Why Total Rewards?

Total Rewards can be defined as “All of the tools available to the employer that may be used to attract, motivate and retain employees. Total rewards include everything the employee perceives to be of value resulting from the employment relationship”.

There are five elements of total rewards, each of which includes programs, practices, elements and dimensions that collectively define an organization’s strategy to attract, motivate and retain employees. These elements are:

• Compensation
• Benefits
• Work-Life
• Performance and Recognition
• Development and Career Opportunities

The elements represent the “tool kit” from which an organization chooses to offer and align a value for both the organization and the employee. The elements are not mutually exclusive. Total rewards strategy involves the art of combining the five key elements into tailored packages designed to achieve optimal engagement. An effective total rewards strategy results in satisfied, engaged and productive employees, who create desired business performance and results.

In a globalize world where local laws and regulations change constantly the impact of C&B becomes more important, so the corporate strategies and remuneration systems need to be adapted to different industries and countries in order to provide the best social and fiscal optimization possible for both the company and the employees.

What do you do in a Total Rewards role?

• Never stop learning.
• Never do exactly the same thing twice (no, not even for your annual processes such as salary reviews or bonus pay-outs).
• Creativity to design and implement solutions that will truly support your company and its employees
• Negotiate with providers to get the best conditions and prices possible for Social Benefits (Health & Life Insurance…) to all employees of the organization.
• Learn and know about Tax & Regulations in each country in order to apply the benefits in the best way for the company and employees.
• Get involved in many aspects of running the business, and through it, get real exposure to the organization, with Finance, Sales and Marketing obviously, but also with the business… and the rest of HR.
• Simulations and multiple scenarios analyses, and the legal, cost and fiscal implications of your decisions.
• At the forefront of the organization, in good times (distributing bonuses and introducing new rewards and recognition practices) and in bad times too (figuring out cost control mechanisms and redundancy plans).
• Interact with people at all levels of the organization, from the junior staff through to line managers, to top Executives and the Board members.

Borja Burguillos

Changing the HR Game: How Gamification is disrupting Human Resources

Following my previous posts “Why Digital is radically disrupting HR?” and “Digital Will Give Power to the People” about how digital is changing the human relations today I would like to write about how gamification will change labor relations as we know until now.Since the first Nintendo sets arrived in homes in the mid-1980s, the workforce has become increasingly populated with employees who have grown up with computer games. For many people entering the workforce now, such games are more than just an occasional pastime. Games form the very backdrop of their lives. These individuals do much of their socializing through computer games and use the vocabulary of gaming even in conversations that have nothing to do with games.

What is Gamification?

With gaming concepts and terminology gaining prominence among young employees, it’s probably not surprising that companies eager to attract, engage, incentivize and retain members of this generation have been taking games seriously. Gaming concepts have begun working their way into key HR processes in two distinct forms, often called serious games and gamification. Whereas serious games are actual games used in the workplace whose purpose is beyond merely providing entertainment, gamification is the weaving of game mechanics such as virtual currency, leaderboards (boards that display leaders in a competition), badges, or leveling up (progression to the next level in a game) into existing work activities or processes without the development of a full-fledged actual game.

You can find more information in the report Trends Reshaping the Future of HR: Digital Radically Disrupts HR by Accenture Digital.

Why now?

The idea that gaming elements can be useful in the workplace is not new. For example, sales groups have long used leaderboards and other gamification-like mechanisms to foster friendly competition. And organizations as serious as the military have used war games and their civilian equivalents to train soldiers and leaders. What is new is that more and more workers are familiar with and enjoy gaming.

In addition, the commercial platforms that have industrialized the development of games and gamification are more widely available to organizations. These factors have made it much more affordable for enterprises to create serious games and to incorporate gamification into business processes. For example, some serious games leverage general which provide graphics, game editors and artificial intelligence functions to achieve high levels of sophistication and create simulated characters.

