senior executive compensation the i of bfsi - risk - …€¦ · · 2018-03-05senior executive...

India • Volume 3 • Issue 1

Demystifying the I of BFSI

Performance Target Setting for Executives

Untangling the Complexity

04

Senior Executive Compensation Cautious Economy. Optimistic Salaries

11

Best Managed Boards The Interviews

22

what’s inside

04 36

cover Story

16

Performance Target Setting for Executives Untangling the Complexity

04Senior Executive Compensation Cautious Economy. Optimistic Salaries

11

Best Managed Boards The Interviews

22Salary Increases in India The Question of Sustainability

29The 17th Aon Hewitt Salary Increase SurveyHighlights

34

Trend Check Rewarding Top Talent

36 Survey Calendar38

The article traces out the travels, trials and tribulations of the life insurance industry in India and looks at how it has impacted human capital over the years.

11


editors

Shilpa Khanna

[email protected]

Sushil Bhasin

[email protected]

Tel: +91 124 4155000

editorial, reprints &

Syndication office

Aon Hewitt Tower, DLF Centre Court

Sector-42, Gurgaon, India-122002

Tel: +91 124 4155000

Fax: +91 124 4052010

Subscription requests

[email protected]

editorial Feedback

[email protected]

Design

CREATIVE InC. (www.creative-inc.in)

Total Rewards Quarterly is published

four times a year by Aon Hewitt

Copyright © 2013 Hewitt Associates

India Pvt. Ltd.

Total Rewards QuarterlyIndia • Volume 3 • Issue 1

www.aonhewitt.com/india

Sandeep chaudhary

Partner,

Talent and Rewards,

Aon Hewitt

For more information, please write to us

at [email protected]

I see this year as a turning point in how India Inc. has traditionally managed talent and rewards. The plummeting economic growth and increased focus on the expense line is compelling HR to think innovatively. More than ever before there is a heightened debate on salary increases, incentives, goal setting, etc. I see a larger acceptance of the fact that we should relook at our conventional methods and be more open to alternative and untested approaches. Reduced promotions, muted bonuses, lessened hiring are all signs of tapering corporate growth. However, the real question is not how do we survive, but how do we inspire and create the positive energy to succeed.

Our historical challenge has been to get employees connected to the larger purpose and to demonstrate what’s in it for them. Our larger energy is consumed in managing the outcomes rather than linking performance to agreed goals. I see a lack of this creating an outbreak of disengagement and low self-esteem in private sector employees.

What makes most organizations average is their obsession with benchmarks and market practices, which is the best recipe to kill innovation. They are unsure about trying anything new. We are still negotiating for salary increases, fighting to hire the same (un)proven profile, struggling to link compensation with tangible productivity gain. Very few organizations are willing to expand the paradigm to include unconventional approaches. Understanding employee preferences, for example, could redefine our approach to managing rewards and could be a key driver for the change that we are seeking. We know that people across gender, age groups and income levels have different needs, yet we have not bothered to ask them and are not willing to weigh that in while designing our rewards strategy.

There are good lessons to be learnt from Indian business houses, who have been prudent, invested right and created a better security net – an approach that has more or less remained consistent during the peaks and turfs of business.

Many articles in this edition will help you introspect. In the same vein, the theme, “Total Rewards: Changing the Game” has been finalized for this year’s annual rewards conference. I look forward to meeting you at the conference on Thursday, May 30, 2013 at Grand Hyatt, Mumbai to deliberate on this further.

India • Volume 3 • Issue 1totalrewards QUARTERLy

03

Performance Target Setting for Executives

Untangling the Complexity

Conventional target setting processes often reinforce the notion of a zero-sum game between the management, the board and shareholders.

Our experience shows it need not be so.

www.aonhewitt.com/india04

Politics, Emotions and Analysis Issues in Target Setting

Figure 1.

Understanding the Emotional ComponentThe target setting process is often an intensely personal experience for the CEO and the board. The fact that a few million dollars of management compensation is linked to achievement of these targets strongly amplifies the intensity. The board and the management can potentially view this process as scoring 'points' against each other. Upon conclusion of a recent board meeting, wherein we were asked to observe proceedings, one of the nominee directors remarked, 'We stretched our CEO economic profit targets by 20% and created 50 million dollars of additional shareholder value.' Aside from the financial component, the notion of debating targets is fraught with the collision of egos. Some CEOs worry that the moment their management team is asked to participate in target setting discussions with the board, that their own leadership status and credibility will be undermined. Conversely, board members may be

Amid today’s choppy economic waters, boards, remuneration committees and activist shareholders need to revisit the approaches traditionally employed to define and assess the performance of their executives. The conventional wisdom on target setting is that companies should set 'stretch, but realistic' targets. In essence, companies are trying to find a 'sweet spot' – one that represents a step increase above their historical performance trajectory, yet is also fair to the management. However, not many companies have been able to translate this philosophy successfully into practice. Aon Hewitt believes that there is no silver bullet solution to target setting. nonetheless, boards and compensation committees can institutionalize a reasonably comprehensive target setting framework to set the 'bar' for the value that the management needs to create for its shareholders, and can assess whether their actual performance has met expectations in a transparent and objective way.

What Ails Conventional Target Setting Systems?In our experience, most leading companies are able to articulate their performance metrics in a way that reasonably captures the firm’s strategy and key drivers of value creation. As a case in point, Temasek (Singapore) has clearly articulated guidelines for their investee companies, requiring them to consider sophisticated issues such as risk adjustment for use of capital, as well as balancing long-term versus short-term orientation when making choices on performance metrics. While the performance metrics often capture the thrust of the organization’s strategy, the approach of setting targets and appraising performance using these metrics is much less robust. In reality, many companies do not have the facts they need to make fully informed decisions about target setting. Instead, they make do with an eclectic mix based on hard data (that is not broadly shared across the senior team or the board), and legacy opinions that have acquired the status of facts simply because no one has ever challenged them. As a result, assumptions are not tested, and more often than not, the board and the management resort to their 'comfort zone' of extrapolating last year’s actual performance to set next year’s targets. These issues should be examined more closely because they illustrate the underlying components of the target setting process – politics, emotions and analysis.

While the performance metrics often capture the thrust of the organization’s strategy, the approach of setting targets and appraising performance using thesemetrics is much less robust.

PERSPECTIVE


05

concerned that challenging management targets could send signals that might be misinterpreted as unsatisfactory performance, or loss of confidence by the board. Another important dynamic that affects the process is the risk of distortion. For most boards, strategy and target setting discussions are already complex enough. Firstly, they need to interpret relevant facts, relying on people who know more about the details than they do. Secondly, they need to ascertain if management might intentionally skew some of the facts. Most importantly, they need to apply their own experience and perspective to decide whether the recommendations are right. It is not surprising then that this multistage process can be affected by any distortions in judgment. Individuals often are unaware of their own biases. Further, in the absence of detailed information, they may not even be equipped to detect or neutralize any such management biases (Reference 1).

Understanding the Political ComponentBecause target setting involves so many stakeholders – the management, the board and shareholders – the process inherently carries tensions arising from the different interests of each party involved. Consider, for example, a diversified manufacturer that had representation from a Private Equity (PE) firm on its board. Historically, the firm had set incentives based on Return on Assets (RoA) targets at the company and the business unit level. However, for the year in question, the nominee director forcefully argued that significantly higher Earnings Per Share (EPS) targets should replace RoA targets. It turned out that the PE firm was contemplating a strategic sale and, as such, the EPS metric was a more acceptable yardstick for valuation. Even more critical is the dynamic operating between the board and the management. Most large companies have a dedicated strategy department that diligently develops a rolling long-term plan every year. Often, these plans hardly get off the ground. Many companies, at least in theory, expect a functional leader, such as a Chief

Financial Officer, to play the role of a challenger to the strategy. But an 'insider' whose primary job is to critique the management can lose political capital quickly.

Understanding the Analytical ComponentA less subtle but significant issue impacting target setting is the depth and breadth of the analysis that supports the dialogue. In addition to the business plan, information on analyst consensus estimates, peer performance and future guidance, and the growth expectations implied in current market multiples, can yield valuable insights. yet, these are often not considered for reasons that can be attributed to nothing but inertia. In certain cases, these insightful factors are dismissed as irrelevant, with statements such as 'We are overvalued by the stock market.' Scenario and sensitivity testing of key value drivers is far easier to incorporate into the analysis. Such tools are useful to improve the quality of the strategy through a deeper exploration of the risks involved. Moreover, they can also help the board understand the range of performance outcomes, set realistic levels of stretch in targets, design appropriate pay performance schedules, and develop a formal, proactive mechanism to recalibrate targets if 'tail' events occur. A large chain of hotels was embarking on a diversification strategy into property development and management. Core to this strategy was to redevelop specific hotels in advantageous locations into commercial and residential assets. The redevelopment would dilute short-term operating profits but would deliver long-term value. The strategy underpinning the business plan was sound. However, a value driver discussion revealed a critical assumption that the entire profit of the assets under question would be lost during the redevelopment period. Deeper analyses revealed that a fair proportion of the MICE revenue (meetings, incentives, conferences, and exhibitions) from corporate customers could be reclaimed by other hotels in the chain. Mere presentation of information and analyses helped the board retest a critical assumption and drive a constructive target setting discussion with the management.

Overcoming the Barriers to Sound Target SettingTo be sure, some companies and their boards do a good job of exercising sufficient diligence in the target setting process. Overall, though, to be effective, firms must recognize and address the core issues we articulated earlier. A few best

Board members may be concerned that challenging management goals could send signals that might be misinterpreted as unsatisfactory performance.


practices and practical tips that can improve both the process and the outcomes of target setting are as follows:

1. Require In-depth Information and Analysis to Support Target SettingBoards and remuneration committees must insist on greater depth and breadth of the information underpinning the target setting conversation. Four main sources of information (refer to Figure 2) should be required: Business plans/budgets Peer analyses Capital markets, expectations Sensitivity/scenarios analyses

Management should not view these information requirements as tools intended to uncover slack in bottom-up forecasts. On the contrary, we have seen the management effectively use this information (and in particular, the 'what does it take' analysis) to defend their targets.

