Presentation on theme: "The institute for employment studies Workforce Segmentation: Back to the Future? Duncan Brown Director, Reward Services."— Presentation transcript:
the institute for employment studies Workforce Segmentation: Back to the Future? Duncan Brown Director, Reward Services
Segmentation: what do we mean? Decentralisation? Differentiation? Discrimination?
the institute for employment studies Segmentation: a brief personal history By rank/class By business unit/department By geography By performance By job family By generation
Some segmentation dilemmas Local authority: department head says he cant afford to offer Councils 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?
Major Bank: Decentralise Start with a grand plan Adopted a classical approach to strategy development Top down, heavily planned and very rational Ordered and rigid The centre has all the answers What the offer should comprise Who should get what What individuals pay adjustments should be Focus on pay Pay to get people in Pay to keep people Pay to increase performance Result sheep dip package design reward done to you broad brush decision-making
Resulting reward strategy Design Spend much more time talking to people Plan for initiatives to adapt in their implementation Incorporate inherent flexibility Aim for locally owned change Introduce comprehensive flexible benefits package Decision making Pay decisions made where the information is No centrally dictated pay adjustments or matrices Local decisions, central framework
Initially carried out an EPR and found: starting salaries tended to be higher for men part-timers got lower performance scores than full-timers and 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 progression Improving/extending EPR data and analysis Or maybe re-centralise: UK FS company
Changes in base pay structures Emphasis on high performance Differentiated market pressures Job flexibility Emphasis on costs Low inflation Equal pay
Job family approaches are increasingly common Around a quarter of organisations use them for evaluation/pay/career management purposes Range is from 2-40; average is 5-8 Complete mixture in terms of basis of definition Key Issue 1: The design reflects the main purpose in using them: clarify career progression reflect market pay variations Key Issue 2: Managing the balance Key Issue 3: Balancing the number of vertical levels/grades with the number of horizontal levels/families Key issue 4: equal pay n insufficient market flexibility n lack of local ownership n why do it? n expensive to set up n complex to administer/maintain n greater internal barriers/walls Too Few Too Many
The mix in reward policies and practices in one firm Policy issues e.g. market stance. LTI Senior manager arrangements. Pension Job evaluation system. Pay structure. Performance appraisal. Recognition awards Pay rates for all staff recruited locally. Bonus schemes below grade x Designed at Centre Designed Locally/ Unit Operated at Centre Operated Locally/Unit
Where are the different aspects of reward managed in your organisation? Operated at centre Developed at centre Developed locally Operated locally Reward Area Pay 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.
Rewards need to match the organisation structure Centralised, Tight Business Strategy based on integration and synergies. Predominantly internal growth. Structure Centralised HR All managers/staff on corporate contracts. Generally long service. Career orientation. Career and succession planning emphasis Diversified 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.
Countervailing pressures to segment and to unify Technology Globalisation Equal pay Cost Diverse workforce External market pressures Local business/customer fit The Choice society
The pros and cons CommonSegmented GoodsReinforces one emloyer Supports mobility Efficient Good market/business fit Local ownership Flexible BadsInflexible Lack local ownership Lacks market fit Divisive Lack of local capability Expensive/complex
Building the balance
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 Ghoshal Marketing: 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 Andrews In HR and rewards.
Trying to get the best of both worlds in reward Highly uniform rewards - Reinforces one firm behaviour - Supports mobility - Efficient to run - Fair for similar jobs - Inflexible - Lacks market fit - Loss of ownership Unit specific rewards - Good market alignment - Local ownership - Flexible - Restricts mobility - Limited local expertise - Less efficient to administer Intermediate - Flexible and efficient - Best of both worlds -Overly complex and confusing -Loss of responsibility/control
Reward Principles in one firm Strategy-driven - Use rewards more effectively to create strategic differentiation Pay-for-performance - Provide incentive - Reward high performance - Variable cost flexibility Market-aligned - Recruit - Retain Total rewards - Create engagement - Enhance appeal and value - Provide personal choice One firm - Fair, non-discriminatory treatment - Prevent internal barriers Open and honest - Adult/adult relationships - Promote understanding
The one-firm principle We use a one-firm approach, wherever possible: We have a firm-wide benefits package We 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.
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
Example of the reward policy balance: a major oil company 1. Top 1500 Common 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 Staff Core principles; Local management;
The balance in HR roles and responsibilities in one employer Level of HR StaffSenior Management Managers and Professionals Staff HR at Corporate HQ Design, operation and control of pay Guidance via principles and advice. Agree to and audit actual systems. Guidance via principles HR at Regional HQ Administer pay Design pay systems Operate for HQ employees Advise and audit for country employees Agree to and audit actual systems HR at Country Operating Level Operate and administer for local staff Design systems, operate and administer Types of Employees
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.
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
Reward strategy is all about managing the balance Ease of Entry/Change Reward Strategy Business Strategy/ Needs Long Term Aims Scale of Impact Internal Employee/T U Needs/ Expectations Immediate Demands External Pressures Market Equal Pay Legislation Organisat ion needs Local Needs