Re-engineering Compensation and Rewards for ambition driven employees

1. Re-engineering Compensation and Rewards for ambition driven employees Shounak Deshmukh 3rd December 2011

2. Advent of trade & barter system……Age old way to transact • Trade : At a glance • 3000 BC: Barter system prevails • 1800 BC : standardized weights & measures ; beginning of long distance trade; extant records of loan made by priests to merchants found in Babylon • 600 BC: beginning of coinage • 200 BC - AD 200 : Mercantile activity flourishes, trade via silk route and sea; guilds play a major role • 1100 : Intercontinental trade via Egypt and red-sea became prominent • 1500 : Sea-borne trade routes to Europe open up • 1550 : Sher shah’s copper and silver currency and Akbar’s standard weights and measures boost commerce • 1565 : London Royal Exchange commenced • 1600 – 1800 : Tussle for control of Indian trade between European powers, British emerge supreme • 1700 – 1800 : General bank of India, presidency banks, bank of Bengal formed • 1950 – 2000 (early) : Agriculture exports remained mainstay

3. A look at what was happening to the Indian Economy 1770 : Crop failure, ad-hoc revenue policies of EIC lead to disastrous famine in Bengal, Bihar and Orissa 1991 : “Param” India’s 1st supercomputer built by C-DAC 1825 : Indian opium used by British to pay for Chinese products (silk & tea) 1855 : The first Jute mill set up in Bengal 1896-1900 : Recurrent famines, food grain production declines, commercial crops increase 1931 : Census, 37.8%- landless laborers, 24.3% - tenants at will, 9% - small farmers, 25% - middle farmers, 3% - Zamindars 1854-55 : First cotton & Jute mills established 1903 : First Five star hotel “TajMahal” opened 1907 : Tata Iron and steel co. founded 1918 : Trade union movement begins 1936-39 : TU’s and strikes increase

4. New age Economy, moving from “Wages to Total Rewards” Old Economy New Economy Wages/Salaries Compensation Total Rewards Rewards Myopic perspective Long Term view Fairness/Amelioration Competitive Edge Personnel manager Business leaders Narrowly-defined jobs and job standards Broad, generic roles -emphasis on competence and continuous development Hierarchical and rigid pay structures - only way to get on, is to move up. Focus on next promotion Broad-banded and job family pay structures emphasising flexibility, career development pay and continuous improvement Consolidation of rewards into base pay More emphasis on ‘at risk’ pay

5. Reward strategy a part of business strategy Business Results Business Strategy People Requirements Employee Needs HR Strategy Organizing (the right jobs) HR Programs Staffing (the right people) Rewarding (the right incentives) Developing (the right skills) Performing (the right outcomes)

6. Changing workforce leads to changing needs The motivations, aspirations and expectations of the Gen Y ers will be significantly different than ever before!! 6

7. India Story – More about India’s Gen Y ers • In India they make-up more than half of the working population • Not all employment ready, hence talent in short supply • Ambitious, optimistic, have a clear sense of where they are headed • Entrepreneurial mind-set, business savvy, technologically capable and connected • Highly competitive, seeking higher education, • Plenty of opportunities therefore they are job-hopping • Expect challenging work assignments, accelerated career growth, socially responsible work place, flexi-work and freedom, innovation in their jobs • Willing to work in shifts to support global operations • Opportunities to learn, Quality of Life, Compensation are the top three reasons for “choosing a Company” • An office setting in the urban area is most sought after – ease of access, transportation are crucial needs. • Five star on-site services – reception, catering, medical, gymnasium are a big draw Source:Generation Y and the Workplace Annual Report 2010 7

8. Reward Management – the more inclusive approach Base Salary Incentives Perquisites Benefits Extrinsic Rewards Intrinsic The reward linked to the TASK The reward linked to the POWER the job may hold The reward that comes from knowing that the job is part of a BROADER MISSION While all 7 components are present in everyone’s perception of their job, the intrinsic elements are easily overlooked by companies as part of a reward system. The true reasons why an employee stays or quits are often hidden in the intrinsic elements. Knowing the balance of these components, especially in case of Gen Y ers, is crucial to developing a reward system that goes beyond the purely pecuniary, and, at the same time, engage and retain the talent needed. Source : Dr Ichak Adizes book, Corporate Lifecycles 8

9. Changing Paradigm It is well documented that the new workforce generations place high value on quality time, family and freedom. Traditional incentives such as titles, raises and corner offices, while still important, are somewhat less important than the motivation of “relationships” and “experiences”. 9

10. Communicating Rewards Source: Aon Consulting sponsored round table Conference Board Event New York City 2009 10

11. Rewarding Generation Y - Trends • Lesson Number 1 : • Today, the new reward is balance. Reward Gen Y employees by giving what they want - FLEXIBILITY. • A junior associate who does a stellar job on a client project could be rewarded with an invitation to attend a dinner with that client. That "reward" may have been well-received by all earlier generations. • But not so with Gen Y. Gen Y is a generation of employees who value their personal time.  Being "asked" to attend a work-related event in addition to their normal work duties is not a reward.  Flexi time, paid holiday is the real bonus 11

12. Rewarding Generation Y - Trends • Lesson Number 2 : • Rewards will have to be FREQUENT – else risk loosing the employee because they don’t “feel appreciated” • For many leading employers, “year-end” is the time to reflect and reward employees for their hard work and dedication throughout the year • However in the new world how recurring is the reward is as important as what the reward is – Online Gift Cards as an incentive for Gen Y is catching-on. That they can be delivered and redeemed all the time are attractive options 12

13. Rewarding Generation Y - Trends • Lesson Number 3 : • The old paradigm of ‘pay your dues, work hard, you will be rewarded’ is fast changing. Reward me EARLIER - and I will work hard   • Question : ‘If you had seen your parents right-sized and down-sized, even when they dedicated their life to the corporation, would you be prepared to make the same sacrifices for the same promises? • Long Service Awards / Loyalty, which many organizations have used successfully has clearly limited value. 13

14. Rewarding Generation Y - Trends • Lesson Number 4 : • More value on whether or not the job is ACCOMPLISHED than on how long or the amount of effort it takes • A strong desire to work on their own terms • Generation Y employees typically focus more on actually accomplishing the task as opposed to "how" the task is to be accomplished • Rewarding ‘whats’ is therefore important 14

15. Rewarding Generation Y - Trends • Lesson Number 5 : • The Reward spectrum will consistently evolve to include benefits that help you remain socially active. An EXPERIENCE to share with friends or family. If Gen Y ers could choose their own rewards their first preference would be experience based • Dinner, day trip, holiday • Experiential gift of your choice. E.g. flying, driving, • Time off work • Retail gift voucher, Fuel vouchers, Movie tickets, Merchandise E.g. desk accessories, pens • Donation to a charity of your choice • Among the most popular benefits are those that extend family-friendly programs e. g. Paid paternity leave is one example 15

16. Thank You.