Likewise, vendors such as Bunchball and Badgeville have created cloud-based gamification engines, which deliver key gamification functions as web services. This greatly reduces the cost and complexity of incorporating gamification into enterprise web applications. These developments have given rise to a varied set of applications that have transformed various HR processes.

What is next? The road ahead

Gamification of HR is still in its early days. Still, games and gamification have begun to alter the way HR professionals and employees experience various HR processes. Some of the changes are incremental. Others could prove disruptive, such as use of gamification to replace occasional, private top-down feedback with real-time, public 360-degree feedback.We’re just beginning to understand which game-related transformations are most beneficial to organizations and how to estimate the degree to which workers may embrace these changes. As games and gamification—along with insights into how they can help organizations generate valuable business outcomes—continue to improve, this trend will likely become more important.

We may never get to the point where the experience of going to work is as exciting and engaging as a great game. But high-performance enterprises will likely push the boundaries to see just how close they can get.

Borja Burguillos

Highest salaries around the globe by country

It’s results always interesting to know where globally speaking we can get “as employees” the highest salaries. I got very interested to know the answer so I decided to start to look for it. We can find an immense biography about this topic with millions of research and statistics and different potin of view about how to measure it.

I got a report from Mercer called “International Geographic Salary Differentials report” which showed what exactly I was looking for. An index with a relative pay levels worldwide. For sure this index can help employers make informed salary decisions to control costs and ensure competitive pay across markets but also to employees to make their own decisions.

All multinational organizations compete diligently for specialized and skilled talent, they can’t afford to misalign salaries with local market standards. In the era of the globalization be equipped with accurate and timely geographic salary differentials is a must. Organizations can guard against under- and over-paying key positions — either of which would have serious ramifications for operations.

See below a very interesting infographic about what are the countries who best pay.

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Do you want to run a digital business? Gamification is a must

Gamification has become an essential part of any digital business strategy as a way of digitally motivating people and overcoming barriers of scale, time, distance, connectedness and cost.

As Mr. Burke from Gartner Inc. said and I totally agree “Game mechanics and design have been used to engage and motivate people to achieve their goals throughout recorded history”. “Gamification is about rethinking motivation in a world where we are more often connected digitally than physically. It is about building motivation into a digitally connected world. And we are just getting started in this journey. Gamification will continue to develop for many years to come.”

Gamification has tremendous potential to motivate people, but right now most organizations aren’t getting it right. The road to gamification success is full of pitfalls, and many companies don’t understand how critical player motivation is to success.

What organizations need to understand?

1. Gamification is about motivating people to achieve their own goals, not the organization’s goals.
2. Use gamification to empower their customers, employees and communities to reach their goals.
3. Gamification talks about share goals. If a business can identify the goals it shares with its audience or provide its audience with goals that are meaningful to them, then it can leverage gamification to motivate these players to meet those goals, and the company will achieve its business outcomes as a consequence.
4. Business leaders must understand the opportunities to leverage gamification to digitally motivate customers, employees and communities.
5. A digital engagement strategy challenges business leaders to go beyond interactions; it challenges IT leaders to go beyond transactions. Rather, it requires the design and delivery of digital experiences.

The opportunity and the future

The opportunity is to focus on engaging people at an emotional level. One way to motivate people is to present them with practical challenges, encourage them as they progress through levels, and get them emotionally engaged to achieve their very best. Gamification does just that.

At its core, gamification is about engaging people on an emotional level and motivating them to achieve their goals. However, most organizations rely primarily on transactional engagement strategies in their interactions, for example by focusing on employees’ concern to earn a living and to meet the minimal expectations of the employer.

Organizations need to shift focus to emotional engagement if they want to truly motivate people.

Those organizations that are more aggressively adopting gamification already have multiple gamified solutions in place that support different business areas, address different target audiences, and achieve a wide range of business objectives.

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What is an effective Employee Value Proposition?

