CASE STUDY
New e-reward case study examines overhaul of reward at COLT Telecom
COLT is a telecoms company, established in 1993. Its employment model was similar to that of many telecom and dot-com organisations which came and went in that decade. But, as a new case study by e-reward.co.uk outlines, COLT has grown and prospered, and this growth has brought a need for consolidation and rationalisation of reward arrangements which had been put in place without much strategic intent.
In this case study, written and researched by e-reward.co.uk, we see how a high-tech/telecom company which put in place varying reward structures as it expanded throughout Europe and depended heavily on share options to engender loyalty, commitment and excitement has radically reshaped its reward system. It has moved from spot salaries to a new nine-level pay structure, which enables it to benchmark individual pay rates directly against a pan-European survey.
COLT has also changed its bonus arrangements, so job level determines the bonus, rather than the other way around, and overhauled benefits so that they are pitched at the market median in each country. What's more, it has decided to abandon attempts to rescue underwater share options which are worth less than the current share price, and has introduced new arrangements which require managers to purchase shares themselves, and which are related to managerial performance.
Company profile: COLT Telecom
| Employees | 4,000 worldwide 1,200 in the UK. |
| Location | Headquarters in London, locations throughout Europe. |
| Business activities | COLT provides business telecommunications services including voice, data and hosting solutions, to organisations such as the Bank of England, Lastminute.com, Transport for London and Channel 4. It started life in 1993 as a provider of telecommunications to the City of London and has since built a 20,000 kilometre wholly owned long distance fibre optic network which connects 9,000 buildings in 32 European city networks in 13 countries. |
| Web site | |
| Interviewee | e-reward.co.uk interviewed Vivian Leinster in May 2004. Vivian is director of compensation and benefits. |
| What you will find in this report | Page no. |
| Spread across 18 pages (6,300 words), this report examines the following issues: | |
| Executive summary | 5 |
| Company profile -- overview -- what you will find in this report | |
| Background | 5 |
| Underwater options -- uncompetitive base pay -- culture change | |
| Restructuring | 6 |
| Six functions -- new accounting proposals for share schemes | |
| First steps | 7 |
| Current problems -- stated objective of the remuneration review | |
| A new reward philosophy | 8 |
| Reward mix -- compensation package -- base salaries -- performance management -- share options -- benefits -- COLT reward strategy | |
| Remuneration review project | 9 |
| Senior managers' survey -- priorities for project -- research findings -- actions taken | |
| The new pay structure | 10 |
| Move from spot salaries -- nine job levels -- bonus guidelines -- the process | |
| Bonuses | 12 |
| Enabling individual and team contribution to company success -- bonus potential ranges for each level | |
| Performance management | 12 |
| Problems with performance management -- personal development -- individual targets -- performance rating definitions | |
| Share options | 14 |
| Senior share purchase plan -- performance options -- welcome options | |
| Benefits | 15 |
| Audit of benefit provision -- overhaul -- company cars | |
| Problems and lessons learnt | 15 |
| Verdict -- a final word | |
| Appendix A | 16 |
| Document extract -- COLT job level descriptions |
Want to know more?
Title: COLT telecom breaks away from the dot-com model with consolidation and new pay structure.
Issue no.: e-research no. 23.
Date: June 2004.
Pages: 18 (6,300 words).
Availability: Published by e-reward.co.uk. Click on "Research Reports" on the left-hand navigation panel of the e-reward.co.uk web site and complete the simple online subscription form at www.e-reward-data.co.uk/content/ResearchReports.asp
For more details email: paul@e-reward.co.uk
Posted 3 July 2004