#Ppmahr18 lets talk transformation reward strategies - ies peter reilly
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Let's Talk: Transformation - Reward Strategies
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#Ppmahr18 lets talk transformation reward strategies - ies peter reilly
- 1. The march of the market: pay determination in a changing context Peter Reilly, Principal Associate, IES For further information contact: peter.reilly@employment-studies.co.uk
- 2. Changing context Business environment challenges: competition regulation globalisation uncertainty scrutiny
- 3. Changing context (2) Business strategic positioning: cost reduction quality improvement search for innovation productivity pressures performance culture
- 4. Changing context (3) Reduced collectivism A litigious society Low inflation Slow economic growth Public sector austerity Tight labour market New working (contractual) arrangements Focus on the gender pay gap
- 5. A cultural shift in people management Activity Outcomes Mediocrity Excellence Post Person Central Local Control Flexibility Collective Individual Internal External
- 6. 96% 92% 88% 76% 63% 54% 36% 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% Recruiting/retaining key staff Employee engagement and motivation Keeping labour costs in check Making sure pay is aligned with market Dealing with skills shortages and/or anomalies Linking pay to productivity Aligning pay rises with inflation %ofrespondents 'Very important' or 'important' issues for reward strategies in 2014/15 External environment: strategic reward priorities Source: IDS
- 7. Ability to pay Fixed to index (eg RPI) Collective bargaining Individual negotiation Regulated Market benchmarking • with/without underpinning job evaluation Ways of determining base pay levels At organisational or sector level
- 8. Pay supplements and allowances • Recruitment • Retention Rewards for qualifications (Performance) bonuses Emphasis on benefits Remuneration options (beyond base pay settlement)
- 9. % use of pay supplements in public sector LGA survey 2015/16 NHS Employers 2017 0 10 20 30 40 50 60 Shire District Councils recruitment difficulties retention difficulties market supplements 0 10 20 30 40 50 60 70 80 children's social workers adult social workers mental health social workers planning officers legal professionals Single and upper tier councils recruitment difficulties retention difficulties market supplements 0.00 0.50 1.00 1.50 2.00 2.50 3.00 Central functions Hotel, property and estates Senior managers Managers Nursing Scientific and technical NHS: Recruitment and Retention payments
- 10. Spectrum of pay comparability approaches Source: Aon, 2013
- 11. Declining importance of formal JE? The use of market rates (underpinned by job evaluation) to determine pay “appears to have fallen sharply”. “The organisation’s ability to pay is the most important factor” CIPD Survey on Reward Management 2014/15 But a lot of sectoral variation: Public sector services 50% more likely to use JE than others Third sector dominated by the ability to pay Private sector equally likely to use market with/without JE
- 12. The push towards market pay Internal equity External equity Relative internal value External value
- 13. The push towards market pay/lighter JE Internal equity External equity Relative internal value External value Formal JE schemes Looser job levelling
- 14. Perceived weaknesses of JE Some systems complex to develop and costly/time consuming to implement/maintain Can appear to be scientific and objective when it is judgmental Can lead to slow, inflexible responses to recruitment/retention/recognition difficulties Potentially unresponsive in fast changing situations JE factors do not accord with what is really valued by the organisation Fits some jobs better than others: poor for specialists? Internal valuation not external – does not reflect the market
- 15. Weaknesses of JE (2) Can be used to reinforce existing hierarchies Less useful where role flexibility is prized Process based on only a superficial understanding of jobs under review Conventionally does not address how job is done Theoretically job not incumbent focused but overly influenced by job holder in practice Can produce gaming of system especially where close connection between £s and points Challenge of meeting demand for transparency but wish to preserve sanctity of process
- 16. Competing organisational pressures (1) External relativities • skill shortages • intense competition • market alignment Internal relativities • felt fairness • traditional hierarchies • equal pay drivers
- 17. Flexibility • job change • market change • rewarding contribution Order • wage drift • inconsistency • discrimination Competing organisational pressures (2)
- 18. Balancing priorities! External equity Internal equityPay system Economic logic Psychological logic ● market alignment ● supply and demand ● rate for the job ● open/transparent ● felt fair ● justifiable
- 19. A job evaluation fightback? Prominence of equal pay Link to talent and career management Use as an OD tool Leadership development programmes Facilitate a merger (other integration) To facilitate reward management
- 20. External market pricing issues How do you pitch ‘core’ workforce against external market: • who are the comparators – sector, size…? • which jobs used? • which market positioning sought? • which geographies apply (local, regional, national, international)? How homogeneous/heterogeneous a workforce? Do specialists (or other segments) differ?
- 21. External market pricing issues, cont. What matching process is used? • Public data or bespoke? • Job description or title based? Comprehensive or limited remuneration data? • Base pay, total pay and benefits? • Average pay and structures? How reliable is the market data quality? Is there a proper market to analyse? Can you defend it publicly?
- 22. ‘Mimetic wage’ systems - simplistic pay matching as a defensive retention strategy Risks with market based pay systems
- 23. Sectoral convoys in reward management Arrowsmith and Sissons
- 24. ‘Mimetic wage’ systems - simplistic pay matching as a defensive retention strategy Ignoring internal cultural requirements? Risks with market based pay systems
- 25. Internal culture issues? Does the culture demand fairness? How much difference can be tolerated? And on what basis are differences justified? What is the relative importance of: • procedural justice? • distributive justice? How transparent does the pay system have to be? Is there a bias against complexity?