2. Co-opt Shareholders in the Target Setting ProcessIn addition to strengthening their management discussions with a solid fact base, boards can prepare themselves by having a dialogue with key institutional shareholders. In fact, understanding and managing shareholder expectations is an increasingly important responsibility of the board for both goal setting and incentives. Many institutional shareholders consult pay for performance tests from proxy advisors in order to scrutinize goals and incentive plans. However, boards would be well served to have direct interactions with a few key shareholders well before the disclosure event. If conversations are conducted early in the process, it is likely to be more open-ended and conducive to the candid sharing of information. In contrast,

delaying the conversation until 'after the fact' can lead to discussions that take a defensive tenor.

3. Establish 'Top-Down' DirectionThe CEO of a large engineering group required his business unit heads to identify three of the top five percent of the company’s maintenance assets for potential disposal every year. The divisions were allowed to retain assets in this category only if they could demonstrate a certain minimum increase in return on investment. In essence, the burden of proof on performance improvement fell to the business heads, rather than the other way around. The additional effect was the launch of an underperforming asset reduction initiative by all business units that led to Return on Capital Employed (ROCE) improvements beyond the minimum threshold. In another example, the board of directors of a large property player mandated that at a minimum, the CEO’s performance scorecard should always include at least two Key Performance Indicators (KPIs), wherein performance is assessed relative to peers or with external benchmarks. Furthermore, the weights of these KPIs should exceed 30%. The more obvious motive was to lighten the cumbersome budget-based targets on some KPIs. Other positive results identified were an enhanced focus on non-financial drivers of the business, along with more comprehensive coverage of peer group performance in the business planning and target setting discussions.

4. Frame the Conversation Around a Range of Outcomes Instead of a Point EstimateAs highlighted earlier, scenario modeling elevates the notion of 'stretch' target setting beyond a mere catchphrase. Such modeling helps quantify 'stretch' based on the likelihood

Suggested Information and Analyses to Facilitate Target Setting

PERSPECTIVE

Figure 2.


07

Kumar Subramanian Regional Practice Leader – Executive Compensation

& Performance, Aon Hewitt, India

For more information, please write to us at

[email protected]

of achievement. Also, by understanding the range of performance outcomes, remuneration committees can help define the performance upside and downside risks and fine-tune the pay-performance curve. no doubt, the rigor of scenario planning influences the quality of target setting and incentive design. However, in our experience, the issue is less analytical and more one of organizational mindset. Most leaders feel uncomfortable with the very notion of acknowledging the existence of significant risks, let alone discussing them with the board. The chairman of a large industrial group has successfully deployed a process to help the management with confronting the unknown. Because he has seen that anxiety creates underreporting of real risks, he has established a process to identify scenarios that first involves asking the management to paint a picture of what he calls the 'darkest nightmare'. Secondly, the management is given a chance to 'peer into the darkness' together with the board, so they can define the risk quantitatively. The next step is a detailed plan to counter each nightmare, while acknowledging clearly that certain risks are inherent in the business and can only be mitigated, not eliminated. A few other organizations use more sophisticated checklists to detect any bias in building scenarios.

5. Define the Conditions Under Which the Targets will be Adjusted or RevisitedEstablishing targets is a good starting point, but companies also need a sound governance mechanism to revisit them over time. Progressive companies define boundary conditions that will trigger a reexamination of the plan. These could include big, non-recurring events such as mergers, divestitures and large investment projects. Certain other companies also define thresholds around variables, such as oil and commodity prices or freight rates, within which the targets will apply. The targets would be retroactively adjusted upon movements beyond the threshold to ensure that the management is not unduly rewarded or penalized. Many progressive companies not only articulate boundary conditions upfront, but also define the

methodology for recalibrating targets. For example, quite a few asset-intensive companies have successfully deployed a capital deferral policy to incentivize managers to undertake strategic value creating investments that have long gestation periods. This involves creating a 'suspense account', wherein the planned negative earnings are 'parked' for a pre-approved gestation period. However, the management is held accountable for any overrun or additional deviation from planned earnings during the gestation period.

Using Capital Deferrals to Adjust Long-Term Performance Targets

*Sample illustration using assumptions on size and economic profit profile of

existing business and new venture

Figure 3.

These adjustments not only eliminate the disincentive to invest in growth that creates long-term value, they also hold the management accountable for the additional capital they invest.

Reference:

1. Refer to 'The Big Idea: Before You Make That Big Decision' by Daniel

Kahneman, Dan Lovallo, and Olivier Sibony, Harvard Business Review,

June 2011, for a more detailed and insightful exposé on cognitive bias in

decision making.

Establishing targets is a good starting point, but companies also need a sound governance mechanism to revisit them over time.

This is an abridged version of the original article. The original is available on request.


Total Rewards Optimization helps your rewards make a difference.

For further details and queries, please write to us at [email protected]

• Uses conjoint technique to collect preference data

• Fully self-adaptive survey based on individual employee preferences

• Completely customizable rewards attributes

• Provides real-time data analysis

Strong retention of talent and getting them to consistently deliver high performance requires organizations to offer compelling rewards programs.

Our analyses of the data shows that the mood guiding salary movements was either of cautious optimism or a resignation to the reality that Indian executives will need salary increases for them to be retained.

Increasingly, Indian organizations are focusing on monitoring RoI on compensation spends.

Rewards design has never been this challenging. There are tough questions that rewards heads and HR leaders are asking of themselves.

Enter Aon Hewitt’s Total Rewards Optimization (TRO) – the key to unlocking the potential of Total Rewards.

TRO is a preference measurement tool that helps organizations optimize plan costs and employee preferences to increase RoI on compensation spending.

Aon Hewitt’s Total Rewards Optimization (TRO) Can Help Organizations Find Answers to the Questions Above.

What is the right compensation package?

What are the rewards that employees want? Do these differ by employee segments?

Which rewards deliver maximum employee engagement for current investments made?

What are high performing employees looking for?

For HR professionals to provide real functional expertise that is both strategic and leading-edge, they must hone their skills and capabilities. Aon Hewitt Learning center (AHLc) provides targeted courses in Human Capital Management for HR and non-HR professionals.

www.aonhewitt.com/india

Flagship certification Programs

If you are an HR professional, AHLC offers the following public certifications for you:

Certified HR Professional (CHRP): For entry to mid-level HR professionals who wish to have a successful career in Human Resource Management (typically zero to five years of experience).

Certified Rewards Professional (CRP): For working HR professionals inclined to specialize in compensation or working compensation professionals at entry level aiming to deepen their knowledge.

catalog of courses on offer

If you carry the mandate of training employees in your organization, AHLC offers courses in the areas of:• Business skills for HR• Technical skills for HR (talent supply, capability

growth, performance and rewards)• Personal effectiveness for HR/people managers• Building partnerships for senior HR and

business professionals

Custom in-house trainings are designed and delivered as per your needs and learner groups.

Unlock Your Potential

Real Content | Real-Life Learning | Real Business Outcomes

For any queries on Aon Hewitt Learning Center,write to us at [email protected] orvisit us at www.aonahlc.com

Launching in May – Registrations Open• Each certification program consists of a combination

of study modules delivered by expert consultants• Registrations are ongoing and classroom sessions

are being scheduled based on learners’ preferences

Want to become Aon Hewitt certified?

PERSPECTIVE

Senior Executive Compensation

Cautious Economy. Optimistic Salaries.

11India • Volume 3 • Issue 1totalrewards QUARTERLy

up the numbers and without them it would have actually been a 9.6% drop in net profit year-on-year. Fy2012 closed on a negative note, with about 55% of listed companies posting a dip in profits2. While companies showed an increase of more than 20% on revenues, there was a significant squeeze on account of higher input costs. There was a general environment of gloom with almost no visible reforms and no big ticket projects being undertaken by the government. The HSBC PMI stood at 54.7, a marginally improved number than the previous quarter but far lower compared to 2010. Remuneration committees across the country decided salary changes in the background of this economic and business environment. Our analysis of the data shows that the mood guiding these salary changes was either cautious optimism or a resignation to the reality that Indian executives will need salary increases for them to be retained. Let us look at how the different elements of compensation played out over this period for executives in India Inc.

Highlights from Our Analysis

1. Early Signs of the Brakes Being Applied?We had an interesting challenge this year, with the increase in the size of the database, the average pay data fell compared to last year. This was primarily on account of a set of smaller companies that entered the survey. Hence, while on an aggregate basis we found the median executive pay across most jobs to have dipped from last year, the reality is slightly different. We analyzed salary increases using a set of about 150 organizations that were participants in the survey across both years and the results showed only a slight deceleration in salary increases for executive roles. As against an almost uniform trend of greater than 13-14% increase in salaries over the last 10 years (with the exception of 2008-09), this year the salary increases across most jobs were in single digits with an average increase on fixed pay by about 10% and on total pay (including annual and long-term incentives) was between 11-12%. To a large extent, these averages are influenced by certain roles such as R&D, sales and marketing, etc. which saw fairly high salary increases. Across the 25 roles that we covered in this exercise, about 60% roles had less than 10% salary increases.

2. Dilution of Any Significant Industry Differentials in Compensation at the Very TopThe core message that emerges from analysis of sector-specific data is that there is only a marginal differentiation

OverviewIt has been three years since Aon Hewitt India started the Executive Compensation Survey. When launched, this was the first such survey being conducted by any consulting firm in India. Over the years, the study has matured with not only a much wider pool of data collection (our database size has increased by 250% over the last two years) but also far greater granularity in data. This has enabled us to analyze the data along a wider set of parameters – industry sectors, ownership types, revenue and employee sizes, etc. We have also started analyzing predictive indicators in the form of regression equations by sectors and business sizes to be able to assist clients in judging appropriate pay levels through a triangulation approach of benchmark data, market pay equations and current pay levels. This survey was conducted between July and October 2012 and over this period, data was collated from 205 companies across a set of 12 industry clusters and ownership definitions. Companies reported data for their CEOs and direct reports to the CEO across a variety of functions and roles. There has been a fair bit of outcry across different forms of media on 'excessive' executive compensation and our survey results present an interesting representation on that issue.

