Complex can of worms – The Investment Association urge fund managers to divulge pay practices

Photograph-by-Ian-DavidsonIntroduction
The Investment Management Association has urged its members to disclose their pay policies and how this encourages alignment between investment teams and clients. At one level this is a worthy aspiration, particularly given the recent attacks on the industry by the Institute of Directors. On the other it is a smoke and mirror exercise to hide poor practice and misaligned reward. Anyone with any knowledge of the workings of financial services reward knows that broad principals often hide dirty details at the operational level.

Complexity, culture and competition
The publishing of generic pay policies cannot reflect the necessarily complexity of remuneration structures and practice in the investment management industry. Investment and asset management is, like the majority of financial markets, heavily segmented, heavily differentiated and deeply complex, There are considerable differences between the activities of an Equity Index fund, an active bond fund, a property fund and an active emerging markets equity fund. Their risk and reward profiles are totally different as is often the time frame in which they operate, There are multiple flavours of “funds of funds” as well as cross holdings of house and non-house funds with the occasional derivative overlay. Each and every segment will have a different reward strategy, outputs and labour markets. The industry has long ago moved away from “long only” strategies to complex and hybrid mixtures of long, short, derivative and real asset funds; all with very different revenue and risk profiles,

The characteristics of retail and institutional funds can be different as are their objectives. The maturity and fund flows also add layers of complexity to structuring remuneration. Some investment funds are nearer hedge funds than the traditional investment approaches with hedge fund like carry arrangements and performance fees. No one set of remuneration principals can cover the vast array of arrangements – often set on a fund by fund basis and changed every year,

Culture
As we have learned from the history of the many investigations in to financial services malpractice; culture can play a larger role in determining behaviours, reward and performance than any set of policies. A typical example is the on-going issues with LIBOR fixing. The “nod and wink” or the tacit acceptance by senior management that certain behaviours will not be noticed if a profit is turned is as frequent in investment management as it is anywhere in financial services. The same pressures on sales and fund performance exist in this industry as it does in, say investment and corporate banking. The amounts at stake are of eye watering size. In 2013 assets under management just in the UK were £6.2 trillion and that is before the recent uptick in world stock markets. The FT estimates that an average compensation cost per employee at global asset managers is US$263,000 and is set to overtake investment banking pay by 2016.
Regulation in the sector is growing and increasingly odious. However, as history of the recent past shows, the regulators are invariably behind the curve and just do not have the intellect or resources to catch up with changing remuneration and risk profiles in fast moving, innovative financial services industries.

Competition
The competition for star players in the investment and asset management industries are just as intense as in investment banking. Individuals and teams move houses with remarkable rapidity; given the alleged longer term horizons. The facts are that performance is measure over months, quarters and annually the same as it always has been. Despite regulation, lucrative transfer terms are still a very active activity in this market place. Again, there are few star performances and everyone knows who there are. The fight to retain and recruit talent from a limited pool is one of the major drivers of remuneration in this sector. A 2013 survey by Heidrick & Struggles in late 2013 noted that:
• 41% of respondents are actively recruiting
• 57% of distribution professionals are open to considering new opportunities
• 50% of survey respondents had changed jobs in the last three years
Dated as this survey is, the trend can only be upwards given the ever increasing amount of assets under management in the global marketplace as investors scramble for return in the long-term low interest rate return environment.

The amount paid to these star players cannot be overestimated, although small in number their remuneration can add up to a considerable percentage of the employee costs of an organisation. Thus the use of averages is, like most remuneration measurement in financial services, deeply misleading. The differentiation, the complex nature of packages, the uncertain future value of compensation awarded today means that even establishing a base line is fraught with methodological difficulty.

Remuneration policies
If you wanted to be mischievous; it would be fun to play buzzword bingo with investment and asset management remuneration policies. They all want to attract, retain and reward. They all want to create shareholder value within the risk appetite of the organisation. The vast majority will pay lip service to employee behaviors and risk management as counter-balances to pure performance measurement. Frankly, I could write a remuneration policy for any of these organisations in a relatively short period of time.
These policies hide a complex reality of highly diverse practices with a dazzling array of performance metrics (often differing between individual peers in the same team) that would take an actuary to calculate the outcomes; and that is before the inevitable horse trading around what the metrics actually mean and how they should be applied.

