ORC Sightlines
June 2003
- Total Remuneration for Flexibility, Cost Control, and Globalization of Pay Systems
- Crisis Management Lessons from SARS
Total Remuneration for Flexibility, Cost Control, and Globalization of Pay Systems
Total remuneration—defining and market-pricing the value of the entire compensation package, including benefits, incentives, and perquisites—can be an effective tool for attracting and retaining top talent while controlling costs. At the April meeting of the Global Reward Meeting Group, members discussed how a total remuneration approach can change employees’ perception of their pay, especially in companies and countries where, traditionally, employees have taken benefits and other non-cash compensation for granted. By making visible the value of non-cash rewards, the total remuneration approach gives employers the flexibility to maintain competitive compensation levels while changing the emphasis placed on the various elements in response to economic and market conditions.
For example, when merit budgets are tight, employees are more likely to accept lower increases if they understand the value of the other elements of their packages in relation to the market. Similarly, employers will have more vehicles for delivering rewards to top performers without increasing costs. And the process of market pricing the various pay elements gives companies the data they need to negotiate more advantageously with benefits providers and to make informed spending decisions.
Companies experienced in the process of converting to a total remuneration approach advise starting with a careful, division-by-division market analysis of
- Salaries
- Short-term incentives
- Long-term incentives
- Benefits and perquisites
In allocating weights and values, each pay element should be targeted to a specific marketplace, and local divisions should be given the flexibility to adjust to prevailing practices in their geography. The resulting policy will balance total package value with individual element value to permit comparisons on both levels. Because of this dual focus, allowing for both consistency and flexibility, the exercise of developing a total remuneration strategy can help companies globalize their pay systems as well.
Crisis Management Lessons from SARS
The experience of 9/11 for many companies was a crash course in crisis management, and the lessons learned helped managers deal with the SARS crisis when it first emerged late last year. In those first weeks and months, little information was available to help businesses deal with HR issues arising out of the epidemic. Fortunately, many companies were able to activate processes established after 9/11 for gathering information, making global and local decisions, and communicating with employees.
Now that the threat of SARS has abated somewhat, or, at least, now that more plentiful information has allowed us to view the crisis in perspective, we can look back at how companies responded and draw some further lessons from their experiences. One such lesson is the importance of access to benchmarking networks in times of emergency when the only source of information is other companies facing similar issues. In the case of SARS response, ORC was able to survey hundreds of companies and share results with members in a very short time frame. Another lesson is how to adapt general crisis management techniques to specific types of emergencies, in this case, medical.
During a session at the May meeting of ORC’s Occupational Safety and Health (OSH) group, a process for response to medical emergency was outlined1:
- Set up communication, HR, and safety management teams and provide information and guidance on risk level stratification at the global and country levels (These teams would be chaired by the corporate medical director to provide coordination.)
- In each region or business unit, develop plans to ensure business continuity and health of employees, visitors, families, and others
- Implement mechanisms for regional managers to keep teams and each other informed of developments, information, and key learnings
- Provide information to employees regarding policies and medical care guidance
A 4X4 matrix can be used to assess risk. One axis of the matrix lists categories of risk (medical, travel, evacuation, business/facility) and the other shows levels of risk (cautionary, serious, severe, critical). A set of recommendations for managers is associated with each box in the matrix.
For more information on management response to medical emergencies or the Occupational Safety and Health group, contact Ann Brockhaus, ann.brockhaus@orcww.com, 202-293-2980.
- Many thanks to Ron Kitson and Dr. James Schuppert of Corning Incorporated, who shared this material at the meeting and permitted ORC to paraphrase it with attribution here