We can define Employee Value Proposition (EVP) as the balance of the rewards and benefits that are received by employees in return for their performance at the workplace.

Minchington (2005) defines an Employee Value Proposition (EVP) as a set of associations and offerings provided by an organization in return for the skills, capabilities and experiences an employee brings to the organization. The EVP is an employee-centered approach that is aligned to existing, integrated workforce planning strategies because it has been informed by existing employees and the external target audience. An EVP must be unique, relevant and compelling if it is to act as a key driver of talent attraction, engagement and retention

The classic employer-employee deal is becoming extinct:

• It’s unaffordable. Rising costs, especially for health care and taxes, concerns about existing or new legacy obligations, slow growth and continuing economic uncertainty require employers to rethink both the size and structure of their reward investments.
• It’s outmoded. Long-established workplace practices are increasingly inadequate to meet the needs and support the performance of a technologically mobile and digitally savvy workforce
• It’s ineffective — and inefficient. A rewards strategy that’s not aligned with the way a company creates value for its customers — or optimized to channel investment where it will have the most impact — will struggle to deliver desired performance or meet key financial and talent objectives

Companies face serious challenges when it comes to attraction, retention and engagement of talent. Following the research “Towers Watson 2012 Talent Management and Rewards Study – Global” reveals what it takes to get it right

Companies that have adopted an increasingly integrated approach to Total Rewards strategy, design and delivery decisions — supported by an overarching Employee Value Proposition — are:

• 5x more likely to report their employees are highly engaged
• 2x more likely to report achieving financial performance significantly above their peers

 What is an effective Employee Value Proposition?The evolution of an effective EVP and Total Rewards strategy

A Total Rewards framework provides the roadmap to update rewards strategy and align it with business needs.

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Compensation philosophy

1. What is a compensation philosophy?

• Articulates what the company believes about how its employees should be treated financially
• Provides guiding principles for designing cohesive compensation programs
• Lays out what is important to the company
• Communicates a consistent and clear message
• Should be backed up by the company’s actions

Your stated philosophy should reflect the company’s intentions and set expectations for employees. Example statements:

• Efforts will be recognized, but results will be rewarded.
• Employees with the greatest level of sustained performance receive the greatest rewards in pay.
• Solid performers will be targeted at 50th percentile. Top performers will be targeted at 75th percentile.
• By linking pay opportunities to clearly outlined individual performance objectives, we offer every employee an equal chance to succeed.
• All employees should share in the financial success of the company.
• Our compensation programs are globally focused, locally competitive.
• We want all employees to think like owners, which is why we award stock options to every employee.

2. Why do you need an explicit compensation philosophy?

• Managers might be making compensation decisions that are not in the best interests of the company as a whole
• There may be an implicit philosophy that isn’t consistent across the company
  • Look at employee communications over the years
  • Informally survey top managers of the company
  • What do the current compensation programs look like and what do they “say” about the company’s beliefs?
  • Does the corporate culture offer any clues?

3. How do we develop a compensation philosophy?

• Interview senior management and Board of Directors
  • Business objectives, current and future
  • Desired employee behaviors to accomplish those objectives
  • Competitive environment and desired positioning
  • Recruiting or retention issues
  • Pay elements and desired mix

• Outline current rewards programs
  • Where are we now?
  • Where do we want to be?
  • How do we get there?

4. When might your compensation philosophy change?

• Leaving start-up phase
• Major change in your business model
• Business and headcount growth that outpaces expectations
• Following a merger or major acquisition

5. What is a successful compensation system?

• Supports the company’s compensation philosophy
• Enables the company to compete for the talent it needs to be successful
• Provides sustainable compensation programs
• Allows the company to meet its financial goals
• Flexible enough to accommodate changes in the company or marketplace
• Motivates and rewards complementary objectives over the short and long term

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Executive Compensation Principles

Determining and structuring long-term compensation plans is a complex, multi-year process for boards that is constantly evolving. Compensation plans have many objectives measured over a multi-year time horizon, including:

• Ensuring that compensation decisions are highly correlated to long-term performance.
• Enhancing the alignment of interests between executives and shareholders.
• Mitigating the risk of unintended outcomes or the creation of inappropriate incentives.
• Attracting, motivating and retaining top talent.

