reward presentation university of cape town – 29 september 2008

Reward presentation Reward presentation University of Cape Town – 29 September 2008University of Cape Town – 29 September 2008

Kobus du PlessisKobus du Plessis

Area Reward ManagerArea Reward Manager

British American TobaccoBritish American Tobacco

the bigger picture

Business Strategy

Employee Benefits & Non-

financialRewards

Market surveys

Job Evaluation/

Job Profiling

PerformanceManagement &

Employee Development/Structure

Pay levels & relatives

Pay structures

Total remuneratio

n

Performance pay

Reward

Strategy

Improved Improved performancperformanc

ee

Foundation

Market and pay

Organisational processes

agenda

• reward foundation• job profiling and evaluation

• market & pay• market surveys• pay levels• variable pay

• organisational processes• employee benefits• non-monetary benefits• performance management & employee development • pay for performance

Total R

eward

job evaluation

T h e U n d e r l y i n g P r i n c i p l e

A c c o u n t a b i l i t y

J o b s e x i s t t o a c h i e v e a n e n d r e s u l t

A c c o u n t a b i l i t y A c c o u n t a b i l i t y

P r o b l e m S o l v i n g

T h e r e f o r e , t h e j o b h o l d e r r e q u i r e s a l e v e l o f k n o w l e d g e

a n d e x p e r i e n c e c o m m e n s u r a t e w i t h t h e s c a l e a n d c o m p l e x i t y

o f t h e d e l i v e r a b l e s

K n o w - H o w

P r o b l e m S o l v i n g

T o a c h i e v e t h i s e n dr e s u l t , j o b h o l d e r s m u s t

a d d r e s s p r o b l e m s , c r e a t e , a n a l y s e a n d a p p l y j u d g e m e n t

1 32

OUTPUT PROCESS INPUT

Job evaluation measures the OUTPUT, PROCESS and INPUTrequirements of the JOB and NOT the performance

of the individual in the job relative to these job requirements

job evaluation

TopManagement

Senior Management

Professionally qualified specialists and middle

management

Skilled workers andjunior management

Clerical, equipmentoperating, juniorsupervisory staff

Staff with narrowrange of basic skills

HayJE ManagerPaterson

F

E

D

C

B

A

1801+

735 - 1800

371- 734

192 - 370

0 - 24

25 - 74

75 - 124

125 - 174

175 - 224

225 - 275

85 - 191

Up to 84

example - BATSA

A

B

C

Y

N

Q.2

Q.3

Y

N

Q.7

Q.6

Q.5

Q.4

YN

BA

N

YN

1

2

3

5

6

7

Q.1

4

The JE Manager system uses standardised questions and decision trees to arrive at JE Manager points

Example:Acquisition and Application of Theoretical Knowledge

• X - Minimum level of knowledge required

example - BATSA

Division Job Title Grade Date Time

SUPPORT SERVICE SECRETARY B4 1-Apr-97 3.30 pm

Factor Weight X Y Score Basic Pts. Wtd Pts.

Acquisition & Application of Knowledge 1.4 4 3 F 9 13

Skills Acquisition and Practice 1.1 3 4 F 9 10

Judgement 1.9 4 3 F 9 17

Planning and Leadership 1.6 2 2 C 3 5

Communication 1.6 2 3 D 5 8

Job Impact 2.4 3 3 E 7 17

Total 42 70

Job evaluation result produced by JE Manager…

example - BATSA

Employee / Manager

JE Facilitator

JE Audit Committee

NotificationJob evaluation request

& actual evaluation

Job evaluation results reviewed

Job evaluationresults approved

The job evaluation process in BAT SA…

agenda




Total R

eward

What do we need from salary surveys and how does this relate to job grades….

JEManager

Salary Surveys

BySurvey

Company

Job Grade34

Job Grade33

Job Grade32

Job Grade31

Job Grade30

More complex job

Less complex job

We need:• Lower quartile• Median• Upper quartile• 90th percentiledetails per job grade

