Presentation on theme: "Workforce Segmentation: Back to the Future?"— Presentation transcript:
1 Workforce Segmentation: Back to the Future? Duncan BrownDirector, Reward Services
2 Segmentation: what do we mean? Decentralisation?Differentiation?Discrimination?
3 Segmentation: a brief personal history By rank/classBy business unit/departmentBy geographyBy performanceBy job familyBy generationStarted at vauxhall there were different loos. Then international companies – job for acct frim to intro a pan european pay structure.Then central govt it was devolution of pay and breaking national pay structures. But that only raised issues of should there e more feedom and variation in depts – one study at every level they don’t give us enough freedon from above but don’t trust the people down below. Then (over) in an oil company see the pendulum swing from highly cent to totally decent but then couldn’t move around so used a framework to help us to consider rt balance. More recntly job families used by around 35% orgs to get better mkt fit. Some question if discrim inatory eg barrister. But job families as in government can be lateral unfiying eg lawyesr in govt, as well as divisive. Most recently looking at age factors
4 Some segmentation dilemmas Local authority: department head says he can’t afford to offer Council’s flexible working policies.Local authority: should we remain within national agreements?Local authority: should we remove market supplements in the current economic climate?Uk plc: should we bring our IT function back into the corporate pay and grading structure?Foundation NHS Trust: should we come out of AfC for hard-to-recruit staff groups, or for all staff?PLC: should we offer corporate car and benefits policies to a new joint venture in a different labour market?
5 Major Bank: Decentralise Start with a grand planAdopted a ‘classical’ approach to strategy developmentTop down, heavily planned and very rationalOrdered and rigidThe centre has all the answersWhat the offer should compriseWho should get whatWhat individuals’ pay adjustments should beFocus on payPay to get people inPay to keep peoplePay to increase performanceResultsheep dip package designreward done to youbroad brush decision-making
6 Resulting reward strategy DesignSpend much more time talking to peoplePlan for initiatives to adapt in their implementationIncorporate inherent flexibilityAim for locally owned changeIntroduce comprehensive flexible benefits packageDecision makingPay decisions made where the information isNo centrally dictated pay adjustments or matricesLocal decisions, central framework
7 Or maybe re-centralise: UK FS company Initially carried out an EPR and found:starting salaries tended to be higher for menpart-timers got lower performance scores than full-timersand men tended to be more likely to receive ad-hoc payments.Actions in response:Training recruiters and line managers to ensure only pay higher starting salaries when objectively justified.Starting salaries signed off by divisional directors, candidates’ previous salaries checked with their employers.Ensuring contribution, not service-related pay progressionImproving/extending EPR data and analysis
8 Changes in base pay structures Emphasis on high performanceDifferentiated market pressuresJob flexibilityEmphasis on costsLow inflationEqual pay
9 Job family approaches are increasingly common Around a quarter of organisations use them for evaluation/pay/career management purposesRange is from 2-40; average is 5-8Complete mixture in terms of basis of definitionKey Issue 1: The design reflects the main purpose in using them:clarify career progressionreflect market pay variationsKey Issue 2: Managing the balanceKey Issue 3: Balancing the number of “vertical” levels/grades with the number of horizontal levels/familiesKey issue 4: equal payToo ManyToo Fewinsufficient market flexibilitylack of local ownershipwhy do it?expensive to set upcomplex to administer/maintaingreater internal barriers/walls
10 The mix in reward policies and practices in one firm Policy issues e.g. market stance.LTISenior manager arrangements.PensionJob evaluation system.Pay structure.Performance appraisal.Recognition awardsPay rates for all staff recruited locally.Bonus schemes below grade xOperated at CentreDesigned Locally/ UnitDesigned at CentreOperated Locally/Unit
11 Where are the different aspects of reward managed in your organisation? Reward AreaPay strategy and policy goals;Job evaluation;Market definition and stance;Grade structure;Pay budgets;Pay increases;Bonus;Pay administration;Training/support processes;Pensions;Performance appraisal;Salary surveys.Operated at centreDeveloped at centreDeveloped locallyOperated locally
12 Rewards need to match the organisation structure Centralised, ‘Tight’BusinessStrategy based on integration and synergies.Predominantly internal growth.StructureCentralisedHRAll managers/staff on corporate contracts.Generally long service.Career orientation.Career and succession planning emphasisDiversified ‘Loose’Financially-oriented growth strategy.Growth by acquisition.Decentralised, small corporate office.Business-based contracts.Greater emphasis on external recruitment.Business-based HR and development.
