Next Generation: Total Rewards

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Next Generation Total
Rewards Practitioner
The

• October 2006
• Ryan Johnson
• Director, Information Development and Public
  Affairs WorldatWork

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• A little about my roles at the Association
• And a little about WorldatWork

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The WorldatWork Evolution
1955 1958 1963 2000 Ohio Wage Midwest American
Salary Compensation Compensation WorldatWork
Association Association Association Vision Visi
on Vision Vision Pay job Pay job Education
The global knowledge valuation valuation cert
ification of and information leader in Ohio in
Midwest compensation in employee rewards
to professionals in improve organizational
the USA performance
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Current WorldatWork Member Demographics
Functional Area
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Three Topics Today

• The Theoretical
• The Next Generation of Total Rewards
• The Tangible
• The Next Generation Total Rewards Professional
• The Tactical
• The Three Secret WorldatWork Member Benefits
  That You Need to Take Advantage Of

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The Next Generation ofTotal Rewards
Part 1 The Theoretical

• The New WorldatWork Model

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The Evolution of Rewards
TotalRewards
Compensation
Pay
Total Compensation

• Compensation
• Benefits
• Work-life
• Performance and recognition
• Development and career opportunities

• Base salary
• Position description
• Job evaluation

• Base salary
• Variable pay
• Incentives
• Executive equity

• Base and variable pay
• Equity
• Incentives
• Benefits

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Total Rewards Model 2000 05
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Methodology of the New Model

• WorldatWork Strategy Committee
• Two years of discussion
• Focus groups, surveys, depth interviews
• Model had numerous iterations
• Approved by Board of Directors, 10/05

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The 2006 WorldatWorkTotal Rewards Model
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Why a New Model?

• Evolution of the term total rewards
• Evolution in our membership
• Body of knowledge is being built

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What Do You Call It?

• More than 90 (combined) in our Sept. 2005 member
  survey said their organization talks about
• Total Rewards
• Total Compensation or
• Compensation and Benefits

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Evolution of Total Rewards Concept

• Q How does your company define total
  rewards?
• 56 comp, LTI, retirement, health care and
  welfare (everything with a measurable financial
  value)
• 21 all financial rewards plus quality of life
  
• 11 all financial and non-financial factors
  affecting employees experience, including job
  deployment
• 10 comp, LTI, and other cash based items
• 1 other

Source Deloitte 2006 Employee Rewards Survey
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Evolution of Total Rewards Concept

• Q Which of the following best describes how
  your company manages total rewards (as you
  defined it previous question)?
• 37 Concept is of interest, but no significant
  action taken
• 29 Comp, benefits and related functions work
  together on this concept and have a total
  rewards policy
• 22 Comp, benefits and related functions have
  discussed the concept and are considering
  further steps
• 8 We have a total rewards function that actively
  manages all rewards components as an integrated
  whole
• 4 Concept is not of interest to us at this time

Source Deloitte 2006 Employee Rewards Survey
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But still highly aspirational

• Do health care cost increases enter into salary
  budget discussions?
• 73 No
• 19 Yes, some impact
• 8 Yes, major impact recent years

Source WorldatWork.org Quick Question, July 2006
(n218)
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But there is also some good news

• Just a few of the companies who now have
  employees with total rewards in their title
• Sun Microsystems Johnson Johnson
• HR Block State Farm Ins.
• Target Corporation Heinz
• Verizon Burger King
• FedEx Qualcomm
• Pitney Bowes BP
• Blue Cross Blue Shield The Gap
• Childrens Healthcare System Northrop Grumman

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Making the Model Tangible

• This model will be the basis for the
  associations
• Website and database organization
• Magazine content
• Research agenda
• A tool for you, academics, and anyone else
  interested in Total Rewards
• We know that integration is the hardest part The
  University of Notre Dame

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Where is the TR leverage today?

• Which of the 5 elements is your biggest
  differentiator as an employer?
• 32 Benefits
• 23 Work-Life
• 18 Development Career Ops
• 17 Compensation
• 10 Performance Recognition

Source WorldatWork.org Quick Question, Sept 2006
(n387)
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The Next Generationof Professional
Section 2 Tangible

• What Your Peers Think

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What Does Success Look Like for Todays
Compensation Professional?

• Is it really simply advanced technical competence?

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Fact Compensation is interactingwith
higher-level functions.

• More interaction with CFO 53
• More with Comp Committee 53
• More with CEO 51
• More with legal 47
• Source 2005 WorldatWork Survey Changing Role of
  Compensation

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Fact What is valued and required of compensation
professionals is changing.