A Background of Volatility and UncertaintyMost of the data that you will see in the following pages pertains to compensation decisions that were taken in the period between March and May of 2012. This was a fairly bleak phase for India Inc., the last quarter of 2012 had closed with a 2.7% profit growth1 compared to the previous year. Certain companies and a few sectors such as banking, cement, technology and pharma were holding

As against an almost uniform trend of greater than 13-14% increase in salaries over the last 10 years (with the exception of 2008-09), this year the salary increases across most jobs were in single digits.

12 www.aonhewitt.com/india

in compensation levels for positions such as the CEO, COO, or CFO across industry types. This however, is not true for many of the other executive positions such as Head of Sales/Marketing, etc. where there appears to be sufficient differentiation by industry. The data reflects the lowest standard deviation from the mean at the CEO level across different industries, increasing marginally for the COO, CFO and Head of HR roles and then increasing significantly for other positions. In theory, this indicates far greater mobility for the top 2-3 positions across industries and also the fact that some positions are more critical across certain industries than others, e.g. the Head of R&D in an FMCG/pharma company, at an average, earns more than 2x of standard manufacturing companies or the Head of Service who earns a far higher premium in telecom companies compared to other industries. Companies should, while constructing peer groups for executive positions, keep this factor in mind and ensure multi industry peer groups for certain core general management roles – currently, most organizations (more than 75% of respondents in our survey) use a simplistic approach of using peer groups for executive pay that are identical with the rest of the organizations.

3. Deriving Predictability and Patterns in Executive Pay Levels Remains Elusive The survey analyzes data across a range of anchors that go beyond just industry differentials. The purpose of this exercise is to identify patterns that can help us create predictive equations for our clients. In this, we came upon a range of interesting outcomes on the behavior of executive pay data: a) Correlation of executive pay with financial scope factors: The survey had a fair mix of companies with revenue sizes ranging from less than `100 crores to greater than `50,000 crores. Given the wide range of sizes, we ran regression tests on pay data. The results showed a low Pearson Coefficient of Correlation (R2) value of 0.28 between pay and revenue size. This number looks particularly stark when compared to the same data for US CEO pay and revenue size, which stands at approximately 0.6. Similar comparisons apply for CFO/COO/CHRO roles as well, where the R2 value in India stands at approximately 0.30 as compared to US levels of 0.6-0.7. If we ignore the statistical considerations and look purely at the raw data, the average ratio in compensation between CEOs managing businesses in the range of `500–1,000 crores and CEOs managing businesses with more than `30,000 crores in revenue is only about 1.7x on fixed pay and about 2.9x

on total pay. So, while the business size might be six times, the compensation multiple is never more than three times. b) Correlation of executive pay with employee size: We included a comparison with employee size primarily so as to factor in the technology companies that have a very large employee base but may not necessarily be very large in revenue. Unfortunately for us, given the large number of unlisted companies in the survey, using market capitalization as a scope factor for business was difficult. Perhaps predictably, the R2 values were even lower with the number for CEO pay with number of employees being 0.12. The number for direct reports to the CEO was approximately 0.15-0.25. Again the raw data reveals very narrow compensation changes even when the size of the employee base changes significantly – a ratio of 2.0x on fixed pay between CEOs managing employee sizes of more than 25,000 as compared to CEOs managing a workforce of less than 500. The similar ratio on total pay is just 2.6x. c) Correlation with ownership dynamics: In our study last year, we found some interesting trends in how CEO pay is very clearly correlated with the nature of ownership. not only is there a significant differentiation between pay on account of whether a company is listed or not, there is also a clear differentiation in pay on account of whether the company is promoter-driven (and this is largely the case in Indian companies) or shareholder-led (here it could be Indian companies as well as MnCs). Let us first look at the listing criteria. There exists approximately a 2x multiple between the pay for a listed company CEO and that of an unlisted company. We analyzed companies of similar size that were promoter-run versus those that were shareholder-run and as with last year’s study, there appears a fairly clear premium for

The average ratio in compensation between CEOs managing businesses in the range of `500-1,000 crores and CEOs managing businesses with more than `30,000 crores in revenue is only about 1.7x on fixed pay and about 2.9x on total pay.

PERSPECTIVE


CEOs in shareholder companies vis-à-vis promoter-run businesses (only considering for jobs where the CEO is a professional and not a part of the promoter group). d) Within all our different buckets of revenue, employee size, ownership types, etc., we found a distinctly wide range in compensation data, e.g. for companies within a revenue range of `1,000-2,000 crores, the minimum to maximum range on total pay was approximately 300%. Similarly, for companies in the revenue range of `2,000-5,000 crores, the range on total pay was approximately 230%. The analysis across all of these various anchors leads to a basic fact that there is yet no clearly discernible pattern with regard to factors that determine executive compensation. And while we are able to generate some level of predictive equations in certain sectors and in certain size buckets, a more broad-based index is still almost impossible to create.

4. Pay Mix Continues to Evolve into a More Performance-driven StructureThe mix of pay for executives across fixed, annual and Long-Term Incentives (LTI) has evolved continuously over the last decade. The move has been towards a far greater performance alignment in the overall pay for CXOs. This year, we see the pay mix for the CEO reflect an almost equal split between fixed and variable and the variable component being structured marginally more on LTI as compared to annual bonuses. This approach is replicated across direct reports to the CEO with an approximately 57-43 split between fixed and variable compensation, and variable pay being split with a higher weightage towards LTI. It is interesting to note the trend towards greater prevalence of LTI in overall CXO pay, seems to be gradually getting aligned with the global phenomenon of increasing focus of incentives to payout over a longer

term as opposed to annual. However, the fact is that even though executive pay has a significant presence of LTI, the benchmarking approach is still largely anchored around either fixed pay or fixed pay and annual incentives (71% of companies reported either as their anchor for positioning), therefore it will still take time before long-term incentives get inherently anchored as an element of compensation. However, pay mix for Indian executives still seem very different from global patterns, with variable component for Indian CEOs being much lower as compared to most Western geographies. As the chart below represents, except for China, most countries have more than two-thirds of total CEO pay being delivered through incentive compensation. India, in comparison, has so far moved up to having only about half of compensation being incentive-driven. For direct reports to the CEO, India is also far more conservative as compared to most global economies where at least 50% of the total pay for these positions is delivered through a combination of annual and long-term incentives. Interestingly, we did not find any clear differences in the pay mix between heads of support functions and individuals heading business roles.

CEO Pay Mix by Country

Source: Aon Hewitt Database

Annual incentive structures are primarily defined around business incentive awards, while long-term incentives are largely driven on stock option programs with almost 50% of all LTI plans being structured around the option program. The prevalence of deferral in annual incentive structures is still fairly nascent in the Indian context, and most annual incentives plan payout in the same year as they are earned. From a LTI context however, we find most plans being structured on a 3-5 year vesting schedule with a greater prevalence towards the shorter end of the spectrum.

There are still some gaps that remain in the whole structure of executive pay when compared to global standards – the pressing need is to ensure that the governance of executive pay is more rapidly aligned to global standards.


5. Performance Pay is Driven Entirely on P&L Metrics A discussion on incentive compensation is incomplete without an analysis of what drives incentives for executive jobs across organizations. Particularly in long-term growth economies such as India, the choice of metric goes a long way in determining the extent to which the earning potential of an executive is tied to real performance. Our study collected data on performance metrics for CEO, business head and functional head roles and the results reflect a strong alignment towards driving P&L performance across most organizations. At the CEO level, almost all companies have metrics on a combination of profit/profitability and cost savings parameters, metrics around top line growth are prevalent in almost all companies as are non-financial metrics such as customer satisfaction or employee engagement. However, the interesting thing is that very few companies seem to drive metrics that reflect efficiency parameters e.g. Return on Capital, Return on Equity or Assets, etc., only 5% of respondents highlighted these as metrics in their CEO scorecard. The structure gets broadly replicated at the business head levels with profitability metrics and top line metrics appearing across all organizations, there is a higher prevalence of non-financial parameters. There seems almost no difference in the kind of metrics being used for business and function head positions across most organizations. While broadly the pattern around usage of metrics seemed to remain consistent across different industries, ownership buckets or organizational life stages, some facts do get validated. For instance, public listed companies seemed to have a significantly greater focus on profitability while private companies focused more on free cash flows. Although intuitive, early stage businesses show a far greater focus on input metrics such as service quality, etc. while having lesser focus on cash flow or profitability as compared to growth or mature businesses.

In ClosingThe study captured some interesting insights on the thinking within companies with regard to executive pay levels. In line with some of the data that we have discussed in this note, we found organizations worrying less on fixed pay or benefits but being more concerned about aspects such as ensuring long-term incentive earning opportunities are appropriately structured or ensuring that performance metrics and targets are designed to ensure line of sight along with the impact of achievability, etc. We found organizations

Anandorup Ghose Director – Executive Compensation and Governance,

Aon Hewitt, India


[email protected]

realizing and worrying about communicating the right value of long-term incentives to the executive team. Executive compensation in India is still in a bull market phase and while there have been some moderations on account of a muted economic and business performance, the trend line remains intact. Also while organizations agree to the fact there are still some gaps that remain in the whole structure of executive pay when compared to global standards – the pressing need is to ensure that the governance of executive pay is more rapidly aligned to global standards. We hope this report will help HR departments and remuneration committees take more informed decisions towards managing executive compensation in their organizations.