salary surveys

Defining the lower quartile, median, upper quartile and 90th percentile…

Highest salary

Lowest Salary

Rank order ofALL salaries ofALL companiesat a particular job grade

Lower Quartile

25% ofsalariesexceeded

Median


Upper Quartile


90th Percentile


salary surveys

Intelligence Report 2007

example - BATSA

38 760 85,561 100,737 118,593 134,367

37 6,179 58,637 68,458 78,747 90,412

36A 13,740 40,833 47,818 54,568 61,690

36B 28,833 30,228 35,424 41,226 47,250

35 22,596 21,906 27,119 32,469 37,791

34 19,179 19,666 22,861 26,520 30,485

9 37,702 16,051 20,167 24,119 27,278

8 19,909 14,099 17,158 20,397 23,764

7 108,050 10,600 12,844 15,793 18,349

6 18,753 8,198 9,344 11,550 13,933

5 54,495 7,362 8,788 10,711 12,678

4 16,433 6,109 7,276 8,852 10,210

3 31,173 5,376 6,297 7,144 7,774

2 59,352 4,990 5,556 6,467 7,353

1 55,308 4,492 4,798 5,027 5,331

25th 75thGradesMarket Ranges Excluding BATSA

Sample Size

Median 90th

pay levels & relatives

• Market position

• Which market – national, regional, sector, etc.

• Date of data


• Pay scale principles• Number of grades• Number of different pay scales• Pay ranges, pay slope and pay overlap

Different norms in different countries


• A successful pay structure……..

• reflects the company’s business strategy and culture• reflects the culture and pay practices of the country• rewards adequately for higher levels of job responsibilities, skills or

competencies• reflects the target market• is affordable• adheres to sound design principles• provides a structure to reward performance

BATSA example

Job Grade X

90th

percentile

Median

75th

Percentile

MarketCompanySelectedPay range

Marketanchor

+40%

-10%

Comparatios

100

140

90

High skillsHigh

performance

On standardskills and

performance

Low skillsLow

performance

variable pay

Best Practice: Most Successful Incentives

• Cascade/Aligned with important business goals to clarify how value is created

• Measure what counts not what can easily be measured• Goal setting: Top-Down - Participants involved in ‘How To?’• Results, not activity accomplishment• As measurement improves, performance focus shifts to more individual

and less team, group, organisation-wide• Organisation: Did we get value? (ROI)• Participants: Were awards consistent with what I/we contributed?

REGULAR COMMUNICATION

variable pay …alternative design options

Primary Corporate ObjectivesNet turnover target

Profit targetSales volume target

Cash flow target

Supportive Business unit

Objectives

Business UnitIncentive

Table

Corporate Incentive

Table

Supportive Individual Performance

Objectives

IndividualIncentive

Table

CORP C + BU C + BU + Ind.

100% 70% 50%

- 30% 30%

- - 20%

variable pay….share participation schemes

Threshold

Target

Budget

Target

Stretch

Target

Override

Target

0% 10% 20% 40%

% of Salary Converted to Share Allocation

Share allocation transferred to individual following a vesting period

Typically limited to senior executive teams and senior professional staff:Retention ability of scheme results from fact that employee would be

leaving a monetary entitlement behind should he/she resign…

example – market trends

example - BATSA

• Inclusiveness:• “Include everyone.”

• Reward team results as opposed to individual results:• “In the emerging world of work, business success is increasingly determined by

team effort rather than individual effort”

• Line of sight:• “Ensure that employees see a link between what is required of them and the

incentive payments.”

• Simplicity:• “Keep it simple.”

• Incentives must become part of the daily business agenda:• “Incentive targets and achievements against these targets must be common

knowledge for employees and a source of daily inspiration for behaviour”

example - BATSA

CompanyCharter

FunctionalCharter

IndividualPerformance

Contract

5 Bonusable Objectives

Line of Sight Objectives

Functional Line of Sight Objectives

Individual Performance Objectives


Rating

Individual Salary

CompanyScore Card& Ratings

FunctionalScore Card

Annual IncentivePayments

Ensure employees see link between what is required of them and

incentive pay

25%

25%

25%

25%

Incentive Payment

Year-to-date

Cash Flow

Sales Volume

Profit

Net Turnover

Threshold Target Stretch Override

30%

example - BATSA

agenda




Total R

eward

employee benefits

In deciding which benefits to offer, it is very important to understand the difference between the following two mayor benefit classes:

• Core Benefits:

• These are benefits where participation is a condition of employment for all employees. A core benefit is therefore compulsory for all employees and the core benefit offering by the company is largely determined by:

• The company’s social responsibility view.• The social security benefits available from the state.

• Non-Core benefits:

• These are the balance of the benefits a company elects to offers to all staff or certain categories of staff.

• The benefit selection offered is determined by the company’s need to be competitive on benefits relative to its key competitors for talent.