• More strategic thinking required 76
• More understanding of company 61
• More project management required 52
• More business case development 51
• More exec. presentations required 47
• Source 2005 WorldatWork Survey Changing Role of
  Compensation

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Total Rewards / Compensation Professional Success
Profile

• Question Is there a success profile for
  a compensation/total rewards practitioner today?
• Results from 22 senior level practitioner
  interviews

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Company 1

• Understand the business
• High personal integrity
• Knowledge and comfort with global economics and
  marketplace
• Ability to be flexible
• Do more with less

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Company 2

• Cultivate relationships finance, legal, tax and
  HR
• Knowledge of global labor/environ. trends
• Honed analytical skills for financial analysis
  and to support complex decision making
• Ability to consult, negotiate and sell
• Creative thinking
• Strong communication and facilitation skills
• Think holistically
• Be able to get over it

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Company 3

• Understand changing demographics and what will
  motivate employees in the future
• Understand the business and impact of rewards
  decisions on the business
• Understand corporate governance
• Be creative, push the envelope
• Make principle-based decisions

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Company 4

• Know the business of your company
• Accounting principles and selected areas of law
• Find comfort in an ever-changing landscape
• Creativity is highly valued
• Attention to detail is more important than ever
• Decisions, policies and practices must be well
  thought-out and documented

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Company 5

• Understand your business
• Integrity
• Financial acumen
• Explain complex ideas in simple ways
• Know your audience and custom-build
• Strong writing skills
• Commitment
• Guts and Thick Skin

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Company 6

• Study the implications of globalization
• Understand psychology and create or study data
  about employee preference
• Understand accounting and implications of CB
  decisions on the business
• Vendor management

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Company 7

• Comp staff will increasingly come and go from
  other areas of company
• Consulting skills
• Ethics and integrity
• Keys to becoming a leader
• IQ, EQ, experience, potential

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Company 8

• See beyond the market data
• See beyond the programs to objectives
• Global forces will change the way business is
  conducted in U.S.
• Need to understand and work with finance

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Company 9

• Know business purposes and premises
• Think and act with very long time horizon
• Study interplay between design, tax, accounting,
  SEC, and ext. environment
• Know how compensation is leveraged just like a
  plant, or a marketing cost
• Know that your programs are no longer invisible
  outside of the company

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Company 10

• Bias for action/results orientation
• Lead change
• Business and functional expertise
• Candor, challenge, feedback
• Interpersonal skills
• Savvy, street smarts
• Maturity and adoptability

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Leadership
IMPORTANCE
Managerial
Technical
Individual Contributor
People Manager
Director / Vice President
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Ten Key Takeaways

1. Technical competence is foundational
2. Knowledge of the business is as important as your
   compensation/TR skills
3. Know how to get things done
4. Communication/team skills are essential
5. Have and build a personal network of external
   peers

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Ten Key Takeaways

1. Know the organizational culture
2. Working knowledge of all areas of rewards
3. Be able to do more with less
4. Stay abreast of industry trends and new company
   practices and products
5. Bottom line Constantly add value

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The Three Biggest Secrets of WorldatWork
Membership That You Need to Take Advantage Of
Section 3 The Tactical
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133rd Annual Salary Budget Survey

• N2,700 across N. America
• Published August 1
• 2006 3.8 across all ee categories and includes
  merit, general and COLA
• 1981 10.5
• 2007 projected 3.9
• Current CPI is 3.5

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33rd Annual Salary Budget Survey

• First Time Ever Metro Area Data
• Data for both Dallas and Houston
• Dallas 3.8 (06) 3.8 (proj. 07)
• Houston 3.7 (06) 3.9 (proj. 07)
• The survey also contains 2006 and 2007 actual
  and projected merit, general/cola, total increase
  and months between increases for four employee
  categories

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33rd Annual Salary Budget Survey

• Most Prevalent Attract Retain Programs
• Sign-on/Hiring Bonus 69
• Spot Bonus 45
• Retention Bonus 35
• Part Time w/ Benefits 28
• Variable Pay Usage 79

• Source Salary Budget Survey, WorldatWork 2006

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2New Survey Search tool

• Most common question into our
  Knowledge Center
• Online, multiple category searchable directory of
  more than 800 surveys
• Launched August 1
• First month more than 2,000 searches

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3HQ Library

• Database with 20,000 documents
• Knowledge Services knowledgecenter_at_worldatwork.org
  
• On-site Library at HQ

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One Final Thought

• What would happen if senior management in every
  company viewed employee rewards as an investment
  to be managed, rather than a cost to be
  controlled?

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Questions?

• Ryan Johnson
• Director of Information Development and Public
  Affairs
• WorldatWork
• Direct 480-905-5986
• Email rjohnson_at_worldatwork.org