The remuneration policy will no doubt talk of alignment of interest with clients; but what does that really mean in practice? As one large institutional investor said to me only last week; she did not really care how the return was made provided she they hit their target benchmark. Other investors will have strict ethical guidelines or even religious considerations as constraints on the activities of the managers. Thus what aligns with one client requirements will be an anathema to another. Yet it may well be the same investment manager running both funds – what then is “alignment”?

Concluding can of worms
The request made to investment managers to be more open on their remuneration is a good try but no cigar. Being pragmatic, it may be seen as a sophisticated effort to ward off yet further regulation and statutory disclosure. The reality is that, like so much remuneration in financial services any potential “truth” is deeply hidden and can only be understood by seasoned professionals and remuneration analysts and even then on the basis of numerous, conflicting assumptions.
I know from experience that the world of asset and investment management remuneration is complex as a necessity. It reflects the fragmented, segmented complex world in which these organisations flourish and make a great deal of money.
Trying to reduce the environment to the level of disclosure of remuneration policy is perhaps something of a pointless, resource wasting and ultimately a counterproductive exercise.

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Pay reviews; the Compa ratio magic. Strong Analytics V

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Introduction

We are, in most organisations, in pay and bonus round season. I have been involved in running pay and bonus rounds for over fifteen years.  One of the most helpful ratios and presentation tools is the compa ratio.  It is an incredibly powerful analytical tool.  At its most simple the compa ratio is the role is the position salary divided by the market salary.  This gives a ratio.  The magic is the amount of information contained in that number.  A compa ratio of 1 indicates that the position is paid at the market rate.  A ratio of less than one show the position is paid at less than the market rate and by what percentage and a ratio of more than one shows the position is over paid against the market and by what percentage.

By building graphs and visualisations of the compa ratios you have a powerful tool to assist management in making decisions on where to spend the limited salary increase resource.  Compa ratios can also be derived from total cash or even total compensation figures; although please see the methodological warning below.

What is it?

Most of us have salary data information from salary surveys.  We use this data to see how various positions sit in our labour market.   If I work in an insurance company I may have the excellent Mercer survey on insurance pay; if I work in banking I may very well use the methodologically sound McLagan survey.  Provided the jobs or roles have been correctly matched we will have a mass of market data on most of the roles in our organisation.  We will also have the average salaries for the same roles in our own organisation.

Here are some examples of comp ratio calculation:

Position salary Market salary Comp ratio
100,000 100,000 1 (Salary at the market position)
100,000  90,000 1.1 (Salary 10% above the market)
100,000 110,000 0.9 (Salary 10% below the market)

By using the simple compa ratio we will be able to see how our roles fit to the market.  Here is an example from a data set:

Role Average of Current Base Salary Average of Salary Compa
Actuary

$370,000

1.03

Management   Team

$370,000

1.03

Analytics analyst

$36,000

1.03

Analytics

$36,000

1.03

Analytics Manager

$100,000

1.01

Analytics

$100,000

1.01

Asst Trader

$47,648

0.94

Commodities

$41,603

0.95

EM

$29,347

0.96

OTC

$57,696

0.93

Special   Sits

$44,335

1.02

Treasury

$31,333

0.63

Here we have roles categorised by department with the compa ratio.  We can immediate see that there is an issue with the Assistant Trader role in Treasury.  At 0.63 we are clearly paying well below the market.  At best this warrants further investigation; at worse we have an immediate problem that should be prioritised in the pay increase distribution.   The concept becomes more powerful when we convert the data in to a graph

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In this example I have produced a graph showing both compa ratio and the attrition rate.  There is a strong negative correlation between compa ratio and attrition rate.

Getting clever

Using compa ratios it is possible to compare departments against one another as well as roles within a department.

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This shows the compa ratio by department; again illustrating where our pay round fire power should be concentrated.

The analysis can be extended to looking at sex discrimination, for example.  In this graph we look at the differences between males and females by compa ratio.

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This chart again gives an indication of areas that will require to be considered when carrying out the pay review.

Making connections

Another very useful application of compa ratios is to compare department compa ratios against a range of business analytics.  So, in the table below I have compared compa ratio with return on risk capital.  The concept is to focus our pay increases on to those areas that give the best return for the business.