• Where practical, the company would allow the employee to exchange a non-core benefit (partially or fully) for cash or another non-core benefit.

employee benefits

Traditional Design

Salary * #

+

Benefits

=

Total (fixed) Package *

+Incentives

=

Total Cost of Employment*

* = Benchmark points to labour market# = Pensionable and incentive basis

Modern Design

Flexible Package #

+

Core Benefits

=

Total (fixed) Package *

+Incentives

=

Total Cost of Employment*

Salary

Car benefit

Medical benefit

Contribution to retirement fund

In-service life cover

Disability cover

Annual incentivescheme

Benefit design trend

Benefit selection and designModel design for medical benefits…

Company pays

Employee pays

Full or significant portion ofpremium

No or insignificantportion of premium

SingleMedicalBenefit

Plan

Fixed monthly amountas core benefit

contribution,($80)

irrespective of plan chosen by employee and

number ofemployee

dependants

Balance of premiumrequired for

chosen benefitplan:

Gold ($120)Silver ($40)Bronze ($0)

Choice ofMedicalPlans:

Gold ($200)Silver ($120)Bronze ($80)

Traditional Design Modern Design

non-monetary benefits

Proposed recognition channels within recognition mandate

• Simple “thank you” cards that can be sent by anyone to anyone in the organisation

• Small “thank you” gifts (e.g. book, music CD, flowers, etc.) with a capped maximum value – expenditure to be approved at management level

• Achievement certificate / trophy presented at some form of awards ceremony.

• Development opportunity – i.e. attendance of an innovation conference

BATSA example

Employee to Employee Manager to

EmployeeOpCo /

Clusters Area Region Global

Thank You Cards

(to individuals)Yes Yes

Token Gifts

(to individuals) Yes

Awards

(to teams incl. project teams)

GM / MD Awards

Area Directors

Awards

Regional

Director

Awards

Golden

Leaf

Awards

Development

Opportunities

(to teams incl

project teams)

OpCo Sponsored

Development Opportunity

(i.e. Local Conference in field

of work)

Area Sponsored

Development Opportunity

(i.e. Above market BAT Conference on specific topic like innovation)

Regionally Sponsored Development Opportunity(i.e. international conference on area of interest)

pay for performance – BATSA example

Individual

BAT SASkills

with market

value

Performance

Competitive

Comparatio

100Market

Anchor

95

125

Succeed

110

140Exceed

100

90

Inadequate

115

Reward for skills with

high demand in market

Market 90th Percentile

Market Upper Quartile

75th Percentile

Nearly There

+

Job evaluation(JE Manager)

+Salary surveys

Tools

Performancemanagementsystem (PerForm)

MarketMaximum

10% of employeesin SA market

Up to 15% of BAT SA employees in order

pay for performance

Target performance distributions per performance rating….

Exceed SucceedNearly there &

Inadequate

<10%65% - 80%15% - 25%

The reality is that if more that 25 % of employees achieve exceed ratings,OUR STANDARDS ARE TOO LOW !

Battlefield bonuses…

• When should they be used…• Where performance of an individual/team goes well beyond an ‘exceeds’

performance.• Where an individual/team has contributed to a significant activity or project which was

not in the work plan. They have delivered successfully on this significant unplanned item as well as delivering their agreed work plan.

• They have made a significant personal sacrifice to manage a workload well above that normally expected, usually in the situation where significant unplanned activity appears during the year.

• In other words, battlefield bonuses are there to recognise truly exceptional performance that goes significantly beyond the exceed benchmark

• Quantum of Battlefield bonuses• In most circumstances the payment of 1 month’s salary would be appropriate• In very exceptional cases the payment of up to 3 month’s salary can be made

reward governance and communication

Decision maker:

• Board Compensation Committee (BCC)

• Human Resources

• Line Management

• Employee

Decision mandate:

• Remuneration strategy and policy decisions

• Research remuneration best practices in market and:• Motivate appropriate remuneration practices and levels for

organisation to BCC• Train and guide line managers in application of approved

remuneration practices.

• Application of approved remuneration practices within constraints of an approvals framework.

• Make-up of his/her total remuneration package within the constraint of his/her own total remuneration package value.

Issue: who should make which remuneration decision in the company…

reward governance and communication

Advantages and disadvantages of communication alternatives:

• Written communication+ Accessibility – can reach everyone with written communication.+ Relatively cheap medium.- Information in written communication can get outdated very quickly.- When updated communication gets distributed, difficulty in recovering/disposing of outdated version.

• Electronic medium+ Information can easily be kept relevant and up to date at all times.+ Easily facilitates add-on services – electronic payslips, decision support tools, etc. as well as e-mail question

and answer facility for line managers and employees.- Access to information can be more difficult - not everyone might have access to a computer and even if

computers are available (through for example employee computer kiosks), employees might still have difficulty in accessing information due to lack in basic computer skills.

