the end of executive incentives? - university of...
TRANSCRIPT
The end of executive incentives?
Jarrod Moyle Director – Strategic Pay
The End of Incentives?
+ Were large bonuses the cause of the GFC? + Have the rules changed so much that
performance pay is no longer relevant? + Is this the end for incentive pay? + Is it better to simply have a fixed remuneration
package?
Overview
+ Trends in Executive Incentives + Dan Pink – the end of incentives? + Its all about RESPECT + Pay and engagement – why pay matters + How to make pay distinctions
Executive Short Term Incentives - Types
CEO’s Senior
Executives
STI 60% 54%
Commission 4% 7%
Profit Share/ Bonus 49% 55%
Strategic Pay CEO & Top Exec Report June 2012
Executive STI’s – Performance Outcomes
CEO’s Senior
Executives Revenue 51% 52%
Profit or Margin 73% 64% Return on Assets, Equity or Investment 12% 8%
Customer Satisfaction 39% 34%
Balanced Scorecard Outcomes 47% 44%
Other 27% 31%
Strategic Pay CEO & Top Exec Report June 2012
Dan Pink - Drive
+ For simple, straightforward tasks, financial incentives work well
+ For complicated tasks, where conceptual, creative thinking required – incentives don’t work
+ Carrot & stick doesn’t work + Pay people enough to take the
issue of money off the table, (more than enough)
Dan Pink – 3 Factors That Lead to Better Performance & Personal Satisfaction
1. Autonomy – the desire to direct our own lives 2. Mastery — the urge to get better and better at
something that matters 3. Purpose — the yearning to do what we do in the
service of something larger than ourselves
Alfie Kohn – For Best Results, Forget the Bonus
1. Choice – workers should
participate in making decisions about what they do
2. Collaboration — able to work together in effective teams
3. Content — to do a good job, people need a good job to do
Alfie Kohn – New York Times 1993
Kenexa/JRA – Key Drivers of Employee Engagement
1. Alignment & Purpose sense of “common purpose” believe in what organisation is trying to accomplish personal achievement
2. Inclusiveness & Belonging sense of belonging fun place to work my contribution is valued
3. Learning & Growth full use of my knowledge & skills encouraged to try new ways of doing things helpful feedback & coaching
4. Confidence in Leadership Kenexa/JRA 2012
Mercer What’s Working Survey 2011
80 85 90 95 100 105 110 115 120
Being treated with respect
Work-life balance
The type of work that you do
The quality of the people that you work with
The quality of leadership of the organisation
Base pay
Working in an environment where you canprovide good service to others
Long-term career potential
Having flexible working arrangements
Learning & development opportunites
Benefits
Promotion opportunities
Incentive pay/bonus
Factors Influencing Motivation & Engagement at Work
What We Can Learn From Drive
+ Money is not a big motivator – works well for simple tasks
+ It’s not as simple as carrot and stick + Rewards narrow our focus, concentrate the mind + Difficult to incentivise creativity and innovation –
environment plays an important part + Intrinsic motivators far more important + Old school management = compliance/control vs.
new management = engagement/purpose
The Problem With Dan Pink - Drive
+ Experiments with students, not real workplace + Examined do higher rewards lead to greater
performance, not do variable rewards lead to higher performance
+ Most people come to work because they get paid + How much is enough to take the issue of money off the
table? Median? Upper quartile? + Can we afford to pay everyone high fixed remuneration? + Does everyone in the workplace perform equally high, all
the time? + Is it fair to pay everyone the same amount?
Kenexa/JRA – Employee Engagement:
“The extent to which employees are motivated to contribute to organisational
success, and are willing to apply discretionary effort to accomplishing
tasks important to the achievement of organisational goals.”
Kenexa/JRA 2012
World at Work Conference 2012 presentation by Dr Jack Wiley, President Kenexa High Performance Institute
1st
2nd
3rd
4th
5th
6th
7th
World at Work Conference 2012 presentation by Dr Jack Wiley, President Kenexa High Performance Institute
Wiley, J., & Kowske, B. (2012). Respect: delivering results by giving employees what they really want. San Francisco: Jossey-Bass
This did NOT ask if they felt WELL PAID –
but FAIRLY PAID
World at Work Conference 2012 presentation by Dr Jack Wiley, President Kenexa High Performance Institute
World at Work Conference 2012 presentation by Dr Jack Wiley, President Kenexa High Performance Institute
World at Work Conference 2012 presentation by Dr Jack Wiley, President Kenexa High Performance Institute
World at Work Conference 2012 presentation by Dr Jack Wiley, President Kenexa High Performance Institute
Pay and Engagement
+ Is my contribution valued here? + Does this organisation care about my wellbeing? + Am I treated fairly compared to others in the
organisation? + Is the reward system clear and transparent without
favouritism? + Is the reward system consistent and predictable? + Am I recognised and rewarded if I go the extra mile? + Are rewards related to performance?
Assessing the Value of a Job
There will always be distinctions between what different jobs are paid. Need a defensible approach for decision making:
+ Job evaluation – analysis of job factors
+ Market benchmarking – what are similar roles paid?
Strategic Pay 10 Factor Job Evaluation System
1. Education 2. Experience 3. Complexity 4. Scope 5. Problem Solving 6. Freedom to Act 7. Impact/Results of Decisions 8. Interpersonal Skills 9. Authorities 10. People Management
Determining Individual Pay
Once you have determined what the job is worth, must decide what each individual’s pay will be: + Equal - everyone paid the same + Based on tenure + Based on skills or qualifications + Outputs or performance Salary increases Incentives/bonuses
Variable Pay vs. Fixed Package
+ Do it right or don’t do it at all + Those with variable costs have greater flexibility + May be the time to introduce variable pay + Removing incentives will mean top performers
will look elsewhere + Need high performance now more than ever + Incentives don’t have to equal control,
punishment and manipulation, but reward and valuing contribution
Cash Still Has its Place
+ Pay is very important – but must be seen as part of engagement picture
+ Be clear and deliberate about pay policies – too important to ignore
+ Decide what is important to your organisation – guiding principles
+ Demonstrate that pay is not just a contractual obligation but valuing individual contribution
