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Global Total Rewards—2016 Review

The mission of Freelance Total Rewards is to advance effective total rewards and mobility practices in Asia. Let me share how we, as a profession, have advanced in 2016, from my direct observation. Based on hundreds of interactions with clients, consultants, students and various HR and rewards practitioners, I have seen the following developments in 2016. For now, I will only list them. Watch future blogs for more commentary on each.

Total Rewards Advancements in 2016

  1. We continue to develop professionally through continuous education.
  2. We are reevaluating “pay for performance” from the Asian perspective.
  3. We are taking flexible work arrangements more seriously.
  4. We are starting to show HR is about good management, not about HR.
  5. Big HR firms are more focused on expensive products than ever.
  6. Mobility expertise is more about getting value for money
  7. Job evaluation is coming in-house as big firm solutions are unsustainable.
  8. HR is under increasing pressure from CEOs to source good talent.
  9. DB is as good as dead. Everything is now DC except healthcare.
  10. Seniority based grading and promotion is fighting for survival.

Have a great 2017!

We at Freelance Total Rewards thank you for the privilege of contributing to your success, as we begin our 5th year. We are trusted to help manage the biggest and most important single expense in most of our organisations, and I believe the best is still ahead for our profession. Here’s to a new year and to exceeding all your KPIs!!!

Tom Farmer
Managing Director, Freelance Total Rewards Pte Ltd.

Quotes by Daniel T. Carroll

December 1986. I attended the Awards banquet for the Eastern Michigan University’s Business School. I received the Outstanding Management Student Award that night. It was a nice moment. But what stuck in my memory were the words of Daniel T. Carroll, a noted management consultant and guest speaker for the evening. Strangely, little information is available on Google regarding Mr. Carroll. Yet there are three quotes I scribbled in my program that evening that have had lasting impact on my career and my work. I’d like to share them with you, in dedication to the man who inspired me to seek the path of a consultant.

“The people who know how work for the people who know why.”

Simple, and profoundly true. Isn’t it?

“How do you keep your ‘stars?’ Put away the rule book and get out the checkbook.”

We in HR love consistency, policies, rules. We want to avoid setting precedents, so we insist that no one exceed the pay range maximum. Guess what? We are all guilty of breaking our own rules. Know when to put away the rule book and get out the checkbook. (But get value for money! If you must “overpay” someone, then load them up with additional duties to justify the cost!

And finally,

“When you are given more responsibility, you immediately say you need more authority. I say, when you are given more responsibility, you need more knowledge.”

These statements taught me important attitudes about my work:

  1. Seek always to understand the why.
  2. Think like a business manager, not an HR manager.
  3. Seek knowledge, grow, build your capability. Don’t seek power or authority.

Thank you, Mr. Carroll.

What does Collaboration Look Like?

This topic—collaboration—has come up lately in client discussions and it’s a very important element of effective performance. Here are my quick thoughts…

Collaboration is different from teamwork. Teamwork is a very broad term and can refer to two people or two thousand people where roles are generally well defined and people do their part as a team member. When everyone does their job, you have teamwork. A rowing team demonstrates teamwork. Collaboration, on the other hand, normally comes up when something must be done which is not clearly part of anyone’s job. “That conference was the result of many collaborators.” “No one was doing it, so we decided to collaborate on it.” Crew members on a rowing team rarely talk about collaborating to win a race. But if something went wrong and it was unclear who was supposed to do something, it becomes an opportunity for collaboration if two or more step forward to address it.

I know of a company in start-up phase and growing fast. They need to maintain the start-up culture where people wear multiple hats and do whatever it takes to deliver quality to customers. At the same time, they seek efficiency to avoid overlapping roles, duplicate efforts or turf wars. The company is evolving rapidly, so roles are not static. Therefore, job descriptions make no sense—they are too static and could create silos for people. The only alternative I see is to define “roles” stating each person’s general area and the level of accountability they have for decisions or output or outcomes.