Data Sources

1 Business Standard Study, May 2012

2 Hindu Business Line

PERSPECTIVE


For people not very familiar with the acronym accentuated world of financial services, there sometimes stems a confusion when they are confronted with BFSI. Believe it or not, many people still elongate the grandiose sounding abbreviation to read as ‘Banking and Financial Services Industry’. And that’s not the correct one. BFSI routinely (and supported by Wikipedia) stands for Banking, Financial Services and Insurance. There have been enough and more reasons and logic for insurance to be kept slightly separate from the more traditional financial services as the unique nuances of this sector range from the obvious to the not-so-ordinary. The Life Insurance (LI) space in India has followed a divergent trend from the rest of the BFSI sector, in the last decade or so. While the economic crisis devoured the larger financial sector like a giant tsunami, LI hung on like a stoic survivor only to eventually grapple with its own demons, and as a result, today is in the midst of a challenging environment. not surprisingly, the talent and rewards implications for this sector remain quite unique and inimitable, and it’s interesting to see how they have shaped up as the industry has evolved. The genesis of this article is to trace out the travels, travails, trials and tribulations of the LI industry in India as it carves its own niche in the dynamic BFSI space, and more importantly, how that has impacted the human capital that it engaged over the years.

The Millennium ChildThe insurance industry in India has come a long way since the time when the sector was tightly controlled, with LIC clearly ruling the roost. With the introduction of the 1999 IRDA Act, the industry opened up and it led to the birth of the private LI industry in India. Between 2000 to 2002, was the golden era; LI in India was booming and the success stories of the newly formed private LI companies encouraged many other insurance firms to follow suit and commence business in India. Today, there are 23 private LI companies operating in India, as a result of that unprecedented growth. Companies witnessed a dream run in the first decade of this century. Both on account of new Business Premium (nBP) and Gross Written Premium (GWP), numbers grew rapidly till 2010, notwithstanding the financial crisis that had engulfed the rest of the sector. This rampant growth obviously had a huge impact on the talent space. Till 2010, amongst all Financial Institutions (FI), LI in terms of pure headcount growth was one of the leaders. While

most FIs (such as banks, investment banks, broking firms) were still recovering from the economic downturn, LI in India seemed to be rallying. The sector was hiring talent from banks, nBFCs and other allied industries such as FMCG and life sciences and giving them impressive year-on-year salary increases and bonuses. As can be seen in the below graph, while the FI sector had shrunk its salary increase numbers in line with the slump in business, LI had still managed decent increases in 2009 and beyond (the best amongst FIs).

Salary Increases – FI Sector

Source: Aon Hewitt Salary Increase Survey 2008-09 to 2012-13 (Phase 2)

Figure 1

Growth Pangs Set InThe party of a rollicking childhood eventually ended as the end of the first decade approached. And this was less to do with market realities or cyclical pressures than the

The human capital base that had grown in proportion to the growth in business premiums, is now coming to terms with the not so rosy scenario that confronts the LI sector today.

COVERstory


intrinsic way in which the sector had continued to operate in. With a focus on top line and rampant expansion, most LI companies continued to grow GWP and nBP by focusing on short-term investment products (not the core long-term savings products sold traditionally). Hiring, sales incentivization (which often led to mis-selling), branch expansion, and business models helped the industry grow rapidly both on account of nBP and GWP. However, given the skewed focus on short-term aggressive products and the inefficiencies that crept in the sales and operating model, the sector soon found itself struggling with high costs and less than modest levels of profitability, which to date has accentuated to a problem of gargantuan proportions. The regulatory body had no choice but to step on the pedal, and strictly review the business models as well as to manage consumer interests which had no doubt taken a beating given the lop sided growth of the industry. However, against the backdrop of regulatory changes which started in 2010, the growth momentum slowed considerably. In 2011-12, many LI companies reported negative yOy growth of GWP. Private sector insurers posted a 4.52% decline (11.08% growth in the previous year) in their premium income. First year premium also registered a decline of 9.85% in comparison to growth of 15.02% during 2010-11. While there are many theories which support that the drop in GWP is due to a change in regulatory norms, changes in product mix and the strategy of the company, the subdued business sentiment also had a significant impact on the business, unlike earlier. And the human capital base that had grown in proportion to the growth in business premiums (and more so in line with the optimism and ambitions that had rallied the sector), is now coming to terms with the not so rosy scenario that confronts the LI sector today.

Cutting the Flab as Age Catches UpAmongst FIs, after banks, LI companies are the largest employers in terms of headcount. Till 2010, most LI companies grew rapidly in terms of manpower. More was

good and hiring was done to feed the optimism and fervor that had gripped the sector. The agency channel was driving this headcount growth to a large extent. All of this began to change post 2010, as organizational health and financial concerns prompted companies to take a hard look at their burgeoning size, and take corrective action. Over the last three years, many LI companies have significantly reduced their overall headcount. In the year 2012, organizations which systematically optimized headcount, reduced their overall numbers on an average by 15%. This trend is observed across both tier 1 and tier 2 companies (McLagan Aon Hewitt defines tier basis the gross premium and headcount. The cut-off for tier 1 company is gross premium of 5,000 crores or above and headcount greater than 7,000). To ensure that the reduction in headcount does not impact business, many organizations have already invested or are currently investing in sharpening their technology platform. Technology-led business transformation initiatives are expected to drive efficiencies and business growth.Outsourcing is also emerging as a key trend. Companies are not only looking at outsourcing traditional shared resources and operations roles such as admin, F&A, IT ,HR, customer service and central operations but are also open to outsourcing sales roles (sale through the alternate channel).

Styling Suitable StructuresInterestingly, the dynamics of the LI industry has led to many changes in how organizations structure themselves. Till 2010, the Chief Distribution Officer (CDO) was a key role in most organizations; however, this role seems to be diminishing. Due to increased pressure on sales and margins, CEOs today are actively involved in sales. As a result of this, in many organizations the various heads of channels of distribution report directly to the CEO. Amongst the 17 organizations that participated in the McLagan Aon Hewitt LI Survey, only five have a CDO today. Another significant change that we observe at the top level is that the Head of Finance or the Chief Financial Officer (CFO) in many cases is taking up senior level roles in sales, operations (claims and underwriting) and even actuary. Possible reasons could be that organizations today are often not looking at replacement hiring very quickly, and use this opportunity to give a wider span to top management. Another factor could be that since the LI companies are facing challenges in meeting the business numbers, an in-depth understanding of finance is an added advantage.

The Aon Hewitt Salary Increase Survey reveals that insurance along with banking is one of the most volatile industries in terms of average salary increases over the last few years.


Austerity Measures to Manage Compensation BetterThe Aon Hewitt Salary Increase Survey reveals that insurance along with banking is one of the most volatile industries in terms of average salary increases over the last few years. The survey mentions that over the last three years, the LI industry has witnessed a dip in the actual merit based salary increase in 2012-13. At 8.9%, which is by no means low, the numbers have gradually dropped over the last few years. With organizations becoming focused on cost management, pay for performance as a concept is gaining a lot of acceptance in the LI world with CEOs and boards asking for a commensurate improvement in productivity as compensation levels go up. With limited budgets available, more and more organizations today are focusing on differentially rewarding their key talent and providing them with an accelerated growth path. When compared to overall financial institution, the performance distribution curve is steeper in case of insurance. As can be seen in the graph below, not only are LI companies far more strict in their ratings mechanism, but they also are showing a higher multiplier for salary increases when it comes to their top talent.

Salary Increases Across Performance Levels

Source: Aon Hewitt Salary Increase Survey 2012-13

Figure 2

HR teams are not only working closely with businesses to ensure that the limited budget is distributed in the most prudent fashion, they are also designing and implementing many non-compensation related initiatives (such as role

enhancement, international stint, focused L&D opportunities) to engage top performers. On the variable pay front, organizations are aiming towards making a strong linkage between performance thresholds and corresponding bonus payouts. The McLagan Aon Hewitt Insurance Survey revealed that in 2012 the variable pay in terms of pure quantum fell approximately 18% over the last year in line with declining performance. Long-term incentives have also gained momentum.Organizations today are looking at shifting a part of the overall variable as deferred payouts particularly at the senior and top management levels, as they see this to be an effective retention mechanism. Sales incentives are also under a lot of scrutiny. There is much talk in the industry about maximizing returns on sales force investment. Organizations today are looking at measuring productivity very seriously. Another emerging trend is the addition of retention or persistency while calculating incentive payouts. Organizations are not just tracking new business premiums but are equally concerned about recurring revenue/gross premium. While still at a pilot stage, in the future, we are expecting to see organizations deferring sales incentives over a period of time, not only to ensure that the gross premium target is achieved but also use it as a measure to track mis-selling.

How do the Newcomers Stack Up Against the Veterans?While austerity and cost management are the top focus of insurance firms, if we look at tier 1(T1) and tier 2 (T2) firms in isolation, the story is slightly different. While the overall LI industry has declined on GWP by approximately 5%, the T1 firms have de-grown by approximately 7%, while on the other hand, T2 firms have grown by approximately 3%. While the low base of the GWP can be one of the reasons for this growth, we also observed that on the rewards front, T2 firms are getting more aggressive. Last year, it was seen that many T2 firms undertook a significant manpower optimization exercise where they

With organizations becoming focused on cost management, CEOs and boards are asking for a commensurate improvement in productivity as compensation levels go up.

COVERstory


let go of a significant part of their sales and some part of the operations team at the junior most levels. While they were reducing headcount at junior levels, they continued to hire at the mid and senior management levels, with the objective to build business. With a significant part of the sales population being shaved off, the HR teams were able to work with a larger budget and reward aggressively at mid to senior levels. The McLagan Aon Hewitt LI Survey reveals that on total fixed pay, the T2 firms are ahead of T1 firms almost across all levels of management, with the exception of the CXO level. Particularly at the mid management, they are almost 10-13% higher than the T1 counterparts. However, after accounting for variable pay, T1 firms continue to enjoy a higher pay level. Additionally, T1 firms have been conservative in giving pay increases across levels and their median growth has been almost flat across the organization. At the mid and senior levels, the median has actually shown a negative movement. However, for T2 firms the increases have been

positive across, particularly at the junior levels, where the median has moved by 8-9%. nevertheless, the high increases across levels and the low headcount base has led to a higher cost per employee. While T2 firms are rewarding their employees to ensure that they attract the top talent and build for the future, the 'Return on Wages' has been less than satisfactory. The cost per employee in a T1 firm is far more competitive as compared to T2 with the latter being higher by 8% at junior levels and 10% at middle management level on the per capita cost. However, the difficult question that now confronts the T2 firms is whether this higher per employee cost is translating into the commensurate productivity and business performance. And if not, how long is this model sustainable and practical?

