay element to reward performance

Short Term Variable Pay

Pay for Short Term Performance (STI)

A period of a year or less

Long Term Variable Pay

Pay for Long Term Performance (LTI)

A period of more than a year

Woohoo!

Incentive Plans can be designed for Fixed, Short Term and Long Term Variable Pay

OR

Non‐Cash Rewards (Recognition)

Recognition


Fixed Pay Incentives (aka Merit Pay)

Advantages Disadvantages

• Easier to Administer if no other incentive programs exist for participants

• Not a permanent driver of productivity

• Merit Pay can lead to entitlement behavior.

• Many regions suggest budgets that are too small to reward performance

• Base pay increases are a permanent, compounding cost to the company. It is difficult to reduce pay once it has been awarded.

3%

23%

3%

5%

7% 11%

7%4%


4

Variable Pay Incentives

Advantages Disadvantages

• Can be very effective if administered correctly

• Awards may increase or decrease with performance and budget

When business results are good, the variable awards can be significant and when business is bad the awards can be smaller therefore reducing costs and improving the bottom line.

• Employees are motivated to re‐earn variable pay each cycle

• Performance must be measured and the plan administered

Many companies have a hard time doing this correctly and efficiently

• The variable pay plan will need to change over time with the business



Extrinsic Motivation

– Money, Prizes, Awards

– Best when linked to or communicated in tandem with intrinsic motivators

– Successful technique to focus behavior

The External Drivers and Results of Success


5


Intrinsic Motivation

– Prestige, Respect, Sense of Accomplishment, Culture, Emotion

– Foundational and long‐remembered

– Skill Improvement

– Talent and Effort Validation

– Recognition amongst peers, industry or company leaders

The Internal Desire to Succeed


How to Design and Incentive Plan ‐ Approach

Discover what you truly need, thoughtfully design a solution, execute effectively with strong communication and modify as your business changes

Diagnose | Design | Execute | Adapt


6



Start Here





7







8

DIAGNOSISPHASE!

START WITH THE


DIAGNOSE STEPS

STEP 1 Establish a Cross Functional Team

STEP 2 Reaffirm Rewards Philosophy

STEP 3 Determine Guiding Principles

STEP 4 Diagnose Internal / External Influences

STEP 5 Create a Compelling Value Proposition

STEP 6 Gain Approval and Executive Sponsorship

Identify objectives, issues and describe solutions


9

DIAGNOSE

STEP 1: Establish a Cross Functional Team

Team to include:

Human Resources (HR Consultants, Training, Rewards)

Finance

Information Systems (HRIS, etc.)

Operations

STEP 2: Reaffirm Rewards Philosophy

How does your company view talent?

Are all roles critical to the companies strategic advantage?

STEP 3: Determine Pay for Performance Guiding Principles

What is the purpose of the incentive plan and what principles will keep us on track during the design and administration of the plan?


DIAGNOSE

STEP 4: Diagnose Internal / External Influences

Internal Influences: Understand factors within your company that have an impact on your business

Goals(KPI’s) / Business Strategy / Mission / Vision

Talent Strategy (strategic or tactical resource)

Talent Infrastructure (management structure, policies and practices)

Systems and Support (information, transparency and manager support)

HR Service Delivery Model

Take Inventory of Talent Sentiment and Rewards Programs

12 Pillars: Cultural Fit & Readiness

Radar Graph: Program Gaps


10

DIAGNOSE – Strategic Approach

12 Pillars Analysis

Interview key stakeholders in your business to provide a detailed evaluation of factors that impact your company's ability to attract, retain and reward talent.

Total Reward Radar Analysis

Provide and assessment of the Current State versus the Ideal State.

The analysis shows the potential of the company’s current talent programs.

Holes are discussed, prioritized and corrected.


