Emerging trends in performance management and compensation

1. Emerging trends in performance management and compensation • June 2019

5. PERFORMANCEMANAGEMENT THE MEDIA IS STILL PREACHING ABOUT PERFORMANCEMANAGEMENT

6. Global insights on Performance Management: What’s all the noiseabout?

7. Mischievous media headlines? In our view, the media headlines have been somewhat misleading, but we do accept that the traditional way that PM has been done is changing. The key trends are: Trend 1: From paper chase to a conversation Trend 2: Quantitative and Qualitative, Financial and Non-Financial metrics Trend 3: Use your judgement, you are getting paid to Trend 4: Individuals and teams Trend 5: Outputs, not activities Trend 6: Not only IQ, but EQ and SQ Trend 7: Consciously develop a performance culture Trend 8: The nub of it is – who: a. Adds value? b. Would you fight for not to lose? c. Would you hand pick to be in your team?

8. A fundamental shift… It’s a way of life

9. CEB Research 2016 • Based on 10 000 respondents in 18 countries (CEB, 2016), the business case for throwing out ratings fails to hold for most • These entities are not doing away with performance management. International research by CEB (2016) suggests that around 15% of organisations are considering doing away with ratings and for those that have, the initial euphoria and boost in morale soon dissipates when reality sets in. Furthermore, they report that less than 5% of managers are able to manage their talent effectively without ratings

10. Individual reward for high performing organisations

11. Reward categories influencing attraction, motivation and retention of employees Nienaber & Bussin

12. Pay for Performance

13. Pay for Performance Cont…

14. Individual reward for high performing organisations

15. Individual reward for high performing organisations • Advantages • Defensible differentiation • Strategy alignment • Disadvantages / Risks • 100% objectivity? • Time and energy investment • Performance horizons of different roles

16. Team-based remuneration challenges 1 2 • Figuring out how to reward individual performance without: • Encouraging internal competition • Local optimisation • One person feeling rewarded while another feels punished. • Some employees are happy to come to work, do a good job, and go home. Others want to go the extra mile and really make a difference. • Rewarding a team for their collective performance negates the difference in discretionary effort of individuals. Compensation should be used to motivate people, but can be divisive and have a negative impact on performance 3 4 • Social loafing: team members get by thanks to the effort of their colleagues • Huge cost to an organisation • Resentment between colleagues • Individual initiative can be undermined and discouraged • Less motivation to work hard when your team mates do not, but everyone is rewarded equally. • Fostering of unhealthy internal competition between teams. • Instead of fostering cooperation, the consequences include lack of information sharing and collegiality. • Where there is low trust and transparency in an organisation, team reward can be destructive.

17. How? • Performance management process WorldatWork model, 2007

18. How? Reference: Halogen software, 2016

19. Role of PM… • No matter what else changes there are a few factors that in our view will never change. Organisational leaders will always want: • To improve organisational performance • To align individual and organisational objectives • To align individual behaviour with values of the organisation • To provide the basis of personal development • To develop a performance culture • To improve individual performance • To confirm contribution/performance pay decision • To motivate people

20. Role of PM… • No matter what else changes there are a few factors that in our view will never change. Organisational leaders will always want: • To improve organisational performance • To align individual and organisational objectives • To align individual behaviour with values of the organisation • To provide the basis of personal development • To develop a performance culture • To improve individual performance • To confirm contribution/performance pay decision • To motivate people

21. Some basic changes • Live it! • Look forward AND back • Link it to the business mechanics and measures • Simplify • Be courageous! • Build strategic links with the overall talent strategy • Make it a management initiative, not only an HR project • FROM Command and control … TO Coach and mentor • Make it personal • Do the goals make business sense? • Don’t underestimate the value of learning and development

22. Remuneration & rewardDefinitions and Terminology + LONG-TERM INCENTIVE VARIABLE PAY + SHORT-TERM INCENTIVE Total earnings Total cost to company + car benefit Total remuneration Total cost of employment + cost of employee benefits + other benefits Guaranteed package Total guaranteed package FIXED PAY Base Basic salary BASE / BASIC SALARY

23. REF: W@W 2008 TOTAL REWARD APPROACH TOTAL REWARDS STRATEGY Remuneration Benefits Work-Life Performance & Recognition Development & Career Opportunities OrganisationalCulture Employee Satisfaction & Engagement Business Performance& Results Attract Motivate Retain BusinessStrategy HumanResourceStrategy

24. The 21st Century EVP Organisation Strategy HR Strategy Employee Value Proposition (EVP) Employee Value Proposition (EVP) This is what makes our organisation the preferred employer 5 Important Pillars (adapted specifically for you) Remuneration Performance Feedback Career & Development Work Environment Inspirational Leadership • Tickets to the game • Has to be right • Flexible • Internal & External equity • How am I doing • Development • Control over performance • Link to pay • I know where I am going • Growth of portable skills • Vertical & Horizontal • Stimulating • Tele commuting • Work life balance • HR policies • Leading and Managing • Training • Development • Dual career paths Attract Motivate Retain Enjoy Enthuse Inspire Engagement Index (EI) – how do we compare to the National Index?

25. Perception of the Value of Work • Challenge/Interest • Achievement • Freedom and Autonomy • Workload • Quality of Work Relationship Quality of work • Competitive Pay • Good Benefits • Incentives for Higher Performance • Ownership Potential • Recognition Awards • Fairness of Reward • Supportive Environment • Recognition of Life Cycle Needs/ Flexibility • Security of Income • Social Environment Tangible Rewards Work/Life Balance • Quality of Leadership • Organisational Values and Behaviours • Reputation of Organisation • Risk Sharing • Recognition • Communication • Learning and Development Beyond Current Job • Career Advancement Opportunities • Performance Improvement and Feedback Future Growth/ Opportunity Inspiration/ Values Enabling Environment • Physical Environment • Tools and Equipment • Job Training (Current Position) • Information and Processes • Safety/Personal Security

26. Understand the new work compact

28. The trend seems to be clear