The Value of a Total Reward Strategy...IHG Reward Philosophy IHG Reward Strategy IHG will drive high quality growth and financial returns for shareholders by attracting and retaining

© 2016 IHG

The Value of a Total Reward StrategyThe Past, The Present, The Future?

Nicos NicolaidesDirector, Compensation & BenefitsIntercontinental Hotels Group

May 2016

Private and confidential 1

© 2016 IHG

Agenda

• Introducing IHG?

• Total Reward Considerations

• DNA of Reward: Framework for Success

• Metrics and Engagement

• Communication Strategy

• Final Thoughts


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Let’s start with an Icebreaker …


Different groups of volunteers were asked to repeatedly drag a circle on a computer screen into box, recording how many times they did it in five minutes.

Source: The Psychology of Pay – People Management Magazine, October 2015

Group 1

They were paid $5 for their efforts

Group 2


Group Average

159

What was the Group 2 Average?

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What was the Group 3 Average?



Group 1


Group 2


Group Average

159

Group 3

Nothing, but they were told they were doing him

a big favour

101

© 2016 IHG

And the answer is …



Group 1


Group 2


Group Average

159

Group 3

Nothing, but they were told they were doing him

a big favour

101

168

© 2016 IHG

Introducing Intercontinental Hotels Group

• Listed on FTSE 100

• Over 5,000 hotels worldwide (although majority franchised).

• We manage over 700 hotels globally

• C&B cover over 100 countries for ‘Corporate’, ‘Reservations’ and ‘Hotel’ lines of business


© 2016 IHG

How is IHG/C&B structured?


Atlanta, USAMER Region12 countriesOffices in:Toronto, MexicoBrazil, etc.

Denham, UKEurope Region26 countriesOffices in Paris, Frankfurt, Moscow, etc.

Shanghai, GC Region4 countries(+ Beijing, Hong Kong)

Singapore, AMEA36 countries(+ Tokyo, Jakarta, Sydney, Dubai, Delhi, Bangkok)

Manila, Phil.Global Shares Services Team

© 2016 IHG

Before you start doing anything – set your strategy


IHG Reward Philosophy IHG Reward Strategy

IHG will drive high quality growth and

financial returns for shareholders by

attracting and retaining high quality

talent through:

- rewarding competitively

- incentivising superior individual

performance with meaningful

reward opportunities and

- ensuring reward promotes a

winning culture based on

engagement and collaboration

…to set IHG apart as a truly great

place to work

We benchmark ourselves against other

hospitality companies by location, size of

property and position such that:

• Target total direct compensation (base

pay + annual incentive + long-term

incentive) at or around median versus the

relevant talent market

• With flexibility to apply above median

market packages on an exceptional basis

for critical, high performing talent in key

markets

• Benefit provision targeted at or around

median of relevant market

Reward aligned to building capability,

development and career opportunities,

employee wellbeing, recognition, etc.

Execute under the realms of Total Reward

9

Compensation

Base Pay AllowancesVariable Pay/BonusIncentivesService Charge

Benefits

Retirement Healthcare/WellnessLife and other insurancesJob-related perquisitesVoluntary benefits

Development & Career

Performance ManagementLearning and & developmentCareer opportunitiesJob design/challengeMobility opportunities

Work Lifestyle

Organizational cultureWorkplace flexibilityWorkplace facilitiesInformation /communicationNon-financial/status recognition

Transactional Rewards

Ind

ivid

ual

Rew

ard

s Co

llective

Rew

ards

Relational RewardsThe bottom half is more likely to differentiate you from your competition

© 2016 IHG

Global versus Local


Base Salary/Allowances

Short Term Incentives

Long Term Incentives

Benefits

Int’l Assignees

Attract and retain talented employees with

right skills, behaviours, attitudes and values

Focus on priorities and reward individual

and team performance

Create sustainable value and align to

shareholders interest

Competitiveness, retention, re-enforce values,

wellness and culture

Move and develop capability. Right talent in

the right place to deliver our ambition.

GLOBAL philosophyLOCAL Surveys

GLOBAL Framework

GLOBAL Plan

LOCAL Plans

Managed by GLOBAL Team

© 2016 IHG

West versus East


At IHG we experience the following as you go from West to East:

• More emphasis on ‘Cash is King’ as opposed to Benefits

• More demands on career progression, job titles, etc.

But with globalization, the gap is closing …

© 2016 IHG

Mercer Framework: The DNA of a Reward Function

HRHR

FunctionFunction

DNA

FinancialUnderstanding

Understanding Management

Information

Process Management

Marketing

Business Performance

Driver analysis

Cross Functional Appreciation

Business and Functional

Governance

Leadership Concepts

Relationship management

Consulting and Facilitating

Change Management

Negotiation

Organisational Design and Analysis

Organisational Culture Assessment

Variable pay and recognition

schemes

Pensions and Benefits

Share plans

Non-financial rewards

Employment law, tax and other regulatory

influences on reward

Base salary structures

Benchmarking

Numeric literacy

Basic financial analysis

Job evaluation

Organisational Assessment

Reward DataManagement

Reward Policy Design

Perspectives on Reward

Management

MotivationTheories

Job Design

Leadership

Groups and Teams

Persuades senior management

InterpersonalSkills

Cost and ProcessAnalysis

Communication

Active listening

Technology Literacy

Customer Services Focus

Team Membership and Management

Project / VendorManagement

BusinessKnowledge

Business Engagement

Skills

Core Reward

Knowledge

CoreReward

Skills

Reward Education

CoreOperational Capabilities

RewardDNA

Mobility and expatriation

© 2016 IHG

Market competitiveness: where does IHG fit overall?


