Total Rewards Quarterly

Changing Times: A Radford Perspective

Q. The technology lifecycle is becoming progressively shorter, how has this challenge been managed by industry players?

A.Companies are taking a broader view of the product portfolio – what do we sell, how does it integrate, how do we create a uniform design language, customer experience and 'brand'. This invariably requires proactive management of the product lifecycle – which has led to greater emphasis on the product manager role. There have been instances where companies have responded by changing the nature of the product itself – moving away from more hardware-based to more software-based controls, and focusing on ease of upgrades. There have also been changes in development methodology, such as moving away from the older 'waterfall' methods to ones like Agile that emphasize speed and flexibility.

Q. Technology has grown at a rapid pace in the last few decades. The skills required in one year are different from the ones required in another. How is the demand for talent met with — through training and/or recruitment practices of firms?

A. Radford's 2016 Talent Pulse survey highlighted that companies must create a culture that enables people to constantly adapt and learn to drive productivity and accelerate innovation. Many are creating cross-functional units that bring together all colleagues involved in the end-to-end customer experience. Some of the most common development opportunities are shown in the table below.

Another way companies, especially the largest companies, are addressing the talent gap is through acquisitions. Corporate Venture Capital (CVC) units have become increasingly active in scouting out and acquiring the technology and talent they need to continue to expand and innovate.

In recruiting, companies have started establishing a profile of those who are technically fluent and will best succeed in and respond to the company’s value proposition as opposed to just looking for the 'hot skill'. They have also started considering the use of consultants/contingent workers for skills or capabilities that are expected to migrate into the broader population.

Q. What are some changes expected in the way rewards are handled in the IT/ITeS sector in the coming few years?

A. Some of this depends on the size and maturity of the company. For example, startups or pre-IPO companies typically focus on equity rather than cash as a variable incentive. As the companies grow and are financially able, they are more likely to introduce a cash-based incentive plan or adjust the performance measures from a focus on product development milestones to also include financial goals.

Q. With the increase in size of organizations, the complexities associated with offering flexibility goes up. On the other hand, smaller organizations may face challenges in enjoying the advantages of economies of scale and therefore, have a limited capacity in ability to offer varying benefits. How does size affect the way organizations manage Total Rewards’ customization?

A. I don't think flexibility alone is the goal, or necessarily having a lot of options. Sometimes, fewer choices in benefits are better if the quality is good for the cost and targeted to your employee group.

In terms of total direct compensation, it is very rare for US headquartered companies to offer employees choices in the mix of their salary, variable incentive and equity. In other words, employees can't 'trade' salary for more variable incentive opportunity or vice versa. Most tech companies that provide equity to employees provide it in the form of restricted stock; with very rare exceptions, they do not allow employees to choose between restricted stock and stock options.

The more flexible and complex your rewards program, the more you need support to create and run it. I have a very fundamental disagreement with the assumption that a rewards program has to be all things to all people. The trend that I would say is becoming more prominent in the market is companies moving away from the 'me-tooism' of 'the market' and taking an honest look at what they are. What do we do? What do we value? What are our cultural touch points? Essentially, it’s understanding what about your culture and company attracts people, who is most attracted to your company, and then building programs around that kind of person, instead of assuming arbitrarily 'Millennia's want X'. Where I do see differentiation is in communication. However, that’s different than having program differences – instead, it’s more the marketing point of view of “How do we want to market/communicate our programs to each ‘slice’ of our organization based on what we’ve determined they value or how best it’s communicated?”

Q. With the focus on non-financial performance of companies increasing, how has that impacted the way rewards programs are designed?

A. Financial performance will always be important whether it's a publicly traded company with shareholder expectations or a private company whose investors are watching their funding and anticipating when the company will make a profit. In order to drive financial performance, many companies are changing the way they work to drive innovation and product development, for example, but the ultimate goal is still ultimately good financial performance.

Q. With the volatility in economies being caused by various factors, how do global organizations maintain the balance between rewarding responsibly and perceived fairness by employees?

A. That is a key issue and most important part of a company's pay philosophy and strategy. It means balancing external and internal factors: Paying responsibly is guided by market norms – what is the competitive practice in the local market among your peers in terms of the going pay rate for different roles, skills, experience? What can the company afford in fixed compensation vs. variable/performance-based compensation?

And, it’s not just about employees wanting to be paid more, but employees expecting to see that their pay is commensurate with their contributions. It's fine-tuning the broad 'going rate' for individual contribution and performance. Companies can measure whether employees in their organization perceive whether they are fairly paid by analyzing their internal employee engagement data to see whether top performers are more satisfied with their pay than low performers and if not, working to correct that. That's what pay for performance is all about and why so many companies have ditched the annual performance review (and ratings) — which may sound counter-intuitive but have replaced that with ongoing performance and development conversations.

Across Asia, but especially in fast growing markets such as India and China where businesses are looking to for both their top line and bottom line growth, companies are running into the ever present challenge of talent attracting and retention. While traditional approach to reward, especially in 'hot jobs' has seen to maximize pay to levels that rival some developed markets, global cost pressures has created limits to companies’ largesse. Our discussions with clients in the region show that a more holistic approach in creating a differentiated employee value proposition, that combines equitable compensation, career progression, and above all, a unique place to work allow firms to create a more nuanced approach to employee attraction and retention. This requires HR's role in creating a unique EVP; involvement of line managers/ business; and the still crucial importance of rewards.

Q. Are the changing demographics of employee populations making flexibility a necessity rather than a choice? What has been your experience in the way organizations are responding to these changes?

A. I think it's more the age we are living in, with all the technological advances, that makes flexibility do-able and is appealing to employees of all demographics, not just young, mid-career, or older workers. For example, the ability to work remotely is appealing to everyone, as is a sabbatical. In the US, employee benefits packages have long since had flexibility built into them, giving employees the choice of varying degrees of medical coverage, and optional amounts of risk coverage within a budget provided by the company.

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