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Creating Flexible Compensation and Reward Strategies

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Creating Flexible Compensation and Reward Strategies Powered By Docstoc
					Creating Flexible Compensation & Reward Strategies to
facilitate the current economic climate – Case Study
Presented by: Farid Ahmed, Head – HR for Gulf & E
P         d b F id Ah d H d                         Africa
                                      f G lf East Af i
for the IIRME – Compensation & Benefits Forum, 2010
                                                1
Agenda:
 Case Study: “Nokia Siemens Networks”
    Foundations of our company Strategy, Vision & Values
    HR Integration post merger
 Engaging our employees
 NSN’s Total Reward Principles
 NSN s
 What did NSN do to align the C&B structure to facilitate the new
 corporate identity/change and strategy
 What to keep in mind whilst making changes to your systems
Parent relationship: a key asset


Opportunities th
O                 hd
     t iti through deep     I i ht and l       i
                            Insights d learnings of   f
consumer understanding      opportunities in different
                            industries
                  p
End-to-end development of
communications solutions    Strong global presence
Common go-to-market and     Connection to general
customer collaboration      infrastructure projects
Pioneering innovators join forces
      Siemens since 1847                       2007
                                                      Nokia since 1865
    Industry first live demonstration   2006          2004   Industry first commercial
                      g
            of Long Term Evolution                           end-to-end 3GPP IP
                                                             Multimedia Subsystem
                   Built first UMTS     2001
                 network in Europe                    2001   World's first Multimedia Messaging
                                                             Service Center
The first telephone exchange using      1980                 World's first triple-mode (GSM,
     the digital electronic switching                 1999
                                                             EDGE, WCDMA) base station
 system EWSD goes into operation
                                               1950   1991   World's first GSM call
             The beginning of data      1957                 made in Radiolinja's network,
                       processing                            supplied by Nokia

        Construction of Telefunken                    1982   Europe's first digital exchange,
                                                             E      ' fi t di it l     h
                     television set
                                        1935                 the DX 200
                                                      1967   Nokia's first generation
      Completion of the Rhineland       1921                 of manual radio telephone systems
                 telephone cable
                                               1900          Roots in           bb
                                                             R t i paper, rubber,
                    First automatic     1905                 and cables, in just over 100 years
               Telephone exchange                            Nokia becomes a powerful
                                                             industrial conglomerate
             Russian long-distance      1855
                telephony network

                        Founded 1847                  Founded 1865
   Leading Global Enabler of Communications
   Services
   Services*
                                                                    Scale enables
                                                                    •                         y
                                                                        Overall cost-efficiency
                                                                    •   Global reach in services and sales
                                                                    •   R&D power for portfolio of new technologies
                                                                    •   Global platforms and partners




          Ericsson           Nokia               Alcatel -     Huawei           Cisco             Nortel   Motorola
                             Siemens             Lucent
                             Networks

All companies with comparable carrier business revenues,
Source: Nokia Siemens Networks estimates and company reports    *Based on 2008 carrier business revenues
So what did we do post merger at NSN?
Created a New Mission & Vision
Statement
The future of communications
  One world connected.

 Broadband          Multitude of
 everywhere         services and
                    business
                    models
        5 billion              Internet is the
        connected              heartbeat of the
                               modern society
So what did we do post merger at NSN?
Created       t f                  hi h    ld drive       d
C t d a new set of company VALUES which would d i a new and
blended LIVING CULTURE in the company




1. Focus on Customer
      p
2. Inspire
3. Innovate
                 p y
4. Communicate Openly
5. Win Together
Nokia Siemens Networks’ Capabilities:
           Capability                        Resources
Product Innovation             Product R&D, Marketing research and
                               testing, trend insight, Mfg. know-how


Distribution / Logistics       Logistics knowledge, centralized
                               warehouses, forecasting,
                               warehouses forecasting distribution


Unique Customer Relationship   Loyal committed customers, ability to
 Experience
&E     i                               li th ff i b         d    th
                               personalize the offering based on the
                               customers needs, employee
                               commitment, knowledge of customers,
                                         g
                               trend insight




                                 8
Guidelines for HR Integration
                                                   Start here ...

                                               Be clear about current        As Is Analysis
                                                state of HR Systems
Shared Resources, Open                          and Process in both
                                                     companies
Communication
                   Information Shared                                        Analyze both company
                     through various                                         jobs and functions and        Job Leveling
                    public and easily                                        unify the organizational
                  accessible resources                                            competencies


                                                                                                              HR Systems
Functional                                                                                                    Integration
                Functional and                                                     HR Systems & Process
Road test       Organizational                                                     Integration by Country
and          Effectiveness tweaks
Tweaks