A Different Battle Will BeginThe war for talent has been a familiar battle that LI companies have been waging within themselves as with the rest of BFSI and some other industries. Attrition has always been a concern area for LI companies. While the current overall attrition rate of 63% (as per SIS Phase 2 – 2012-13) is far controlled as compared to what it was a few years back, this number is still fairly volatile especially given the high rates of attrition within the mammoth sales force, that forms the backbone of most LI companies. And there is more complexity that could make the war murkier and bloodier.

Legacy payout ratios and traditional staffing models will need to be challenged as HR will need to carve out a roadmap for a leaner, more cost-effective set up.

S. No Company Name Tier Code

1 Bajaj Allianz Life Insurance Tier 1

2 Birla Sun Life Insurance Tier 1

3 HDFC Standard Life Insurance Tier 1

4 ICICI Prudential Life Insurance Tier 1

5 Max Life Insurance Tier 1

6 Reliance Life Insurance Tier 1

7 SBI Life Insurance Tier 1

S. No Company Name Tier Code

1 Aegon Religare Life Insurance Tier 2

2 Aviva Life Insurance Tier 2

3 Bharti AXA Life Insurance Tier 2

4 Canara HSBC Oriental Bank of Commerce Life Insurance

Tier 2

5 DLF Pramerica Life Insurance Tier 2

6 IDBI Federal Life Insurance Tier 2

7 Kotak Life Insurance Tier 2

8 PnB Metlife Tier 2

9 Star Union Dai-ichi Life Insurance Tier 2

10 Tata AIA Life Insurance Tier 2

Tier Classification Basis Gross Premium and Headcount

Figure 3


As nBFCs get ready for licenses to operate as banks, it is anticipated that the LI industry could be hit fairly strongly in terms of talent leakage. And they may be at risk as far as poaching goes because of three main reasons. Firstly, as the LI sector struggles to do well, the new nBFC banks may find it rather easy to attract talent from the sector given the new opportunities. Secondly, the compensation levels in insurance are lower than banking (in terms of absolute levels) so the talent becomes ‘attainable’ (refer figure 4). Thirdly, and most strategically, the new banks will need to focus hard on financial inclusion and setting up of a sizeable rural reach. Who better to manage this than LI distribution heads, who have done a remarkable job in pushing into tier 3 and 4 cities? Talent erosion is expected not just at the top levels but is anticipated to have a far reaching impact at junior levels as well, especially across these cities, which are typically servicing the agency network. So, from both a pull as well as a push perspective, the LI sector is likely to be the favored hunting ground. As can be evidenced by the graph (refer to figure 4), pay levels in insurance are lower than MnC banks in terms of fixed pay and lower than Indian banks in terms of total compensation.

TCC with LTI Comparison (Life Insurance Versus Indian Banks Versus MNC Banks)

Figure 4

Where Do We Go from Here?In spite of the business challenges that the industry has had to brave in the last few years, over the medium to long-term the growth prospects of the industry in India will remain attractive. As per a McKinsey report, the Indian LI industry’s GWP is projected to grow at a rate

Roopank Chaudhary Director – McLagan Consulting,

An Aon Hewitt Company

For more information, please write to us at [email protected]

Sagorika Roy Consultant – McLagan Consulting,

An Aon Hewitt Company

between 13-14% from 2010-15, and India is expected to contribute 10% of total global premium growth in this period and be one of the few major markets globally to grow at double-digit rates in this period. However, to tap this growth, potential companies will need to think and act differently, come up with more sustainable and cost-effective strategies, and understand the consumer needs much better. The role of HR will also commensurately need to become more strategic and forward looking. CEOs will look at HR managers to manage compensation costs, drive a stronger focus on 'Return on Wage' spends, organize structures to enable execution of strategy and create a compelling environment to differentiate heavily on performance. The focus will shift from attrition to key talent retention, and long-term incentives will be used to stimulate the right business behaviors along with being a retention tool. Business productivity is likely to be viewed alongside compensation positioning, and companies are likely to link the two parameters very tightly. Legacy payout ratios and traditional staffing models will need to be challenged as HR will need to carve out a roadmap for a leaner, more cost-effective set up. As the landscape matures and the rules of the game become more constraint-driven, the companies that come out on top will be the ones who can manage their human capital more strategically, without dropping the ball on the operational implications.

Sources:

- IRDA Report – December 2012

- Aon Hewitt Salary Increase Survey

- McKinsey Report

- McLagan Aon Hewitt Life Insurance Survey 2012

COVERstory


Supported by

Aon Hewitt, in partnership with the Mint publication, conducted the inaugural Best Managed Boards study in India in 2012. The study partners were the Bombay Stock Exchange (BSE) and national Stock Exchange (nSE). The aim of the study was to identify organizations across the country, that are successfully running viable and sustainable companies as a consequence of having implemented best practices in their boards. SEBI was also consulted while structuring the study.

The Aon Hewitt-Mint Best Managed Boards of 2012 were chosen through a detailed evaluation by an eminent jury comprising Mr. y H Malegam (Chair of the Jury), Mr. Philip Armstrong, Mr. Anil Singhvi, Mr. M Damodaran, Mr. Janmejaya Sinha and Mr. Sanjay nayar.

In our last issue, we featured an interview with Mr. Uday Kotak, Executive Vice Chairman and Managing Director of Kotak Mahindra Bank, to bring to you an inside view of one of India’s Best Managed Boards.

In this issue, we unveil the success stories and bring to you edited excerpts of interviews with the Chairmen and Managing Directors of the other five winners.

Dr Reddy’s Laboratories Limited

EID Parry (India) Limited

HDFC Bank Limited

Kotak Mahindra Bank Limited

Tata Consultancy Services Limited

Tata Steel Limited


THEinterview

Best Managed Boards

Tata Steel Limited

Tata Steel has a strong culture of governance built over generations of policies and processes that are strongly entrenched in the company. The sustainability of these processes is one of the key reasons for rating Tata Steel as having a Best Managed Board.

The board processes and constitution is robust and has the potential required for a global board. The board maintains high focus on compliance as well as structured reporting and communication with all the stakeholders which helps self-percolate the good culture of governance to the lowest levels in the organization.

It is one of the two Indian companies on the list of the World's Most Ethical Companies released by the Ethisphere Institute and also one of the first companies to implement social accountability standards.

Hemant M. NerurkarManaging Director

Q. How has your company ensured good governance at the board level?A. The Tata Steel board has a very rich tradition and the board in many ways is like a friend, philosopher and guide to the company. It has helped us become a global company by giving us strategic direction. Simultaneously, the board is very particular about the Tata values, tradition and especially ethics. That is something that has always helped us to maintain high standards of governance.

Q. what processes do you follow and what has worked?A. The Tata group, as you know, has adopted Tata Business Excellence as a model which has its own seven chapters on how to run an organization. That becomes a guiding philosophy and we improve on it. Most important are the Tata values and the Tata conduct. This is what distinguishes us from other companies. For instance, we have given up some lucrative assignments, simply because they did not fit in with our philosophy.

Q. is there the fear that if independent directors have been on the boards for a long time, their independence could be compromised because of familiarity with the management? it may prevent them from asking uncomfortable questions.A. yes, but every coin has two sides. Fortunately, in the Tata group, we

have many checks and balances to ensure that we do not interfere with the working of the independent directors. My personal view is that continuity helps. The checks and balances include that each board member comes prepared, has knowledge on the subject and asks questions that are relevant and helpful to strengthening the business.

Q. Do you think the level of corporate governance in india can be raised?A. The guiding philosophy of the managements and the boards is what

matters. The quality of governance depends on the quality of people who sit on the boards, and the level of confidence they bring to the table.


HDFC Bank’s board is very well-constituted with an apt mix of dominant professionals and experts from different spheres of life. The independent members of the board are a significant source of support to the management team. They bring in a strong focus on outcomes and actions while providing adequate diversity required for banking operations.

The board and the management team work in tandem to formulate the strategy and together ensure an efficient execution, compliance and a strong culture of governance.

The board has delivered value to its shareholders and presided over a period of rapid growth for the bank while effectively managing business risks.

Aditya PuriManaging Director

reporting and an open style of management. So I think a board, given the wide variety of experience that they have, could be very valuable in managing risk or defining the macro environment in terms of making sure that the policies and procedures reflect the kind of risk that the institution should take as presented in the business plan. But it would have to be a joint effort between the board and the management.

Q. How can the level of corporate governance be raised?A. Firstly, it must be clearly understood that the board has a role. Board member is the representative of the shareholders, he/she is required to ensure that there is a balance and the management is doing what it’s

supposed to do. I think wherever you will find a good board, the job and responsibility of the board is very clearly defined. The law provides for the board to be empowered under regulation and if they exert the power given to them within the existing framework, there is no reason why you should not have an effective board.

Q. How do you constitute a framework of best practice structures and processes?A. The point is that all of us know what is right and what is wrong. The question is how to institutionalize it. It’s only when practices are institutionalized to the last detail that they work. So the framework has to be policy and procedures that back your fundamental objectives.

Q. How do you assess the role of the Ministry of Corporate Affairs and the securities and exchange Board of india? is there any scope for further improvement in corporate governance issues? How effective are the ministry and regulators?A. This is a tough one. In general, I would only say it is better to keep simple rules, fewer rules and if somebody violates it, he should be penalized. The problem is not with the rules in this country, the problem is with the accountability. If there is a rule and you break it, you should be worried. So I think there is no dearth of good regulators who have provided the framework, but the problem is ensuring that there is accountability and deterrent punishment.

