e-Lignment
How Web Technology is being used to Reinforce Global Reward Strategy
If there was any doubt that alignment of employees contributes to the creation of shareholder value, then Watson Wyatt’s Human Capital Index (HCI) demonstrates that companies with a high score on the HCI dramatically outperform those with low scores in the creation of shareholder value.
The HCI is a statistical regression model that isolates the input of individual human capital policies and practices and expresses each in bottom line financial terms. Clear rewards and accountability was found to rank second only to recruiting excellence as a driver of shareholder value.
The adoption of a reward strategy with a clear line of sight to a company’s key business objectives is one important element in driving shareholder value. But when a company is a multinational, operating across multiple countries, applying a consistent approach and gaining employee attention and understanding is a multi-dimensional problem. In the past it has proved too difficult for most companies to tackle.
The key lies in global communication to explain and reinforce the important messages about reward, especially amongst the senior management group who are expected to drive global business performance. Time differences, geographical separation, IT infrastructure inconsistencies and a lack of comfort and familiarity with the use of computer systems all combine to make consistent communication very difficult. All of these problems can now be solved using the internet and web technology.
Global connectivity and access to the latest information and important messages is readily achieved. The costs of communication have dropped dramatically and web technology provides both speed and relative ease of connection for disparate IT systems.
One of the most recent advances which the web has made possible is the production of global total reward statements. An increasing number of companies are finding this an attractive proposition, although by no means straightforward to implement. A common intention is to develop a global, real-time personalised reward statement for senior management across the world. The use of web technology enables a large amount of information to be made available on every executive's desk, whenever they want to look.
Our experience is that a good deal of preparation is needed to implement an effective system which, once operational, beats a paper statement by far. Beyond providing a statement which enables executives to see the total value of their own package, there are significant further attractions:
- almost limitless information can be provided about the various components of the individual's package
- modelling tools can be incorporated to answer questions such as "what will my stock options be worth?"
- projection tools can be provided to aid understanding of the benefits package
- where there is flexibility and choice in the form of remuneration, software can be included to enable executives to see the effect of different choices and register their preferred selection ('employee enrollment')
- where a company is wanting to implement widespread use of web technology, delivering total reward statements to executives over the corporate intranet can create top level buy-in and enthusiasm to drive change.
It is of course inevitable that a high quality finished product is only achieved if a suitable amount of time and effort is invested at the outset to plan and execute the design effectively. As with any business operation, adequate planning is essential to an effective result. In our experience companies do tend to underestimate the importance of the 'discovery' process and have found, to their later cost, the price of inadequate preparation. For this reason a project plan is needed and we generally find that a structured three-stage process is helpful.
Discovery
- Define the objectives and key success criteria.
- Document all components of the reward package.
- Understand the technology platform.
- Identify all relevant databases and systems.
Invention
- Determine the messages to be communicated.
- Determine the content, design the layout and text.
- Define the data capture process.
- Develop formulae and graphics.
Delivery
- Production of delivery software.
- Communication to employees
The desire to work at the speed of the internet age, where an internet 'year' is often cited as a period of only three months, means that a focused effort is required, with proper planning at the outset.
Some of the information required is readily available and can be relied upon - for example, base pay and variable pay.
Stock option data is typically held centrally, making collection of this information comparatively easy. However, benefits information tends to be much harder to obtain, especially when senior executives have complex arrangements arising from employment in a series of different countries. Pensions data is probably the hardest of all to capture, given the wide variation in plan designs and the typical practice of utilising local standard software products for the administration, often handled by third parties.
The prospect of a personalised reward statement delivered through the company's corporate intranet is highly attractive to most executives. As the finalised product is so simple to use, there is a tendency for executives' expectations to be very high and it is important to manage these. Often the statements will provide a frozen, historic view when they are first produced, whereas individual expectations are for a fully operational real-time system, with full modelling capability. The required IT solutions are now available, but executives need to understand that it will take time to connect all of the diverse information from many separate computer systems around the globe. If expectations are managed well, the corporate intranet offers a real opportunity for making rapid progress in using web technology to reinforce key corporate messages to excite and motivate key executives worldwide.
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