13 Countervailing pressures to segment and to unify TechnologyGlobalisationEqual payCostDiverse workforceExternal market pressuresLocal business/customer ‘fit’The Choice society
14 The pros and cons Common Segmented Goods Reinforces ‘one emloyer’ Supports mobilityEfficientGood market/business fitLocal ownershipFlexibleBadsInflexibleLack local ownershipLacks market fitDivisiveLack of local capabilityExpensive/complex
16 Achieving the right balance At the organisational level and in business strategy:“An appropriate balance lies at the heart of effective management” . Prof Kets de Vries, ‘The Neurotic Organisation’“We want to be big and small, global and local” HSBC“Organisations need to be ambidextrous” Prof O’Reilly & Tushman“The successful organisations combine the hard and soft, the support and the stretch, the yin and the yang”.Prof Sumantra GhoshalMarketing: the McRice Burger, Intel and HSBC – tailored global campaigns“Advertisers are simultaneously exhibiting both the global reach and the local resonance of the brand…globalisation is associated with the new dynamism of relocalisation”Jackson and AndrewsIn HR and rewards.
17 Trying to get the best of both worlds in reward Unit specific rewardsGood market alignmentLocal ownershipFlexibleRestricts mobilityLimited local expertiseLess efficient to administerHighly uniform rewardsReinforces one firm behaviourSupports mobilityEfficient to runFair for similar jobsInflexibleLacks market fitLoss of ownershipIntermediate-Flexible and efficientBest of both worlds-Overly complex and confusing-Loss of responsibility/control
18 Reward Principles in one firm Strategy-driven- Use rewards more effectively to create strategic differentiationPay-for-performanceProvide incentiveReward high performanceVariable cost flexibilityMarket-alignedRecruitRetainTotal rewardsCreate engagementEnhance appeal and valueProvide personal choiceOne firmFair, non-discriminatory treatmentPrevent internal barriersOpen and honest- Adult/adult relationships- Promote understanding
19 The one-firm principle We use a one-firm approach, wherever possible:We have a firm-wide benefits packageWe will work towards common terms and conditions such as overtime and TOIL.We will consider and manage the relationships of the rewards for people with common skills and roles across the firm, such as support staff.We will have consistent eligibility criteria for variable pay across the firm and some consistency in its structuring.We recognise that we operate in some very distinct and divergent labour markets, and also the value of reinforcing team and business unit identity.
20 A “Mid Atlantic” Approach in a Scandinavian multinational “Our philosophy is to provide market competitive rewards to our employees worldwide through a flexible structure, addressing the needs for personalisation, empowerment and commitment”.Integrated Compensation Planning and Review System.Country pay values based on global methodology but local market data.Global stock target/values.Benefits principles eg DC pension, but cognisant of local practice
21 Example of the reward policy balance: a major oil company 1. Top 1500Common bands, but local market pay ranges;Common incentive approach (North America and ROW);Local benefits but common approach for international staff cadre;Executive development.2. Senior Managers (next 4000)Common bands with job evaluation, local ranges;Locally designed incentives to meet specific criteria;Local benefits but common approach for international staff;Executive development for high potential/international staff.3. Other StaffCore principles;Local management;
22 The balance in HR roles and responsibilities in one employer Types of EmployeesLevel of HR StaffSenior ManagementManagers and ProfessionalsStaffHR at Corporate HQDesign, operation and control of payGuidance via principles and advice. Agree to and audit actual systems.Guidance via principlesHR at Regional HQAdminister payDesign pay systemsOperate for HQ employeesAdvise and audit for country employeesAgree to and audit actual systemsHR at Country Operating LevelOperate and administer for local staffDesign systems, operate and administer
23 Total rewards can contribute to that balance Can act as ‘fog’ and ‘glue’By providing a common framework within which necessary variations between different parts of the organisation can operate.By allowing irrespective of organisation structure for the ultimate level of segmentation:individual choice.
24 Conclusions on the common/segmented reward balance “Organisations are finding it essential to introduce a balance between the standardisation of corporate practice – to communicate a common strategy and provide corporate ‘glue’ – while at the same time being responsive to the needs for differences in terms of cultures, values and market practice”. Professor Stephen Perkins
25 Reward strategy is all about managing the balance Organisation needsBusiness Strategy/ NeedsExternal PressuresMarketEqual PayLegislationInternal Employee/TU Needs/ ExpectationsReward StrategyLong Term AimsScale of ImpactImmediate DemandsEase of Entry/ChangeLocal Needs