Department Average of Salary Compa Average of RORC
Political Risk

0.93

32.00%

M&A Advise

1.00

28.00%

Treasury

0.89

18.00%

EM Debt

0.99

14.00%

Special Sits

1.00

14.00%

Derivatives

0.97

12.20%

Swaps

0.95

8.20%

OTC

0.95

7.40%

FX

0.95

7.23%

EM

0.96

5.50%

Vanilla

0.94

3.50%

Grand Total

0.95

11.60%

This approach shows a low correlation between market position and return on capital of 32%.  Depending on our reward strategy we may wish to focus our pay budget on, for example, Political Risk which has the top return on capital but has a compa ratio below one, showing we are paying, on average, below the rate for the market.

Thinking bigger

A similar approach can be taken when using a compa ratio for “total cash” – that is salary plus annual cash bonus.

A word of warning

I will talk of some of the methodological issues later in the article; but of particular note is that great care must be taken when looking at total cash market survey results.  Survey organisations use different methodologies so be sure you are comparing like with like in terms of cash bonus definition and the timing of the payment of the bonus.

Combining data

One of the most powerful ways to use total cash compa is to compare base salary compa, total cash compa and, for example performance ranking or even better, a business KPI to ensure alignment of bonus payments with outcomes.

A common reward strategy is to place salary at the median of the market place but to pay bonuses at the upper quartile, or better, for upper quartile performance.

He is an example of a table of salary compa ratio, total cash ratio and return of risk capital.

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This is a very powerful analytic graphic.  It shows that there is a major mismatch between the areas achieving the best return on risk capital and the market position for both salary and total cash.  It further shows that two areas with very similar RoRC have different compa ratios for both salary and total cash.

We can carry on with this type of analysis with almost any business metric and any mixture of KPI’s and compa ratios.  It is a really powerful way to think about pay and bonus analysis.

Methodological warning

A major consideration when thinking about this type of analysis is that salary survey data relates to positions, not individuals.  Further, accurate job matching is essential to ensure a good “fit” to the data.  Salary surveys are best viewed as not absolute numbers but as indicating relativities in the marketplace.  It is more important to look at the relative position of a role than the absolute salary level.  This is because roles are different between organisations as are the people who fill them.

To use the compa ratio approach well requires a good understanding of the statistical methodology underlying the raw numbers, it advantages and its limitations.  We need to understand both the size of the data population and its stability.  Even quite large populations used for data can cause issues if that population changes year on year.  This applies both to the organisations taking part in the survey as well as the roles and the individuals within the roles.    Survey data is averages of samples; good statistical approaches can ensure that the samples closely resemble the total population; but in many cases there are no more or less than a sub-set.

This applies still further when looking at total cash survey data.  The definition of total cash and the age of the data are essential consideration when manipulating the analytical outputs.

Conclusion

When we are analysing data in preparation for the pay round the compa ratio is a very powerful analytical tool.  Used effectively it can give a great deal of data in a simplified format that is amenable to graphs, diagrams and info graphics.

Used in conjunction with business data it can create meaningful business insights that will shape and direct the nature of the pay and bonus round in your organisation.

If you would like to understand more about data analytics and the pay round please contact me at idavidson@rewardresources.net

Pay round visualisations – Strong analytics III

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Introduction

An important part of any pay review is reviewing pay.  That is looking at pay modelling, outputs and outcomes.  My experience says that the 80/20 rule applies.  80% of the pay round outcomes will be straightforward.  What will be of interest is the 20% of the population that comprises of exceptions and outliers.  So a good analysis will be layered to provide details on the total spend by department or area and the identification of outliers and exceptions.

The most effective way to provide this data is to do so using graphical data and info graphics.  Human beings assimilated graphical data far faster, in most cases, than vast spread sheets of data or even summary data in tabular form.  We like to look for patterns and at pictures when going through the sense making process.

The other very important piece of the presentational jigsaw is to show, wherever possible, the link to business metrics and key process indicators. (KPI’s).  It is very useful to show correlations between our reward outcomes and business metrics.  We must use the data to show our “bang for the buck”.  That we are spending shareholder money to best advantage.  This approach should be supported by reference back of the pay outcomes to our reward strategy.  So if our strategy is to pay our top performers at the upper quartile of our pay market we must show that correlation in our presentations.

