Creating a Sustainable Rewards and Talent Management Model: Results of the 2010 Global Talent Management and Rewards Study Yvonne Cox AmCham Vietnam October 2010 2010 Towers Watson. All rights reserved.
While the recession is over in many countries, its impact has been profound Following the global financial crisis and recession that occurred in many countries, we may be at a point of inflection China, India and Brazil experiencing strong economic growth Spain and Ireland continue to suffer through economic contraction and double digit unemployment U.S., most of Europe, Canada and Japan are somewhere in between U.S. unemployment remains stuck around 10% Most regions took cost cutting and cost management actions as a reaction to the recession Real wages have been flat or declining 1
Recession forced companies out of business as usual mode and changed the employee mindset Companies: Reduced labor costs through hiring and salary freezes, reduced bonuses and layoffs Over 44% of companies globally took four or more cost cutting actions Resulted in reduced rate of increase in the real value of total rewards Re-evaluating business strategies to protect bottom line and drive productivity gains Employees are Thankful to have a job in light of past layoffs Recovering from no pay increase, no/smaller bonus, reduced benefits and furloughs Less likely to have promotion opportunities Survivors who have made it through in one piece barely Theme of Renewal Looking forward, organizations must re-think the way they design and manage their reward and talent programs Theme of Security Employees are looking for job security, stability and opportunities to earn higher levels of pay (which may be unavailable in current organization) 2
Looking Ahead As we emerge from the recession, companies are faced with additional challenges Continue to get the basics right: competitive base pay and benefits Respond to increasing demands by employees for security, stability and opportunity that are difficult to meet Confront the complexities caused by lack of career advancement opportunities for top talent and employees with critical skills Develop new leadership competencies for their executives to ensure they can manage in the new and changing environment In order to attract, retain and engage employees, organizations need develop a sustainable rewards and talent management Strategy one that is flexible enough to be vital throughout the economic cycle 3
Attraction and Retention in Today s Environment 2010 Towers Watson. All rights reserved.
Companies will need to address the deal gap and shifting employee attitudes I want to deliver innovative products and services but I am not sure I can here. I want career advancement, but may need to leave my company to get it. I want job security, stability and good pay/benefits but I see the safety net eroding. I want more freedom and flexibility in how I work. I want a wide range of jobs and work experience do I need to change companies? 5
The Role of the Employee Value Proposition 2010 Towers Watson. All rights reserved.
What is an Employee Value Proposition (EVP)? An employee value proposition is the experience offered by an employer in exchange for the productivity and performance of an employee. Employee perspective Employees connection with the EVP determines their level of discretionary effort in bringing the company mission, vision and values to life. Employer perspective A strategically designed EVP attracts, retains, engages and motivates employees to drive business success. Ultimately it comes down to the give and the get 7
The Current Landscape of Rewards and Talent Management 2010 Towers Watson. All rights reserved.
The Current Landscape of Rewards and Talent Management: The Headlines Base Pay Annual Incentives Long-term Incentives Talent Management Renewed focus on competitiveness of base pay Year over year increases in merit budget Broader use across all organizational levels More alignment between executive and broad based employee measures Increased focus on profit, revenue and individual goals Goal-setting moving toward pre-recession practices Some increases in award value More emphasis on performance shares and relative TSR goals Renewed focus on career development opportunities, succession management and executive competencies Continued focus on enhancing the performance management process Integration of talent management and other reward programs 9
Talent Management: Strategy and emphasis vary Economic and business conditions cause organizations in different regions to emphasize different business and talent management strategies and executive competencies 10
Global Consistency 2010 Towers Watson. All rights reserved.
Companies with global operations are moving to increase consistency of their reward and talent management programs Drivers of the move to more globally consistent design and administration include: Alignment Governance Cost Management Efficiency Quality Talent Mobility Complexity 12
Asia Pacific Findings 2010 Towers Watson. All rights reserved.
Asia Pacific Region Leading Growth Asia Pacific continued to decline in 2009 but with encouraging 2010 projected GDP rates owing to strong performances as early as the 2nd quarter of last year. Large fiscal stimulus packages and loose monetary conditions aided recovery specifically in China (with a fiscal stimulus package equivalent to 8% of their GDP), as well as Japan, South Korea, Vietnam and Thailand with fiscal packages of at least 5% of their GDP. The region will continue to be vulnerable due to high exposure and dependence on global trade cycles and export sensitivities of medium and high technology products that tend to be more cyclically volatile. Weaker global conditions is seen to further emphasize cost-cutting in developed countries, and drive more manufacturing and support services to outsourcing nations in Asia. 14
Economic and business conditions have led organizations to emphasize different business and talent management strategies and executive competencies Business Strategy Executive Competencies Strategic TM Priorities Asia Pacific Grow through product and market expansion Compete by developing innovative products and services Creativity and innovation Knowing the business Developing people Increase investment in talent pipeline and in acquiring new talent 15
Moving Ahead 2010 Towers Watson. All rights reserved.
The imperative to create a sustainable rewards and talent management model What is Sustainability? Effective in any economic environment; supports robust growth but is scalable in a downturn Flexible in terms of company investment in rewards and talent management programs Addresses the broad range of elements of the deal that are important to employees Allows for flexibility to target key employee groups such as high performers, critical-skill employees and high potentials Formalize and communicate the EVP to both current and prospective employees Organizations can focus on key high gain actions for building sustainability 17
High Gain Actions for Building a Sustainable Model FOCUS ON THE BASICS Those elements of the deal that are attractive across employee segments Competitive Base Pay Challenging Work Career Advancement Opportunities Convenient Work Location Vacation or Paid Time Off Security - retirement DIFFERENTIATE Rewards based on employees performance Elements of T&R based on different employee segments Formalize and Communicat e EVP DEVELOP GLOBAL CONSISTENCY Across regions, levels and talent and reward programs Organizations with global consistency report higher level of talent and reward program effectiveness Provides a platform for getting the basics right DEVELOP LEADERSHIP COMPETENCIES To ensure they can manage in the new and changing environment. 18
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