Apart from role profiles, collaboration is needed. Without collaboration, even broad role profiles will become well-defined “jobs”, whether written or unwritten. In the absence of collaboration, a person could take a stand that something is, or is not, their job. And when they must work with someone having the same “job description mentality” there is an increased risk that vital work will fall through the cracks, or for duplicate effort, turf wars or simply confusion. It starts to feel political and the customer can become the real loser. But if two people who are collaborative by nature are given a task, they will get it done without duplicate effort or things falling through the cracks. They will each take ownership and work out specific roles and actions to achieve the business result. 

I have now—after 30 years of working with job descriptions—come to the conviction that job descriptions make most sense for mature organisations that are no longer growing or evolving significantly. They are inherently static (point in time) and difficult to maintain. They should be brief and fluid, if they are used at all. (If an organisation maintains job descriptions for disciplinary purposes, you are perhaps doomed to their use, but better to maintain job standards along with your SOPs and KPI’s, not in the job description. Those countries or companies that ask employees to sign their job description when they are hired, are limiting managers from freely assigning work and deploying resources in response to changing business needs.)

So back to collaboration. Collaboration is a behavioral competency demonstrated when a person takes accountability for their own work AND related upstream and downstream work. Collaborators say “let’s get this done.” They do not say “that’s not my job.” Maybe all our job descriptions should include “collaborates with others when necessary to ensure customer requirements are met, willingly performing work that may not be included in this job description.”

Now if everyone had the inclination to jump in and get things done that are not part of their job description, why not keep roles ambiguous? The problem here is accountability and performance management. I find that people are generally happy to step in and assist others when they feel secure that they are performing their core duties well. But if people lack the certainty that they are doing their “main job” well, they will hesitate to step outside their main role. For this reason, I believe roles must be clear enough, and feedback must be frequent and specific enough, to enable this level of emotional security. Only then will people collaborate freely and heroically.

Your thoughts?


Coach for Performance, Reward for Retention

I will be presenting the latest and most comprehensive analysis of “no ratings” performance management in the Asian context, next week, at HRMAsia’s Performance Management and Rewards conference, in Singapore, on Tuesday, 11 October at 2 pm. The event will be held at Holiday Inn Orchard City Centre on Cavanaugh Road, behind Centrepoint. Here is the Performance Management & Rewards Conference brochure.

Find out how the trend is shifting from “jump on the bandwagon” to “let’s assess our practices.” The take up in Asia on this trend is significant, but not universal. I will also share some specific emerging pay practices that do not link pay to performance ratings. Of course, you will see high level results from the 2016 survey on Ending the Use of Ratings in Asia. To receive a full survey report, participate in the survey which will be closing soon. Click HERE to join the survey.

Come find out the latest. Hope to see you there. If you cannot make it, contact me for a briefing on the topic.


Here’s a thought for my comp&ben friends

I think Fred Herzberg would fully agree!

SeptemBER, time to rememBER

When the months end in ‘ber, it’s time to check in on year end priorities for managing comp and benefits. Here’s my fourth annual “Ber” to do list for C&B people.

The last few months you’ve made progress on your KPI’s but now planning season is upon you. A few things start to happen for companies on a calendar year fiscal year. They may not all apply, but I’ll bet most of these priorities apply to you:

Seven Comp & Ben Priorities

  1. 2017 Salary Budgeting–You must deliver salary increase budgets for each country. There are 7 inputs to setting your salary budgets for each country:
    1. Last year’s budget – the decision makers will want to be reminded of this, promise.
    2. Local salary trend – big firms, WorldatWork have good surveys on salary trends and projected salary budgets, normally indicating merit, general (across the board) and total increase projections.
    3. Market analysis – benchmark your company’s jobs every year and compare the results for a matched set of jobs to see how much the market values have moved year-over-year. Average the market compa-ratios (employee salary divided by the job’s market value) for all employees together (incumbent-weighted) to determine your company’s overall market position.
    4. Business and financial conditions – if the economy, the industry or your company’s finances are strong, don’t be shy, ask for what you need. If there is economic or financial uncertainty, ask anyway, but expect pushback.
    5. Voluntary staff attrition rate compared to industry norms. If your salaries lag the market significantly but you are not losing good talent (low attrition rates), then your salary budgets can match market trend. But if you are experiencing high voluntary attrition relative to your industry, and you know your pay lags the market, you may need a catch up budget. How much to request? If you have a high attrition rate, and your salaries (and total compensation) lag the market by 10% or more (i.e. compa-ratios of 90 or less), you should request an additional 1.0% of payroll. If the gap is 15% or more, ask for an additional 2%. These are only rough guidelines. Don’t ask for huge catch up budgets–it will show your lack of business savvy. Take small steps and find other ways to address your high attrition other than raises.
    6. Total cash compensation – when considering your salary budget requirement, make sure your market analysis includes total cash compensation. If you pay big bonuses compared to your industry, it’s ok to let salaries lag the market. I know of a company in Taiwan that pays massive performance incentives and very low salaries (about 60-70% of market.)
    7. Promotion plans – some companies establish separate budgets for promotions. Other companies do not, arguing it is unnecessary since there are unplanned savings from vacancies during the year, and that vacancy-related savings are sufficient to offset the cost of promotions. If your company budgets for promotions, you can easily determine the right budget by answering two questions: first, what percentage of employees will be promoted? Second, what is the average promotional salary increase percentage? Multiply the answers to determine the required promotion budget, as a percentage of total annual payroll.
  2. 2017 Benefits Budgeting–You need to provide finance an inflation rate on your insured benefit premiums as well as self insured claims. Contact your broker and start shopping the market before blindly signing a renewal. If you’ve been with the same insurance company for 5 years, they are feeling comfortable so shop the market and make them re-earn your business. Locations with aging workforces will see higher premium increases. Developing locations are seeking to improve safety nets, for example, China is requiring both local and foreign employees to participate in China Social Insurance, so be sure to capture those in your budgets. TowersWatson has some of the best analysis of healthcare inflation in Asia, indicating healthcare costs are rising about 10%.
  3. Annual Market Analysis–Your compensation surveys are being published in the next several weeks, with some coming out in September. Don’t wait til the last minute! It’s tempting to wait til late October when all your surveys have been published (by Hay, TW, Mercer, McLagan, etc.) but remember you need to confirm your matching, check the year-over-year market movement by job, to see if there are jobs where the market moved up more the expected, or perhaps moved downward, in which case you have to decide whether to accept the new market value or stick to the current market value (and see if it goes down again next year). Your market analysis results can serve as inputs to salary budgeting (see item 1 above), salary range updates, and to inform salary offers in the coming year.
  4. Annual Pay Cycle Planning–Do you know who is running the annual merit/increment process? Who is responsible globally, regionally, by country? Who is working with the software vendor (if you use 3rd party software) for modifications and configuration? What are the milestone dates? How will Chinese New Year impact milestone dates, manager deadlines, performance rating calibration and approval, etc.? Are you moving away from use of performance ratings? If so, your market analysis (step 3 above) is more critical, since you will need accurate compa-ratios. Who updates salary ranges? There’s a lot of work to be done for the annual salary review. In comp, this is the biggest project of the year, so plan now.
  5. 2016 Incentive Accrual–One thing I recommend doing now is updating your forecast for 2015 incentive payouts (to be paid early 2017.) Finance needs to maintain their accrual on the balance sheet for the bonus payment liability. If incentive-related business performance has been low, payouts may be lower than budgeted, depending on your plan design and funding formula (if any). If so, it’s bad news for employees, but good news for finance, who can make plans to earmark potential surplus incentive budgets for other needs. However, if business performance has been good, your incentive accrual may be insufficient and finance may have to increase that accrual to avoid a year-end cash flow crisis. Make instant friends with finance by giving them an estimate of year end bonus cost.
  6. 2017 Incentive Design–You think September is busy, it gets worse each month now through next March, so do yourself a favor and get some things out of the way now. For next year’s incentive plans, ask some business leaders if they have any input/feedback on the current plan design, likely payouts, etc. Update your accruals (see step 5) and have an informal chat with your head of HR and head of Finance and see if they have any sense about the richness of payouts, who’s getting low (or no) payouts, who’s getting bigger payouts, etc. Is the incentive plan doing what it is supposed to do? Will it help attract, motivate and retain the best performing individuals? Is it rewarding the best performing teams, units, regions, etc.?  If you can confirm that the plan is working well, then you can plan on a lighter incentive design process for 2016. If you get feedback that says something needs to change, then you should start more detailed planning now and make sure planning doesn’t get swept aside by merit and bonus planning, or other priorities in December and January. Ideally, new incentive plans/schemes should be issued in the first month of the new year, but no later than March, in most organisations.
  7. Finish your KPIs–it’s time to get realistic about what you can accomplish on your own time. What can you delegate? What do you need help with? If you (or your boss) have unspent consulting dollars, now is the time to get someone to help you get your KPI’s across the finish line. The only thing more tragic than not spending your consulting budget is not spending it AND failing to complete your KPIs!