Getting pay visualisation right saves time, effort and increases the credibility of the reward team.  It aligns the reward analysis with that of the organisation and its management.  Having a cohesive pay narrative, linked to business outcomes with make the “sell” of the pay round easier and faster.  Anticipating the questions of our stakeholders is both simple and powerful.

Exceptions and outliers

If the pay round is well structured management will have a focus on the exceptions and the outliers.  Identify the top and bottom ten per cent of your pay proposals.  Clearly identify those staff who are being rewarded outside the policy or in a different way to their peer group.  DO NOT provide pages of spread sheets or tabular summary data. (Unless specifically asked for by a stakeholder).  For most managers pages of data are difficult and time consuming to read and difficult to interpret.

This graph shows a correlation between revenue ranking and market position.  It is immediately oblivious that there is an outlier.  The reason for that person’s position on the graph can be explained and a recommendation made as to how to correct the anomaly and increase the correlation between revenue ranking and market position.  (The underlying assumption is that this is part of the pay strategy).
Revenue
 

Develop the pay narrative

As reward professionals, working closely with our HR business partner colleagues, we should have developed a coherent pay narrative.  A story of what our pay round is trying to achieve and what it has actually achieved.  The reason for this is that it makes explanation, presentations and data analysis much easier if we have started off with a basic, clearly expressed set of principles and assumptions.  This may include foreign exchange rate decisions, key metrics including the budgets and a clean set of data as a starting point.  Time spent cleaning pay data is never wasted and can save a vast amount of time and trouble later in the process.  Data is never perfect.  I have frequently come across situations where the headcount I was using for the pay review and the information in the Finance department was different.  Agree and reconcile the approaches and numbers before the pay round starts.

There is never enough time or resources to process a pay round perfectly.  By undertaking the data cleansing, agreeing the pay narrative and assumptions and any reconciliations in advance (and appreciating that is not always possible) will save time and lead to a better pay review process.

A picture is worth a thousand words, or ten spread sheets

Producing high quality, clear info graphics and visualisations of reward data is a very efficient use of resources.  Returning to the 80/20 rule it allows management to focus on the 20% of the pay review that is important or of interest to our stakeholders. Graphics such as the one below can be used to answer questions before they are even asked.  Using this approach highlights our exceptions and the extremes of our pay distribution.

The supporting data is of course available behind the graphics.  But, returning to the theme of a good pay narrative, we can illustrate and support both what we are hoping to achieve and what we have actually achieved.  A good graphic is a “smack in the face with the obvious”. A crude but accurate comment on what a good graphic should achieve.

Business metrics and KPI’s

It is no longer enough just to present raw pay data.  We have to put the information in to the business context.  We must illustrate the connections and correlations between our limited pay and bonus budget and business outcomes.  Reward the performers and the revenue generators.  Pay outcomes can be used to give a clear message as to what behaviours and activities will be reward and those which will not.   Many organisations, even those in financial services, are looking carefully at the “how” something is achieved as well as the “what”.  Balanced scorecard approaches are very common; it is still possible to focus on the financial outcomes by giving it a high scorecard weighting; but we can nuance the approach by giving smaller weightings to cultural, behaviour and approach.  A well-constructed balanced score card will be measurable and give another basis for our graphics to show appropriate correlations.
Blog pic 3

In an earlier post (https://iandavidson.me/2013/08/23/pay-round-processes-a-big-data-approach-including-the-add-on-benefits-to-recruitment-training-and-development-and-succession-planning/) I showed how it is possible to run a pay round based almost entirely on those factors that lead to business success.  It is not easy and arguably it removes “discretion” from managers.  But, it is the use of that very discretion that often leads to upset and even legal challenge.  A robust process backed by robust data is the way forward.

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Conclusion

The pay round in the vast majority of organisations is resource and time constrained.  It can be made easier on all stakeholders by presenting a solid reward narrative illustrated and supported by appropriate and timely visualisations.  This allows the focus of the reviewing stakeholders, be they the Remuneration Committee, Executive management or line management, to be on the 20% of the population that requires attention rather than the 80% that does not.

A strong story, answering questions before they are asked and linkage with business metrics will be both appreciated as part of the alignment of HR and business strategy and as an efficient way to manage a pay round.  Providing good graphics saves time and increases focus when resources are, like high pay increases, very rare.