                                                                                Aligning Compensation,
                  Change Management                                                Benefits & Reward        C&B
                Programs Executed from        Nokia          Siemens
                   the beginning with                                             To a new a balanced       Integration
Change          constant communications       Employee       Employee                   structure
Management, Open
Communication
                                 Introduce a new
                            performance management                   New HR Systems
                              program and personal                    Training & New          Training, Re-Induction
                             development plan for all               Company Induction         Ch      C        i ti
                                                                                              Change Communication
               Performance          employees
               Management
               Implementation
What is Employee Engagement?
Why is it important?
Employee Engagement has an immediate impact on
business performance

 Engagement impacts Productivity, Business
 Performance and Customer Satisfaction.
 Disengagement increases voluntary
 employee turnover at high cost to the
 business
 Estimates f di      d    k   i
 E ti t of disengaged workers is
 somewhere between 16% and 50% of the
 workforce.
 Employee disengagement costs the U.S.
                   $350 billion in lost
 businesses nearly $
 productivity annually. (Deloitte and
 Touche; Gallup)
 Saratoga Institute estimates the average
 cost of losing an employee can be 1x or
 2x annual total salary.
NSN Engagement Framework
Employee engagement is “a heightened emotional connection that an
employee feels for his or her organization, that influences him or her to
exert greater discretionary effort to his or her work".



                                                   engaged,
                                       To be fully engaged employees must have:
                                       • Rational understanding of the organization's strategic
 Rational                  Emotional
                                         goals, values, and how employees fit (Think)
            Engagement
                                       • Emotional attachment to the organization (Feel)

                                       • Motivation and willingness to invest discretionary effort to
                                         go above and beyond (Act) – Reward and Recognition
                                         are key drivers here
            Motivational
Employee Engagement & Desire to Stay

       Personal Needs               The Job
What I want out of                   Meaningful & Challenging
                                    Work
a job…
                                     Career Development
                                    Opportunities
The return I expect for my            Recognition & Reward
efforts
                                   Personal
                                     Empowerment
The relationship I desire
                                     Two-way feedback
with my manager …
                                     Well being at Work

The work situation I
prefer …                     FIT   Organizational Culture
                                    Leadership style and
                                       g
                                   manager actions
                                     Trust
The type of organization
                                     Innovation
I want to be part of …
                                     Collaboration
Total Reward* Philosophy Principles
                                                                           Our reward programs
Reward programs                                                            are designed to attract
                                                                           and retain key talents
                                                                              and engage our
 1.    Reflect our values                                                       employees.
                                                                                employees
 2.    Are understood and appreciated by employees
 3.    Contribute to NSN business success by balancing market
       competitiveness and affordability based on a total reward approach.
 4
 4.    Are
               Performance driven (individual and company)
               Flexible
               Fair



 * World at Work (WaW) definition: Total Reward is the complete package for employees, including all
 forms of compensation, benefits perquisites and the like. Everything the employee perceives to be of
 value resulting from employment relationship.
The NSN Reward House



                          Total Rewards
                 Philosophy and Principles




                                          Supplemental   Global
  Base Pay   Incentives       Benefits
                                              P
                                              Pay        Mobility




                          Job Levelling
                                                                                                                                      Total Rewards




Compensation Elements
                                                                                                                                Philosophy and Principles




                                                                                                                                                            Supplemental   International
                                                                                                             Base Pay   Incentives       Benefits               Pay           Mobility




                      y
               Base Pay                                                                                                              Job Levelling




               • Your payment for your everyday job, recognizing your daily contribution to the business.
               • Increases depend on your performance and your development in the role.
               • Part of Total Target Cash (TTC)


               Short Term Incentives
               • Reward for results achieved based on predefined objectives in Achieving Together process.
               • Six months cycle.
               • Part of TTC


               Long Term Incentives
               • Cash plan which ties potential rewards to NSN’s long term success as a company.
               • Plan cycle is three years.
                 Very limited nomination b
               • V    li it d                 d    ti i ti
                                   i ti based participation


               Benefits
               • Benefits include programs that are used to supplement cash compensation an employee receives e.g.
                 holiday allowance, healthcare, pension schemes.
               • Most policies are country specific and will vary by market


               Supplemental Pay
Supplemental   • Additional payments for overtime, standby, call-out and shift-working
    Pay
               • Eligibility limited to certain jobs and grades
               • Global policy with local variation according to local laws and prevailing market practice
TOTAL Target Cash – Compensation - Reward



                     Short Term       Benefits &       Supplemental         Long Term
   Base Pay                                                Pay
               +     Incentives   +   Allowances   +                    +   Incentives

                                                         Restricted          Restricted
                                                        participation       participation



Total Target Cash                                      Total Reward
An employee's total cash                               Total reward package including
consists of base salary and                            all potential components
                        target.
short term incentive at target                         adding up to the total income.



