Nowadays, highly motivated employees are recognised as critical to business success. At a recent conference, senior executives of Berli Jucker, McThai, Mercer, Chevron and True Vision discussed the design and implementation of compensation and reward schemes to motivate employees and drive organisational results. The Nation's Pichaya Changsorn was with them, at a conference organised by the OmegaWorldClass Research Institute
An old Chinese proverb that says "money can hire ghosts to grind flour" continues to be true, provided the financial gain is big enough.
So says Saksit Sathanapong, human-resources policy manager of diversified trading conglomerate Berli Jucker.
However, non-financial rewards such as a sense of accomplishment are increasingly important, especially for higher-ranking and financially-comfortable executives, he told a recent conference organised by the OmegaWorldClass Research Institute.
He said factors that motivated employees varied according to the generation to which the workers belonged. Surveys have shown that "baby boomers" (aged over 45) prefer work flexibility and time off to do things they enjoy. Generation X workers (aged from 30 to 45) regard money as the most important thing, while generation Y and the "millennials" (aged under 30), perceive career advancement as the leading motivator.
Remuneration packages should also be tailored to suit the nature of the business. At Berli Jucker, for instance, the packages for the company's industrial-products division differ from those for the healthcare-products unit. The remuneration scheme for the industrial-products group is focused on competencies and "pay on fairness", while that for the healthcare division emphasises performance and "pay for competitiveness" (sell more, get more, with no ceiling). The industrial products group opts for developing its own talent, while the healthcare group thrives through buying talent, he said.
"It continues to be debatable whether 'buying or building' [talent] is more expensive. But if 'built' talent doesn't fully utilise what they have [been paid] to learn, then the 'built' [talent approach] is expensive," Saksit said.
He said companies were increasingly shifting from "pay for position" to "pay for competency", which allowed employees to continue receiving pay rises even though they kept the same jobs. This is because in some skilled positions, the more experience workers have, the more they can contribute to their companies, he said.
Saksit said higher wages did not necessarily lead to higher costs, as long as productivity was higher. For example, Berli Jucker outsourced its snack manufacturing, only to find it was costing more because contract workers who had less experience caused more waste in the production process. Skilled staff, on the other hand, knew exactly how much oil they should use, for instance, to fry snacks.
Saksit said that in providing a support function, the human-resources units of most companies tended not to be creative, and simply followed market practices. Therefore they had resorted heavily to monetary rewards to attract and retain talent.
Jirawat Taengjanegit, director of human resources for McThai, the franchisee of McDonald's restaurants in Thailand, said businesses nowadays did not want to pay monetary rewards, but still yearned for performance. In McThai's view, there is no immediate link between rewards and performance. Rather, a reward system must work to drive the corporate culture and environment, which in turn will drive employee engagement and commitment, and that will lead to productivity improvement and finally to improved business performance, he said.
"HR has a duty to create an atmosphere that 'encourages hens to lay down their eggs'. If you focus solely on the end-results, it won't be sustainable," he said.
Jirawat said rewards should drive a desired culture and behaviour, rather than simply paying for an immediate result. An increasing number of companies were turning to non-monetary rewards to drive staff engagement, which led to higher company results.
A reward system should be aligned with corporate objectives while at the same time being tailored to meet employee's needs. Generation-Y workers, although less loyal to their employers than the older generations, have a huge potential to contribute to their companies, and this can retain them, Jirawat said.
He said human-resources departments usually spent a lot of time trying to tackle issues that caused job dissatisfaction, such as company policy, supervision, relationships with bosses and peers, work conditions and salaries, but failed to resolve any of them. Rather, HR should be focused on job satisfaction or motivational factors, including achievement, recognition, work itself, responsibility, advancement and career growth, he said.
"If you make people feel that they have achieved, they will be satisfied," he said.
Non-monetary rewards include learning new things, job enrichment, job enlargement, job rotation, empowerment, team-working, making them feel their ideas are listened to, treatment with respect and making them feel they're part of something bigger than themselves.
Non-monetary recognition includes good words, praise, being thanked publicly or presented with awards, having lunch or dinner with executives, opportunities for training or meetings, enjoyable duties and an increased role in decision-making.
Mercer (Thailand)'s director for human-capital consulting Wutt Srikham said most companies paid a bonus for every member of their staff. However, some Thai banks now have a five-score rating system to grade staff according to performance. They do not pay a bonus to staff who receive the lowest grade and pay below the average for those on the second tier.
