Debrief on the 16th IIRME Compensation & Benefits Forum – Day Two

In my last post I covered Day One of the 16th Annual Compensation & Benefits Forum organised by IIRME in Dubai. It’s time to cover the second day of the conference, which was just as good as Day One.

The day started with Jonathan Budden from Microsoft who detailed what makes a company a Great Place to Work.

Microsoft is a regular leader in this contest, including in the region. Jonathan explained how much focus there is on engagement in the company, with up to 4 metrics coming straight out of the employee engagement survey and directly impacting the individual performance ratings of people managers.

Microsoft encourages its team members to get involved, including through participating to the Employee Experience teams in the various sites.

Jonathan’s top tips :

  • Capture engagement from the start including induction. He mentioned this is especially important for managers.
  • Recognise the right behaviours. For example, they have a monthly People Award, which goes to someone who went out of  their way to help make someone else successful.
  • Address different needs. For example, Microsoft focuses on high potentials with a mix of activities including coaching, big projects, touch points with the General Manager, 360 feedback etc. Or, they look into diversity with programmes for women and Gulf Nationals.

He also mentioned : “We put a lot of emphasis on people driving their own experience at Microsoft”. I’m a former Microsoftee and agree that this is a big part of the culture at MS – nothing is delivered on a silver platter, you need to work for it, even for your development. This is a great feature as it means that employees don’t take their growth for granted, or “due” to them…. something that may sometimes be missing with the younger Nationals in the region.

Marius Van Rensburg from the Royal Group and Martin McGuigan from Aon Hewitt then jointly presented on executive pay.

They explained how the current trends of more focus on disclosure, shareholder influence and real pay for performance are only just starting to trickle in the region. Another comment they made was to point out the smaller impact of institutional shareholders in the region.

Executives have more pay at risk than in the past, but it will be tougher to earn, with higher/better set targets, thresholds, hurdles, (financial) performance measures.

41% of companies in the region say that the Board is more involved with compensation planning than 2 years ago.

There will also be more focus on executive compensation governance. Some examples they listed included DP World getting awards on the UK stock exchange, ADNOC, the regulations in the Saudi Arabia stock exchange, or the fact that Abu Dhabi public listed companies need to have a Remuneration Committee with 2 Non Executive Directors on it.

Overall it was an interesting, interactive session which highlighted that, generally speaking, C&B is less involved in executive pay in this part of the world than in the developed countries – but with a trend towards more involvement.

I then discussed how to develop reward strategies to attract, grow and retain a very mobile national workforce.

I have covered this topic before here and here, so I will let you dive into these posts by yourself if you are interested 🙂

Eddie Finnigan from Zurich came as a practitioner (Head of Compensation Middle East) not as a provider to explore the connection between pay and performance.

His presentation centered on 3 questions we need to ask when looking at total rewards :

  1. What are we spending ?
  2. How do we spend it?
  3. Do we truly have a handle on affordability ?

Some of his tips to create a good link between pay and performance :

  • Get the basics right
  • Implement good governance
  • Do good things great
  • Link performance management to merit and bonus
  • Differentiate sales incentives
  • Keep it simple

The one idea I liked most is simple, yet under-used : “Hold the mirror to the business”, as Eddie said. Show managers the total cost of their employees, not just external benchmarks. It is very powerful as it holds multiple potential impacts on your organisation, from a cost awareness to greater performance differentiation to more investment from managers in the development of this truly most precious asset – the employees.

Ramakrishna (RK) Krovvidi from Du then covered holistic pay-for-performance

He first urged us to think about what pay-for-performance (PFP) is :

  • What does it mean for our organisation ?
  • What are  we targeting to achieve ?
  • What enabling eco-systems do we need (culture, communication, transparency, educated managers…) ?

He then emphasized how we need different types of pay for performance at different times of the growth cycle of the organisation, looking at the needs of shareholders and how it would translate in PFP for employees.

For example, in growth phase, shareholders need value maximisation, which means higher pay for higher performance for employees. At maturity, shareholders look for sustained growth, which means focus on improving relative performance for employees. And in the decline phase, shareholders need to protect value and cover risk, which translates into aggressive differentiation for employees so that the good ones can remain at competitive pay levels in the market despite the decline of the organisation.

RK also translated the meaning of a hurdle in an incentive scheme. The purpose, he said, is that if the minimum company performance is not achieved, then the hurdle means that the company is paying back to the shareholders the amount of PFP that was accrued… creating a better return to the shareholders despite the lack of performance.

This was a very energetic and business-oriented presentation that really stood out for me. Thanks RK !

