PERFORMANCE PAY
Recession has been wake-up call for reward, says Hay Group
The global downturn has been a “wake-up call” for reward. Sloppy practice crept into reward processes during the boom years and the recession has prompted many organisations to “think more sharply about who – and what – they are paying for”. These are among the main findings to emerge from a new study by Hay Group.
For many, the recession has been an “opportunity to retrench and reassess,” says Hay Group. “Organisations have seized the chance to clarify their reward strategy and seal any cracks in the foundations, improving and strengthening their reward and performance management systems. Panic and the need to cut costs may have been the significant drivers but the lasting legacy is a concentration on the optimisation of pay.”
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Hay Group's global study, based on interviews with senior HR specialists from over 230 companies in 29 countries, examines how companies are developing their reward practices to drive their business strategy. It concludes: “Across all sectors and regions, organisations are struggling to re-build profitability. With revenue growth hard to come by, the focus is on balancing four often conflicting tensions – containing costs and improving performance while managing risk and keeping your employees engaged.”
Creating a performance culture
When it comes to performance pay, Hay Group reckons that it’s time to get “back to basics”. This means making performance pay really work, with a much greater focus on “creating a culture of performance through aligning rewards to the performance metrics that drive profit and revenue growth”. It’s also essential to build line management skills in setting goals, coaching performance and recognising and rewarding performance.
Hay Group urges employers to use reward programmes to “help you move from an ‘entitlement’ to a ‘performance’ culture”. In practical terms this is leading to a greater differentiation of reward based on individual performance. As the report explains: “Companies are channeling the limited rewards available in a far more focused way to those employees most vital to the future of the company: the top performers, high potentials, and those with scarce skills.”
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Colin Evans, head of reward services at Hay Group in the UK, provides an overview of the global research into the factors driving change in reward and how companies are responding to these challenges. He also highlights the key differences between practices in the UK and the rest of the world. Go to: www.haygroup.com/uk/media/Details.aspx?ID=26762.
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Title: The Changing Face of Reward, Hay Group, June 2010.
Research details: The survey was conducted in October and November 2009 via face-to-face or telephone interviews, using open-ended questions:
The majority of respondents were HR specialists, with around two-thirds of those at director level and a third at manager level.
Almost half were based in Europe, a quarter in Asia, a sixth in North America and others evenly distributed across South America, Africa and Pacific.
The respondents in the survey manage revenue streams of approximately US$4.5 trillion and employ around 4.7 million people in total.
Three-quarters were multinational, with a fifth operating in more than 50 countries.
Availability: To request a full copy of the 40-page report contact Jemma Dunne, email: jemma.dunne@haygroup.com or tel: 0207 856 7330. For more details visit www.haygroup.com/uk/downloads/Details.aspx?ID=26870.
Hay Group is a “global management consulting firm that works with leaders to transform strategy into reality”. To find out more visit www.haygroup.com.