It’s been a busy month as I attended and spoke at 3 HR conferences in 30 days ! It’s a bit tiring but I really enjoy meeting new people, hearing from different organisations and opening my mind to new concepts.
So this week will be a “special” : I’ll write 3 posts, two of them covering the 17th Compensation & Benefits Forum from IIRME, as well as one for the Excellence in Talent Management Summit from Teneo. I will report on the points that I found most interesting, unusual or valuable.
First off, call me biased, but in my opinion the annual Compensation & Benefits Forum from IIRME is the best C&B conference in the region. I’ve attended it multiple times and this year’s version, organised by Ramy Bayyour, was a success as usual. Excellent attendance, great speakers, and good opportunities for networking.
So here we go – Day One !
Robert Mosley is an accomplished chairman and started the Forum with a quick interactive poll.
Here are some of the numbers :
What do you think your pay review will be (or has just been) in 2013 ? 35% responded 5% (while 26% said it was 5% in 2012), 16% said 4% and 12% of the audience said 5.5%. A general comment was that it seems that salaries are starting to increase again, albeit not at the pre-crisis levels.
This was confirmed by the next question, What will happen to bonus payments in 2013-2014 at your company ? Only 4% said “lower than last year” (vs 24.5% of respondents to the same question at the Forum last year), 53% said “same as last year”, and 33% said “more than last year” (vs 24.5% of the audience being this optimistic last year).
Finally, we also saw a clear increase in employee resignations/attrition rates, with one-third of respondents saying it is now around 6.5% at their organisation. We are still far from the 10 to 11% rate of the years before the crisis, but this is still a significant rise compared to 14.5% of respondents facing some form of attrition last year (at lower levels too).
Tim Knight presented an overview of the economic outlook in the Middle East and its impact on pay.
Most numbers came from the World Bank.
The GCC represents only 12% of the Middle East and North Africa population of 377 million people, but 51% of its GDP. Youth unemployment will represent a challenge though.
In Bahrain, an alarming 28.3% of 15 to 24 year olds are unemployed, vs 9% of the general population. In Saudi Arabia, the largest country of the GCC, unemployment is 5.4% overall but a staggering 28.2% for the youth. These numbers probably explain a part of the unrest that has plagued the 2 countries in the wake of the Arab Spring. Even the UAE, with a low 4% overall unemployment rate, is at risk with 12.1% of its youth unemployed.
Given that the GCC population continues to grow at an average 3.2% (1% in the rest of the world), this is a potential time bomb, which the local governments are trying to anticipate through their nationalisation programmes and focus on education and skills development in line with market requirements.
Tim also shared some numbers regarding executive pay. According to a Hay report, Senior Management pay tends to plateau at around 20,000 USD a month in the GCC, while in Europe and USA, executive pay continues to grow.
His view is that companies in the region should consider introducing Long-Term Incentives to attract the right calibre of senior executives that will be able to address the huge growth expected in the region. LTIs would also help to lock these executives in (retention), and by linking LTIs to performance, ensure top managers are focused on delivering the right results for the organisation.
Related posts :
Jan Kuzel from Honeywell covered how C&B can avoid the return of pre-2008 uncontrolled growth, and balance employee and business requirements.
Jan started with a view of the current growth, comparing it to the boom and bust years we have just gone through. Even though growth is definitely coming back (something confirmed, if informally, by the poll at the beginning of the day), companies nowadays are trying to have more control about the growth in pay packages.
As Jan noted, “salary is a ticket for the race” but it is not the only thing needed to attract and retain your talent.
As part of your Compensation strategy and design, he mentioned an important point : create an Employee Value Proposition (EVP) that is adapted to your different target populations, for example Nationals vs expats, graduates vs experienced employees, or even for females.
When you want to focus on retaining your key employees, you have to look into certain aspects :
- identify your “must retain”,
- ensure succession planning and managerial pipeline,
- design short- and long-term development programs,
- implement deferred compensation,
- and, what I liked most : have a Policy For Exceptions or know what you will allow as exceptions to your policy – in advance. This is great advice, clearly something coming from the trenches of managing HR !
Finally, Jan concluded that Compensation & Benefits professionals need to :
- manage expectations from senior management, notably by making it clear that you won’t be able to attract and retain everyone,
- use market data but also your common sense,
- decide fast ! (because speed matters),
- and push back on the business when needed. Thankfully, leaders who have gone through multiple recessions are usually more reasonable than just saying “hire at any cost”…
Related posts :
- 5 traps to avoid for your Compensation projects
- Don’t like handcuffs ? Join Netflix !
- Are you benchmarking…or copying ?
Binny Rieder from IBM delivered a presentation packed with examples on using analytics in Compensation.
Binny explained that Ginni Rometty, the CEO of IBM, sees “data as the next natural resource”. Data will change how we make decisions, how we create value, and how we deliver value.
Predictive analytics identifies correlation and assumes causal relations, and is used by her team of C&B specialists at IBM to drive better business outcomes.