Balance of power – Executive pay and shareholders

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Introduction

There is considerable controversy over levels of executive pay.  There are a multitude of stakeholders or would be stakeholders pugnaciously striving for influence.  Remuneration committees are supposed to control executive remuneration.  However, as the MM&K recent survey shows, FTSE CEO Remuneration increased, on average, by 10% in 2012.  Why are shareholders allowing this to happen?

Balance of power argument

I had a fascinating discussion with the executive pay guru Cliff Weight on the subject of the balance of power argument (although the discussion below is entirely mine) when looking at executive pay. 

The Executive’s power

Most of the time the executives hold the balance of power because:

  • Changes in executive board members, unless well managed, tends to lead to a fall in share price
  • Changes in senior management generally signals a failure of strategy or strategic uncertainties – which lead to a fall in share price
  • A lack of good succession planning by the Board so there is no immediate, obvious internal or external replacement.
  • A shortage of good candidates with the relevant experience and willingness to take high profile roles.  This tends to mean organisations can be without a CEO or Finance Director for six to nine months; which leads to a fall in share price.

No Board or Remuneration Committee wants to be seen to be acting in a way that damages shareholder returns. 

The Stephen Hester debacle

A good example of how NOT to carry out changes in senior management is shown by the apparent decision of the UK Treasury to replace Stephen Hester, the CEO of RBS.  The announcement seemed to take the markets by surprise – leading at one point to a 7% drop in RBS share price.  Further, the lack of any successor or allegedly any succession planning by HM Treasury means there is something of a leadership vacuum in RBS (even with their excellent senior management team) that causes great uncertainty to both investors and employees.  This, just at the point when RBS had turned around and had a clear and compelling vision of its mission and future.

The Shareholder’s power

Shareholders have limited power over executives; they have the upper hand mainly when:

  • There are downside earnings surprises
  • Takeover or mergers are under discussion
  • There is a strategy dislocation – a disruptive technology or social trend; look at Smartphones impact on the traditional phone manufactures
  • The market loses confidence in the management of an organisation

These tend to be seminal points in an organisation’s existence that hopefully do not occur too often.

Important issues for Remuneration Committees and Executive management

Both parties to pay discussions need to think about the balance of power issues and how they influence the reward dynamic.  Strategy needs to be owned and driven by the entire executive team; hopefully mitigating the effect of the departure of any executive.

Good management of shareholder relations and open communication will help reduce any share price “shocks” when changes do take place.  Good financial PR will again mitigate both the shock and share price impact.

The paradox of succession planning

One of the potential failings of Boards when considering the balance of power argument is succession planning.  In an ideal world a replacement for the CEO would have been identified and prepared for the new role well in advance of the change.  Unfortunately there is a paradox here.  A CEO could perceive that work by the Board to identify her successor was a signal of their imminent departure.  As invariably such issues leak, so the market would view it in much the same way.  Dammed if you do and dammed if you don’t.  There is also the issue that the heir apparent may become impatient with the wait and either go elsewhere or worse actively seek to undermine the existing CEO with the Board.

There is no easy or obvious answer to the succession paradox; but clearly it is an issue that must be taken on board in the balance of power debates.

Conclusion

The balance of power approach is a useful framework to view trends in executive pay.  I can see no immediate answer to how or even if, the balance of power should be more equally distributed.  Like any good explanatory framework, the balance of power debate asks more questions than it answers.

 

 

 

Strong analytics

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Introduction

The UK’s CIPD has published its annual reward survey. The CIPD reward survey; http://www.cipd.co.uk/hr-resources/survey-reports/reward-management-2013.aspx  

Our findings show organisations responding to multiple contextual factors in their reward management choices.  Economic conditions continue to drive pay decisions for many. In the private sector, market competition and employee value are also key drivers, while in the public sector
more traditional forms of reward management prevail.”

The drivers of reward continue to be to attract talent and reward productive behavior.  I would argue that retention is less important that it used to be due to the lose labour market. The survey also looks at employee benefits; these can both support the social culture of a business and provide valuable, cost effective non cash engagement tools.

