Remuneration Strategy by Derek Hendrikz

2nd Annual Remuneration &
Reward Summit
24-26 June - Premier Hotel OR Tambo
Hosted by Smart Link
www.smart-link.co.za
Presented by
derek hendrikz

Copyright © 2015
Derek Hendrikz Consulting
www.derekhendrikz.com

Remuneration
Strategy

Define
Remunerate
Assess
Grade Work

Defining Work

Copyright © 2005 - 2011 Derek Hendrikz Consulting
processvs. projects
the paradox of strategy…

do what you did yesterday perfectlytoday…
• process induces repetition
• repetition induces perfection
• perfection induces performance

boldlydo what has never been done before…
• projects bring about change
• change brings about transformation
• transformation brings about relevance

processmath…
results
action = 1

projectmath…
results
action > 1

Process vs. Projects
Process Projects
• Cyclic in nature
• Evolutionary
• Performance-based
• Driven by managers
• Results divided by action = 1
• Puts bread on the table
• Clear beginning and definite end
• Revolutionary
• Relevance-based
• Inspired by leaders
• Results divided by action > 1
• Puts possibility of bread on the
table

Process
Environment
Team Opportunities
Customers
Risks
Relationships
Suppliers
Competitors
Stakeholders
PESTLE

Inputs Outputs
Process
Team Job Description

Process
Inputs
Task Activity People
Money
Assets
Authority
Behaviour
Task
Functionality
Time
Location

Process
Outputs
Quality
QuantityProfit

Creating the Strategic Frame…
• Develop mission as a process
• Analyse the environment
• Develop projects
• Create process structure
• Develop a strategic scorecard
• Create a behavioural frame

Grading Work

the Context / Problem PMS Ratio
Problem
Complexity
(Process-based)
Project-based
Perception-
based
Process-
based
Integrative

2500 BC
Agricultural
Age
1800
Industrial
Age
1980
Information
Age
1990
Machine
Intelligence
Age
20??
Nanotech
Age
The velocity
of change

The Point of Irrelevance
Point of
Irrelevance
Mind-Set
Time

Pace of Irrelevance
Mind-Set
Time

Job Evaluation is a methodology of appraising
the value or worth of one job in relation to
others within organisational context.

Steps for carrying out Job Grading....
• Train departmental representatives in the use of the method.
• Extract job descriptions from processes.
• Create Job Evaluation Committee – mix of line management,
HR and experts to decide on plotting of jobs.
• Organization map and banding proposal – HR & senior
management puts together a proposal for banding (scales
expressed in points) or grading staff and describes the benefits
that each band attracts.
• Board Review – once jobs are rated and the organization map
completed, the relevant authority will review the summary, the
banding proposals and cost if any.
• Assuming the above are approved, the overall project manager
will then move to implementation.

A job is evaluated by looking at the knowledge
required to do the job, the experience needed
for the job, the problem complexity inherent
to the job, the context complexity in which the
work is performed and the accountability
assigned.

Knowledge
Context
Complexity
AccountabilityExperience
Problem
Complexity
5Factors
for Job
Grading....

Job
Content
Job
Context
vs.

Hay Evaluation....
Job Content
Know How
(knowledge &
experience)
Inputs
Problem
complexity
Process
Accountability
Output
Context
Complexity
Environment
Risks
Opportunities

Know How....
• Knowledge Level
• Experience Level

Level
A. Basic
B. Elementary
C. Intermediate Knowledge
D. Extended Knowledge
E. Diverse or Specialized
F. Diverse or Specialized
G. Broad or Specialized Mastery
H. Externally recognized expertise
Knowledge

Level Explanation
I
Performance of a task(s) highly specific as to objective and content,
and not involving the leadership of others.
II
Performance or direction of activities, which are similar as to
content and objectives with appropriate awareness of other
activities.
III
Direction of an important unit with varied activities and objectives
OR guidance of an important sub function(s) or several important
elements across several units.
IV
Direction of a major unit with noticeable functional diversity OR
guidance of a function(s) which significantly affects all or most of
the organization.
V Management of all units and functions within the organization.
Experience

Applying the Grades....
•Combining selected codes will then give a
know-how grading.
•E.g. a seasoned supervisor to whom
interpersonal skills are important will be
graded FI2