Binny shared 4 examples where she and her team used analytics to solve issues related to topics as diverse as pay compression, a surge of attrition in newest hires, employee engagement, and attracting talent in Africa.
Here are the steps they followed :
- clearly identify the challenge
- perform a thorough analysis
- establish a trend
- formulate a recommendation based on analysis and simulation.
For the C&B and HR folks who are interested in starting to use analytics, Binny shared some advice :
- focus on the biggest, most challenging opportunities
- start with questions, not with the data (“What are we trying to do here ?”)
- embed your insights to drive actions and deliver value
- keep your existing capabilities while adding new ones (for example keep your existing dashboards and reporting)
- use an information agenda to plan for the future.
Smaller organisations in particular should start by structuring their data collection (even if it comes from multiple sources) so that there is enough data to produce valid analysis. And working in a spreadsheet, including using graphs, still is the easiest way to sift through the information and identify trends :-). Ah well, Excel is not going away any time soon – at least for us in C&B !
Related posts :
- Compensation Geek, hero of the Recruitment team !
- Understanding R-square value in compensation analysis
- A graph based on a pivot table – can it make it easier for you to grow your credibility ?
- Time saver tip – Custom Views in Excel
John Harker from Al Futtaim explained how his group is preparing for its future growth.
The group currently has about 40,000 employees in 29 countries and sees a lot of its growth coming from Africa. John explained how the Human Resources function evaluated which actions to take in order to be ready and find its future leaders in the markets where the company plans to expand.
Of course they want to attract people for the right jobs, with the right skills, who are fully engaged. But they also want to be “future proofed”, which to Al Futtaim means they can answer Yes to the following questions :
- do we know where we need our talent for the future ?
- do we plan for succession ?
- have we identified a pool of high potential talent ?
The focus is on planning, and preparing now in order to be ready when the need will arise (a concept also clearly demonstrated in Halliburton’s presentation, see below).
John also described how the company went through every HR policy, process and form, and aligned them to the strategy of the organisation so that they would walk the talk.
For instance they looked at the percentage of vacancies that were filled internally and found it was only 11%. One of the reasons was that every internal candidate for a promotion had to be compared to at least 3 external candidates, a policy which did not support the aim to grow talent internally and was therefore amended.
The result was to send the right message to employees through the actual HR policies, not just through the stated mission of HR. Similarly, each project that HR delivers is clearly linked to the benefits it will, should or has delivered, to place it into the broader context of bringing value to the organisation.
Andrea Tarantino from Reckitt Benckiser and Muhammad Jamal from Halliburton shared their experience of managing C&B in growth markets, respectively Africa and Iraq.
About Africa, Andrea highlighted some of its specifics : there are countries that did not exist 2 or 3 years ago (for example South Sudan), market can move faster than surveys – when there are some (for example public sector salary increases spilling out to the private sector in Algeria), and there is a lack of specialised talent in the countries but also outside – and that includes language skills such as engineers speaking Portuguese to work in Angola etc.
In these new markets, he pointed out, your compensation decisions are between two options :
- Do I want to lead this market ?, which means you take a risk to get it wrong, or
- Do I want to see what others do first ?, which is safer… but what if there is no market whatsoever and you lose your opportunity to be first mover ?
His advice : networking as a source of knowledge. Under the principle of “We are all in the same boat”, many other C&B pros will want to share information, ideas and maybe even frustration at times (I know about that first-hand…. I used to be that Compensation pro who couldn’t find data and was asked to produce un-realistic salary structures !).
Andrea also said to go there personally, build relationships and use the advice you get from local recruiters, HR, consultants and accountants… because “every country in Africa is different, so give employees what they want not what you believe they want”.
Muhammad then explained how Halliburton set its operations in Iraq back in 2006, targeting to have 150 operations employees there before they had won any bid to enter this market.
There was no skilled workforce locally and they had to work from scratch, establishing training facilities, developing a competency framework and eventually a pay structure (years later). Halliburton focused on sustainability through the introduction of retention elements for key profiles, a very operational succession plan, cost control and keeping an eye on attrition.
Muhammad walked us through the evolution of their employee population in Iraq, a striking success. They now have a majority of their local employees with 3 to 6 years tenure and considered as fully established professionals.
Another cluster of employees, around a third of the size of the main one, is made of local experts with 6 or more years of experience, outstanding performance and leadership skills.
By 2010/2011, Halliburton was ready for the heavy bidding, with clients fully appreciative of their commitment and long-term view. This was a great example of anticipation and becoming ready to demonstrate the availability of a skilled local workforce in the bids they participate in.
Peter Cox from Zurich International made some proposals about retirement savings.
In 2010, combined End of Service liability in the GCC was 16 to 17 billion dollars, a number expected to increase to over 75 billion dollars by 2020. The numbers are staggering !
Peter stated that larger employers in our region are starting to recognise that facilitating retirement savings in a cost-effective manner is good for the attraction and retention of employees.
He made some suggestions about some of the points that should be included in the design of your scheme if you decide to put one in place :
- the employer contributions, which are used to offset End of Service payments, should be visible to employees, and can be audited.
