Article: 'Employees to drive the next-gen rewards strategies'

Benefits & Rewards

'Employees to drive the next-gen rewards strategies'

We are seeing a growing shift in the market when it comes to benefits design and implementations, says Kartikey Singh, Associate Client Partner, Advisory, Korn Ferry, in an interaction with People Matters.
'Employees to drive the next-gen rewards strategies'

As a member of Korn Ferry’s Singapore Reward and Benefits Solution leadership team, Singh specializes in the area of Reward Strategy, Sales Compensation, and Executive Pay and Governance. He advises organizations across EMEA and SEA to ensure they align reward pay-outs to business outcomes.

Singh has a successful track record of leading global teams to support large MNC clients, developing total reward frameworks and strategies, ensuring alignment with human capital strategy, market competitiveness, and regulatory compliance.

Prior to joining Korn Ferry, Singh worked with PwC where his client work was focused in the areas of organizational restructuring, Reward Strategy and performance management system

Singh earned his MBA with specialization in Strategy and Human Resource from XLRI, Jamshedpur in India. He also holds a Bachelor of Engineering (B.E.) degree with specialization in Electronics & Communication Engineering. 

How do you see the evolution of compensation and benefits to total rewards? What's new?

The transaction value of rewards in terms of running payroll and conducting benchmarking is being taken up by new analytics and technology platforms. Compensation and benefits as it was known earlier had become total rewards, which is a concept that means being equally tangible and cash-based, as well as intangible and experience-based. 

This new paradigm not only forces the reward function to focus on cost and optimization, which are very business-centric, but also on employee welfare and experience, which are employee-centric. For far too long, the compensation concept is driven by the needs of the organizations, but the new age reward would have an equal component of employees’ needs and would therefore cater to ideas beyond pay, focusing on employee expertise, progression, purpose, mobility, flexibility and more. 

What has been the most significant change in employee benefits over the last five years especially in APAC or SEA market? 

The benefits proportion as a percentage of the total package is only around 10 percent in Singapore. This is significantly lower than that of other developed countries in the West and even the USA, where the value of benefits can go up to 30-35 percent respectively. 

However, we are seeing a growing shift in the market when it comes to benefits design and implementations. More organizations in APAC and SEA are integrating benefits in the pay structure to increase the perceived value of the total package. This is aligned with shift in benefits toward those that are most appreciated by the employees; for example, we have seen organizations in Asia starting to test flexible benefits, where they allocate a certain fixed sum of dollar value by grade and give the options to employees to select the packages that make more sense for their individual situations. They typical classify benefits in categories around financial, health and well-being, lifestyle and work-related benefits and let employee select relevant ones from each of the categories. This is not only helping them to optimize cost but also making benefits effective from a perceived value context.

For far too long, the compensation concept is driven by the needs of the organization, but the new age reward would have an equal component of employees’ needs and would therefore cater to ideas beyond pay, focusing on employee expertise, progression, purpose, mobility, flexibility and more 

How should total reward professionals and businesses frame Total Reward strategies given the changing expectations of employees? 

There are five fundamentals tenets to designing a superior rewards strategy are as follows:

Break the link with organizational hierarchy – move away from the current hierarchical structure focus on vertical progression ‘through the ranks’:

  • Focus on skills rather than role accountabilities – roles will be constantly changing and require individuals to develop the right skills to drive business success;
  • Measure performance based on achievement – recognize the need for bravery in great performance and understand the critical behaviors that will underpin achievement;
  • Stop locking people in with reward systems – remove the link between length of service and highest-paid, breaking the golden cage;
  • Encourage mobility – recognize the value of horizontal and lateral movement as a critical part of career and personal development but break the culture of financial entitlement.

Once reward professionals use the above building blocks to develop reward strategies and policies, it would not only help align rewards to stakeholder interests, but also create a unique employee experience. 

When designing rewards strategy, it is crucial that they use differentiated positioning by employee segments/job families, as well as skill sets to focus on the key skills/functions that are core and critical to the business and are less competitive for other functions. Reward of the future would become more person driven rather than job driven, and it is important that organizations and professionals start to move beyond the grade and structure-based approach to a more flexible and person-based approach.

How is technology such as analytics transforming pay and benefit practices? 

Technology and analytics are playing an important role in making HR become more tactical from a decision-making perspective. From live dashboards to interactive bots, from succession heat maps to manpower optimization ratio, information is readily available and can not only help management take quick and business-centric decisions, but also improve the entire work experience for employee. 

We are seeing HR as a growth consultant who can increase revenues by building better cross-functional teams, introducing product and service innovation faster and achieving their KPI revenue from these innovations. HR can also act as a productivity driver, decreasing overall cost of operations by increasing productivity via simplified processes and automation. The future evolution will focus on understanding and tapping emerging digital technologies that can enable efficient and effective delivery of HR strategies and programs. 

Pay and Benefits is also evolving at a fast pace from being a cost item to be an investment item. Platforms are more interactive, dynamic and can provide businesses with key information on cost efficiency, market movements, sensitivity ratios, etc. that shape the workforce and effectiveness conversations. We would assume that there is going to be an increased role for AI and Bots in the future to support HR in analyzing market data and jobs and advising on pay level for employee groups based on individual preferences.

Large organizations now realize that a personalized, agile, holistic rewards system is essential to attracting, motivating, and developing talent. So why are so many companies falling short, even as they realize their rewards programs are outdated?

Organizations are changing but the pace of change in slow. Moving away from a hierarchical grade-based pay approach to a dynamic market-linked personal pay is not easy. The internal buy-in within organizations is very difficult. 

However new age organizations in technology and fintech are able to absorb these changes much quicker and faster than traditional manufacturing and industrial organizations. In addition, moving to a personalized and agile reward system might increase inflation in pay in many cases, as without proper governance and control these systems can also be misused. Whilst we see organizations moving to these reward systems at their own pace, the reputation of organizations would be impacted if they remain dormant.

More organization in apac and sea are integrating benefits in the pay structure to increase the perceived value of the total package. This is aligned with the shift in benefits towards those that are most appreciated by the employees

What are the top challenges that businesses face when it comes to framing the total rewards strategy and its implementation?

Challenges faced by organizations are quite similar when it comes to framing and implementing reward strategies. The most common ones are:

  • Aligning reward pay-out with stakeholders’ interests: There is a growing disconnect between pay outcomes and business outcomes and organizations typically find it difficult to bridge this gap.
  • Managing cost and maximizing value: The curve of optimization is typically based on cost and perceived value to employee, many organizations miss this concept and tend to focus mainly on spent. If it’s not valued by the employee, then the return on this spent is sub-optimal.
  • Offering a distinctive Employee Experience: Many organizations consider market benchmarks as gospel trust and try to align their reward quantum and practice based on them. Seldom do they realize that what is best practice might not be the best fit for their specific situation.
  • Delivering Transparency and Equity: The most common challenge around the implementation side to ensure a sense of fairness and transparency. Many times, internal equity issues create massive dis-engagement amongst employees even when the market competitiveness is quite high.

As we enter the year 2020, what trend or development do you think will significantly impact the reward profession?

Balancing rewards between the needs of employee and needs of business will be crucial. 

Millennials would make organizations take notice of their unique requirements, especially the intangible rewards, and would force them to adapt to a more flexible approach to remain competitive and an employer of choice. Rewards would need to focus on improving employee and organizations productivity by assessing risks, anticipating changes. Being able to react faster to market challenges around talent and employee needs would become a critical determinant of success. 

 

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Topics: Benefits & Rewards, #ExpertViews

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