REWARD SOLUTIONS FOR THE FUTURE

9 May 2014

Daniel Hibbert

MERCER

Contents

Page

Adapting reward to reflect the increasing complexity of public services 2

Using reward to support workforce transformation 6

The role of performance management and reward in engagement 9

Conclusions 14

Adapting reward to reflect the increasing complexity of public services

3

MERCER 4

Large delivery organisations Smaller commissioning organisations

Jobs designed around professional groups Jobs designed around business needs

Reward for job size Reward for contribution

Unconnected with talent management Integrated with talent management

Emphasis on equal pay compliance Achieving equal pay compliance alongside flexibility

Each term and condition of employment dealt with in isolation

An integrated “Total Reward” approach to all terms and conditions

Complex and inflexible processes Pay decision making based on business needs, rather than process

The changing public service landscapeHow reward needs to change as local government adapts

Reward is central to the transformation journey

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Alternative talent and reward modelsThe characteristics of each model are summarised below

Specialist skills need to be developed within the organisation and long-term loyalty is required

Skills are readily available in the external market and long-term career opportunities within the organisation may be limited

Long-term career opportunities are available for those who develop within a defined career path

The job is flexible and broadly defined and the capabilities of the job holder are critical to the value created in the role

Talent characteristics

Incremental pay spine, with pay starting behind market and moving ahead of market with service

A single rate of pay for the job, aligned with the external market

A pay system that fits with the defined career path, supporting the development of the individual through that career path

Pay is varied by reference to the capabilities of the individual

Reward approach

5

1. Loyalty model

2. Market model

3. Career model

4. Dynamicmodel

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How the dynamic model operatesNew operating models require more focus on individual capability

6

Minimum Salary

High Performing – Non-Consolidated

50

55

60

65

70

Bas

e sa

lary

£'0

00 High Performing – Consolidated

Developing Range

Additional salary paid to consistently strong performers

Paid to exceptional performers, and not

consolidated into Base Salary

Individuals who are still developing into

their role will be paid in this range

The Rate for the Job paid for the

expected standard of performance

The illustration shows a Rate for the Job of £60,000. There is the potential to earn a further 15% of salary based on performance, of which 5% of salary may be consolidated into salary and the rest may be withdrawn if performance subsequently declines.

Below the Rate for the Job there is a developing range of around 10% of base salary.

Using reward to support workforce transformation

7

MERCER 8

How simplified job design can support transformationThe benefits of improved job design Simplified job design:

- Supports with the shift from measuring job content (job evaluation) towards measuring individual capabilities and performance;

– Enables future changes and restructurings to be carried out more efficiently through the use of generic job descriptions, including using a job catalogue;

– Facilitates the process of transformation by enabling the move towards new employment contracts.

How changes to job design can support a transformation journey:

Initial changes to reward to bring this into line with the needs of the organisation

1 New roles and new appointments made on the basis of the new job design and reward approach

2 Changes made to existing roles to fit with the new organisation in line with transformation

3 New simplified organisational

design and reward structure

in place

4

MERCER 9

How to link reward directly with transformationAll employee “Gainsharing” plan

March April March June

On an annual basis the plan is set up to pay a target amount at the end of the performance year, subject to the achievement of a set of clear measurable Council-wide performance targets.

Actual payment varies depending on achievement against target.

Payment made based on an assessment of achievement of Council-wide targets following the end of the year, as agreed by a Remuneration Committee (or equivalent).

Payment could also be subject to a minimum standard of individual performance.

During the year there should be ongoing

communication of performance against

objectives to support the creation of a

performance culture

1

2

3

Start of performance period

End of performance period

The role of performance management and reward in engagement

10

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EvaluationDevelopment Performance Evaluation

PeopleDevelopment

Differentiates performance

11

Provides coaching and support for

personal development

The performance management debatePurpose paradox: development versus evaluation

11

Good performance management achieves the right balance between people development and performance evaluation

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Performance managementWhat should performance management do for you?

Improve performance – Individuals and organisation

Identify top talent – individuals and teams

Help people succeed – individually and collectively

Performance management should also be used to engage employees in:

Issues relating to organisational performance, and

How each individual contributes to that performance.

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Mercer research - 2013Management capability has the biggest impact on overall success?

13Mercer 2013 Global Performance Management Survey Report Copyright © 2013.

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Using performance management and reward in engagementWhat is needed to engage employees and enhance performance?

Clear objectives and expectations

Regular dialogue on actual performance and on progress made

RewardTraining and development

Performance measuremen

t

Career discussions

Integrated performance management, reward and engagement model

Conclusions

15

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Making changes to reward and performance managementComponents of the business case for change

16

Benefits/savings Risks A workforce engaged with the

performance agenda

Stronger long-term talent management and career development

Reduced future costs, moving away from the “one size fits all” approach

Increased capacity to recruit and retain high performing staff

An enabler for transformation supporting change and flexibility

Adverse employee relations impact

Costs of transition, including use of resources and relating to pay protection

MERCER 17

Questions for discussion

1. Which of the four talent models are most suitable for your workforce?

2. Should the same talent model be applied across the workforce?

3. Is there the capability to manage a different type of reward and performance model?

4. How should the reward system be adapted to support the transformation journey?

5. Can performance management be used as a positive engagement tool?

6. How strong is the business case for making changes and should this be a priority?

MERCER 18

Questions and Discussion

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Daniel Hibbert PrincipalMercer Tower PlaceLondon, EC3R 5BU

+44 (0) 20 7178 5520 +44 (0) 7557 031371

daniel.hibbert@mercer.com

Contact details

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