Smarter Web Company PLC · LSE:SWC
Smarter Web — Institute for Employment Studies — Investor Presentation (2017)
32 slides from Smarter Web's investor presentation, 2017
Slide 1: Pay determination in a changing context: job evaluation, market pay and reward
Pay determination in a changing context: job evaluation, market pay and reward Peter Reilly, Principal Associate, IES For further information contact: peter.reilly@employment-studies.co.uk
Slide 2: Changing context
Changing context Business environment challenges: ▪ competition ▪ regulation ▪ globalisation ▪ uncertainty ▪ scrutiny
Slide 3: Changing context (2)
Changing context (2) Business strategic positioning: ▪ cost reduction ▪ quality improvement ▪ search for innovation ▪ productivity pressures ▪ performance culture
Slide 4: Changing context (3)
Changing context (3) ▪ Reduced collectivism ▪ A litigious society ▪ Low inflation ▪ Slow economic growth ▪ Public sector austerity ▪ Tight labour market ▪ New working (contractual) arrangements
Slide 5: External environment: strategic reward priorities
External environment: strategic reward priorities 'Very important' or 'important' issues for reward strategies in 2014/15 100% 96% 92% 90% 88% 80% 76% 70% 63% 60% % of respondents 54% 50% 40% 36% 30% 20% 10% 0% Recruiting/retaining key Employee engagement Keeping labour costs in Making sure pay is D
Slide 6: A cultural shift in people management
A cultural shift in people management Internal External Activity Outcomes Mediocrity Excellence Post Person Central Local Control Flexibility Collective Individual
Slide 7: Ways of determining pay levels
Ways of determining pay levels ▪ Ability to pay ▪ Fixed to index (eg RPI) ▪ Collective bargaining ▪ Individual negotiation ▪ Regulated ▪ Market benchmarking • with/without underpinning job evaluation
Slide 8: Declining importance of JE?
Declining importance of JE? The use of market rates (underpinned by job evaluation) to determine pay “appears to have fallen sharply”. “The organisation’s ability to pay is the most important factor” CIPD Survey on Reward Management 2014/15 But a lot of sectoral variation: Public sector services 5
Slide 9: The push towards market pay
The push towards market pay Relative internal value Internal External equity equity External value
Slide 10: Spectrum of pay comparability approaches
Spectrum of pay comparability approaches Source: Aon, 2013
Slide 11: The push towards market pay/lighter JE
The push towards market pay/lighter JE Relative internal Formal value JE schemes Internal External equity equity Looser External job value levelling
Slide 12: Perceived weaknesses of JE
Perceived weaknesses of JE ▪ Some systems complex to develop and costly/time consuming to implement/maintain ▪ Can appear to be scientific and objective when it is judgmental ▪ Can lead to slow, inflexible responses to recruitment/retention/recognition difficulties ▪ Potentially unresponsive in fast
Slide 13: Weaknesses of JE (2)
Weaknesses of JE (2) ▪ Can be used to reinforce existing hierarchies ▪ Process based on only a superficial understanding of jobs under review ▪ Conventionally does not address how job is done ▪ Theoretically job not incumbent focused but overly influenced by job holder in practice ▪ Can produce gami
Slide 14: Competing organisational pressures (1)
Competing organisational pressures (1) External relativities Internal relativities • skill shortages • felt fairness • intense competition • traditional hierarchies • market alignment • equal pay drivers
Slide 15: Competing organisational pressures (2)
Competing organisational pressures (2) Flexibility Order • job change • wage drift • market change • inconsistency • rewarding contribution • discrimination
Slide 16: Balancing priorities!
Balancing priorities! Economic logic Psychological logic External equity Pay Internal equity system ● market alignment ● open/transparent ● supply and demand ● felt fair ● rate for the job ● justifiable
Slide 17: A job evaluation fightback?
A job evaluation fightback? Prominence of Use as an equal pay OD tool Facilitate a merger (other integration) Link to talent Leadership and career development management programmes To facilitate reward management
Slide 18: External market pricing issues
External market pricing issues ▪ How do you pitch ‘core’ workforce against external market: • who are the comparators – sector, size…? • which jobs used? • which market positioning sought? • which geographies apply (local, regional, national, international)? ▪ How homogeneous/heterogeneous a workfor
Slide 19: External market pricing issues, cont.
External market pricing issues, cont. ▪ What matching process is used? • Public data or bespoke? • Job description or title based? ▪ Comprehensive or limited remuneration data? • Base pay, total pay and benefits? • Average pay and structures? ▪ How reliable is the market data quality? ▪ Can you defe
Slide 20: Risks with market based pay systems
Risks with market based pay systems ▪ ‘Mimetic wage’ systems - simplistic pay matching as a defensive retention strategy
Slide 21: Sectoral convoys in reward management
Sectoral convoys in reward management
Slide 22: Risks with market based pay systems
Risks with market based pay systems ▪ ‘Mimetic wage’ systems - simplistic pay matching as a defensive retention strategy ▪ Ignoring internal cultural requirements?
Slide 23: Internal culture issues?
Internal culture issues? ▪ Does the culture demand fairness? ▪ How much difference can be tolerated? ▪ And on what basis are differences justified? ▪ What is the relative importance of: • procedural justice? • distributive justice? ▪ How transparent does the pay system have to be? ▪ Is there a bias
Slide 24: Risks with market based pay systems
Risks with market based pay systems ▪ ‘Mimetic wage’ systems - simplistic pay matching as a defensive retention strategy ▪ Ignoring internal cultural requirements? ▪ ‘Self-serving bias’ in data collection and analysis ▪ Complaints against JE in favour of market pay based on ‘tautological arguments’.
Slide 25: Solutions
Solutions ▪ Avoid false scientism in market benchmarking and job evaluation ▪ Focus on business goals being met ▪ Ensure your JE system and pay approach meet that requirement ▪ Balance internal and external equity in wage setting ▪ In JE management balance commitment to the core system with process
Slide 26: Testing reward effectiveness
Testing reward effectiveness A six step model: 1. Set goals 2. Identify evaluation criteria 3. Select an evaluation method 4. Collect and analyse data 5. Interpret findings 6. Develop and implement improvements Scott, McMullen and Sperling, 2006
Slide 27: A set of C-riteria for assessment
A set of C-riteria for assessment Externally Convergent with Compliant competitive to business strategy legally, internally recruit and retain and required equitable, fair values, skills and behaviours Controlled, Pays for efficient to Pay and Reward contribution and manage and System performance ad
Slide 28: How do you decide what to measure in reward?
How do you decide what to measure in reward? Goals ▪ Organisational impact? ▪ Effectiveness? ▪ Efficiency? ▪ Unique, hard to imitate or generic?
Slide 29: One way of looking at progress
One way of looking at progress H Importance to business L H Effectiveness in meeting goal
Slide 30: How do you decide what to measure in reward?
How do you decide what to measure in reward? Process and time orientation ▪ Inputs, outputs and/or outcomes? ▪ Past, present or future orientation?
Slide 31: Useful reading (for an easy summary)
Useful reading (for an easy summary) https://www.gov.uk/government/publications/a-review-of- pay-comparability-methodologies
Slide 32: Thank you
Thank you www.employment-studies.co.uk
Institute for Employment Studies — Investor Presentation (2017) on 6ix