The focus of the following principles is on “pay for performance” and the integration of risk management functions into the executive compensation philosophy and structure.

While proxy disclosure is limited to the top five executives, boards are expected to ensure these principles are used in determining compensation practices throughout the company. The compensation programs for senior executives set the tone and should reflect a company’s overall compensation philosophy and risk profile.

The board and the compensation committee of every public company are responsible for, and accordingly must be actively involved in, establishing and independently verifying compensation philosophy, setting performance measures and assessing performance.

The Canadian Coalition for Good Governance (CCGG) recognizes next 6 principles as the Key of the Executive Compensation. Totally agree with them.

• PRINCIPLE 1 

A significant component of executive compensation should be “at risk” and based on performance.

• PRINCIPLE 2

“Performance” should be based on key business metrics that are aligned with corporate strategy and the period during which risks are being assume.

• PRINCIPLE 3

Executives should build equity in the company to align their interests with those of shareholders.

• PRINCIPLE 4

A company may choose to offer pensions, benefits and severance and change-of-control entitlements. When such perquisites are offered, the company should ensure that the benefit entitlements are not excessive.

• PRINCIPLE 5

Compensation structure should be simple and easily understood by management, the board and shareholders.

• PRINCIPLE 6

Boards and shareholders should actively engage with each other and consider each other’s perspective on executive compensation matters.

Borja Burguillos

Why do we need an HR Strategy?

Reading the website creative HRM (which I totally recommend) I saw a really interesting presentation about why do we need an HR Strategy and How we can build the effective HR Management function in the organization achieving challenging business goals.

1. WHAT’S HAPPENING IN THE WORLD?

Current Business World

• Highly competitive environment… each company can copy and paste products
• High levels of uncertainty … the growth era in the industry gets shorter and products replaced quickly
• Generation Y is not loyal with the employer … they are loyal just with their values
• Green business as a priority for the modern western organization
• Constant cost cutting pressure from shareholders and competitors
• State protection on the rise … again
• New competitors from emerging marketing growing each day creating the additional pressure on prices

Current HR Industry

• Global workforce management … aligning and unifying many different cultures in one organization
• Global talent management and implementation of global relocation policies
• Increasing performance pressure … while (try to) keeping employees satisfied
• Global HR processes blocking the local flexibility
• Permanent fight with increasing costs of employment
• Shifting jobs globally, building the operational centers around the Globe
• Changing HR environment

HR Industry: Trends

• Hiring talents globally to ensure that all positions in the organization are staffed with the best talents
• Supporting innovations to build the sustainable competitive advantage
• Building highly diverse teams as each team can have members from different continent and from a completely different cultural background … setting new rules for the team work and gaining the right team spirit
• Working with the older employees … the company gets older, the employees get older as well … keeping the young spirit inside the organization is the challenge and a trend
• Pushing responsibility down the chain while keeping global and local policies … the global organization is not agile, the local organization cannot be controlled efficiently … HR has to find the right balance between global policies and the local execution
• Less permanent employees and more project based employees … the lifetime employment is the word from the history … the organization cannot offer the certainty, the employees do not offer the loyalty… the project based employment will be on a rise

2. WHY HR STRATEGY?

HR Strategy: What is it?

• HR Strategy connects the business strategy with the effort of Human Resources to build a better and competitive organization and aligns top executives with the HR team
• Sets clear objectives for HR in the areas of the talent development, succession planning and organizational development to ensure the future of the organization
• Defines the key principles for the compensation and organizational design strategy as the organization keeps itself thin and quick
• Brings a clear border between global and local decision making processes allowing to act to HR Manager autonomously
• Defines key areas which will be used as the competitive advantage on the job market
• Identifies gaps in the people management area which have to be improved in a defined time frame

HR Strategy: Why do we need it?

