Delivered at the 2016 World@Work Total Rewards Conference, this presentation offers an alternative to annual salary increases while increasing the meaningfulness of rewards, aligning rewards with performance, and making better use of the time of both employees and managers. Presented by Juan Pablo Gonzalez, partner at Axiom Consulting Partners and Bruce O'Neel, VP-HR at CSG International.

1. STRATEGY § ORGANIZATION § TALENT
Annual Salary Increases:
Is the Juice Worth the Squeeze?
Juan Pablo Gonzalez
Partner
Axiom Consul1ng
Partners
jgonzalez@axiomcp.com
Bruce O’Neel
VP—Human Resources
CSG Interna1onal
bruce.oneel@csgi.com

2. PAGE 2 | Annual Salary Increases: Is the Juice Worth the Squeeze?
Juan Pablo Gonzalez
Partner, Axiom ConsulDng Partners
§ +25 years experience in Total Rewards,
increasing Human Capital ROI, Strategy
& Organiza1on Transforma1on
§ Partner at Axiom Consul1ng Partners
§ Senior corporate HR roles at Constella1on
Energy, BaaN Co., Aon, Philip Morris
§ Co-author of Shockproof: How to Hardwire
Your Business for LasAng Success
Bruce O’Neel
Vice President—Total Rewards &
HR OperaDons, CSG InternaDonal
§ +20 years experience in HR Strategy,
Compensa1on & Benefits, Performance
Management, Training & Development
§ Senior corporate HR roles at T-Mobile,
Safeco Insurance, and Verizon
One of the world’s largest and most
established providers of business
support solu1ons, primarily serving
the communica1ons industry.
Consul1ng firm helping clients
succeed by aligning strategy,
organiza1on and talent.

3. PAGE 3 | Annual Salary Increases: Is the Juice Worth the Squeeze?
Ineffective pay practices are making headlines!
Wall Street Journal
“ Annual wage growth has been stuck
near 2% since the economy began to
steadily add jobs in 2010.”
Harvard Business Review
“ Why More and More Companies Are
Ditching Performance RaDngs”
Wall Street Journal
“ CompensaDon Gains Fail to
Break Out for U.S. Workers”
New Yorker
“ The Push Against Performance Reviews”

4. PAGE 4 | Annual Salary Increases: Is the Juice Worth the Squeeze?
What do most annual compensation-related processes look like?
Typical processes are well-understood, if not well-liked.
Effec9ve financial controls.
“The Devil you know.” GOOD
THE
BAD
THE
UGLY
ANDTHE
Minimal differen9a9on.
Poor link to pay.
People “game” the system.
A growing belief that
“it’s not worth it.”
Complex processes at the worst 9me.
Stagnant, minimal salary increase budgets.
Forced ra9ngs distribu9ons.
Unclear messages about the value of performance.

5. PAGE 5 | Annual Salary Increases: Is the Juice Worth the Squeeze?
Session Objectives
Learn a new approach that addresses long-standing
challenges in rewarding performance by:
Increasing the meaningfulness of rewards
Aligning rewards with the nature
of the performance achieved
Making beaer use of the Dme of
both managers and employees

6. PAGE 6 | Annual Salary Increases: Is the Juice Worth the Squeeze?
Eliminate duplica1on
and non-value add
micro-management Facilitate
communica1on
and alignment:
improve knowledge
of others, one agenda,
one cadence
More
accountability
on leaders for agile
decision-making
Strategy, structure and people alignment enables a more effective organization
Top management proximity
to customers, suppliers
and other stakeholders
Empower our people
and improve u1liza1on of
their skills and competencies

7. PAGE 7 | Annual Salary Increases: Is the Juice Worth the Squeeze?
People & Process Perspective
PEOPLE & PROCESS PERSPECTIVE
Develop our people to compete in the
global market, allowing personal growth
Ensure
employees have
the right skills
and talents to
deliver on our
business
objecDves
Expand in-depth
domain experDse
necessary to
ensure long-term
success
Align
organizaDon to
maximize value
delivery—
Business Units,
DevOps
Embrace a
culture of strong
accountability—
delivering on
commitments to
colleagues and
customers
Align goals and
compensaDon
plans to meet
our business
objecDves

8. PAGE 8 | Annual Salary Increases: Is the Juice Worth the Squeeze?
A holistic Total People Strategy drives employee behaviors
to ultimately influence business outcomes
LINKAGE MODEL
§ Engagement
§ Reten1on
§ Produc1vity
§ Customer service
Employee
Behavior
Customer
Behavior
§ Customer sa1sfac1on
§ Customer a^rac1on
§ Customer reten1on
Financial
Performance
§ Labor cost
§ Opera1ng costs
§ Opera1ng margin
§ Revenue growth
§ ROIC
§ TSR
Value ProposiDon
Components
Performance-
Based Rewards
Career, Leadership and
Environmental Rewards
Founda1onal
Rewards

