Q&A : Daniel Tan, C&B Guru

Can Creative C&B Programs Make a Difference?

Today, companies face unrelenting pressure to engage and retain their employees. With a globally competitive landscape for talent, and increased mobility of the workforce, the conditions are proving to be more challenging by the day. Some organizations have started to segment their workforce to be more targeted in how they reward and incentivize them. They have begun exploring new ways of retaining their best people and developing creative C&B programs is one of the ways.

Have you ever wondered if ‘Creative C&B Programs’ is an oxymoron, no offense to our highly esteemed C&B friends. I’m sure you have your own questions as well. Well, let’s hear from our resident C&B guru, Daniel Tan.

Evelyn:
Hey Daniel, let’s get straight to our questions today regarding ‘Creative C&B Programs’. Do you think it’s fair to say it’s hard to get creative with compensation and employee benefits?

Daniel:
Evelyn, I’d say that it’s not hard to develop creative compensation and/or benefits programs. Of course, it’s not a walk in the park, taking more effort and insights than developing and installing the compensation and/or benefits programs suggested by market benchmarking. The greater challenge lies in daring to be 'different' from your competitors and being able to demonstrate the ROI of a more creative approach in the long term.

Evelyn:
And how much latitude do you think we have in the corporate world to have creative C&B programs?

Daniel:
Unfortunately, there’s not enough latitude for creative C&B programs that would support the business better.

An example of a creative compensation solution is the signing or sign-on bonus when introduced in the professional sports arena possibly in the 1940s. Subsequently, the sign-on bonus has been adopted by the corporate sector, initially for senior executives and more widely now.

We know that the sign-on bonus has enabled the business to hire key talent and more quickly, as well as retain them for, say, a year through the common lock-in clause.

An example on the benefits front is the birthday leave which I implemented in a previous organization. Employees really appreciate this benefit which signals that the company values them as individuals. Moreover, the benefit is just a day and wouldn't significantly impact productivity. I think there's room to implement similar benefits that can be truly meaningful to employees.

Evelyn:
The strategic workforce planning premise advocates taking a differentiated approach with employees in critical roles as well as with top performers. Do you think adopting such an approach could help keep key talent in an organization?

Daniel:
Sure, a differentiated (even individualized) approach to rewarding employees in critical roles would help to retain them. Some of the highest performing organizations in the world have already adopted bold moves to differentiate pay and rewards. In his latest book 'Work Rules', Laszlo Bock, SVP of HR, Google, shared that 'the range of rewards at almost any level can easily vary by 300 to 500 percent, and even then there is plenty of room for outliers.'

Although not all companies can pull off what Google is doing, there is still room to bring real meaning to the familiar philosophy of 'pay for performance'. Some considerations: During the 1990s and especially in the run up to Y2K, compensation for certain IT positions shot up quickly and even exponentially. A differentiated and creative approach would have been to introduce a pay component to shore up the gap for the selected IT positions whilst keeping the base pay levels unchanged.

You may ask why not just increase the base salaries of the selected employees (and, in so doing, keep a clean compensation structure). This would also help with retention. True.

However, when the market value of the above positions returned to reality during the early 2000s, organizations that added to the base salaries found themselves paying those higher rates for the foreseeable future.

Therefore, increasing the base salary was a quick fix but there was the unintended consequence of having to put up with the higher pay for the long haul. Other ways of differentiating rewards could be to vary the pay mix, utilising both short-term and long-term programs without locking in more dollars than required.

Evelyn:
A significant number of organizations have hopped on the ‘flex-ben’ wagon in recent years. Do you think implementing flexible benefits is an effective way to increase employee engagement and retention?

Daniel:
Flexible benefits represent an effective way of delivering more value from the same benefits spend. Clearly, the win for employees is more value and the win for employers is cost management.

Through higher perceived value, flexible benefits programs could facilitate employee engagement and retention, particularly if there's alignment with an organization's values, culture and other HR programs.

That is, there'll be alignment if a flexible benefits program is implemented in, say, a firm that values flexibility and has a flexible work arrangement and policy. This would further help to engage and retain employees who are aligned with the organization’s values.

Evelyn:
What could be the potential pitfalls of taking a segmented approach to designing such C&B programs? What could be done to minimize these potential drawbacks?

Daniel:
Evelyn, a potential pitfall is managers and/or employees clamouring for consistent C&B programs which runs counter to the segmented approach.

Another potential pitfall is the adverse impact on wider team collaboration. As an illustration, consider the merit increase or variable bonus programs. Employees who have been asked to mentor other employees may not be motivated to do so as they may prefer to focus on their own work goals and performance which could result in higher salary increases or bonus payouts.

To minimize the above potential drawbacks, it is vital to carefully and clearly define the employee segments at the outset. The goals for segmentation should be clearly supported by the C&B programs that follow. It is only with the preceding due diligence that a comprehensive implementation and communication plan could be developed, to properly address all relevant stakeholders.

Evelyn:
There has been a lot of discussion about working differently with Generation Y employees, do you think the longer-term view would be to offer employees different sets of pre-selected or curated employee benefits while maintaining core benefits?

Daniel:
It would either be to offer pre-selected supplementary employee benefits by employee segments or extend the same with some choice.

Yes, this is flexible benefits, but different from the current prevalent practice in two important respects. Firstly, there would be more effort required on the part of C&B or HR specialists, as annual reviews of the types and/or costs of benefits would be required. Secondly, there would be more sharing with employees for them to be more informed users of benefits.

The current prevalent practice involves extending the same menu of benefits items to employees, for them to choose, up to the allocated flex-points or flex-dollars.

Evelyn:
It seem the obvious thing to do would be to ask employees what sort of employee benefits would meet their needs. What do you suggest we do to draw out such information from them?

Daniel:
Yes, you have pointed out the obvious approach. However, HR and C&B practitioners are concerned about opening Pandora’s Box so to speak.

In my view, we could run employee benefits survey or focus groups with careful scoping. The former could inform us of the benefits needs and wants by employee segments, with the latter providing richer qualitative information.

Evelyn:
Daniel, do you have any other comments on creative C&B programs?

Daniel:
As said, it’s not hard to develop creative C&B programs or solutions. The pre-requisite is insights on the organization and/or business strategies and plans, and taking a well-considered and even integrated approach to help solve the challenges to business.

Evelyn:
Thanks for your time, Daniel – and for sharing your perspectives with us.

Daniel:
You are welcome, Evelyn. It has been a pleasure!

Dear Readers, we would love to hear from you and if you have other questions for Daniel, please e-mail him at Daniel.Tan@DecodeHR.com

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