One key aspect that Charles Cotton, the CIPD Reward and Performance advisor, notes is that the reward profession is not particularly advanced in analyzing information in a way that is useful for the business.  Cotton goes on to note that

 

“Few employers are able to calculate the cost of their compensation and benefit programs, let alone be able to express this as a proportion of revenue, profit or economic value added.”

   

 

 

 

 

Strong Analytics

Reward and HR professionals have a number of tools to add value to the business case:

  • Strong analytics
  • Employee segmentation
  • Data visualisation

Our colleagues in Finance use KPI’s and key ratios to illustrate financial outcomes and we must do the same in reward. We must understand:

  • Key business segments and drivers
  • The timeframe – immediate, medium or long term, for the business strategies in those key segments
  • Key performers in those segments and responsible for those drivers

This information can drive our reward strategy.  By presenting appropriate strong analytics through data visualisation on the basis of appropriate segmentation gives a very powerful tool kit for us to work with and make recommendations to line management.

Asking the right questions

Any good analytical work and modelling starts with asking the right questions.  There is no point providing large amounts of statistical data and analysis without have a clear view of the questions we are using the data to answer.  This is a big issue with big data.  We have the data; but what do we use it to prove or disprove? 

Reward interventions must “do” something; be it reduce turnover, encourage managers to align with the interests of shareholders, or produce specific results.  Reward professionals must be able to show the outcomes of their products and programs.   For example, we must be able to show the relationship between our variable pay spend and the revenue generation, the return on capital employer (RoCE) and other key financial indicators.

Disclosure requirements

The “Say on Pay” requirements in the US and the regulations in the UK require the production of charts showing, for example, growth in relative total shareholder return against executive compensation.  We must extent this type of analysis through the organisation to show the stakeholders in the business; be they employees, executives, shareholders and regulators, that our reward program is progressive, does not reward failure and, as far as is possible, is “fair”.

I have argued in other blog posts that we are seeing the erosion of privacy around pay.  Within five years we will be reporting, as a minimum, on employees by bands of pay and more likely very detailed pay statistics on every employee in our organisation in the interests of “fairness” and transparency.

Strong Analytics II

There is little excuse for not providing strong analytics with appropriate data visualisation. Microsoft Excel provides some very good analytical and graphing tools and using the PowerPivot addin allows for the analysis of very large data sets and even the development of simple data cubes.  That is before we get in to many of the off-the-shelf compensation management tools and packages.

Here is an example of strong analytics presented through visualisation I produced from some sample data:

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The use of Microsoft Excel’s conditional formatting provides some intuitive “at a glance” analysis of bonus levels by department.  I thought about the type of questions the CEO might want to ask about the data and provided the answers in graphical and colour formats.

This second example shows a very simple graph of correlation between TSR and total remuneration for a FTSE 100 Executive.  It immediately shows the linkage between pay and performance; although TSR needs to be measured over a much longer time period, or alternatively normalised to remove the effects of the economic cycle, to provide a better analytic.

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Conclusion

As the CIPD survey noted, reward is, as always, becoming more complicated.  At the same time we are seeing far more scrutiny of pay by the largely uninformed politicians, regulators, shareholder advocacy groups and the media.  We must arm ourselves for this intrusion by preparing our toolkit of strong analytics to defend our positions and explain our philosophy.

 

CIPD Hackathon – Hacking HR to Build an Adaptability Advantage; A reward perspective

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Introduction

The UK’s HR professional body, the CIPD has recently set up a “Hackathon” to look at how HR can build an adaptability advantage.  A good idea with an interesting approach.  There appears to be limited consideration of how reward will support and enhance the approaches.  Reward has powerful implements in its tool kit to support change.   So I set my mind to an analytical structure to think about building adaptability advantage.

Wisdom of crowds – a challenge

I am a great believer in the wisdom of crowds.  Therefore I throw a challenge out to all those interested in reward, change, innovation and HR to generate ideas as to how the reward toolkit can be used to support adaptability advantage.

The reward blockers

Reward is largely designed to support existing behaviour.  So, in some organisations, it is used to support the status quo.  Rewarding behaviour that supports the organisation’s ideology and putting reward power in the hands of managers who have an understandable vested interested in supporting the status quo.  The challenge is to design an analytical reward framework that supports creative destruction, moving on from the status quo to a new organisational state and ideology.