DIAGNOSE

12 Pillars Analysis

Foundation for Success


11

DIAGNOSE

12 Pillars Analysis

Motivate


How we empowereach other to

succeed


DIAGNOSE

12 Pillars Analysis

Motivate

Vis

ion


Lead

ersh

ip

Dire

ctio

n

Tea

mw

ork


12

DIAGNOSE

12 Pillars Analysis

Motivate

Vis

ion


Lead

ersh

ip

Dire

ctio

n

Tea

mw

ork

Engage

How we work together for

success


DIAGNOSE

12 Pillars Analysis

EngageMotivate

Vis

ion


Lead

ersh

ip

Dire

ctio

n

Tea

mw

ork

Em

pow

erm

ent

Impa

ct

Per

sona

l Val

ue

Ful

fillm

ent


13

DIAGNOSE

12 Pillars Analysis

EngageMotivate

Vis

ion


Lead

ersh

ip

Dire

ctio

n

Tea

mw

ork

Em

pow

erm

ent

Impa

ct

Per

sona

l Val

ue

Ful

fillm

ent

Reward

How a company, customers and

coworkers share in success


DIAGNOSE

12 Pillars Analysis

Engage RewardMotivate

Vis

ion


Lead

ersh

ip

Dire

ctio

n

Tea

mw

ork

Em

pow

erm

ent

Impa

ct

Per

sona

l Val

ue

Ful

fillm

ent

Cul

ture

Dev

elop

men

t

Rec

ogni

tion

Com

p/B

enef

its


14

DIAGNOSE

12 Pillars Analysis

Engage Reward

Empowered Workforce

Motivate

Vis

ion


Lead

ersh

ip

Dire

ctio

n

Tea

mw

ork

Em

pow

erm

ent

Impa

ct

Per

sona

l Val

ue

Ful

fillm

ent

Cul

ture

Dev

elop

men

t

Rec

ogni

tion

Com

p/B

enef

its


DIAGNOSE


Perform a GAP analysis to shows the strengths and weaknesses of the current reward programs

Ideal State

Opportunities

Strengths


15

DIAGNOSE

STEP 4: Diagnose Internal / External Influences

External Influences: Understand factors outside the company that have an impact on your business

Regulatory / Political / Tax

Geographic / Cultural Practices

Economic / Labor


DIAGNOSE

STEP 5: Create a Compelling Value Proposition

Will the costs of development and administration of the plan be offset by the savings it will deliver?

Know your data

internal costs

competitive pressures

Anticipate the concerns

Tie to the pay philosophy and company objectives

STEP 6: Gain Approval and Executive Sponsorship

An Executive sponsor is critical to the programs success

Ensures strategic alignment

Will remove potential roadblocks (resistance from others)


16

The DESIGNPHASE!


DESIGN STEPS

STEP 1 Define Plan Participants and Objectives

STEP 2 Identify Metrics

STEP 3 Select Incentive Plan Type

STEP 4 Define the Plan Mechanics and Administration

STEP 5 Model the Plan and Transition Phase

STEP 6 Design Execution and Communication Strategy

STEP 7 Gain Approval

Draft plan, test design and finalize details


17

DESIGN

STEP 1: Define Plan Participants and Objectives

What areas of the business would benefit from an incentive plan?

Determine the Objectives that need to be Aligned to Achieve Overall Business Results

Consider a holistic approach

Cascade goals

Be aware of other department dependency and conflict


DESIGN

STEP 2: Identify Metrics

Identify Metrics/KPI’s that Correlate with Performance on Objectives

SMART Goal Framework

S pecific

Well Defined

Employees need to understand how to accomplish

M easurable

Goal can be measured accurately with progression

It is known when the goal is achieved

A greed Upon and Attainable

Participants agree the goal is attainable and important

Other stakeholders (departments, coworkers) understand goal and agree it is important

R ealistic

Recommended distribution for goal setting and attainment

T ime Based

Have a start and end date


18

DESIGN

STEP 2: Identify Metrics (continued)

Identify Metrics/KPI’s that Correlate with Performance on Objectives

Common Metric Types:

Financial

Productivity

Quality

It is often best to use quality metrics in addition to productivity metrics


STEP 3: Select Incentive Plan Type

Motivational (Carrot)

Incentives (STI and LTI)

Plan mechanics, metrics/goals and determined and communicated in advance

Payout varies with performance achieved

Bonuses

Reinforcement

Recognition

Cash (i.e.. Spot Bonus)

Non‐Cash

Sharing Plans

Profit Sharing

Gain Sharing

Goal Sharing

DESIGN

Compensation is Communication.