- 26. ‘Mimetic wage’ systems - simplistic pay matching as a defensive retention strategy Ignoring internal cultural requirements? ‘Self-serving bias’ in data collection and analysis Complaints against JE in favour of market pay based on ‘tautological arguments’ Liable to import gender biases from the market Risks with market based pay systems
- 27. Avoid false scientism in market benchmarking & JE Focus on business goals being met Ensure your JE & pay systems meet that requirement Balance internal & external equity in wage setting Be market ‘informed’ rather than market ‘driven’ Use RRPs as short term measure whilst more helpful interventions (career, learning) bear fruit In JE management balance commitment to the core system with process flexibility Use JE in a ‘supportive way’ (where broad banding) Evaluate the effectiveness of your policies Solutions
- 28. Testing reward effectiveness A six step model: 1. Set goals 2. Identify evaluation criteria 3. Select an evaluation method 4. Collect and analyse data 5. Interpret findings 6. Develop and implement improvements Scott, McMullen and Sperling, 2006 • Organisational impact? • Effectiveness? • Efficiency? • Unique, hard to imitate?
Notes de l'éditeur
- 30% of workplaces use collective bargaining 30% of workplaces use personal contracts
- 30% of workplaces use collective bargaining 30% of workplaces use personal contracts
- 30% of workplaces use collective bargaining in 98 down from 60% in 1984 30% of workplaces use personal contracts
- Say what graph shows and where it comes from (subscriber survey) Top items is r/r – big change from last year’s survey when ee engagement was top, and r/r was much further down Ee engagement still there, but keeping labour costs in check comes in a close third So what does it all mean? The rising concerns over recruitment and retention are linked to the apparent change in the economic outlook – poss that upturn in activity is coming. And the worries about employee engagement could reflect the way in which the long recession, and its effect on incomes, has had an impact on staff motivation. The continued focus on costs perhaps presents a conundrum, since it is not always easy to reconcile this with the top two concerns. But maybe there are ways of squaring the circle, by being inventive…
- Vertical alignment as in job families rather than horizontal found in JE based remuneration
- Analytical matching involves analysing and describing jobs in terms of a set of job evaluation factors, as in a conventional point factor scheme. There is often a simple job description, often called a job or role profile to distinguish it from a conventional job description, that simply sets out the purpose and main tasks carried out by the jobholder. A grade or level structure is developed consisting of a sequence or hierarchy of grades or levels that have been defined analytically with the same set of factors used in the job profiles. The job profiles are then compared factor by factor with the range of grade or level profiles to establish which grade provides the best match and thus grade the job. So jobs are slotted into the grade with the closest matching description, rather than going through any detailed points scoring process. Levelling is a method of job evaluation that focuses on defining the levels of work in an organization and slotting jobs into those levels. It can simply be an alternative term for an analytical job matching or job classification scheme that allocates jobs into a hierarchy of grades by matching job definitions with the most relevant of the grade definitions. The difference is that in a proper levelling scheme the emphasis is on defining and describing how the organization is structured as a basis for considering the relative value of jobs, rather than on simply measuring relative worth. The work levels technique is concerned with the design of an organization, how work is structured in a hierarchy and the career paths available. It aims to fuse job evaluation with organisational development and talent management considerations. This can extend its purpose well beyond that of a traditional job evaluation programme.
- OD = sensible organisation design (not too many layers, sensible spans of control) leadership development programme = linked to key competencies. Talent = framework for career development and to facilitate mobility Reward management – changes to pay systems, pay benchmarking E-Reward JE survey 2007 Really arguments for grading except JE delivers on the equality point.
- Schmidt and Dworschak (2006), for example, coined the term ‘mimetic wages’ to caricature the way many private sector firms will seek only to mimic or match the wages of competitors without systematic analysis and primarily as a defensive retention strategy. Babcock, Xianghong and Lowenstein (1996) highlight the dangers with pay surveys, of inaccurate matching of jobs and that the choice of pay comparators can carry the risk of ‘self -serving bias’ especially in formal negotiations over pay and conditions. Brown Bevan and Rickcard (2017) And for those saying they have abandoned ‘inflexible’ job evaluation methods in favour of ‘external market’ pay determination, the whole question of how surveys compare and measure jobs in order to gather their pay level data , other than simple alignment of job titles , makes this a somewhat tautological argument.
- Schmidt and Dworschak (2006), for example, coined the term ‘mimetic wages’ to caricature the way many private sector firms will seek only to mimic or match the wages of competitors without systematic analysis and primarily as a defensive retention strategy. Babcock, Xianghong and Lowenstein (1996) highlight the dangers with pay surveys, of inaccurate matching of jobs and that the choice of pay comparators can carry the risk of ‘self -serving bias’ especially in formal negotiations over pay and conditions. Brown Bevan and Rickcard (2017) And for those saying they have abandoned ‘inflexible’ job evaluation methods in favour of ‘external market’ pay determination, the whole question of how surveys compare and measure jobs in order to gather their pay level data , other than simple alignment of job titles , makes this a somewhat tautological argument.
- Schmidt and Dworschak (2006), for example, coined the term ‘mimetic wages’ to caricature the way many private sector firms will seek only to mimic or match the wages of competitors without systematic analysis and primarily as a defensive retention strategy. Babcock, Xianghong and Lowenstein (1996) highlight the dangers with pay surveys, of inaccurate matching of jobs and that the choice of pay comparators can carry the risk of ‘self -serving bias’ especially in formal negotiations over pay and conditions. Brown Bevan and Rickard (2017) And for those saying they have abandoned ‘inflexible’ job evaluation methods in favour of ‘external market’ pay determination, the whole question of how surveys compare and measure jobs in order to gather their pay level data , other than simple alignment of job titles , makes this a somewhat tautological argument.