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The Changing Face of Reward – What differentiates the successful employers? – seventh in a series

Posted by John Branch

John Branch

Now that my colleague Jan Marsli has looked at engagement levels in his posts here and here, I will take a look at what differentiates the successful employers from those who are struggling.

In what is a rather mixed picture to date there are exemplars in the region that stand out. They have tackled the low hanging fruit but are also addressing the more difficult themes and principles.

Across-the-board, state sponsored salary increases have done little for the development of organisational performance cultures (where the guaranteed element of pay increases the impact of variable increase based on performance is diminished) and have de-emphasised the importance of total reward whilst having the potential to escalate inflationary pressures in local labour markets. However, given the latest resolution from the Abu Dhabi Government announcing increased controls on state sector salary scales and incentive plans, we may be seeing an end to headline grabbing salary increases. Consequently Hay Group anticipates a shift of emphasis in the reward agenda for many organisations in the region.

Indeed in our studies of the World’s Most Admired Companies (with FORTUNE magazine) we see that this agenda is already well advanced. These companies generally pay lower base salaries than their peers, yet get more from their people. On average, WMACs pay approximately 5 percent less in base pay for management and professional roles than other organisations. One of the key reasons why WMACs end up paying less than competitors is that they do a much better job of leveraging total rewards. They are better at getting their people to understand their value, linking them to performance and providing their managers with the tools to use them more effectively. WMACs also find a way to make pay increases mean more, as they typically provide their outstanding performers with an increase that is at least double that of the average performer.  This is a far higher level of differentiation than is typical in the region.

In addition to our WMAC study we can reference individual clients with whom we have had long term relationships;

A logistics company client has a clear engagement strategy, putting its human assets on top of its executive agenda, with a philosophy of empowering its’ people to perform at their best. This is solidified through an operating model that is intended to ensure that every job has a clear and valuable contribution to make, where people can see how they and their role fit into the whole. Accountabilities are clear and so are personal objectives, nothing is fudged and ambiguous statements are avoided. Where a job has financial accountability (sales, budgets, cost impact etc.) this is stated and quantified. This structure provides a clear line of sight for each employee to their role and contribution in the organisation, and how each person or unit relies on other people or units to succeed. It makes for ease of performance management since the performance criteria are clear and it ensures that employees have a strong sense of the importance of their roles to collective success of the organisation.

A further example is where UAE bank comprehensively overhauled its total reward strategy and as a result recognised the need to shift from a “cash is king” culture to one where employees will be educated and encouraged through ongoing communications to value every component of the total reward offer. In this company performance differentiation now ensures not just that high performers receive appropriate rewards but also that weak performers are identified and their reward reduced accordingly; a shift towards true differentiation across the performance spectrum.

One thing that tends to set these and other similarly successful organisations apart is that they tend to rely less heavily on benchmarks to justify changes to their HR policies. Instead they recognise that benchmark data is useful intelligence but that to win the race for talent they have to take some initiatives and innovate.

Such clients recognised that, like many of the WMAC’s, they need to be early to market in some aspect of their total reward package if they are to differentiate their EVP. This approach challenges the prevailing paradigm in the region where benchmark data is frequently regarded as essential to justify change.

In my next post I will look at what typifies the less successful organisations. Are any of the points above making you think that you need to take action?

 

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