Total Compensation
Total compensation package that enables us to
attract and retain key talent.
Value of Additional Reward Elements at Middle
Management JG
    40%
    35%
    30%
    25%
    20%
                                    Benefits
    15%
                                    Overtime/Call Out etc
    10%                             S i l Tax
                                    Social T
     5%
     0%

               s
               o




               e
               o

               g




      Lo h

      ng n



             la
            or
           jin

           po
            ol




    Ba do
            ic




          al
        un
        Pa




         al
        ei

       Es




         n



        D
       B



      M
    o
  Sa
A range of recognition possibilities


                               Cash
                               Award
                             for innovation
                             & outstanding
                              contributions


                            Annual
                      Top Performer Event
                   Trips, role of honor, competitions


                 On-the-spot-Recognition
                   e.g. Dinner, small gifts, flowers



                      Acknowledgement
              e.g. Public recognition, praise, “thank you”
Recognition Best Practice


                                  Top Performers should receive
Timing is crucial – soon after             q         g
                                  more frequent recognition – but
the achievement is better         solid performers should also be
                                  recognized
Consider the appropriate form –
public recognition in                     g peers to recognize
                                  Encourage p            g
                                  each other
employee’s extended
workgroup can be appreciated      Formal recognition should not be
more t a a cas a a d
 o e than cash award                                   y y
                                  a substitute for everyday
                                  gratitude and sincerity
Deliver recognition in a
personal and honest manner        Recognition must not be used to
and show the connection
    sho                                          Compensation
                                  address other Compensation-
between accomplishments and       related challenges such as low
recognition                       base pay or a non-payment of
                                  short term incentives
Benchmarking Process – External Market Data

Benchmark = a reference point for a measurement


  Once a year NSN looks at what comparator companies are paying for benchmark jobs within the
  same local market
      •   Core comparators are listed below, and in addition local comparators are
           dd d h th               i ifi tl important t th l
          added when they are significantly i                   l    k t
                                                 t t to the local market
      •   Local market may be defined as region in a country, one country or a grouping
          of countries if relevant
Budget Elements
 Annual Salary Budget includes multiple elements and is defined Annually at Global and
 Country levels to cover all increases to Employee TTC (Total Target Compensation)
 during the year.


                                                                    Increases due to national labour
                            Mandatory / Statutory                   agreements or government order.
                                Increases
         lary Budget




                                                                    Payable even in salary freeze.


                                                                    Performance related salary increases
                            Merit and Promotion                     determined by Rating and position in range.
                                                                           Promotion.
                                                                    In Job Promotion Delivered through Annual
 nnual Sal




                                                                    Compensation Planning (ACP).

                                                                    Increases in salary with and without
An




                                                                    promotion to higher job level.
                                    Off Cycle
                                                                    Takes place during the year according to
                                                                    business priorities.

                       Budgets are defined at country level according to local market conditions,
                       business priorities and affordability
   2008 and 2009 Financial performance
   Net sales and operating profit
                  p      gp
 EUR                              Net sales                                  EUR                   Operating profit
Million                                                                     Million
                                                                              350
                 4071            4340
                                                                                300         274
 4000
                         3504                                     3625
          3404                                                                  250                      225
                                                  3199
                                          2990                                                                                  201
 3000                                                     2760                  200               177

 2000                                                                           150

                                                                                100    81
 1000
                                                                                 50
                                                                                                                      2
     0                                                                            0
          Q1     Q2       Q3      Q4       Q1      Q2      Q3       Q4
                                                                                  50
                                                                                 -50
                                                                                                                           53
                                2008        2009
                                                                                -100
                                                                                                            -122
                                                                                -150
   Tables show non-IFRS results from Q3/08 onwards when Nokia started
                                                                                       Q1   Q2    Q3     Q4 Q1        Q2   Q3   Q4
   reporting both IFRS and non-IFRS results. Non-IFRS results exclude special
   items for all periods.
                                                                                                        2008   2009
 Merit Guidelines

Drivers for the size of salary increase in the guidelines




      Performance
      P f                                                     Depends on:
                                    Country
      Rating from                                      1) Market movement
                                    Budget             2) NSN position to market
          ATP
                                 of country where      3) Business Priorities and
                                    employee is        Affordability
                                      located




                                  Position in
                                 Salary Range
Managing Change…
And when changing systems or modifying..always
remember:




                         27
             p g            p
“ The art of progress is to preserve order amid
  change, and to preserve change amid order. “
   - Alfred North Whitehead


Thank you




My Contact Information:
Farid.ahmed@nsn.com ; faridahmed25@gmail.com
                                   28
Mobile: +971-50-6452794 (Dubai)

				
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