A suggested framework – resource based strategy

I have used the resource based strategy framework as a starting place.  I know this may be consider a little old fashioned, but it works for me and if you have a better structure I would be very pleased to hear about it!  Using the resource based strategy approach we look at:

  • Resources
  • Capabilities
  • Competencies
  • Value Chain

that support adaptability and how we can use reward to support these factors.

Resources

What are the resources that support adaptability – how do we identify and cluster them?  Clearly people are the key.  But, what sort of people?  One could argue that it is the mavericks and free thinkers that lead the charge on adaptability.  Yet these types of people do not always fit or engage well with the corporate environment.  How do we reward the disrupters in our organisation without descending in to some Faustian pit of chaos?

Capabilities

How do we build organisational and personal capability to support adaptability?  What would the reward structure supporting such capability building look like?  Would we know it if we saw it, how would me measure it?  Organisational learning and routines would be key in building these capabilities – but it has always been an interesting question in the management of knowledge as to how we measure and reward organisational learning?  (Even ignoring the concept that organisations do not “learn” people do the learning).

To sustain competitive advantage our capabilities in adaptability must be hard to imitate – otherwise everyone will copy us and probability at a lower cost.    So we have to reward not only specific capabilities but those that are hard to imitate.  They may be hard to imitate because they are specific to our corporate environment – but to gain competitive advantage they must be so much more than just organisationally or sector specific.

Competencies

The competencies we need should flow out of the capabilities – or perhaps not?  What specific, observable, rewardable competencies are required and with what and how are we rewarding them?

Value chain

What are the internal and external value chains using our unique resources and capabilities that lead to adaptability advantage?  We must look to our clusters of resources and capabilities and how these are combined to give our competitive advantage.  What reward tools do we use to strengthen our value chains and the activities that support them; perhaps across enterprises and organisations, turning rigid barriers porous?

Conclusion

There are far too many questions and too few answers in this blog.  If the reward perspective; which is incredibility powerful in encouraging behaviour change can be harnessed, using the wisdom of crowds, to the task of “Hacking HR to Build an Adaptability Advantage” we will not only add enormous value to the process; but we will be key in ensuring its enduring success.  Over to you O wise crowds.

Visualisation – the new future of reward data presentation?

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Introduction

I am a firm believer in serendipity so I quickly picked up on an article in PCPro magazine on the subject of data visualisation.  Wikipedia defines data visualisation as “According to Friedman (2008) the “main goal of data visualization is to communicate information clearly and effectively through graphical means”.    When I explored the area in more detail I found a wealth of data visualization tools on the internet.  The graphic above is a data visualisation of my four hundred odd LinkedIn contacts.  My next thought was how could this be applied to reward?

Visualisation of reward data

The first major area that could use the visualisation approach is global market data.  How many times have we reward professionals had to present international reward data; often in forms of rows of tabular data.  Would it not be so much better if we could produce a visualisation of the global data?  This could show geo-mapped data at one level or perhaps by industry sector or level of employee.  There are many interesting permutations to explore. 

I have seen a number of interesting info graphics around UK pension data; this can be both a source of data rich information as well as being pretty impenetrable when presented again as tabulated number or on a PowerPoint presentation.  Data visualisation could help immensely in communicating key data to management and employees.

Interactive data presentation

One step further on from just visualising data is to make it interactive so managers can set their own parameters for looking at the data.   I came across one visualisation tool that took your favourite book or musician and produced an info-graphic of similar styles and types.  Could something similar be used for flexible benefits?  The employee could drill down the visualisation of options to help make the choice of benefit and level a much more exciting journey than the normal drop down lists.

Mission to explain – the reward narrative

Those of you who read my blog will know that I have a mission to explain and communicate the reward narrative.  To open up the black box of our profession and put tools in the hands of users so that instead of reward saying “here it is, take it or leave it” we realise that most of our employees are sophisticated consumers of our reward products and are capable of making informed choices if we present those choices in an intuitive and interesting way.

Conclusion

Data visualisation is not new although it is entering a new level of usability as computes become more powerful and the increasing use of tablets lead to a more visually intensive world – not to mention the alleged shorting of attention span in our internet world.

Data visualisation is, in my view, an important tool in increasing the power and relevance of our reward narrative – and it can be quite fun as well.