HR Strategic Tools-Compensations linked to Performance-the Test Factor 'Psychometric Assinments'-WORKPLACE Strategy 'Paternal Needs' 'Paternal Instincts' 'Paternal Bliss'-Retention Tool or a Strategy rolled out when there is a crisis -What could drive a person to consider a lower position? Here are some common instances -
Rewarded for performance
Compensations linked to performance are here to stay
After a disappointing World Cup 2007 showing, when an irate BCCI president, Shared Power announced that henceforth the pay cheques of Indian cricketers would be linked to their performance, he was just following a global trend that corporate in india has already adopted with gusto.
A few years ago, pay for performance was a ‘nice thing to do’ when management drew up its annual strategy, says AVK Mohan, global president, human resource, Spice Corp. But now, Mohan says,“it’s moved from being a nice thing to do to the right thing to do”.
“HR consulting firm, Hewitt Associates latest Asia Pacific Salary Increase Survey echoes this, when it points that pay for performance is a concept that has come to stay in India. In Hewitt’s study 91.8% of responding organizations used this practice to attract and retain talent. Contrast this to 2006, when only 78% used this plan. According to the report, an ‘Outstanding’ performer gets two times the increase than that have an ‘Average’ performer, reflecting the growing performance consciousness in the Asia Pacific region”.
Talk to HR heads and they insist that pay for performance plans are no longer a management-led initiative alone. Instead new hires – especially at the CEO level – that know their value are demanding it and getting it. “Nobody wants a nine-to-five job now, if people are creating wealth for a company, they want a share in it too, and demand it,” says Mohan, who sees it as a very positive trend. As he says, the culture of high performance has come into organizational excellence.
From a company standpoint, variable pay plan help enhance productivity, and improve competitive positioning. Inevitably, highest ratios of variable pays are to be found in high performing sectors like telecom, IT, banking and asset management.
The way companies approach it is to link senior pay packets with company performance as well as individual performance. However, at the junior level, it is linked to individual goals. Also, variable components are higher at the senior level so the CEO stands to gain more. An IT professional says that at the CEO level, the variable component would be as high as 75%. Others say they know of CEOs who get wholly performance-linked packets. Mohan is more conservative – he feels that at junior levels the fixed to variable components ratio would be 80:20 while at senior levels it would be in the range of 60:40.
The other reason why HR professionals are upbeat about pay for performance in the Indian scenario is that comparatively speaking, our stock markets are booming, and pay incentives are increasingly equity-linked. The way the executive salaries are packaged is that if the CEO or top management has played a role in raising the market capitalization of a company, then they get to take a share of it.
The irony, however, is that globally – especially in the US, it is a trend that is now coming in for serious questioning and flak with companies and leading management journals now debating the merits of pay for performance. HR heads admit that variable pay plans work well when the economic climate is strong, but when recession strikes and company performances dip, would CEOs and top management be willing to accept the flip side of variable pay – salary cuts?
An IT professional with a leading Indian firm says that although it is a difficult decision, there are cases in India when employees have agreed to take a pay cut during a bad period. It all hinges on effective communication from the management.
Although the mood among HR professionals and even employees is upbeat regarding pay for performance, there could be tiny storm clouds ahead. Warning signs are sounded even in the Hewitt study itself, which cites that the topmost reason for employees leaving is inequity of pay.
Indeed, as many global companies including the likes of Hewlett Packard, have found out that implementing variable pay structures can be a complicated process. And there are many pitfalls – companies need to avoid going to extremes, make sure there are adequate rewards for long-term per-formance and try and minimize the effects of inequities through an effective communication strategy. For their part, high performing individuals need to make sure they do not overreach themselves and lose track of the correct value they could bring to the organization.
1. Companies need to set realistic targets – employees are gung-ho about performance-linked pays only when the targets are achievable but if the bars are raised to high, then there will be complaints, for sure. An effective way tried out by some IT companies in India is to set threshold limits – e.g. if the goal is to take the company from x turnover to z turnover, then set y as the threshold limit. For each bar above the threshold limit, there are different standards of compensation.
2. For CEOs and senior management, Mohan suggests introducing balanced scorecard processes to assess the level of institutional building that these professionals manage to achieve beyond their functional domain. This will ensure that the company stays on track with long-term targets and rewards are not just for short-term growth. Deferred Bonus schemes are other ways to reward long-term performance or make sure that the company does not end up paying it out for mistaken gains. (For example, a sales team from a PC marketing company might have bagged huge volume orders from a government department but if payments for the order are coming in 24 months later and after repeated chasing, and due to the huge volumes the team has given a hefty discounted price, then the team clearly does not deserve its performance bonus).