One more priority applies to filipinos: it’s time to put up Christmas decorations!

Here’s wishing you a strong finish to 2016 and solid preparations for a successful 2017.


The Traditional Employment Contract is Ending

Is it just me, or are we seeing the end of the traditional employment contract as we know it?

There was a time when we firmly believed:

  • Do good work and you’ll always have a job here
  • You can expect to be promoted every few years
  • You will get an annual salary increase
  • Your boss will help prepare a development plan for you
  • Do what’s in your job description and you cannot be blamed
  • Do everything correctly and you will get a good rating
  • A college degree will ensure you can get a good job

I am not sure any of these are reliable anymore.

Let me suggest a new deal:

If you…

  • Never stop learning
  • Embrace change
  • Understand your customer’s needs
  • Know and build on your strengths
  • Exceed expectations
  • Create value
  • Avoid silos
  • Ignore your job description; do what is needed
  • Initiate job/career change according to your plan
  • Embrace contingent/contract work if you can excel and grow, and you’re currently stuck

…then good things will probably happen.

Goodbye, pay for performance. Hello, real management.

Forgive me for being stuck on this topic, that of companies dropping use of ratings. But I think we are only beginning to uncover the nature of this movement.

You see, I am a lifelong student of management. I have managed as well. I was managing others from age 19, fired someone at age 20, was an assistant manager in retail twice before it dawned on me I should study management. I was Outstanding Management Student my final year at Eastern Michigan University in 1986, and for 30 years I have managed, studied management and taught management. I have trained more than 1,000 HR professionals and over 500 managers in the area of rewards, in recent years.

Here is my opinion on the “trend” of major companies ending use of performance ratings: It depends. it’s a good thing for everyone to drop ratings when managers are ready and willing to manage without them. It’s a bad thing for everyone if managers are not ready.

What’s happening and why

The ground is shaking beneath the corporate world: linking pay allocation to performance ratings—the very foundation beneath most modern reward practices—is unraveling before our eyes. Respected companies such as Microsoft, Adobe, Yahoo, Google, Accenture, Deloitte, Cargill, Juniper and even General Electric are dropping the use of performance ratings. But they are not simply dropping the use of ratings, they are reconstructing the notion of “performance” altogether. But this time, the focus is different: instead of HR coming up with something new, these companies are establishing a new deal with people managers, making them accountable for managing their staff wisely, with HR moving back to an enabling role, versus a policy role.

The new deal with managers: manage your people. The new deal with employees: contribute to business success. The new deal with HR: help managers manage, but don’t do their jobs for them.

How we got here

Management has evolved from pre-HRistoric times where managers were accountable for getting work done. With no HR departments, managers communicated expectations, provided instructions and supervised (observed) their workers to make sure things were getting done and done right. Workers did whatever the boss asked them to do.

With the industrial revolution in the late 1800’s and early 1900’s came assembly lines, and with assembly lines came the notion of a “job”. Instead of trade names such as farmer, miller, smith, cooper and cook (which became surnames, like my own), roles became specialized and job descriptions were invented to clarify duties between worker A and worker B. Silos—or “jobs”—were invented, basically. Jobs were defined by industrial engineers seeking greater efficiency and productivity. Man, working in concert with machine and material, could produce things faster, better and cheaper when each person’s role was well-defined.