HDFC Bank Limited

Q. How effective can the board be in a large bank like yours?A. A board can be as effective as the functions of the board and the management. The board, as far as I can see, is the supervisory body ensuring that the values of the bank as well as the objectives and principles and policies are followed. However, they can only be effective if they are backed up by the management through appropriate


THEinterview

Dr. Reddy’s Lab (DRL) has one of the most well-structured and disciplined boards, in respect to following governance procedures diligently which in turn helps the board make a true value-add to the shareholders.

DRL has well-constituted board with diverse yet relevant skill sets. It is one of the few boards in India where each member has a formally defined responsibility at the board and committee level for which he/she is responsible and answerable to the company.

The board evaluates its own performance periodically involving independent external consultants.

Apart from the board process, the company also demonstrated high shareholder value creation with front running total shareholder return and return on capital.

G.v. PrasadVice Chairman and CEO

Q. what is the broad philosophy that guides the board?A. The board has multiple roles. The popular notion of governance, of course, is one of the most important aspects of a board’s role but beyond governance, the board has other roles too. It is the ultimate policy setting body, and also sets the tone for what the company stands for and how employees behave. In our case, the board is deeply engaged in building a great company. They play a very active role in highlighting areas to focus on for the organization, understanding what the context of the company is and help shape the strategic agenda of the company.

Q. How do you maintain this level of engagement?A. Having a board is one, creating the enabling conditions for them to be fully engaged is another, and thirdly, creating enough structure and forums for them to shape the organization are three important things that have helped us.

Q. How do you create a framework for best practices at the board level and more importantly, how do you ensure participation from all stakeholders, including employees, shareholders, etc.?A. We don’t follow any best practices blindly. We look at all governance practices and adhere to them. Beyond that, we also try to leverage our board in many ways – for the growth of the company. We use their counsel and this helps in the evolution of the company. In terms of disclosures to the board; in

terms of processes, we are compliant. The board also has access to all top-tier managers, they can independently pick up the phone and talk to anyone. As a part of these processes, each committee has an anchor in management. We also organize informal dinners for the senior management to interact with the board.

Q. what are your views on the proposed Companies Bill, which talks about no stocks for non-executive directors and a cut in tenure for independent directors?A. I don’t think working for a fixed period of time makes a director less

independent or otherwise. I also don’t understand the logic of not giving stock. It doesn’t make a difference. Great board members don’t come for money. They come because they want to make a contribution.

Dr Reddy’s Laboratories Limited


TCS' board has guided the company to deliver strong shareholder returns while mitigating risks. The constitution of the board ensures significant diversity in the range of experiences and cultural backgrounds of its directors and enables the company to reflect on the priorities across the countries where it operates. It is also one of the few in the peer group to have gender diversity on the board.

The board members have made themselves subject to best-in-class governance practices and non-mandatory measures as a commitment towards attaining higher self-governance standards.

N. chandrasekaranManaging Director and CEO

and integrate them with our best practices. We also have one of the finest set of independent directors who have enormous experience, great credibility and subject matter expertise in their chosen field. So we have the benefit of their counsel, their advice and their support. Our whole philosophy has been to get the right expertise, to have the right practices, and then follow it up with systems and processes which will help us to keep on driving excellence. Finally, as a company, we try to be the best in our industry and also the best to our employees, shareholders and clients.

Q. How are these best practices translating into good business?A. Good corporate governance is good business automatically. First,

because there is a tremendous amount of trust that gets developed – as being a part of the Tata group and then as TCS. The trust trickles down not only to investors and employees but also to our customers.

Q. Do you have any formal evaluation for the effectiveness of these board members?A. This is an area that is evolving and there are different practices. As of now, we have no formal evaluation method, though. The new Companies Bill is expected to reduce the tenure of independent directors while ushering in some more changes in the corporate governance space. As and when the Bill comes up, we will adopt it. From a group point of view, we get an opportunity to represent our views. But compliance with any government rule is important to us.

Q. Are indian corporate standards on par with those of global companies?A. I’m no expert to comment on this subject. All I can say that there are very good companies both in India and abroad that have excellent standards of corporate governance. Similarly, we have examples of companies that lack good practices both in India and abroad. If we want to figure among the best companies globally in terms of doing business, why should it stop us from being the best when it comes to treating our employees, shareholders and customers well? We at TCS take pride not only in running TCS as a global company but also as one that is amongst the best governed companies.

Tata Consultancy Services Limited

Q. How have you fostered a culture of corporate governance in tCs?A. We have the unique advantage of being a part of the Tata group which has a long history of managing very ethically, with the highest standards of corporate governance. Hence, to begin, we have a set of best practices from the group that we have been able to adopt. From then on, we have been continuously evaluating different best practices from the industry, other sectors, from India and abroad too. We periodically include them


EID Parry has a well-governed ethical board with a strong legacy of processes and functions with meritocracy at its core.

This Chennai-based group relies on a fairly compact corporate board and is an excellent example of how a family-managed group has transformed itself into a corporate entity run by professionals. The family governance model adopted by the promoter family has been acknowledged as one of the strongest in the country.

They follow a rigorous process for ensuring participation and value-add by each member. The board members are required to spend adequate time with the company on its business matters and formally limit the number of directorships they can hold outside of the EID Parry board.

A strong risk assessment discipline is followed by the board while delivering high shareholder value.

THEinterview

Q. what’s the broad philosophy that drives the board in the context of governance?A. We strongly believe that the board should engage in value creation and they should not allow anything which will destroy value for shareholders. Strong governance helps towards sustainability of performance in an organization.

Q. How do you ensure participation from all stakeholders, including employees?A. Engagement is primarily driven by inspirational leadership at different levels and communication. We have a lot of communication on the web – I go live continually for interaction on the web (through the company intranet). I also travel to locations on Founder’s Day and talk to employees – we call it the energy hour’.

Q. How do you manage to preserve the culture and philosophy of your group over generations? How do you measure the efficacy of your efforts to do so?A. We have values and beliefs represented by five lights – quality, integrity, passion, responsibility and respect. We ensure that these get reflected in our interactions with customers, employees, and shareholders. As well in the products we make and services we offer. While most companies track EBIDTA (Earnings Before Interest, Depreciation, Tax and Amortization), we lay a lot of emphasis on how easy it is to do business with the Murugappa group; we call it ‘easy to do business with us (ETDBW).

Q. what is the key learning you have picked at the group that could serve as learning for other companies and entrepreneurs?A. It is our ability to share risks with professionals which keeps the adrenaline pumping. I can’t say that – you take the risk, if it goes right, we gain and if doesn’t, then you (the professional) have made a mistake.

EID Parry (India) Limited

A. vellayanChairman, EID Parry (India) Limited and Executive Chairman, Murugappa Group

For more information, please write to us at [email protected]

Disclaimer: This article is published with permission from Mint, a publication of the Wall Street Journal in India,

based on Aon Hewitt's study.


Our 10 years of Best Employers studies in Asia support the striking evidence: having high levels of Employee Engagement, a compelling Employer Brand, Effective Leadership and a High Performance Culture translate into a committed and productive workforce that delivers stronger business results.

Get started now on your Journey to High Performance by enrolling in the Best Employers 2.0 - India 2013 Study.

To get more information mail us at [email protected]

Join Aon Hewitt Best Employers 2013 Study

Do you aspire to become a best employer?Start your Journey to High Performance

Empower Results

India

Salary Increases in India The Question of Sustainability

The economic uncertainty in the global markets, coupled with the crippling effects of delays in reforms, rising fiscal deficit and stubborn inflation has taken the sheen off the India growth story. The GDP growth in the last three months of 2012, has slowed to a shocking 4.5%; the eighth consecutive quarter of expansion below 8%. Amidst projections of a continuing bleak future, a big question on the mind of corporate India is the impact of the struggling economy on salary increases. The equation

on the surface seems simple – reduced growth, rising inflation and squeezing margins leading to a reduced pool for salary increases, but anyone will tell you that’s not how it plays out or perhaps even how it should. People-related expenses are viewed as an ‘investment’ and not simply as ‘cost’ and therefore, factors that drive these decisions go beyond short-term considerations. Amidst a continued murmur of double-digit salary increases, despite a plethora of odds that perhaps make

PERSPECTIVE


it seem very unlikely, we set out to understand what is really driving these salary increases and more importantly, to evaluate the often asked question – are these increases sustainable in an uncertain economic environment characterized by lower growth?

The Story So FarLet’s rewind to 1991-92, where it all began. The decade that followed was euphoric. Our abysmally low salary levels and an acutely intense war for talent in an economy that was just opening up led to average salary increases as high as 20%. While towards the end of the decade that had settled to a relatively more palatable 15-17%, in some way it set the bar as far as employee salary increase expectations were concerned. The decade of the 2000’s was perhaps the most interesting or rather defining. The 2001-02 dot com crisis was at its worst, a bump on the road with the impact limited and quickly forgotten. While salary increases in the early part of the decade moderated to a 10-12%, the

rapid growth period from 2004-07 took salary increases again to the 15% mark. In some way high growth allowed for more profligacy on the compensation spend. The big pause came with the 2008 downturn. Compensation was right at the heart of the debacle and so began the scrutiny on pay levels, and more importantly, on its effectiveness. While the questions in India were not as scathing as the West, they were enough to shake us out of our comfort zone. The initial enthusiasm over a quick recovery still kept India at the top of the salary increase charts but the continued looming global depression and our own declining domestic situation nudged organizations to once again question the conventional wisdom. While not advocating a reduction in salary increases, we do need to appreciate the changing dynamics of our economy and our workforce and reexamine the premise that we use to arrive at this number.

What Determines Salary Increase Budgets?