3. The success of variable pay plans hinges wholly on effective communication. Hewitt’s study also highlights that the prime challenge faced by organizations in Asia in implementing variable pay plans is poor communication of their objectives and measures to employees.
4. Create room for the not-so-high performers in the organization as well. A variable pay structure across board may not work sometimes. According to Mohan, typically, only 30% of the working populations are high performers. But there is need for the ‘steady doers,’ especially at the operational middle level, and suitable recognition of these rocks need to be built in the company structure as well.
The test factor
Psychometric assessments have emerged as a valuable HR tool not just in selection but team building and training as well
Finding the right person for the right job is proving to be a big nightmare for companies. Given the talent crunch, there are all too many cases of wrong hires, which results in productivity losses, additional costs and delayed timelines.
Today, talent-acquisition teams face unaccountable challenges. Traditional workforce planning techniques are getting replacing by new talent strategies and skill-gap analysis with the use of tech—nology solutions. The objective is to attract the best talent and retain them for longer periods. Given the high rates of attrition, standardhiring practices like placing an advertisement, screening candid—ates, running reference checks and personal interviews are no longer enough. These have limitations at it is difficult to gauge a candidate’s ‘attitude’ – an important component while working in a team setting.
Not surprisingly, more and more companies are taking recourse to tools like psychometric assess-ments that include ability, aptitude and personality/behavior tests during hiring. Psychometric assess-ments are powerful tools not just for evaluation purposes like selection of candidates, but are also use-ful in training needs analysis, employee development and coaching, team building and succession planning. You could test the prospective and existing employees for their strengths and weaknesses and accordingly design suitable training programmes to carve their career growth.
Some of the popular psychometric instruments that organizations use routinely include BIG5 or Five Factor Model, 16PF, MBTI, OPQ32, Thomas Profiling, FIRO-B, DISC and Thinking Pattern Profile. Every instrument has specific traits that correlate together to evaluate the various dimensions of an individual’s personality. However, the results of the top instruments tend to match.
On an average, it tends to cost between Rs.15,00 and Rs.2,500 per assessment. Some companies think it is too costly, and time-consuming to administer these tests. But if one considers the ROI on a longer period – in terms of saving in hiring costs, then the cost benefits are huge. In a survey last year, Right Management, a career transition and organization development firm, reported that the cost of a bad hire ranged from one to five times the annual salary of an individual. 26% of respondents reported that replacing a bad hire cost their organizations three times to annual salary and another 42% said bad hires cost two times the annual salary.
Some dos and don’ts while using these assessment tools:
1. Psychometric assessments act as a supplement tool to collect facts and carry out deeper analyses of the individual like analytical ability, leadership or managerial skills. Ideally, the test should be administered after viewing a resume, and conducting a round of interview.
2. Many organizations conduct one or the other test. However, it is best to administer ability, personality and behavior tests together to get the best results. Psychometric assessments will do wonders only when you employ them as a benchmarking tool to hire appropriate talent. It will measure actual competency, i.e. strengths and weaknesses of individuals and groups.
3. Psychometric assessments should not be considered as a base-tool for rejection purposes. Instead, they should be used to understand the potential talent that is coming on-board and the development costs involved. Secondly, it is a useful tool to benchmark the top and middle-level performers for defining appropriate hiring standards.
4. Psychometric assessments tend to be vulnerable to miss-interpretation. It is important that people with the right training evaluate the results of these tests. Organizations need to be aware of the reliability, accuracy, validity-studies (concurrent & criterion). A regular participation in such assessments can empower individuals to identify their core strengths and areas of development.
Pa’s the word!
Gone are the days when some dads would get back to their workplaces to escape endless diaper changes. The Gen X dads thinks otherwise. And several employers, in an endeavor to accommodate their male employees’ needs, believe in introducing a ‘paternity leave’ policy,
Did you know that a female Emperor penguin after laying her egg leaves it with the male penguin and lets him hatch the egg, before the voyages to the sea for food? The male incubates the egg, for 64 consecutive days, while also starving, at the same time. Dustin Hoffman’s signature line from the film, Kramer vs. Kramer, “What law is it that says a woman is a better parent, simply by virtue of her sex”? Set a benchmark, which led to the emergence of the new nurturing father. Today’s working dads refuse to do overtime at work, and detest the idea of spending only Sundays with their kids because they know of the benefits derived through early bonding between a father and his newborn. With the evolution of the Gen X dad, several Indian organizations, too, are taking the initiative to introduce policies to accommodate ‘new dad’ needs by giving paternity leave to their male employees.