What are you trying to say?

Recognition

Life

Woohoo!


19

DESIGN

STEP 4: Define the Plan Mechanics and Administration

Performance Period

Consider your business cycle, objectives and performance metrics

Timing of Award Payout

Increase Line of Sight with frequent payouts

Pay as Soon as Possible


DESIGN

STEP 4: Define the Plan Mechanics and Administration (continued)Award Delivery

Cash

Stock

Non‐Cash Recognition ‐ Thank You (Public/Non‐Public)

Visit/email/Lunch from Senior Leader

News Article

Highlight at a Team Meeting

Trophy/Product

Perks Special Parking

Casual Dress Day

Massage/Yoga

Events (sports, golf, etc.)

Flex Time

Opportunity Training/Coaching

Coveted Role or Duties


20

DESIGN

STEP 4: Define the Plan Mechanics and Administration (continued)

Determine Award Levels at Target

External Job Value ‐ Conduct a benchmark analysis

Internal Job Value ‐ Consider the job’s value to the company

Pay Mix – Amount of fixed versus variable pay of total compensation


DESIGN


Determine Award Levels at Different Levels of Attainment

Trigger

Threshold Performance

Excellence / Maximum Award (cap)

Upside/Leverage – A multiple of target payout


21

DESIGN


Determine Award Levels at Different Levels of Attainment

Position in the Range

% of EEs in Each Quartile 20% 45% 30% 5%

Performance Rating (PR)PR

Distribution1st

Quartile2nd

Quartile3rd

Quartile4th

Quartile

5 Outstanding 10% 8% ‐ 9% 7% ‐ 8% 6% ‐ 7% 5% ‐ 6%

4 Exceeded Expectations 25% 6% ‐ 7% 5% ‐ 6% 4% ‐ 5% 3% ‐ 4%

3 Expected Improvement 40% 4% ‐ 5% 3% ‐ 4% 2% ‐ 3% 0% ‐ 2%

2 Some Improvement 20% 2% ‐ 3% 0% ‐ 2% 0% 0%

1 No advancement in KSAs 5% 0% 0% 0% 0%

Example: Merit Program for a Company without a Variable Pay Program

EE Current Quartile

Salary PR Increase Percentage

New Salary

1 Q1 $55,000 5 9% $59,950

2 Q4 $70,000 3 2% $71,400

3 Q3 $75,000 4 4% $78,000

4 Q2 $100,000 1 0% $100,000


DESIGN


Reward Program Administration

Human Assets

Technology, and

Related Costs


22

DESIGN

STEP 5: Model the Plan and Transition PhaseDetermine Plan Costs

Minimize unexpected results by calculating costs given various levels of performance

Best Case

Expected Case

Worst Case

Include costs associated with a transition to the new plan,

training and communication

Use numbers from the company’s financial forecast

Obtain Employee Feedback

Supplement your financial modeling with qualitative feedback from a high performing focus group


DESIGN

Compensation Design Tips to Attract and Motivate

Employees


23

DESIGN

STEP 6: Design Execution and Communication Strategy

Plan Execution Strategy

Immediate or Scheduled

Phased

Pilot Program

Training Strategy

Communication Strategy

Initial and Ongoing

Plan document

Consider channels preferred by demographic

STEP 7: Gain Approval

The EXECUTION

PHASE!©2017 Performensation

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EXECUTE STEPS

STEP 1 Build Administrative Infrastructure

STEP 2 Train Managers and Support Team

STEP 3Rollout Initial Messaging and Schedule Ongoing Communication Plan

STEP 4 Obtain Initial Feedback

Implement, communicate, motivate and manage


Culture and Strategy

Systems

Plan Execution

EXECUTE

STEP 1: Build an Administrative Infrastructure

Talent

Ensure you have the right number of trained administrators to successfully run the program

Systems and Procedures

Integrate or enhance existing systems

Establish process flows and policy

Reporting

STEP 2: Train Managers and Support Team

Train the Trainer sessions for Senior Leaders of plan participants

Cascade training to lower level management

HR support and supplementary training to ensure message consistency


25

EXECUTE

STEP 3: Rollout Initial Messaging and Schedule Ongoing Communication Plan

Initial Messaging

Coordinate messaging through multiple channels

Ongoing Communication

Establish annual budget

Create communication calendar

Integrate training and communication to new employee onboarding

STEP 4: Obtain Initial Feedback

Seek manager and employee feedback to gauge if additional efforts are needed


The ADAPTPHASE!