More companies are also splitting their employee-compensation packages into 50 per cent cash and 50 per cent incentive pay. Some of them go further and split the incentive portion into 50 per cent cash and the other half on deferred payments like stocks.
"This means that performance is tied in from day one, and tied in twice. This is the current trend," he said.
There is a "call back" option in case executives are forced to quit the company. They have to withdraw their rights to receive the deferred package and return what they have received. However, the law in Thailand does not permit companies to force their executives to return compensation they have already received.
He said research suggested companies should pay their talented staff, amounting to 5 per cent of the total workforce, bonuses that were eight times the average rate. Outstanding performers should be paid at the 90th percentile of market rates.
Wutt said that some Thai banks still promoted employers to new positions without raising salaries and regarded this as an acceptable practice. This was not the right solution, he said.
The compensation structures of Thai banks are much more complex than general companies. One bank may have as many as 12 salary structures. The salary bands are also very wide. Heads of different divisions may get different salaries, and some unit chiefs may even receive a higher salary than the bank's chief executive, he said.
Notably, incentives are not the only key factor driving performance in an organisation. The most important things are leadership and communication at every level, helping to put everything together, he said.
Chevron Thailand Exploration and Production's human resources manager Nutavoot Pongsiri said that high economic uncertainty had led many companies to shift a portion of compensation to variable and flexible-pay programmes to drive organisational performance. This also accommodates multiple financial scenarios.
Chevron's variable pay scheme, called the Chevron Incentive Programme, has one basic plan and formula that applies to all its employees around the world.
He said Chevron had no "fast track" compensation package because fast-promoted staff could potentially fail on behaviour. Each staff member is required to spend at least 18 months in his or her position before moving to another job. Nevertheless, there are fast-track programmes designed for high-potential employees, but with nothing more extravagant than privileges, like qualifying for overseas assignments or attachment to senior executives.
Regarding employee benefits, Nutavoot said companies should make sure they offered their employees benefits that the staff valued the most. One trick is to issue a benefits newsletter or website, to regularly introduce changes in the value of pay and benefits to staff. This also forces the human-resources department to keep refreshing benefit schemes.
"I believe that every firm should have something for its staff to read, and whenever it is about employee benefits, they will read it. [As a result] you'll be able to retain people without having to pay more," he said.
Nutavoot said companies should bear in mind that any benefit given to staff was difficult to cancel, and after not so many years, staff would take it for granted. For example, Chevron once provided scholarships to the children of all staff every year. Recently, it has changed the conditions, requiring employees to submit applications to a company committee which screens applicants based on their grade-point average.
"While fewer staff receive the scholarships, those who do receive them feel additionally proud and more appreciated. The concept is to make the employees feel they are chosen; that not everyone will receive it," he said.
The same concept should be applied to other rewards, such as provision of training and the chance to dine with top executives, Nutavoot said.
He said that "exit interviews" conducted by the company itself were not effective because half of departing employees would not tell the truth and 81 per cent of them declined to participate because they did not feel comfortable giving information to their ex-bosses or the HR division. Chevron uses an external company, which it hires to conduct its employee-assistance programme, to do the extra job of interviewing resigning workers.
"They will call, without asking [the employee's] name and promise to keep the information secret. Importantly, they're not company staff [who ask exit-interview questions]. The information we have received has been very useful, because they [the departing staff] were willing to give it [under these circumstances]," he said.
Asked to give advice to small- and medium-sized companies, Nutavoot said small companies should not worry about complying with their own' rules or regulations. Rather, they should make their best efforts to attract competent manpower.
"Don't worry about the system. Find ways to get competent staff first, because talent will go where the talent is," he said.
True Vision's director of human resources and administration Pattarapong Bhannasiri said he had found there was no better performance-appraisal method than applying the concept of student report cards to employees.
At True Vision, every employee has a report card which represents a "psychological contract" in which he or she commits to achievements in the course of a year. If that staff member meets those commitments, his or her boss must pay a reward, he said.
"Problems [in a company] usually stem from staff not going in the right direction, because there has been no communication from day one. The concept of student report cards, although it may sound simple, makes it hard to be biased and it records the evidence of what the employee has achieved," he said.
Pattarapong said the "over-achiever" corporate culture which had helped True Vision to survive its near-bankruptcy in the years from 1997 to 2003 had been maintained. Staff who meet their targets receive grade C, and only those who exceed their targets receive higher grades than C.