Conniesia Pereira from NBAD opened the afternoon presenting on variable pay to reduce fixed costs.

Her presentation centered on explaining how her bank had dealt with the situation. Wages are sticky on the downside…

In 2011, NBAD had a double system :

  • The corporate pool was created based on a capped, absolute value
  • Cascading the pool to the units, teams and individuals was based on relative performance as defined through a balanced scorecard.

Her advice :

Remember that your plan should not be so rigid that it is impossible to change

Include an element of subjectivity “because not everything that can be measured is important, and not everything that is important can be measured”. Nice touch !

David Rockey then presented a case study on how Nokia changed its performance management.

Nokia still has 1.3 billion users daily and 850,000 points of sales but despite these formidable numbers, it lost its number one spot in mobile phones.

The company had to make a decision and accept, culturally, that it needs to move to being a challenger in the market now that Apple is the leader.

So David described the changes that were decided in the performance management approach in order to support the new culture.

Some of the changes include, notably, moving from employees’ ratings decided fully at managers’ discretion to one where the rating is driven by a performance/potential matrix with a calibration process. Performance was evaluated once a year, now goals are agreed between the manager and employee and can be changed at any time or at the quarterly check-ins : the performance discussion is now taking place throughout the year.

More than learning about the specific changes, what was interesting is the thought process that Nokia put into deciding these changes, and how they tie directly into the required cultural change and the focus on new behaviours such as accountability, empathy and urgency, the behaviours required of a challenger.

A true example of how HR can support the business strategy and be driven by it.

Roman Weidlich from Towers Watson then discussed how to optimise total rewards for optimum return on investment.

In uncertain times, companies focus more on profitable growth, which comes only from reducing costs and increasing revenue. This translates as follows :

  • Cost management : get the maximum return from our rewards spend
  • Revenue growth : generate growth through employee engagement

He suggested performing surveys to determine what the best level of investment in employees is (benchmark), what the best allocation of that investment is in order to maximise retention/engagement, and whether the answer varies by job family, business unit, country or any other demographic.

Then we should map the elements of our total rewards approach (eg flexible benefits, bonus, base pay increase, pension, base pay, parking, healthcare…) in a matrix comparing perceived value to employees (from low to high) and cost to company.

Once we have mapped, we should ask our employees directly a series of trade-off questions to identify what would have the best impact on employees. One example : ask them to rate on a scale from strongly prefer option 1 to strongly prefer option 2 : “If your job were the same in all other ways, which would you prefer ?

  • option 1 : a 5% increase in base pay with a 10% decrease in target bonus opportunity,
  • or option 2: keeping the same base and getting a 10% increase in target bonus opportunity”.

Roman argued that companies  are often suboptimal in their total rewards allocation because they don’t know the perceived value of the package elements compared to their cost. He gave the example of one of their clients that decreased its short-term incentive and invested more in recognition and flexible working hours as the result of such an audit.They reduced their spend significantly (22 millions) and got a 13% increase in engagement.

Finally, Roman also warned us about the impact of tenure in the country on those perceptions. For example, expats when they arrive in a new country tend to be focused on maximising their short-term cash but once their tenure in the country (not necessarily the company) increases, then their focus starts to shift to longe-term elements of the package.

Tom Raftery formerly from ARC International and currently setting up his own business at It’s all about People – human capital consulting, covered how to communicate rewards.

His presentation was delivered in his usual energetic and engaging style and was much appreciated by the audience.

He first made us think about what we communicate, by doing a quick show of hands on various items such as giving guidance, payslips, employee grade, salary increases, salary ranges etc.

Then he went on to identify some of the most common problems with implementation and communication :

  • Lack of support from senior management and HR
  • Lack of measures, or their validity
  • Communication is limited to memos and a general meeting.

He argued most issues can be linked to poor project management and suggested to pay special attention to elements such as :

  • Timing
  • Dealing with questions and issues
  • Technology platform
  • Duration of the system
  • Will we go through a pilot of full roll-out

Communication starts at the design phase…

The advice I found most useful was : “Don’t communicate only to recipients of your scheme, but also think of the other employees (the ones not eligible) as one of the audiences” because they will be impacted too.

The conference was accompanied by 3 optional, full-day workshops, including one by Tom Raftery and Insel Jemal from MEIR Consulting about competence management, and one I delivered on designing employee retention and recognition schemes.

All in all, the conference reached a good balance of presentations with valuable content, interactive activities and networking opportunities. I look forward to attending and speaking there again next year, and meet many new HR and Compensation professionals from the Gulf region.

 

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