1. The Impact (or not) of Macro-economic Factors A simple mathematical correlation of each year’s GDP and inflation with salary increases since 1998 throw up abysmal numbers indicating almost no correlation. However, since salary increases are done at the beginning of the year (January to March) and GDP and inflation estimates are for the year ending, there is a lag in the decision making. The previous year’s GDP and estimates through the year are more likely to impact the salary increase decision than the

The expectation or belief in the industry is that the economy will turn – being prepared for this situation means retaining top talent and people are willing to continue to pay top dollars to do that.

Year-on-Year Salary Increases

Source: Aon Hewitt Salary Increase Surveys 1998-2012


PERSPECTIVE

year-end estimates. Similarly, the inflation rates prevalent during the period January to March would form a better consideration set. The correlation run in this manner does show some improvement (R2= 0.28) but is still not significant enough to be conclusive. While major economic shifts like what we saw in 2001-02 and 2008-09 have a direct impact on salary increases, minor changes in either GDP or inflation don’t influence salary decisions significantly. Many would argue that these indicators are typically looked at post-facto and more than anything serve to create the justification for management decisions on salary. One also needs to take into consideration what we could call the ‘expected tipping point’ wherein the expectation or belief in the industry is that the economy will turn, that policy reforms have to happen sooner rather than later, that our fundamentals continue to be strong, that interest rates will moderate, and FDI/FII will continue to happen – being prepared for this situation means retaining top talent and people are willing to continue to pay top dollars to do that.

2. The Macro Versus the Micro One has always heard arguments against the so called ‘average salary increase’ number because the average is a fairly distorting statistic. A better way to look at influencers of pay increases would be to look at the micro picture. Arguably, the industry or sector performance is a closer

indicator of salary increases in that sector but we would go a step further to say that even within that we have seen paradoxes depending on individual entities. The financial health, the stage of evolution and the business strategy of each entity could explain the variance and the outliers. Many a time, organizations have overrelied on benchmarks while forgetting to contextualize rewards to their own situation. The micro factors have a significantly higher influence on salary increases and therefore salary increases should always be looked at in context. Outside the context they may seem too prudent or too extravagant and can often lead to misleading debates and inferences.

3. The Talent Demand-Supply Mismatch Talent shortage is touted as one of the key reasons for spiraling wages. While demographically India has an advantage over nations with an ageing population, the quality of the talent pool leaves a lot to be desired. Our Best Employer Study revealed that a large number of organizations found it difficult to fill vacant positions – particularly, at leadership levels. Organizations are therefore willing to pull out the big bucks to attract and retain the right talent. Paradoxically, attrition rates however, continue to be high and contrary to its objectives, the high salary increases in a sellers market leads to rampant job hopping with the aim to increase one’s salary.

Source: Aon Hewitt Total Rewards Survey 2012

Attraction is not Retention is not Engagement


The talent demand-supply mismatch is a reality, and while big pay packets may attract talent, they don’t necessarily help organizations retain and engage them beyond a point. Our recent Total Rewards Survey shows that drivers for attraction, retention and engagement are very different and organizations need to go beyond cash to create a compelling employee value proposition.

4. Globalization and the Emergence of India as a Powerful Epicenter Rapid globalization and the opening up of the economy led to higher mobility and demand for the already coveted Indian talent. Both with MnC setting shop in India and exporting Indian talent to other countries, the existing low pay levels in India came to focus. We started playing the catch up game which very often justified the increases, even in the face of contradictory short-term macro or even micro economic indicators. The data indicates a narrowing trend, particularly with top management salaries, which brings to the forefront the conundrum that organizations face now in balancing the need to compete for talent globally and capitalizing on the cost arbitrage that India offers.

Annual Fixed Pay (India) as a Percentage of Annual Fixed Pay (US) for Equivalent Jobs

Source: Aon Hewitt Database

none of the factors considered here are likely to change dramatically in the coming years. Economic fundamentals continue to be strong, most sectors are still attractive investment destinations and the talent flight between sectors and companies is likely to continue for some time. Salary increases in India therefore are not set out to tank in the near future. There will be periods like 2008, when economic pressure will lead to some correction but overall, organizations will continue to take a long-term view on talent.

The Question of SustainabilityHaving looked at factors that influence salary increase budgets, we come to the next question of whether these increases are sustainable. While this question begs a definitive answer – the answer lies in perhaps two other more important questions: Can we continue to pay salary increases at current

rates but manage the wage bill? And how effectively are we deploying the salary

increase budget to ensure a return on the investment?

Managing the Wage Bill: The Productivity-Performance-Compensation Equation To quote Mr. narayana Murthy from an interview with Aon Hewitt: “As long as compensation as a percentage of revenue remains constant, it’s (high salary increases yoy) not an issue. The focus needs to be on lead indicators like performance, growth and distinctive value creation, rather than the lag indicators, where we start to manage salaries to make up for margins and maintain cost arbitrage.” Similar thoughts were echoed by business leaders at a recent debate on sustainability of salary increases. They unanimously struck down the possibility of a reduction in the investment and instead spoke about focusing on innovation – in moving up the value chain, driving productivity and creating a compelling value proposition that goes beyond just salary increases. Pulling back on investment in rewards, they felt, may have long-term repercussions. Organizations can continue to look at competitive salary increases while maintaining key metrices like compensation cost per employee or compensation as a percentage of revenue or profits through adequate productivity and performance gains. This will ensure that increases continue to remain sustainable in the long run.

The wage bill in an organization can get influenced by ensuring the right organization structure, optimum manning and appropriate talent mix.


PERSPECTIVE

Having said that, the problem we often face in India is an isolated salary increase decision taken solely on the basis of pay competitiveness. Take for example, an organization where the compensation per head appears too low in comparison to industry standards. The inclination typically is to increase pay scales. What that misses out on is that the organization may have deployed twice as much staff to handle the business as compared to its peers due to a lack of technology investment. It is critical therefore to get the full context on productivity and performance to take informed compensation decisions. The wage bill in an organization can get influenced by ensuring the right organization structure, optimum manning and appropriate talent mix. Culturally, organizations in India have shied away from creating leaner structures to avoid the discomfort of layoffs. Contracting, outsourcing and shared services business models however, have emerged and contribute significantly to the ability of the organization to manage the wage bill.

Effectiveness of Rewards: What is Our RoI?Much has been said and debated on the effectiveness of our rewards systems. High attrition, stagnant or falling engagement levels, weak linkages to the right performance metrics all point towards the belief that our rewards systems have failed in leveraging their full potential. An overreliance on cash has put innovation on the back burner. It is often said that difficult times drive innovation and force focus, and rewards management in India Inc. is seeing its share of a shakeout. Leading organizations are now dusting off their legacy and are willing to reset or rethink to get better RoI. The direction of change can be classified into three broad categories: Managing Total Rewards as a portfolio: Organizations are looking for more rigorous ways to determine if the spending on rewards is appropriately sized and appropriately allocated to specific areas like fixed pay, bonus, benefits, and work environment, to get the best results in retention and productivity. Customized rewards: Organizations are moving towards more personalized and experiential rewards as they create a better emotional bond with the organization and are harder to replicate than transactional rewards. Understanding employee preferences and providing flexibility to cater to diverse aspirations is driving interest in segmented rewards offerings, flexibile benefits and a host of work-life and wellness-related initiatives.

Better alignment with performance: While most organizations in India espouse a pay for performance philosophy, an effective identification and measure of the right performance metrics leaves a lot to be desired. Companies often focus on internal measures of performance, but this has its limitations. Benchmarking performance and productivity can help reveal a clearer picture. By analyzing different financial metrics, understanding the strategy, the structure, and the drivers of performance and productivity, organizations can better appreciate why they performed better or worse. At the very least, this helps organizations make better-informed compensation decisions.

In ClosingAfter nearly two decades of double-digit salary increases we have evidently not managed to fulfill the objectives of retaining and engaging our talent and motivating them to deliver higher performance. We seem to be held hostage by competitive benchmarks and untested assumptions. While the deteriorating economic situation provides us with the opportunity or the canvas to redesign or relook at some of our compensation approaches, we must dig deeper and go beyond the salary increase number if we are to bring about real changes with real impact. Tweaking the number up or down will just be a reactionary short-term fix which will soon be forgotten and we will continue to live with the imperfections of our current systems till the economic cycle turns again.

Shilpa Khanna Lead – Research & Insights, Rewards Consulting,

Aon Hewitt, India


[email protected]


The survey covered 518 organizations across 20 primary and 30 secondary industries and is the most comprehensive study on salary increases and rewards trends. As per the survey results, India Inc. projected a 10.3% salary increase for 2013, marginally lower than 2012 actuals at 10.7%. The study shows a wide variance of salary increases across sectors ranging from 6.1% to 13.1%. Financial services, technology, outsourcing remain cautious in 2013. Consumer and industrial sectors which so far have been resilient, also reported conservative increase projections. The data for the survey was collected over December 2012 – January 2013.

overview Salary Increase and Attrition

Salary Increase Projection 2013 (%) 10.3

Projected Increase for Key Talent (%) 14.1

Outstanding: Average Performer Salary Increase 1.7:1

Attrition Rate (%) 19.3

Salary Increase Projection 2013 (%)

Top/Senior Management 9.3

Middle Management 10.3

Junior Manager/Supervisor/Professional 11

General Staff 10.4

India – Key Insights

Industry Scan – Key Insights

The 17th Aon Hewitt Salary Increase SurveyHighlights

Auto/vehicle Manufacturing





energy





engineering/Manufacturing





Financial Institutions





consumer





Hi-tech





IteS





Life Sciences





retail




*Critical talent not reported due to insufficient response

telecommunications




*Critical talent not reported due to insufficient response



'total rewards Statements' trSEmployers have seen the potential of Total Rewards for many years. Each year, they invest vast sums on their Total Rewards programs. But are organizations really reaping the return on their investments? Aon Hewitt can help Quantify and define the full value of your Total Rewards programs Communicate them in a clear, concise and consistent manner Innovate and differentiate your programs for a sustainable competitive edge

Introducing 'total rewards Statements' trS An online employee portal that can consolidate in one convenient platform – the full value of Total Rewards, details of relevant policies and programs, essential employee profile and career history, calculators to model future wealth creation, make flexible benefits choices and much more.