1. Designing the modern HR organization requires the strategy.
2. A strategic shift in HR Responsibilities requires the strategy, which is aligned with business objectives.
3. Change of HR Roles and Responsibilities has to be driven by outcomes from the strategy implementation.
4. Award winning HR function has the innovative HR Strategy.
5. A fast moving company requires the strategic HR management (difficult to achieve without any strategy).
6. The HR Strategy does support strategic decisions. The cost efficient organization always makes decision supported by strategies.

HR Strategy: Design and Implementation

1. Assess the readiness for change. Assess HR team and the entire organization. Use HR SWOT Analysis. Develop the HR Strategy for the next few years.
2. Develop the basic HR framework, which will support the change to being the strategic partner.
3. Clearly define the role of the HR Leader in the organization. Be the architect.
4. Get the approval.
5. Define the changed role of the line management in the people management.
6. Clearly define owners of the HR Strategy. Define who will execute the strategy, define the strategic split of roles.
7. Clarify roles in Human Resources. Define specialist and generalist roles.
8. Design the new HR Organizational Structure.
9. Fill the structure with upgraded talents.
10. Let talents define sub-strategies and upgrade the HR Strategy to the final one.
11. Do the strategic HR.

Borja Burguillos

Compensation’s Role in Human Resource Strategy

Reading the book “Solving the Compensation Puzzle” I realized that even being obvious I had never wrote about the important of Compensation’s Role in Human Resource Strategy so I decides to put this post based on the book and my views.

Compensation is one of many human resource (HR) tools that organizations use to manage their employees. For an organization to receive its money’s worth and motivate and retain skilled employees, it needs to ensure that its compensation system is not an island by itself. Not only is it important for an organization to link compensation to its overall goals and strategies, it is important that its compensation system aligns with its HR strategy.

Too many organizations plan and administer their pay systems by default; or worse, fall back on “the squeaky wheel gets the grease” practices. More than any other area in HR, ignoring pay and performance systems can be devastating. It is a very expensive and laborious process to hire new employees, buy back trust of current employees and renew the organization’s energy and motivation level. By ignoring this issue, it does not go away or get better with time. It will take extra money and valuable resources to fix the system.
Smart, successful organizations do regular planning and evaluating of their compensation and performance appraisal systems. Because compensation is visible and important to employees, it is critical to consistently communicate a clear message regarding how pay decisions are made. In short, a solid pay-for-performance strategy requires that employee pay matches the organization’s message.

Engaging Key Stakeholders to Support the Compensation Strategy

There are three levels of compensation strategy that exist within an HR department:

• The first level is a strategy that is only understood and supported by the HR department.
• The second is a strategy that is supported by the HR department and translated into practical solutions, policies and decisions Compensation’s Role in Human Resource Strategy that guide compensation decisions.
• The third level, which should be an organization’s ultimate goal, is the most difficult to achieve. It is a compensation strategy that supports a pay-for-performance system that transforms and permeates all levels of the organization.

Important Considerations in Designing a Compensation Strategy

Does the compensation system match the organization’s overall objectives? In other words, how does the compensation strategy complement other HR initiatives? For example, if quality, experience and a sophisticated skill set are an organization’s strategic advantages, then it will not be successful hiring employees significantly below the market rate for that position. To answer this question, it is important to review the organization’s strategic plan (at least annually) and discuss whether the current HR and compensation systems are supporting these initiatives.

Where does the organization want to be in terms of market competitiveness? In this competitive job market, it is important to be aware of the organization’s competing firms. An organization can lead, meet or lag the market.