In 1911, Frederick Winslow Taylor, an American mechanical engineer and pioneer in management consulting, published Principles of Scientific Management, explaining how management systems could help maximize prosperity for both employer and employee, through maximum productivity. Rather than looking for the “most competent man”, organisations could perform better with ordinary people when using scientific management systems. Hiring practices evolved with role specialization, and personnel administrators were needed to hire and train the right skills. HR was born.

“The most important object of both the workmen and management should be the training and development of each individual…” – Frederick W. Taylor

While acknowledging the existence of “sweatshops” where people are overworked, Taylor addresses the more prevalent problem of people intentionally underworking.  He points the finger at the practice of paying people a standard rate of pay for doing the same work. These “ordinary schemes of management” result in low performance. He shares a story of a golf caddy boy who advised a green caddy to walk slowly behind his golfer since the faster they go, the less they earn, since they are paid by the hour. He further warned the boy that if he went too fast the other boys would give him a beating.

He goes on to identify an even worse productivity killer – workers hiding from one another the knowledge of how to work faster. Taylor conduct time-motion studies showing more motivated workers producing 30-100% more output than non-motivated workers, attributing the lower performance levels to non-differentiated pay for time worked, peer pressure and lack of knowledge sharing.

This was written more than a hundred years ago. Have we changed? Not much. Sure, we have merit matrices that ensure better performers receive an annual pay raise that is 1-3% higher than average workers. But does that differentiation truly unlock the kind of personal and organizational productivity Taylor was talking about? Does an extra 2% compel a worker to bring their ‘A’ game every day, share their productivity secrets with others and risk retaliation from others who appear lazy in comparison?

In early 2015 Deloitte conducted a study finding even today, 44% of workers work just hard enough not to get fired. We may be differentiating rewards, technically, but are we having any real impact on organizational performance? Individual performance?

Managers must manage

Deloitte (Australia), incidentally, decided in June 2015 to drop the “dreaded use of performance ratings” by June 2016. Instead, the new model requires managers to be more hands on, more confrontational. Managers need to be comfortable sitting down with their employees and discussing their strengths, but inevitably also their weaknesses.

Or as Taylor described it, “those in management should also guide and help the workman…each man daily should be taught by and should receive the most friendly help from those who are over him, instead of being, at the one extreme, driven or coerced by his bosses, and at the other left to his own unaided devices… This close, intimate, personal cooperation between manager and the men is of the essence of modern scientific or task management.”

The dropping of performance ratings, and the use of numerical ratings in various pay formulas, is not meant to eliminate differentiation in rewards. Even Taylor argued the need for differentiation. Instead it is intended to remove an overly-automated, calibrated, forced-distributed labeling process, in order to restore real management. Instead of HR inserting itself into the manager-worker relationship, we are stepping back and handing it back to the manager to own and develop.

Can our managers succeed? Can they develop a “close, intimate, personal cooperation?” Can they daily teach and provide friendly help?

My firm’s own research on Ending the Use of Ratings has shown that manager skills are the single most critical enabler of change, among companies dropping use of ratings. I have, in the last two years, trained over 500 line managers how pay works, how to make good pay decisions, and how to communicate with workers about pay, performance and development.

Is pay for performance dead? No! But it is being redefined. The construct of “performance” in most multinationals has consisted of the “what and the how”. The “what” is what people do, their results, generally measured against key performance indicators, or KPIs. The KPI’s are generally set as SMART goals (specific, measurable, attainable, relevant and timebound.) The how refers to behavior, i.e. competencies and living the company values.

Companies still say performance is important, but in place of the word performance, companies are more likely now to refer to “value” or “contribution” or “impact”. These concepts are broader and more inclusive than performance. Companies are more interested in business success than in completion of KPIs. Those individuals in each area who most contribute to (have the most impact on) business success should be paid the best, relative to the market. There is more focus on retention of key performers for the future than on rewarding people for what they did in the past. The concepts overlap a bit, but they are two different ways of looking at people value.