Given the turbulent economic environment, organizations are setting clear, compelling talent and rewards strategies to meet business requirements. Central to this strategy is engaging key talent and sustaining workforce productivity. Though, for quite some time now organizations have been talking about investing in key talent, the rigor, with which they are implementing programs targeted for this segment has definitely seen an increase. We recently concluded our 17th Annual Salary Increase Survey 2012-13, and as per the survey results majority of organizations reported introducing/improving programs for key talent as one of their top priority for 2013. 83% surveyed organizations stated they have a differentiated rewards strategy for the vital few and take targeted actions to retain them.

Measures to Reward Key Talent

Source: Aon Hewitt 17th Salary Increase Survey

Numbers represent % of organizations

Rewarding Top TalentTrend Check

Focus on the IntangiblesWhile compensation continues to be popular, organizations are focusing more on experiential rewards to deliver a distinctive employment deal. Accelerated career growth, international/cross-functional mobility, focused succession planning, and coaching and mentoring have taken precedence over compensation as top retention measures for key talent.


TREnDCHeCk

Compensation Still an Integral Piece of the Puzzle Our survey results revealed that organizations are looking at multiple strategies to create sharp differentiation in pay between key talent and the rest. 'Paying above the Market' continues to top the charts. Organizations continue to award higher salary increases to their key talent and each year, we are seeing the gap widen.

Sukanya SinghSenior Consultant – Research and Insights,

Aon Hewitt, India


[email protected]

What is interesting to note is that even within the key talent group organizations have a differentiated strategy to manage increments in pay. For top performers, majority (81%) of organizations reported paying higher salary increases, whereas for critical positions, pay adjustments outside the annual merit process was reported as a more popular strategy. For the hi-potential group, the response was relatively low across these measures. One of the reasons for the same could be that organizations rely more on experiential rewards (accelerated career growth, etc.) to create a differentiated employment deal for their hi-potentials.

Average Salary Increase for Key Talent* Versus the Rest

*Defined as hi-potentials, hi-performers and employees with business critical skills

Compensation Measures to Differentiate Pay Within Key Talent Group

*Numbers represent % of organizations.

Follow this space to read about emerging compensation, benefits and other rewards trends in short insightful bytes


Capital Markets Forum Study April-SeptemberA benchmark study conducted for large MNCs and Indian institutional securities firms covering equity capital markets, debt capital markets and investment banking job families.

India Banking Forum Study May-OctoberA platform for all major Indian and MNC banks to come together to share and benchmark their positions, levels, functions and sub-functions across the industry.

Investment Management Forum Study June-OctoberA flagship study in the asset management sector covering key job families like fund management and sales.

Private Banking Forum Study June-SeptemberA study covering large Indian and MNC private wealth management organizations studies benchmark key roles across functions.

Life Insurance Forum Study September-JanuaryA study of the largest life insurance players in India covering positions across all channels of distribution and key corporate functions.

General Insurance Forum Study September-FebruaryA study of the largest general insurance players in India covering positions across all channels of distribution and key corporate functions.

Retail Broking Forum Study October-JanuaryA study that covers Indian and MNC retail brokerage organizations to benchmark positions across sales, PMS and other functions.

Private Equity Forum Study October-JanuaryA study of private equity players covering key positions across fund management roles.

NBFC Forum Study November-MarchA study of large NBFCs covering levels and positions across sales and support.

McLagan – Banking & Financial Services Insights

SURVEyCAlenDAr

FMCG Outsourced Field Sales Force (OFS) StudyFebruary-JuneFlagship study in the FMCG industry focused on presenting comprehensive compensation and benefits benchmarking data for the field sales staff in India.

ITeS Industry StudyMay-AugustA comprehensive study that covers 500+ positions across 70+ job families. The study includes detailed cash compensation and industry trends across ITeS sectors – third party, BFSI captives, other captives and KPOs.

India Hotel SurveyMay-SeptemberThe study covers a comprehensive list of 200+ positions across 11 groups and 160+ properties. It analyzes differentials by city, locations and covers key business metrics.

Hi-Tech Skills Study June-August This study provides benchmark information and best practices with regards to managing compensation for niche and differentiated skills in the IT industry.

Indian Semiconductor and EDA Forum (ISEF)June-AugustThe forum brings together leading semiconductor and EDA companies to benchmark compensation and share salary increase trends, variable pay practices and key organizational metrices.

Salary Increase SurveyPhase I: June-September Phase 2: November-FebruaryOne of the most exhaustive studies in the area of performance and rewards in India. The study measures actual and projected salary increases, variable pay and performance data across employee categories.

India Pharmaceutical Forum June-SeptemberThe forum brings together the key MNCs and Indian pharmaceutical organizations to benchmark their positions, levels and benefits across the industry.

Medical Technology Forum July-OctoberThe study covers leading organizations in the medical devices/technology domain providing robust and comprehensive information on cash compensation and industry trends.

Retail ForumJuly-OctoberThe study covers leading organizations in the retail domain providing robust and comprehensive information on cash compensation and industry trends.

Executive Compensation Study July-DecemberThe study provides organizations with access to rich analysis of data and practices in executive compensation.

Power Sector Forum August-DecemberThe study covers leading organizations in the power and energy domain, providing robust and comprehensive information on cash compensation and industry trends.

Campus Compensation Study October-DecemberThe study provides organizations with trends in compensation for MBAs and graduates from top business schools and engineering colleges across the country.

SIAM Automobile Forum October-JanuaryA study of all auto manufacturing organizations covering compensation data across levels and functions of management. It also serves as a platform for sharing best practices.

Clinical Research Organization Forum October-JanuaryThe study covers leading organizations in the CRO/CRAM domain providing robust and comprehensive information on cash compensation and industry trends.

India Telecom Forum October-FebruaryOne of the flagship studies in the telecom sector that captures cash and benefits information across 170 positions.

Best Managed Boards SurveyDecember-May This survey conducted in conjunction with BSE, NSE and Mint is focused on identifying the best practices in corporate and board governance in India.

For more information, please write to

us at [email protected]

Upcoming Insights


Key benefits

• Cost-effective alternative to high-end dedicated solution software, but also to time-consuming manually-intensive processes

• Noadditionalsoftwareorchangestoyourorganization'sexistingsystemsare required because RemCentral is built on Microsoft Excel. Whilst generic in nature, it can be customized to fit specific organizational processes and requirements

• Transparentandconsistentmethodology for reviewing salaries to ensure the equitable distribution of increases. RemCentral guides the salary review outcomes in accordance with your desired remuneration philosophy, for example to target increases to top performers within your organization

• Reducedpotentialforhumanerrors as RemCentral has been designed to consolidate data into one centralized master spreadsheet, to automatically sort, filter and export information into each reviewing manager's file, and then import it back again once recommendations have been made

• Real-timedatareporting to senior management and/or the board, to enhance the credibility and commercial focus of the HR team

• Easyandfastcreationofsalaryreviewletters, without the need to extract the data to another system

Tool workflow

HR Manager

• Design Salary Structure • Run Payroll Simulations • Freeze Salary Increase Budgets • Salary Increase Implementation • Manager Sheets with Recommended Increases

• Generate Salary Review Letters • Management Approval on Salary Increase • Run Reporting and Analysis • Finalize Salary Increase • Receive Reviewed Manager Sheets

Contact us for a demo at [email protected]

the Business case for change

Managing salary reviews using multiple independent spreadsheets and numerous manual interventions doesn’t always provide the required levels of consistency and accuracy needed for this important HR function.

Aon Hewitt’s RemCentral is an Excel-based program that assists organizations to manage, automate and streamline their salary review process allowing HR teams to focus on the tasks that will significantly influence the success of the salary review.

RemCentral IndiaAon Hewitt’s Salary Review and Management Tool

Greetings from Aon Hewitt!

We are glad to announce Aon Hewitt's 6th Annual Rewards

Conference. Over the years, this has become a pre-eminent

conference attended by over hundred senior HR and rewards

leaders and the only one dedicated to the topic of performance

and rewards. Each year, we make an effort to bring to you original

research, senior industry leaders and experienced HR and rewards

practitioners discussing the latest thinking on various aspects of

rewards in India Inc.

The 2013 edition of the conference is scheduled for May 30,

2013 at the Grand Hyatt, Mumbai.

Our conventional wisdom of managing compensation has not

provided anything that is truly distinctive for organizations. It has

continued to focus on budgets, benchmarking and transactional

methods of pay. The never-ending war for talent, slowing economy,

two decades of double-digit salary increases, executive pay

reaching global levels, increasing disparity of pay between the CEO

and entry level, are all getting us to a point of inflection. It is at a

pivotal point from where it is not just important but critical for our

survival to rethink the future of rewards. Our conference this year,

'Total Rewards – Changing the Game', is focused on doing just that.

In this year's conference, we will bring to you our perspective,

learnings and client case studies on the innovation we need to

bring into our approach to Total Rewards.

Aon Hewitt's 6th Annual rewards conferenceTotal Rewards – Changing the Game

You can look forward to:

• Understanding the business perspective from some of the most

prominent CEOs in the country

• Take a closer look at the economy with a leading economist

• Learn about Aon Hewitt's research and point of view on rewards

segmentation, benefits and incentives

• Hear senior HR and rewards leaders share their success stories

• And of course, interact with your industry colleagues

Venue: Grand Hyatt, Mumbai Off Western Express Highway,Santacruz (East) Mumbai, Maharashtra 400055, India

Conference:May 30, 2013 9:30 am - 6:00 pm Followed by cocktails

Fees:`12,500 for the first delegate.Additional delegates at `7,500.

The above amounts are inclusive of taxes.


Please book your seats at the earliest as we have limited availability.

senior executive compensation the i of bfsi - risk - …€¦ · · 2018-03-05senior executive...

Documents