Problem
Complexity....
• Thinking
Environment
• Thinking Challenge

Level
A. Highly Structured
B. Routine
C. Semi-Routine
D. Standardized
E. Clearly Defined
F. Generally Defined
G. Broadly Defined
H. Abstract
Thinking Environment

Level
1. Repetitive
2. Patterned
3. Varied
4. Adaptive
5. Unchartered
Thinking Challenge

•Combining selected codes will then give a
know-how grading.
•E.g. a hotel bell-boy who applies routine
thinking and does repetitive process-
based work will be graded B1

Accountability....
• Freedom to Act
• Magnitude
• Impact

Level Explanation
R These jobs are subject to explicit, detailed instructions AND/OR constant personal
or procedural supervision.
A These jobs are subject to direct and detailed instructions AND/OR very close
supervision.
B These jobs are subject to instruction and established work routines AND/OR close
supervision.
C These jobs are subject, wholly or in part, to standardized practices and procedures,
general work instructions and supervision or progress and results.
D These jobs are subject, wholly or in part, to practices and procedures covered by
precedents or well-defined policies, and supervisory review.
E These jobs, by their nature and size, are subject to broad practices and procedures
covered by functional precedents and policies, achievement of a circumscribed
operational activity, and to managerial direction.
F These jobs, by their nature or size, are broadly subject to functional policies and
goals and to managerial direction of a general nature.
G Subject to the guidance of broad organization policies, community or legislative
limits, and the mandate of the organization.
Freedom to Act
Level Explanation
R These jobs are subject to explicit, detailed instructions AND/OR constant personal
or procedural supervision.
A These jobs are subject to direct and detailed instructions AND/OR very close
supervision.
B These jobs are subject to instruction and established work routines AND/OR close
supervision.
C These jobs are subject, wholly or in part, to standardized practices and procedures,
general work instructions and supervision or progress and results.
D These jobs are subject, wholly or in part, to practices and procedures covered by
precedents or well-defined policies, and supervisory review.
E These jobs, by their nature and size, are subject to broad practices and procedures
covered by functional precedents and policies, achievement of a circumscribed
operational activity, and to managerial direction.
F These jobs, by their nature or size, are broadly subject to functional policies and
goals and to managerial direction of a general nature.
G Subject to the guidance of broad organization policies, community or legislative
limits, and the mandate of the organization.

Level
M (Minimal)
1 (Very Small)
2 (Small)
3 (Medium)
4 (Large)
5 (Very Large)
Magnitude (scope)

Level Explanation
A Ancillary
C Contributory
S Shared
P Primary
Impact

• Combining selected codes will then give a
know-how grading.
• E.g. a CEO who's freedom of decision making
is only restricted by the Board, organisational
policies and strategy; who's accountability
scope and impact is large will be graded G3P

Context
Complexity....
• Physical
Environment
• Psychological
Environment
• Sensory Attention
Needed
• Risk www.derekhendrikz.com

Code Description (low) SCALE (high)
P
Physical
Environment
1 2 3 4 5 6 7 8 9 10
E
Psychological
Environment
1 2 3 4 5 6 7 8 9 10
H Risks 1 2 3 4 5 6 7 8 9 10
S
Sensory
Attention
1 2 3 4 5 6 7 8 9 10
Assigning points for
special conditions…

Evaluation needs to match 3 Variable's....
Target match
between three
Process
People
Compensation/
Grade

Evaluation Methodology
Process give
reason of
existence to the
job
To achieve the
desired result
change must
take place and
problems must
be solved
Knowledge and
Experience is
needed to solve
problems and
achieve results
Know How
+
Problem Complexity
+
Accountability
Context Complexity; +
Accountability
Accountability

Webbers
Law....
the 15% rule
when the physical
weight of two objects
differed by more than
15%, people could
distinguish between
their weights just by
lifting them

the 15% RULE…
Steps…
50
57
66
76
87…
1 x 15% step = Perceptional Difference
2 x 15% step = Noticeable Difference
3 x 15% step = Clear Difference

Internal Logic behind Webbers Law....

Hay Evaluation & Succession Planning....

Developing a Pay Grade Structure....
Internal Analysis…
• Analyse extent to which similar jobs receive similar pay.
• Analyse existing pay and compensation philosophy.
External Analysis…
• Benchmark pay structure with market.

