Rewards Special: A Philosophy Approach
When we look at trends, organizations are moving from a data driven approach to a philosophy approach. Rewards in India have evolved over a period of time. Starting from the late 80-90s, where rewards were perceived as a mere black box, there was an era of MNCs entering India and organizations trying to understand what is happening in companies around them, which made organizations move into market studies to understand trends and practices. Companies are realizing that data is important for the overall understanding but it is also important to create philosophy for rewards in an organization, factoring the sector, financials and the behaviors the organization wants to drive. Attract, retain and motivate is not a choice but an outcome and therefore, a lot of our assignments focus on design and philosophy.
Companies are focusing on how their operating models drive rewards and how they can differentiate in terms of business model, talent dynamics, functional objectives, etc. Philosophy and design will drive reward policy of the future rather than pure data. The focus is to understand one’s ecosystem and how best one can deliver value, sustain and evaluate employee behavior from a reward perspective. Especially with family owned businesses and Indian MNCs, the orientation to the overall reward program from a philosophy design perspective is really gaining ground.
Increments will still be double digit and would be anywhere between 10-12 percent. How much of this is going to be totally fixed pay and how much will shift to variable pay, is still unclear. Companies are keeping their options open. Increments having a higher proportion of variable component will depend upon the economy and business outlook. From a reward framework perspective, long term incentives are gaining prominence in terms of driving business agenda and the right behaviors. Organizations want “solid citizens” and not mercenaries, which means focus on creating wealth and remunerating accordingly has become important. Driving long term design into rewards has become a critical component of the rewards framework. Lot of schemes are coming up, which are based around long term incentives and are inviting employees to become a part of the overall organizational growth. Stock is a part of this mind shift but cash plans are also in play. For some organizations, who are trying to build a robust talent pool, non-monetary rewards are more about training and development. The monetization of programs and making it a part of the overall reward design has become important. For Indian organizations, reward still means compensation or pure salary, but this perception will have to change and there will be a scenario where the holistic view to rewards will gain prominence. What is really coming up as a trend is communication and transparency and making line managers responsible for rewards communication rather than the HR. Ownership of the so called HR interventions is inevitable and organization policy direction will move towards this.
From a benefits perspective, life insurance policy has become more prevalent among companies as compared to the typical healthcare and personal accident insurance policy. There are business groups in India that have medical benefits at actuals, which is a very high impacting benefit and companies are explicitly communicating the same to employees.
There are a few key differentiators between us and the other industry players. At Hay Group, rewards are divided into few verticals:
• Rewards service line – these are executive and top team rewards. We work around basically defining reward behaviors for CEOs, etc.
• Measurement vertical – the entire work measure is sold through a positioning called Spectrum where work measurement is not just an end in itself, itis a means to an end. This is our key differentiator. Spectrum integrates all types of HR interactions.
• Reward strategy – this includes the whole element of philosophy design and designing different elements - variable pay, reward structures, etc.
Another differentiator for us is that we understand the operating model, organization design and jobs and therefore, rewards and all elements around this are a logical continuation of the journey, rather than a silo in themselves. For us, reward consulting is about completing this link. Data becomes an important input for this but is not the end deliverable. Clients find tremendous value in the same.
We understand Indian organizations very closely. A family owned business and a multinational would work differently. We understand this difference in terms of what has to be transparent, what compliances need to be followed in both cases and we are able to relate to their mindset and culture and then translate it to reward implications.