Managers will need to know their people better, the work they do, how they do it, and the results of it. They will need to judge whether a person is bringing value, or taking up space for a steady paycheck, doing just well enough to not get fired. The manager then needs to allocate scarce rewards in a way that retains those having most value. The concept of a normal merit increase will slowly dissolve over the next ten years, for companies whose managers can effectively manage without “ordinary schemes of management.”

Back in my business school days, I was also VP membership for the Society for the Advancement of Management, or SAM. The founder of SAM: Frederick W. Taylor.

RewardOnline Singapore is now live!

Companies are joining 21st Century’s RewardOnline compensation survey for Singapore. SMEs, MNC regional offices and others are joining Singapore’s newest salary survey in many years. The 21st Century RewardOnline survey is an established survey in Africa, and has now entered Asia, and customised entirely for Singapore as the first priority Asia market:

  • over 1,000 standard benchmark jobs crossing all key functions and multiple job levels
  • salary figures in monthly (12 or 13 or 14 months) or annual
  • data filters for Singaporean/non-Singaporean and local/local plus
  • allowances: car, housing or local plus
  • short term incentives and sales commissions
  • long-term incentives (simplified)
  • benefits: CPF, medical (GH&S) insurance, outpatient/specialist allowance, flex, other
  • project/age/trend the data to a future date when retrieving or exporting online data
  • cross-correlation with Hay, Mercer, TW and other grading systems
  • audited and validated by EY annually

There is no deadline like other surveys: just submit your data, confirm/validate the matches and get immediate access to online data in a week or two along with market comparison reports. The survey is easy to complete, with only about 25 columns in the data template, unlike the big surveys that ask for more than 100 fields of data.

If your company cannot afford USD $5,000 to join the “big” surveys or lacks the C&B staff to satisfy their enormous data requirements, this survey is right for you. It’s easy to convert from your current survey, or run both surveys in parallel for the first year, since all jobs are matched to a level that can be converted to the most common level systems. Conversions have been validated by the big firms themselves.


As the exclusive representative for 21st Century in Singapore, Freelance Total Rewards is proud to present the RewardOnline survey to you, in the manner most convenient for you. Contact us for more information.




Why do we reward performance?

Take this simple test:

Organisations pay for performance:
a.  because it is industry practice
b.  because the employee has earned their merit increase and bonus
c.  to motivate future performance with the company
d.  to retain the best performers

If you answered ‘a – industry practice’ no one can blame you. This is the safe ground. No one ever got in trouble for following the most prevalent practice.

If you answered ‘b – the employee has earned it’ you are seeing it from the employee’s perspective, and you would therefore believe that an employee who tenders their resignation before bonuses are paid still deserves their bonus. After all, they earned it.

If you answered ‘c – to motivate future performance’ you believe money motivates, according to B.F. Skinner’s theory of behavior modification, but ignoring Herzberg’s theory that money is a de-motivator (“hygiene factor”), not a motivator. You truly see money as a reward that will reinforce desired behaviors. Those who don’t get a bonus or merit increase are being punished for lack of performance, which will motivate them to try harder. Never mind what the person’s pay is relative to market, you are betting people are focused on themselves and maybe their peers, not the market.

If you answered ‘d – to retain the best performers’, you are using pay to communicate “love” to your top people, telling them they are valuable to the company. But if the employee has tendered their resignation before getting their bonus, you would probably not pay it, because you have already failed to retain the employee, so why waste company money? But if the person is remaining with the company, you are seeking to get the employee’s compensation toward the high end of market pay to put them out of reach of other employers.


You want to talk about what’s disruptive? Look at the trend that is building momentum of companies ending their use of performance ratings. They are not ‘a’ companies, following the herd. They are no longer ‘b’ companies using looking-back rating systems to compute merit raises. They are also not ‘c’ companies–if you read how these companies are now approaching pay, they are not trying to motivate with money as they are assuming people are motivated more by achievement and teamwork, etc. These companies are ‘d’ companies. They are using money as a retention tool, primarily. At least that is what I conclude having studied ten cases in some detail.

So, ask yourself. Why does your company reward performance?

If you are in Singapore, please join us this evening for Rewards Without Ratings…Really?, a networking event with panel discussion on this topic. Hope to see you there.