Whether it is a start-up or an established organization, it is important for the organization to have clarity around its Rewards Philosophy
Synchronizing is the key to scale-up
Companies need to synchronize with the operational dimensions like business models, product, team, customers and financials before scaling-up, says Anshoo Sharma, Principal, Lightspeed Advisory Services India.
For companies that are scaling, raising capital and growing, there are three key factors that enable success — an idea that is ready for execution; the right team that out performs everyone else looking to build something similar; and capital to drive the first two. The balance of all these three things is important. Along with this, the promoter CEO needs to make sure that the company performs and does well. The CEO needs to find and back the right person who can lead the company. The point to note is that the CEO needs to be able to delegate and not get in the way of good quality people from doing their work. Capturing the market is also important. The market is not forgiving and most companies fail to scale. And one of the main causes for this is premature scaling — when the business is not synchronized with the operational dimensions like business models, product, team, customers and financials.
Strategizing compensation policies during a scale-up
Shanthi Naresh, India Business Leader, Talent Consulting and Information Solutions at Mercer Consulting India Private Ltd, on deciding the compensation strategy during a scale-up.
As companies scale, how does the compensation strategy change?
Start-ups usually tend to pay for the competencies and skills of the person, which may not have a direct linkage to market pay levels. This ‘pay for person’ philosophy changes as companies scale and the number of employees increases. Larger companies look at paying industry-competitive pay levels based on a role/person. Such a pay for position approach provides the foundation for internal equity and a structured & transparent approach to compensation. Transition from an ad-hoc to the more rational pay for position philosophy, often requires significant pay corrections and usually happens over multiple years.
What steps should CEOs and CHROS take when establishing a new rewards and recognition system?
Whether it is a start-up or an established organization, it is important for the organization to have clarity around its Rewards Philosophy. In determining this philosophy, there are four considerations:
Culture and values: The “what”, “why”, “how much” and “when” questions around rewards need to be grounded in the organization’s belief systems, culture, and the behaviour and outcomes the organization expects from its employees.
The demographic mix: Company demographics influence the kind of rewards that will make the company’s value proposition compelling to its employees.
Looking at the market: Companies need to understand the market, analyze its competitors, and also be aware of the government and legislative changes that may impact the compensation structure or plan.
Cost of rewards: A very important aspect of the reward program is how much it will cost the company. A judicious mix of tangible and intangible rewards may be required to balance cost versus value.