- Technology investment costs to put these facilities in place, could be significant.

• R&B training:+ Caters for personal interaction which can greatly facilitate learning and understanding.- Relatively expensive due to travelling.- Increases “down-time” in company - Have to take line managers and employees out of their jobs for the

duration of the training.

No ideal medium - Going forward, the role of the electronic medium is likely increase and grow in prominence.

BATSA exampleGeneral reward

communication on standard policies,

procedures and practices.

Ideally issue resolution 50% to 60 %

Line manager education and

issue resolution up to 70%

HR SC & BP - issue resolution 80% to 90%

Reward CoE - issue resolution up to 100%

Reward CoE to provide framework

and content of interventions to ensure

all stakeholders have access to appropriate

information and support. This will include strategy,

policies, procedures, appropriate guidelines

and applicable training, education and information material.

BATSA example

Channel Target Audience Frequency

Company Intranet All employees Ongoing

Company newsletter All employees Quarterly

Classroom training Line managers 2 x per annum & Ad hoc

HR Business partners 2 x per annum

“Upskilling” sessions HR Community 6 x per annum

Induction All new employees 2-3 x per annum

Information sessions All employees Ad hoc

Road show – “Meet & greet”

Road show – “It’s my life Movie 1 ”

Road show – “Board game 2”

Favourable Scores

Pay and Benefits

Information and Communication

Structure

Learning

Alignment

Culture

Corporate Responsibility

Team Working

Survey Follow Up

Enterprising Spirit

Respect for our Employees

Talent

Freedom through Responsibility

Open Minded

Leadership

Strength from Diversity Insufficient Items for Category Score Computation

Supplementary items AME Insufficient Items for Category Score Computation

Supplementary items South Africa Insufficient Items for Category Score Computation

Coloured Difference Bars indicate a statistically significant difference

Differences From Benchmark

British American TobaccoCategory Scores Ranked By Difference From Benchmark

SOUTH AFRICA END MARKET (1603) vs. ISR SOUTH AFRICA NATIONAL NORM (38582)

50

75

63

66

85

77

76

71

61

54

60

50

58

50

61

4

0

0

-1

-3

-3

-3

-4

-4

-4

-5

-5

-6

-8

-10

-20 -10 0 10 200 25 50 75 100

Category Scores Ranked By Difference From Benchmark Favourable Scores

Pay and Benefits

Enterprising Spirit

Information and Communication

Alignment

Culture

Learning

Corporate Responsibility

Leadership

Team Working

Respect for our Employees

Talent

Structure

Freedom through Responsibility

Open Minded

Strength from Diversity Insufficient Items for Category Score Computation

Survey Follow Up Insufficient Items for Category Score Computation

AME Supplementary Items Insufficient Items for Category Score Computation

Coloured Difference Bars indicate a statistically significant difference

Differences From Benchmark

British American TobaccoSOUTH AFRICA 2007 (1343)

vs. TP-ISR SOUTH AFRICA NATIONAL NORM (36274)

56

52

80

90

81

69

79

70

69

66

60

70

63

60

10

5

4

3

3

3

2

1

1

1

1

0

-1

-2

-20 -10 0 10 200 25 50 75 100

agenda




Total R

eward

total rewardBATSA example

Transparent &

Delivered

Effectively

Empowering & Flexible

Train

ing &

Devel

opmen

t

Opportuniti

es

Ope

n M

inde

d

Fre

edo

m

Th

rou

gh

R

esp

on

sib

ility

Enterprising

Spirit

Strength from Diversity

Co

ach

ing

&

Men

tori

ng

Career

Managem

ent

Peo

ple &

Strateg

ic

Lead

ership

Great Place toWork with

OutstandingPeople

Fair &

Co

mpetitive

BATSA example – reward architecture

Salary Incentives

Battle Field Bonus

BenefitsNon-monetary

recognition

Reward Channels

RewardingIndividual

Performance

RewardingGroup

Performance

RewardingOrganisationalMembership &


RewardingBahaviour

Reward Channel Objectives

Governance EnablerBCC Footprint - governs reward strategy & policy

Control Environment - governs reward practice

BenchmarkingEnabler

Survey FootprintDelivers marketintelligence &

facilitatesreward insights

Job EvaluationEnables

internal &external reward

comparisons

Technology EnablerFacilitates flawless execution

EngagementEnabler

CommunicationDelivers internal

feedback on reward & facilitates

buy-in on rewardstrategy, policies &

practices

TrainingBuilds reward

capabilitywhere required

questions ?????????