What are the strengths and weaknesses of the organization’s current compensation system? An important component of market competitiveness is to find answers to the following questions:

• Is the organization able to attract the appropriate skill sets and types ofemployees when needed?
• Where is the organization hiring its best employees?
• How long do most employees stay at the organization?
• Where do employees go when they leave the organization?
• What are the organization’s promotion policies?
• Are employees frequently asked to take on new tasks without being rewarded for their efforts?
• Do employees value the company’s benefit, incentive, work environment?
• What of these items should be changed or updated?
• What is the employee morale? This information can be gathered from managers, exit interviews, employee surveys and other communication tools. Employee survey feedback, in particular, provides valuable information for moving forward.
• What mix of base pay, incentive pay, work environment and benefit levels make the most sense for the organization when considering the competition, types of jobs, niche and labor market available?

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The future of retirement benefits in a Global world

The retirement topic is undoubtedly one of the biggest challenge that Human Resources has ahead for the XXI century. What to do for retirement? How to manage it with local regulations in a global context?

Multinationals are working through the biggest change in benefits strategy that we’ve seen. Over the past decade, costs of defined benefits (DB) employee retirement plan have mushroomed. People are living longer, investment market conditions are difficult, the cost of healthcare is increasing, regulation is tightening and state pension is in decline. And in spite of the best efforts of sponsoring employers, deficits have remained stubbornly on corporate balance sheets.

At the same time, the nature of the workforce is changing dramatically with far more diversity and less predictability in individual career paths, family and financial circumstances, demographics and the form and timing of “retirement”.

In line with this I would like to highlight the study done by pwc “global-pension-survey”. It’s an excellence global survey (of 114 major multinationals from across the world) and analysis to understand where we are now and what are the main trends for the next follow years.

Competition has never been so fierce in the marketplace, so employers need to be at the very top of their game at a time when many are tackling a DB legacy that could prove clipping. This is a delicate balances to strike and there are many challenges to address.

3 keys to get a successful global pension strategy

• Affordable workplace benefits provision that employees value

This means anility for local entity for local entity management to provide appropriate retirement savings flexibly to their workforce, but within clearly understood affordability and risk constrains. The amounts spent must be justifiable in terms of the dividend they provide to the employer and their suitability for an increasingly diverse workforce. Flexibility and innovation are required to address local regulations, culture, competitive environment and workforce requirements.

• A rigorous and nimble approach to financial and risk management

Financial and risk management should continuously monitor pension risk in the context of broader business risks. They must allow the company to quickly take action to pursue known and wanted risks, hedge or removed unwanted risk and to execute risk reduction measures at the right time and at the right price.

• Appropriate governance structure

Clearly articulated governance (decision-making and decision-implementation) that sets out what matters most to the organization about retirement benefits management, and the resulting allocation of responsibilities between head office and local entity management. Processes should be appropriate and proportionate to the multinational’s own circumstances, bring control and flexibility without excessive complexity, and effectively engage the right stakeholders (including HR).

What HR needs to discuss with the board

HR is the key area to deal with retirement benefits as part of the desired overall reward and employment deal

• Increasing workforce tensions around justifying continuing legacy DB benefits for and increasingly small proportions of the (longer-serving, older) workforce, given the huge difference in costs and risks for the employer versus what is being provided for (younger, shorter-service) employees participating in DC arrangements.
• In the increasingly DC world, dealing with the issue of “adequacy” of retirement provision. Without education and action, many employees will retiree inadequate retirement savings.
• Improving the knowledge, financial literacy and decision-making among employees.
• Addressing the increasing diversity in employees’ needs and wants. Providing appropriate flexibility in the form and timing in which people can use their retirement savings.
• Ensuring money spent by the employer on retirement savings is a good use of the reward budget relative to other options.
• Securing the appropriate arrangements with financial services and administrations suppliers. Flexibility to have fit-for-purpose provision that takes into account the local needs of the business and its employees, including addressing the local environments, regulations, customs and competition.

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