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Merger prompts new approach to reward at Norwich Union Insurance

CASE STUDY

Merger prompts new approach to reward at Norwich Union Insurance

When Norwich Union Insurance merged with CGU, it was faced with a stark choice: whether to harmonise or to opt for a completely new reward approach. An in-depth case study published today by e-reward.co.uk looks at how the insurer developed a new reward structure for a new organisation.

Radical redesign

Not wanting to keep employees in suspense while it went through a protracted harmonisation process, Norwich Union initially confirmed staff on "legacy" terms and conditions. The insurer then embarked on a radical redesign of its pay structure, moving towards total reward. Pay matrices were scrapped and a structure - replete with two broad bands, seven generic occupational groups and 19 career families - was adopted.

Focus on rewarding high performers

Every aspect of this new structure, including the fact that pay ranges have no maximums, is intended to reward high performers. Pay progression is more rapid than under the previous arrangements and variable pay remains a key component of reward. Recognition takes place at local level through incentive awards, and personal reward statements will be issued for the first time in 2003.

The four elements of reward are thus salary, variable pay, an all-employee share option plan, effective from the beginning of 2001, and local incentive awards.

A stronger focus on employee development accompanied the new approach to reward. This established an infrastructure - skills, knowledge and behaviour model - which supports and encourages employees to realise their full potential at work, and widens career opportunities for all.

New structure

The new structure provides the underpinning for:

  • progression arrangements which pay out substantially more to high performers
  • variable pay, which links individual objectives to the company’ s balanced scorecard, and rewards those who exceed objectives with non-pensionable payments of up to 7% of salary for those in broad band 1 and 15% for those in broad band 2
  • skills and behaviours models (competencies) for each generic group to support career development, performance improvement and progression.

The verdict?

Norwich Union Insurance is confident that the merger has made both organisations "more dynamic and less bureaucratic". The new reward package has helped to bring the two organisations together, and there is now an emphasis on we rather than them and us .

What you will find in our report

Over 25 pages (5,700 words), e-reward.co.uk examines:

  • Previous reward systems: The arrangements used by Norwich Union and CGU.
  • Balanced scorecard: Norwich Union Insurance describes its scorecard as a "mechanism for implementing our strategy and measuring performance against our objectives and critical success factors to achieve the strategy".
  • New total reward strategy: Progression, Performance and Pay is the name given to the insurer's new total reward strategy. It comprises four main elements: reward career framework performance and development.
  • Career framework: A new structure was created to help staff to understand how their jobs fit within their business unit and the organisation as a whole. It also helps them develop their careers by moving up or sideways. As part of the process, 19 different career families - clusters of jobs with similar skill requirements and activities - were identified.
  • Market salary guides: Structures were designed to give managers maximum flexibility in rewarding their employees dependent on level of performance.
  • Salary progression: based on a review of the achievement of agreed objectives, based on accountabilities and the skills, knowledge and behaviour model.
  • Variable pay: Employees are rewarded for performance against the balanced scorecard objectives for the year.
  • Recognition mechanisms: Incentive awards recognise and reward performance locally.
  • Performance management: A critical component in improving and rewarding performance at Norwich Union.

 

A final word

The most pleasing aspect of the new arrangements is a much clearer link between development and reward. There is long-term reward potential for those who continue to use the career frameworks to further their development. Although the new arrangements have been well received, we expect them to continue to evolve over time - to ensure our total reward strategy is fully aligned to our business values. - Martin Todd, head of reward, Norwich Union Insurance.

Want to know more?

Title: "Merger prompts new approach to reward at Norwich Union Insurance", E-research, issue no. 3, August/September 2002, published by e-reward.co.uk.

Availability: A single subscription (11 issues) costs just £200 a year. If you would like to subscribe, simply email your name, company, address, telephone and email details to Paul Thompson: paul@e-reward.co.uk. Please specify the number of subscriptions that you require. We will then invoice you.

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PDF format

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Posted 3 September 2002