“I believe that today we operate in an environment where it is imperative to keep pace with the ever-changing social demands. Hence, it’s crucial for companies to adopt progressive people policies like ‘paternity leave,’ and consider the many societal factors that necessitate the need of implementing such a practice,” says Sudheesh Venkatesh, Head – HR, Tesco Hindustan Service Centre (HSC). This year, at Tesco HSC, 60 employees have already availed the benefit of this policy, which entitles a male employee a leave of five days. This benefit is restricted to a maximum of two children only. And in cases where employees have opted for adoption, this policy can still be availed. “Introducing such a policy has several positive implications. It helps in building emotional loyalty with the staff and christens the company as an ‘employer of choice,’” adds Venkatesh. Mini Khanna Chaudhuri, Head-HR, India Business, Microland adds, “Today, we are observing trends where nuclear families and working couples are on the rise and are centered in cities, away from senior members of the family. More and more young couples are having children in their place of stay, without their family members around, for support, thus making it imperative for fathers too, to contribute towards the baby’s well-being,” says Chaudhuri. At Microland, a paternity leave of five days is given to the male employee than can be used anytime, within three months of the child’s birth. Microland pays for all benefits during the leave period of the male employee.
Ranvir Sikand (name changed) didn’t want to miss out on the opportunity of spending every single moment with his child, when his bundle of joy was born. For him, spending a few hours with his new-born before and after work just wasn’t good enough. Luckily for Sikand, his employer, Synygy India Pvt. Ltd. was supportive and let him work from home for two days in a week so as to enable him to take care of his newborn baby. When Vikram Jha’s (name changed) spouse gave birth to premature twins, he was allowed to take a month’s leave to take care of his personal responsibilities, by Synygy.
“Many companies in the West and even in India have provisions for paternity leave. However, what is more important is that, irrespective of classification of leave, a father should be given leave of absence, as necessary, on such a great occasion in his life. On the part of the company, this has to be within the overall annual leave entitlements’ policy. The objective, for an organization is not so much to keep giving leaves under various occasions, but to spare the employee at the right time and occasion, depending on the joy or solemnity of the occasion,” says S K Dutt, Head – Group HR, ABG Group of Companies. At Infosys BPO, around 111 employees, last year, have availed this benefit. Paid leaves are only for five days, at Infosys BPO, and for the remaining days, the employee will be availing earned leaves in case he is unable to join work.
At Synygy, in case of emergency, the father of a newborn can increase his leave or make use of the flexibility options, by either working half days or working from home. The employee is also eligible for an Rs.25,000 allowance, which is paid after child’s birth to reimburse any medical or miscellane-ous expenses that may arise. In cases where the employee is not able to rejoin work within the estima-ted time frame, he is allowed to work from home or with his mentor’s pre-approval allowed to change his work timings.
IBM provides paternity leaves to all its male employees, irrespective of their designation/position in the hierarchy ladder/time spent in the organization etc. The ‘IBM Paternity Leave Policy’ entitles male employees to avail their leaves within 120 days of the birth/adoption of their child. Employees can avail paternity leave up to a maximum of five days and it should be taken as a single block and cannot be broken down into parts. Committed to creating a flexible work environment, IBM provides employees with a variety of flexibility options and these options are available to male employees too, who after serving their paternity leave period are looking for greater flexibility. The ones who want to spend more time with his child/wife or need to address certain health issues pertaining to them or if he has triplets to take care of, the gratitude of the right employer can do wonders! Here are a few steps adopted by IBM:
(1) Individualized work schedule: Employees in consultation with their respective managers can work out a special working hour schedule,
(2) Telecommuting: The employee utilizing this option is on the move, uses shared IBM workspace such as visitor centers, and does not have a dedicated desk,
(3) Work-at-home: Employees can perform their regular work schedule at home,
(4) Leave of absence: This is to provide the employee with the option of being absent from work, without salary, for a period of time in order to manage a personal situation.
So when will men start getting three months’ paternity leave? It will certainly even things up, right? But organizations believe in taking one step at a time and male employees too, aren’t complaining.
Is a loyalty bonus a legitimate, everyday retention tool or a strategy rolled out when there is a crisis?
Ranbaxy Laboratories, the Delhi-based pharmaceutical major that has recently been bought by Daiichi Sankyo of Japan, has announced a loyalty bonus for its key employees. The details have not been unveiled as yet, but it seems likely that these executives will get their annual salary plus a 30-40% premium if they stay with the organization for four years.