Assessing Work

the Ability / Motivation ratio
Ability
(Knowledge & Skill)
Team Player
Wrong
Appointment
Hostage Taker
Super
Star

Basic Performance Continuum
1 5 10 10+
Wrong
Appointment
Develop Reward
Motivate

The PMS Process....
1. Create the Strategic Frame
2. Develop Process Families
3. Develop Team Scorecards
4. Extract Individual Performance Indicators
5. Assess Performance
6. Take Remedial Action

Performance Indicators....
Indicator: Measurement:
Input indicator linked to checklists
Input indicator linked to procedures
Input indicator linked to quality rules
Output indicator linked to targets
Behavioural indicator linked to values
Real time as project is completed
Periodically as executed
Periodically as executed
Real time as targets are achieved
Periodically (360°)

Measurement Item: Weight: Notes:
Input Indicators: % Direct Assessment
Output Targets: % Direct Assessment
Ability Score: % (Objective calculation)
Demonstration of Values: % 360⁰
Behavioural Score: % (Perception calculation)

Performance
Willingness
OpportunityCapacity

Capacity to Perform
The degree to which an individual possesses task-relevant
skills, knowledge and experiences.

Aspects inhibiting an employee to perform a task e.g. the
equipment needed, time available, quality of decision-
making, etc.
Opportunity to Perform

The degree to which an individual both desires and is willing
to exert effort (motivation).
Willingness to Perform

Remunerating Work

Total Rewards are all of the tools available to the
employer that may be used to attract, motivate and
retain employees.
Total rewards include everything the employee
perceives to be of value resulting from the employment
relationship.
The concept of total rewards has advanced
considerably. The power of total rewards is in leveraging
the concept as a whole and the individual elements to
attract, motivate and retain talent.

• Drive organizational success through greater
talent attraction, engagement and retention
• Guide investment decisions for the employer
while enabling informed choices for the
employee
• Clarify the employer-employee relationship
• Build a distinctive employment brand
• Increase the return on rewards and create
value for the enterprise

Employers View… Employee View…
1 Challenging work 1 Base salary
2 Base salary 2 Job security
3 Career advancement 3
Career advancement
opportunities
4 Health/Wellness 4 Organization reputation
5 Organization values 5 Convenient work
6 Organization Reputation 6 Learning opportunities
7 Organization Performance 7 Health/Wellness benefits

Employers View… Employee View…
1 Challenging work 1
Career advancement
opportunities
2 Ability to impact 2
Base salary
3
Career advancement
opportunities
3 Job security
4 Base salary 4 Challenging work
5 Organization values 5 Organization
6 Organization performance 6 Learning opportunities
7 Job autonomy 7 Convenient work location

1. Understand organisational outcomes and the
processes and projects which it must deliver;
2. Develop processes and populate with intelligence;
3. Develop a master scorecard;
4. Link the master scorecard to human performance;
5. Conduct Job Grading Analysis;
6. Define the Employee Value exchange (EVE); and
7. Develop the Total Rewards Strategy (TRS).

Company Expectations Employee Rewards

…an effective total rewards strategy
enables organisations to deliver the
right amount of rewards, to the
right people, at the right time, for
the right reason...

• Employees believe that good performance will lead to
more pay
• Employees want more pay
• Employees do not believe that good performance will
lead to negative consequences
• Employees see that other desired rewards besides
pay result from good performance
• Employees believe that their efforts do lead to
improved performance

1. Fund the Pool
2. Split the Pool

Total Rewards Strategy Elements Skill Job Risk Performance
H M L H M L H M L
Compensation • Xxx
• xxx
Benefits • Xxx
• xxx
Work Life • Xxx
• xxx
Professional Development • Xxx
• xxx
Career Development • Xxx
• xxx
Work Environment • Xxx
• xxx

Total Rewards Strategy Elements Weight Value
Compensation • Xxx
• xxx
Benefits • Xxx
• xxx
Work Life • Xxx
• xxx
Professional Development • Xxx
• xxx
Career Development • Xxx
• xxx
Work Environment • Xxx
• xxx
Employee Name:
Job Description:
Skills Risk: Job Risk: Performance Risk:

Remuneration Strategy by Derek Hendrikz

Remuneration Strategy by Derek Hendrikz

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