26

ADAPT STEPS

STEP 1Determine if Plan is in Alignment with Guiding Principles

STEP 2 Reevaluate Internal / External Influences

STEP 3Measure Employee Understanding and Plan Results

STEP 4 Propose Changes for the Next Cycle

Measure results, adjust to growing business needs


ADAPT

STEP 1: Determine if Plan is in Alignment with Guiding Principles

Revisit guiding principles and determine if the plan is meeting expectations

STEP 2: Reevaluate Internal / External Influences

Determine if plan adjustments need to be made given internal/external influences

Expanding the plan to new participants

Changing objectives and metrics

Enhancing reporting and administration


27

ADAPT

STEP 3: Measure Employee Understanding and Plan Results

A plan should be easily communicated and understood by employees

Verify effective onboarding training for new or transferred employees

STEP 4: Propose Changes for the Next Cycle

Business changes at an ever increasing rate

Performance cycles may become shorter

Seek to optimize the employee experience,

Maximize business objectives, and

Minimize administrative burden / costs


QuickSummary


28


Discover what you truly need, thoughtfully design a solution, execute effectively with strong communication and modify as your business changes



DIAGNOSE

12 Pillars Analysis

Interview key stakeholders in your business to provide a detailed evaluation of factors that impact your company's ability to attract, retain and reward talent.


Provide and assessment of the Current State versus the Ideal State.

The analysis shows the potential of the company’s current talent programs.

Holes are discussed, prioritized and corrected.


29

DESIGN

Compensation is Communication.

What are you trying to say?

Recognition

Life

Woohoo!


EXECUTE

Culture and Strategy

Systems

Plan Execution

Communication and Training

No plan will be successful without effective communication and training

Build and Administrative Infrastructure

Set up your programs to succeed by ensuring proper administration by trained professionals


30

ADAPT

Business changes at an increasing rate

Having the right plan at the right time is critical in ongoing business operations.

Evolve your programs to meet objectives

Seek to optimize the employee experience, Maximize business objectives, and Minimize administrative burden / costs


Confidential ‐ DRAFT

How can Performensation Help?

©2015 Performensation 59

Performensation’s team of experts are ready to leverage our extensive knowledge to tailor solutions for your organization’s unique culture and strategy. We focus on designing integrated programs that are unique, effective and cost‐controlled. Well‐designed programs are the most effective drivers of communication between a company, employees, and shareholders.

Performensation is a proven leader in compensation design. We understand that a program will not work if it is cost prohibitive, or cannot be easily communicated or executed. The strength of our work is in understanding your goals and culture and our application of practical yet innovative solutions.

CONTACT US TODAY AND BECOME MORE SUCCESSFUL TOMORROWToll free 877‐803‐9255 | Direct 415‐625‐3406

email: [email protected] | web: www.performensation.com

31

Performensation was founded in 2006 in response to the demand for more strategic and effective compensation programs.

Each of our projects incorporates four key elements. Each component must be carefully crafted to your unique goals and culture.

Vision: We understand where you are headed and have the skills to get you there. We are respected throughout the industry for our forward‐thinking perspective and our ability to execute on it.

Foundation: Long‐term solutions are based on evidence, not built on gimmicks or fads. They meet your current needs and allow for adjustments to organizational and market conditions. Your program’s foundation must reflect your company and the goals it is designed to support.

Design: A great program combines creativity with practicality. We utilize our broad and deep understanding of rules, regulations, processes and providers to ensure your program delivers high‐performance results. Our designs are easy to understand, compliant and effective.

Communication: Participants only value what they understand. Communication must be built in to every step of the process. We ensure that all program elements are relevant and make sense to your targeted audience.


32

Notes

Documents

Compensation Design Tips to Attract and Motivate Employees · Compensation Design Tips to Attract and Motivate Employees Presented By: This manual was created for online viewing