- the employee should be allowed to keep their payment into the savings fund even after they leave the company, should they decide as such. However Peter did not necessarily support mention portability of the funds especially abroad as these transfers are often difficult to organise.
- AVCs (Additional Voluntary Contributions) from employees could/should be possible. If the company decides to allow AVCs, for protection purposes it should first ensure that employer contributions are ring-fenced, especially if employees can decide their investment strategy on their own contributions. I’m not sure if I like the reasoning behind this one, it kind of assumes that employees can make bad investment decisions, but not the employer ? Or maybe Peter meant that EOS payments would just lay there as capital with minimal or no growth….
- the employer should create their own eligibility and contribution rules as part of the overall benefits package design, for instance, looking at minimum tenure in company to participate in the scheme, or vesting rules such as “you get only XX% of the fund if you leave before 3 years”, etc
I do agree with the ideas presented by Peter and believe that a retirement savings fund is a great tool to differentiate a company from its competitors in a market where talent (especially mid and senior level expats) is scarce and difficult to attract.
Multinationals tend to have these schemes as they implement them on a global basis, or have a global rewards philosophy that usually encompasses the provision of core benefits locally even when they are not mandated by the local law.
But the vast majority of locally-owned organisations still don’t ring-fence the amounts dedicated to the payment of End of Service benefits to their expat employees, and use these amounts as working capital.
So, until this practice starts to fade away and companies decide to actually protect the amounts due to be set aside for EOS payments, CFOs will probably face a major hurdle in accepting the implementation of the retirement schemes – unless the government makes them mandatory…
Related posts :
- Pensions landscape – Europe and GCC part II
- An update on the project on expat retirement schemes in the UAE
- GCC pensions special – April 2012
Shawn Cramer for Maersk Oil Qatar explained how his organisation transformed its rewards practices.
Maersk Oil Qatar has over 800 employees of 50 different nationalities, with 25% of its workforce being Qatari (of which over one half are employed in technical fields).
When the team started to look at how pay was structured, they found a lot of individual clauses and terms in work contracts and had to review everything from scratch.
They covered the following elements :
- cash compensation : basic pay + guaranteed allowances
- performance and recognition vehicles : target bonus structure, referral policy, service and other recognition awards
- work life balance : working hours, leaves
- contractual elements : contract duration, notice period…
- benefits : including benefits in kind, annual leave tickets, EOS, healthcare…
Some of the objectives they achieved were to reduce the number of different contractual elements and employment contract types, to move to cash or allowances instead of benefits in kind where possible, and to have benefits driven by grade and not by individual situation or negotiation.
They even created a one-week paternity leave, the first company in Qatar to offer this benefit. Congratulations for that great move ! Other proposals are still under consideration from their Corporate, something which all C&B working in multinationals have encountered :-)…
Shawn therefore ended with some advice for those embarking on a revision of their Total Rewards offering :
- manage your stakeholders: identify them, get to know them, engage them early and manage their expectations
- don’t forget change management : is your organisation ready for the change ? will it support it or push back on it ?
- establish a transition plan : how will you manage your existing workforce which was on different conditions ? will you have a soft fall or a hard fall ?
Finally, Ramakrishna “RK” Krovvidi from Du showcased how his organisation reviewed its Sales Incentive Plan (SIP).
This was an interesting presentation with a good recap of the basics of Sales Incentive Plan design. They followed a very classic and effective “funnel” or top-down approach :
- strategic alignment : a change in operating model from a functional organisation to a market-focused organisation, a new focus on profitability instead of market share, and moving to a fulfillment role for the sales force all influence who should be on the sales incentive and why, what and how to incentivize, which degree of differentiation to have between employee on SIP and not on SIP etc.
- compensation framework : benchmark and define your desired fixed/variable mix and pay position, look who should be on the SIP in the sales function (“generals vs soldiers”), and internal equity considerations are the next steps in the design process.
- actual incentive design : review value drivers to correlate the SIP to the value generated by the salesperson, decide whether to incentivize teams or individuals based on criteria such as your culture (collaborative or competitive) or your ability to set and track individual targets, and consider the potential need for special incentives.
- finally, performance alignment is two-fold. On the “technical” side, remember to consider that the relation between effort and performance is not always linear, and therefore payout cannot be linear either. Do you know your risk-free sales thresholds, what levels of performance really accelerate value, and how accurately you can forecast your sales ? All these elements will drive your decisions around hurdles, thresholds, accelerators and caps. On the more general side, establish good governance rules about transparency, fairness and compliance, and, in the case of Du, consider the 80/20 rule meaning “don’t tolerate the non-performers”.
Related posts :
- Analyse my SIP !
- How to manage employee moving from Sales to non-Sales
- Why am I not on the Sales Incentive Plan ?
- Why the Sales Director has less on-target incentive than the Sales people
And voilà ! Done for the recap of Day One of the Compensation & Benefits Forum 🙂
My next post will cover executive compensation, managing healthcare and wellness programs, compensation communication, and two innovative approaches from organisations in the region : one on social media and C&B, the other one on mobility programs.
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