Prevalence

Goal: Compete

Some rewards are offered across

organizations and are therefore

expected by employees

Highly prevalent rewards may

differ between industries, job

functions, company ownership

structure, and other factors

Offering highly prevalent awards

assures that an employee will

receive similar rewards as from

competitors

Examples of highly prevalent

awards include retirement, health

benefits, paid time off and the

opportunity for advancement

Differentiation

Goal: Create Separation

Some employers choose to

differentiate highly prevalent

rewards by offering the reward in a

sophisticated / creative form

By differentiating rewards,

employers may stay a step ahead

of competitors’ offerings

Examples of highly differentiated

rewards include on-site childcare

facilities, paid career breaks,

sponsored study, industry

related benefits, and policies that

allows employees to “buy”

additional days off by donating a

day of salary to charity all driven by

employee demand

Innovation

Goal: Win

Innovative rewards are those that

drive progress in the Total Rewards

landscape by creating truly new

rewards

These rewards often consider the

specific expectations and

dissatisfaction around a particular

job function, industry or employee

demographic and strive to meet

this need in a non-traditional way

An example of innovative rewards

include Google’s 80/20 time

wherein employees are

encouraged to spend 20% of their

time at work pursuing projects of

their choice or creation

© 2016 IHG

Basic Advanced Leading Emerging

• Basic benefits (health, etc.)

are provided to employees

(based on standards

offered in the local market

and local legislation).

• Benefits policies and

guidelines are unclear to

employees

• Processes are ad hoc and

often ineffective in

processing basic

transactions (new hire,

qualifying life events)

• Benefits are sometimes out

of compliance

• Benefits (health, etc.)

are provided to

employees (based on

competitive standards

offered in the local

market and local

legislation).

• Benefits policies and

guidelines are clearly

defined and

communicated as part

of the overall reward

strategy.

• Processes are clearly

defined, consistent and

repeatable.

• Benefits are compliant

with government and

contractual

regulations.

• Cost effectiveness and impact of

benefit program on individual

uptake / satisfaction and business

financial performance is analyzed

and adjusted on a regularly

scheduled basis (e.g., annually).

• Industry benchmarked/competitive

benefits are offered to employees.

• Benefits changes are effectively

communicated and transparent to

employees.

• Benefits are coordinated with

finance to evaluate financial and

other risks.

• Benefits administration outsourcing

options are assessed and acted

upon.

• Relationships and criteria for

selecting benefits brokers,

consultants and vendors

established and clearly defined.

• Employee preferences are gathered,

tested and used as input to creating a

benefits menu, with resulting Benefits

investments made in the areas

employees value the most.

• Communication strategy, around

benefits and pensions is clearly defined

and well executed, including a strong

benefits brand; enrolment campaign;

online and interactive communications

vehicles (e.g. Online Total Rewards

statements) - allowing employees to

have complete understanding of their

benefits

• Employee Self-Service is utilized for

Benefits enrolment & administration

wherever possible

• Flexible benefits schemes are researched,

analysed and implemented if required .

The scheme will utilize supporting

technology and communication practices.

Benefits Management: Where is IHG now & we want to get to

Current Future

LeadingBasic Advanced Emerging

14

© 2016 IHG

You can’t manage what you do not measure

At IHG we run an Engagement Survey that includes the following two questions:

• “I get paid fairly for my job”.

• “The benefits I am offered are as good or better than other companies in this industry.”


© 2016 IHG

IHG has strong performance on perceptions of fair pay

How IHG employees responded to the question: “I get paid fairly for my job”.

High performing company norm

Service industry norm

“I g

et p

aid

fai

rly

for

my

job

”(%

agr

ee)

© 2016 IHG

Perceptions of competitive benefits also outperform external norms

How IHG employees responded to the question: “The benefits I am offered are as good or better than other companies in this industry.”

High performing company norm

Service industry norm

“Th

e b

enef

its

I am

off

ered

are

as

goo

d o

r b

ette

r th

an o

ther

co

mp

anie

s in

th

is in

du

stry

.”(%

agr

ee)

© 2016 IHG

Globally, there’s a correlation between benefits and engagement

Perc

epti

on

of

ben

efit

s

Engagement

Each diamond represents an individual hotel

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It shouldn’t end with your scorecard …

We offer all managers assistance with action planning through our resource guide.

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Here is the solution … (at least for IHG)

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Here is the answer … COMMUNICATION

Simply telling employees about the benefits package available to them.

Analysis of Manager’s Action Planning saw that of 101 hotel and teams worked on improving perceptions of benefits.

On average they saw an average improvement of in engagement of 14 points.

© 2016 IHG

Final Thoughts

My ingredients to being a successful practitioner/reward function:

• Knowledge: Subject Matter/Business & Company Acumen

• Speed of Execution: Setting up the processes

• Stakeholder Management (in particular at Senior levels)

• Communication/Education of Reward

Source: Benefex

© 2016 IHG

Any Questions?

Thank you


Documents

The Value of a Total Reward Strategy...IHG Reward Philosophy IHG Reward Strategy IHG will drive high quality growth and financial returns for shareholders by attracting and retaining