In recent times, Ranbaxy has seen the departure of Peter Burema, president of the global pharma business, and Nick Haggard, head of the European operation. And, of course, promoter Malvinder Singh has sold his entire stake (though he continues as CEO). “There is obviously a great deal of uncertainty amongst the employees,” says Mumbai-based HR consultant Shashi Rao.
HR experts are divided on whether a loyalty bonus is a legitimate, every day retention tool or a strategy rolled out when there is a crisis. Such bonuses were part and parcel of the information tech—nology (IT) industry, until the current downturn started. That should indicate it is commonplace and nothing to write home about. “Not at all,” counters Rao. “The IT industry is in a constant state of cris-is. It is perpetually short of qualified manpower”.
What is new in IT is not the existence of the loyalty bonus itself; the period after which it applies is in a state of flux. Earlier, it had become as little as one year. Now, as teaches have nowhere to go, it is as long as three-four years. These bonuses are always back loaded (which means that you get them at the end of the period).
Loyalty bonuses have something in common with stock options. But the latter have fallen out of favour because companies are now required to show it as a cost, which impacts their bottom-lines. Secondly, with the markets so volatile, they are no longer a sure-shot thing. Options have this habit of going underwater (meaning that they are worth less in the market than what the company requires you to pay for it; so it makes no sense to exercise the option).
Rao says that the golden handcuff, which is another word for the loyalty bonus, is what the name suggests – a form of imprisonment. Besides, it is not necessarily effective. It gives rise to sign-on bonuses, which is what a company pays a new recruit to compensate him for his loss of loyalty bonus. It ends up as a vicious cycle, with the star performers forgoing loyalty bonuses and taking only their sign-on bonuses. “So you can jump ship when you please without suffering any monetary loss,” says Rao.
The loyalty bonus may work when it is a perk held out at the time of joining. In that sense, it is an inducement to join and not one to stay. Besides, it takes care of the biggest problem of loyalty bonus-es – the resentment they create in their wake. If a loyalty bonus is applicable to everybody, it becomes like the statutory 8.33% bonus in India. Nobody treats it like an incentive. Loyalty bonuses have to be performance oriented. But if it is applicable only to stars, others in the company get understandably de-motivated. This is what insider say is happening at Ranbaxy.
“All these are gimmicks,” concludes Rao. “The only thing that really works in retaining people is the proper work culture and environment. People will even accept a lower salary if they are happy where they are. The objective of every companyshould be to build a home away from home, not a prison without bars”.
A step back, two forward
What could drive a person to consider a lower position? Here are some common instances.
Does it ever make sense to take a step down the career ladder? If you can get past that nagging, in—born fear that “going lower” can only be a sign of downward career mobility, the answer is yes. Tak-ing a lesser position can help move your career forward if the job fits into a larger long-term plan.
Economic conditions, your financial situation and lack of other alternatives may necessitate taking the best available option – even if it’s a step down. There’s no shame in this, but be honest about how you got into this situation in the first place. I see too many people making this kind of career decision out of what was an avoidable necessity. They were forced to take a lower-level job, because they didn’t take charge of their careers. Do what you have to do, but learn from it.
This is a completely valid reason to take a lower position, but remember, changing professions does not automatically mean you start at the bottom. Look for transferable skills or specialized knowledge that could allow you to side into something above an entry-level role. Also, changing industries is not the same as changing professions. When you change industries but not functions, target a lateral posit-ion, not a lower one. For example, a finance manager in a software company can occupy the same role in a biotech company.
A lower position in a different department can provide new experiences and enrich your career. But as with any career decision, think about the fit, your ability to be successful and how such a move figure into your larger career plan.
Imagine climbing a mountain and reaching a point where the route is blocked or requires climbing skill beyond your ability to pass it. You can give up or make a tactical decision to go back down a bit to look for another route up. Taking the right lower position can be a smart tactical move if you believe you can be successful in the lower role and know there’s a defined path on which you can continue your ascent.
Once you’ve determined why taking a step down makes sense, prepare to sell yourself hard. You’ll be up against more junior candidates, so you’ll need to overcome the hiring manager’s perception that you are overqualified and will get bored and leave.
To convince him otherwise, express a positive, compelling reason you want the job. For example: “I want to build a career in customer service. This job would allow me to apply what I know already and also develop best-practice skills starting from the operating level, which would help serve your customers better”.
Avoid sending a negative message. In all of your communications, demonstrate you:
1. Possess the energy and enthusiasm to do the job and the flexibility, ability and willingness to learn quickly.
2. Will bring more value to the role based on your work experience than an untested junior candidate.
3. Will be content to do the job you are hired for and won’t be making waves three months after you start about moving up.
4. Understand promotions will be based on merit.
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