The Hay Group Total Reward Framework
A new way of understanding reward
Reward strategies must be anchored in business reality to be effective. Which means linking it to your business strategy – and the needs of your employees as well as your organisation. Our Total Reward Framework helps you optimise reward, no matter how challenging the conditions.
Remuneration tends to be one of the worst-managed parts of an organisation’s cost structure. But with 10-70 per cent of total costs wrapped up in it, reward cannot be ignored, particularly in a downturn. To be effective, reward programmes must reflect the needs of the business, now and in the future. Only if they are tied closely to company strategy, business performance and the needs of employees can reward programmes deliver the ROI that is needed in tough times[MK1] .
The Hay Group Total Reward Framework takes strategy as a starting point – and it focuses on total reward: every financial measure together with non-financial rewards [MK2] too. It also takes into account the needs of both company and employee: an even, balanced approach ensures the company’s interests are catered for, while ensuring employees are engaged and motivated[MK3] . This holistic approach is particularly important at a time when costs are under pressure and organisations are, in essence, focused on doing more with less.
Our framework is also tied to a strong implementation plan, ensuring it translates into bottom-line results.[MK4]
Hay Group can design total remuneration programmes that can help you:
· align the value of the total reward programmes with individual performance, business performance and work culture[MK5]
· provide a competitive and differentiated[MK6] total reward package, one reflective of the internal and external value of work
· ensure the external competitiveness of the total reward programme, so that the level and mix of remuneration is positioned against the right comparator groups[MK7] , at the right levels
· develop reward programmes that most cost effectively meet the motivational and retention needs of employees
· ensure employees have buy-in and understand new programmes, which in turn, will increase employee commitment/engagement
· ensure line managers fully understand the programmes and can lead in implementing them
· align people costs with business results[MK8] .
Why Hay Group
At Hay Group, we will strive to understand your business and how designing rewards right can make a difference. Most of all, we ‘know’ [MK9] people, what motivates them and how to effectively influence them.
Our style is to approach reward from a business and an integrated, not just technical, perspective. We blend the financial, organisational and behavioural aspects of reward to create tailored programmes that fit the business strategy as well as HR goals. [MK10] We also make use of proven diagnostic and survey methodologies and our database of rewards offered in businesses across the world.
The result is a total remuneration programme or programmes (base salary plus short-term incentives, long-term incentives and the value of benefits programmes) that ensures your organisation is providing the appropriate amount of remuneration, in the right ways.
Hay Group’s approach
Hay Group works closely with key decision makers across your business, including financial professionals[MK11] , to understand your business strategy, business model, key performance indicators (KPIs), employee demographics and work culture. From there we are better equipped to review and redevelop your reward architecture. We will:
· examine your current remuneration programme and gauge the extent that it aligns with the business strategy, the HR strategy and the reward strategy
· understand the economics and business priorities of your organisation
· understand the employee demographics and potentially different needs of different employee groups
· conduct employee surveys [MK12] to understand which reward programme features deliver the most value to them, and
· look at the messages that your reward programme is giving around each element and determine the extent that they align with reward strategy[MK13] .
From this we then develop base salary plans [MK14] that are aligned with your business requirements and reward strategy. We also model outcomes and costs of alternative plan designs to help you see the bigger picture and explain the potential cost and accounting implications of our recommended strategy. We will then show you how this compares to other organisations and offer insights into why different types of plans tend to be used by different organisations.
Finally, we can provide you with the benefit of our experience and expertise in implementing and communicating the new salary programme: many well designed programmes do not provide a ‘return on investment’ due to poor communications or implementation.
Hay Group in action
Hay Group has helped develop a reward architecture for US store chain Family Dollar. Read our case study.
MY COMMENTS AND QUESTIONS.......
[MK1]In other words, TR can fail if not tied to- company strategy, business performance and needs of employees. Three BIG heads and therefore TR needs Board’s attention and approval. It is not just an HR ball-game!
[MK2]List of non financial rewards- 1. Office, Car, type of laptop, BB, 2. Privileges of travel class, hotel stay, leisure trips abroad in the name of meets etc. 3. Financial and approval powers.
4. Expanse of reports and locations under control.
5. Freedom from low end jobs.
6. Assistants and Junior employees at service and support
[MK3]Is TR an engagement and motivation tool? Tell me how besides Performance Based Incentives.
[MK4]List how TR results in bottom-line results? How is Business P&L, Profitability, Gross margins are related to TR?---You said, strategic, right? Is TR operationally tied with business financial objectives, targets and guidelines of performance. How often TR is revisited and reviewed alongside Business performance and results to check alignment or mis-alignment?
[MK5]What do you mean by aligning with work culture? Does it mean, professionalism, Business Integrity, Commitment to team, client and management? Does it mean knowledge sharing, team work, mentoring, coaching? Simply, living company values? Explain for more and clarifications, if any..
[MK6]What is ‘differentiated’? Give examples. Also, explain why differentiated is required and how it helps the idea behind a TR?
[MK7]What is ‘comparator group’? Explain and how to arrive at ‘comparator group’?
[MK8]This is strategy. How does TR help in building the right framework of reward/Incentive compensation, etc without knowing ‘business nature, profitability, taxation, cost structure, nature of business returns, face and shape of market and competition and “Knowledge of competitor’s Incentive pay structure, policy and guidelines?
[MK9]Interesting? Any idea about Hay’s ‘secret sauce’ and depths and breadth of business and people understanding in different sets of industries, businesses, markets, nature of products and services, locations and levels of employees? Please explain..
[MK10]This is the secret called, “KNOW-HOW”. Can you guess? What is that?
[MK12]Why just surveys? Check financial performance data that was expected against this TR plan and what it achieved? Do not shy away from deep diagnostic and investigation/ audit/analysis…Talking about “Alignment”, right?
[MK13]Survey, interviews and focus group can give this messaging sense? Also, check for if this met the objective of messaging that this plan had at the time of implementation and follow through!
[MK14]I love this term, “base salary plan”. Tell me how does a company arrive at “Base salary” for any level? What all factors it considers and what all weight ages it assigns to each of them? Is base salary a range or a baseline figure or a percentile? How and why companies fix an ‘x’ percentile for the base pay? And what is the right band variance for the base pay range, if you recommend? Give reasons for your base pay range and tell the reasons if range is not followed what will be the consequence?
Aon Hewitt Total Rewards Framework The Aon Hewitt model and approach believes in considering Total Rewards as a business tool and very much linked to overall business objectives! Reward as understood is a very complex mechanism and some efforts of correcting the base pay and titling in a hurry by many MNCs in India have done a bigger crime by trying to correct it by market adjustments without looking at the talent map, complexity and expectations out of role and mapping it against the benchmark. Titles in India are a big misnomer and hardly any survey on compensation ever probes and captures and calibrates the tangible outcome based bench marking! If we dive deep, we will find that the key factors of Education, Experience and Quality of Education, Quality and relevance of experience and education are not calculated granular! A diploma holder technical manager gets the salary benchmarked for the top T-school manager with top quality experience in a challenging and break-through