9. PAGE 9 | Annual Salary Increases: Is the Juice Worth the Squeeze?
Performance Management Transformation
KEY TRANSFORMATION THEMES
Agile Goal Se_ng w Coaching for Performance w Effec1ve Con1nuous Feedback
Strengths-Based Development w Rewards w Social Recogni1on/Culture of Celebra1on
TRANSFORMATION RELIES ON A SHIFT IN PM PRINCIPLES
Annual, One Time Ongoing, con1nuous
Rigid, fixed Flexible, agile, simple
Centralized Local, Real-1me
Appraisal focused Development Focused
Remedia1on Strengths
Corporate mandates/rules Manager accountability
ConDnuous feedback
vs. scheduled annual
salary adjustments
and incenDve awards
Flexible, agile, simple
performance management
vs. standard
compensaDon plan
Development focused
performance management
vs. outcomes-driven
pay programs
RESULTING COMPENSATION CHALLENGES

10. PAGE 10 | Annual Salary Increases: Is the Juice Worth the Squeeze?
You’ve made it this far…
Now what?!?!
Once your organizaDon has risen to the challenge of transforming
performance management, employees and their managers
will expect appropriate rewards for the performance achieved.
Will your compensa9on programs be
barriers or enablers in rewarding performance?

11. PAGE 11 | Annual Salary Increases: Is the Juice Worth the Squeeze?
Should you consider Achievement-Based Compensation?
! Align rewards with the very nature of performance that
is achieved; to provide greater nuance and clarity
regarding expecta1ons and consequences?
! Foster be^er communica1on with a focus on progress
and growth?
! Increase the meaningfulness of rewards?
! Make be^er use of manager, employee and HR 1me?
Are your current compensaDon tools sufficient to:

12. PAGE 12 | Annual Salary Increases: Is the Juice Worth the Squeeze?
The typical approach to paying for performance:
Average
Performer
Top
Performer Difference
Is $22 a paycheck enough to recognize superior performance?
Aker-tax pay
period increase
∼$43 ∼$65 $22
Annual Salary $50,000 $50,000 —
% Increase 3.0% 4.5% 1.5%
Annual increase $1,500 $2,250 $750
Increase per
pay period
$58 $87 $29

13. PAGE 13 | Annual Salary Increases: Is the Juice Worth the Squeeze?
Should you change how you pay? Three considerations:
§ Begin with realis1c assump1ons:
• Performance—and ra1ngs—distribu1on
• Are individual and organiza1on achievement linked?
§ Do labor market condi1ons suggest equal movement –
up or down—across all jobs? (Or is the merit increase
process a COLA in sheep’s clothing?)
§ What percent of employees are eligible for incen1ve
compensa1on?
§ To what degree do incen1ve award payouts vs. target vary
from year to year and between employees in similar jobs?
§ Time-bounded or ongoing?
§ Frequency: Does the achievement align with fixed
(twelve-month) calendar year increments?
The nature of the
achievement to
be rewarded
Mix of Pay
DistribuDon
and Funding

14. PAGE 14 | Annual Salary Increases: Is the Juice Worth the Squeeze?
What is the achievement that is being rewarded?
Demonstrated Competency Growth
§ Learning (e.g. adding, subtrac1ng)
§ Cumula1ve: Addi1on and subtrac1on
make it possible to learn mul1plica1on
and division
Performance vs. ExpectaDons
§ “Doing” (e.g. balancing a checkbook)
§ Point-in-1me: What have you done
for me lately? (Is the checkbook
balanced this month?)
PromoDon-like
§ Vehicle: Base pay increase to
recognize increase in value, that
supports con1nued growth
§ Timing: Pay upon achievement of a
material increase in competence (not
necessarily every 12 months)
§ Magnitude: Consistent with the
increase in capability (> 3% of base)
IncenDve-like
§ Vehicle: Short-term cash
compensa1on to reward achievement
of objec1ves during a defined period
§ Timing: Commensurate with the
period of performance
§ Magnitude: Compe11ve in the labor
market and consistent with the value
of results delivered
NATURE OF ACHIEVEMENT
NATURE OF REWARDS

15. PAGE 15 | Annual Salary Increases: Is the Juice Worth the Squeeze?
Bringing it all together: Achievement-Based Compensation
Demonstrated
Competency
Growth
Significant
Above budget
raise
No bonus
2x “typical”
raise
Target bonus
2-3x “typical”
raise
Above
target bonus
Meaningful
Raise = budget
No bonus
Raise = budget
Target bonus
Raise = budget
Above
target bonus
All Others
Performance
counseling
No raise
Target bonus
No raise
Above
target bonus
Below Meets Exceeds
Performance vs. ExpectaDons

16. PAGE 16 | Annual Salary Increases: Is the Juice Worth the Squeeze?
Are we ready to break loose?
Some will see the degree of change daunDng.
“ How will we deliver on this?”
Current rewards infrastructure is entrenched.
“ Can our financial and HRIS systems
support a new approach?
Employees will have to understand
and adapt to change.
“ We spent years educaAng managers and
employees on how our current system works
and now we are going to change it?”
Do we have the courage to break with conven9on
and address the issues we’ve been facing for so long?