Perspective - Summer 2009

Pay-for-Performance Transformation for SME

A new stage for talent to shine

By Nancy Chiu

Mr. Steven Hong with his employees at Yoke Industrial Corp.'s factory

STEVEN HONG, President of Yoke Industrial Corp. of Taiwan, was drawn to a single presentation slide, shown at the beginning of the partnership between Watson Wyatt and his company. It was a slide that described the relationship between the organizational structure, job duties, market information and the compensation structure.

That was exactly what Steven Hong wanted, something that captured the essence of the growing pains experienced by Taiwanese small and medium businesses (SMEs). In the beginning, these businesses may have only needed capital and skills, but they had matured as the age of information technology and enlightened management came into being. "It's like growing out of your clothes," said Steven Hong. He understood that as organizations grow, structure and management policy needed to evolve together to accompany employees' long-term growth at the company. Past practices of giving hefty raises to employees who were about to leave were not only ineffective, but grew and eventually led to more related problems.

In 1985, Steven Hong started Yoke Industrial Corp., a trading business involving chains and safe sling hooks. In 1996, he created his own brand, Yoke. In order to provide his clients with products that are safer, more reliable and of better quality, he invested 30 million Taiwan dollars into inspection and safety equipment. In 2002, Yoke received the Taiwan SME's Innovation Award and the Rising Star Award from the Ministry of Economic Affairs, R.O.C. In 2008, Yoke became the recipient of the National Award of Outstanding SMEs.

Steven Hong knew the time had come to create grading structures and compensation policies based on job duties and competencies. "Salary tables that resemble train schedules do not reflect reality and are unfair; the concept of salary based on the accumulation of experience cannot truly reflect employees' performance but instead drains talent away from companies" he said. Thus, in order to attract and retain the best talents, Yoke moved away from "train schedules" and benchmarked its salary structure against market data to make compensations more competitive. Every job grade had a "pay range," which provided differentiated compensation for employees with different levels of maturity and competency.

"This, as Mr. Hong said, provided the best incentive for employees to perform at their best which in turn, increased productivity for the company."

Consultants from Watson Wyatt traveled between Taipei and Taichung while the policy transformation was taking place. Said Mr. Hong about the consulting team: "They were able to explain clearly the proper method of structuring pay using articulate and understandable concepts and methods." As they were communicating about the new policies, the consultants provided valuable assistance by acting as a fair, impartial third party.

"The consultants were clearly aware of the necessity for each employee to understand the company strategy and why the new policies were set in place. Because of this, the majority of employees were supportive about the new policies," Mr. Hong said.

The consultants from Watson Wyatt were even able to provide detailed explanations and solve the issues when opposing opinions were voiced. "Management needed to look at the full picture, instead of individual cases; they had to stand firm to defend their strategy," said Mr. Hong who believed that the change was necessary for his company to keep growing and is determined to make it work.

The change was mostly implemented smoothly and successfully. "There is always a degree of natural resistance for employees to accept change." Although the atmosphere at Yoke did not change as a result of the organizational transformation, Mr. Hong feels that "employees had taken more initiatives than before." This can be largely attributed to performance-oriented policies, which connects employees' competencies, performance and compensation, enhancing their motivation and engagement.

Steven Hong believes that the economic crisis will turn into generating future opportunity for Yoke because "we are fully prepared for the economic upturn when it happens."

Yoke is now competing globally with a more diversified product line, better quality and pricing. But most importantly it can now rely on an increasingly efficient and motivated team of talent. Mr. Hong places strong emphasis on employee development, he believes "employees' engagement is created by well-designed policies, and the development of talent will lay the ground for a stronger economic future for companies."

- Nancy Chiu is a Senior Marketing Specialist with Watson Wyatt Taipei office.