Daniel Hibbert -Mercer Presentation

1. Segmenting talent and reward
PPMA Conference - 2013
Daniel Hibbert

2. MERCER
Agenda
Page
Why are new reward models needed? 2
Segmentation of talent and reward 7
Getting value from reward 10
Four practical ideas for changes 15
Questions and discussion 21

3. MERCER
Why are new reward models needed?
3

4. MERCER
Characteristics of local government reward
Strengths
• Equal pay compliance
• A high degree of
transparency
• Strong governance and
processes
Weaknesses
• Too many job titles and grades
• Negotiated, not designed
• No link between pay and
performance
• Little connection between pay
and talent management
• Poor and inconsistent
communication
• These findings are based on PPMA Sponsored research at Hertfordshire
County Council and the Wigan Metropolitan Borough Council
4

5. MERCER
The role of equal pay in reward management
• Gender pay gaps in local government relate to:
– Large numbers of women in lower paid jobs
– In places limited numbers of women in senior roles
• Equal pay compliance is a baseline: it should not be the sole objective of any reward system
• Varying reward solely by job evaluation and tenure is:
– Incompatible with developing a flexible, responsive and high-performing organisation, and
– May be just as risky as alternative approaches to managing pay
“It is a truism, better repeated than left unsaid, that not every difference in pay between men and
women is proof of unlawful sex discrimination.”
Lord Justice Mummery – Haq v the Audit Commission - December 2012
5

6. MERCER 6
Pay is negotiated, not designed
This is typical local authority pay and grading structure:
0%
2%
4%
6%
8%
10%
12%
14%
16%
18%
20%
G
rade
1
G
rade
2
G
rade
3
G
rade
4
G
rade
5
G
rade
6
G
rade
7
G
rade
8
G
rade
9G
rade
10G
rade
11G
rade
12G
rade
13G
rade
14
SeniorM
anager5
SeniorM
anager4
SeniorM
anager3
SeniorM
anager2
SeniorM
anager1
Green Book Grades
%PayRange
0
50
100
150
200
250
300
NumberofNJC/HayPoints
% Pay Range
NJC/Hay points

7. MERCER
Why “one size fits all” cannot work
7
• Local authorities increasingly have to deal with different:
– Service delivery models
– Types of jobs
– Employee aspirations (including generational differences)
– Employment markets and talent flows
• New models are needed to ensure that local authorities get value
for money for their expenditure on reward
• These models will be different for different local authorities and for
different segments of the workforce within the same authority

8. MERCER
Segmentation of talent and reward
8

9. MERCER
Alternative talent and reward models
Loyalty
model
Market
model
Career
model
Dynamic
model
Specialist skills need to be
developed internally and long-term
loyalty is required by the employer
Skills are readily available in the
external market and long-term
career opportunities with the
employer are limited
Long-term career opportunities are
available for those who develop
within the career path
The job is flexible/ broadly defined
and the capabilities of the
individual job holder are critical to
the value created in the role
Talent characteristics
9
Incremental pay spine, with pay
back-loaded so higher levels of pay
become available with service
A single rate of pay aligned with the
external market
A pay system that fits with the
career path to support the
development of individual through
the career path
Pay reflects both the external
market and is varied by reference to
the capabilities of the individual
Reward approach

10. MERCER
The Market Model
Contrasting the market model with a career model
The Dynamic Model
Minimum
salary
Developing
Range
High
Performing -
Consolidated
High
Performing -
Non-
Consolidated
50
55
60
65
70
Basesalary£'000
10
Additional salary
paid to consistently
strong performers
Individuals who are
still developing into
their role may be
paid in this range
Paid to exceptional
performers, and not
consolidated into
Base Salary
Minimum
salary
Developing
Range
21
22
23
24
25
Basesalary£'000
The Rate for
the Job paid
for the
expected
standard of
performance
Individuals who
are developing
may be paid in this
lower range
The Rate for the
Job paid for the
expected
standard of
performance

11. MERCER
Getting value from reward
11

12. MERCER
Element of Employment Value
Proposition
Overall market positioning
Lag Compete Differentiate
Pay and
benefits
Base pay
Profit sharing and
incentives
Pension
Other benefits
Wellbeing policies
and practices
Development opportunities
The nature of work (working
environment, job satisfaction,
etc.)
Private
Sector
Local
Government
Private
Sector
Private
Sector
Local
Government
Private
Sector
Private
Sector
Private
Sector
Private
Sector
12
Local
Government
Local
Government
Local
Government
Local
Government
Local
Government
A Total Reward approach

13. MERCER
Why communication matters
% of employees
satisfied with their rewards
Source: Mercer’s ‘What’s Working’ study
National Norm
Communication
rated good
How satisfaction
changes if:
Communication
rated poor
61%
71%
33% 27%
61%
52%
% of employees
committed to their
organisation
• Mercer research shows a clear correlation between
– Communication and employees’ satisfaction with reward, and
– Communication and commitment
13

14. MERCER
Performance must be part of that communication
Business performance
expectations
Poor individual
performance
Performance
Time
• A candid performance discussion must take place prior to the cross-over
point where individual performance moving from “Strong” to “Poor”
• Individual performance must keep pace with increasing and changing
business performance expectations
Strong individual
performance
14

15. MERCER
What is good practice in communication?
1. Total Reward statements
3. A “talent conversation”:
– In which the line manager provides
feedback on both in-year performance and
long-term development, and
– Can relate this to the reward system
2. A reward system that is clearly linked to talent
development and performance
• This conversation cannot take place if the pay system has no
connection with talent management and performance
• Without this reward systems cannot provide value for money
• Communication is not just about
Total Reward statements and
policies. There are three critical
components:
15

16. MERCER
Four practical ideas for changes
16

17. MERCER 17
Four practical ideas for changes that can be made
• We have identified four practical and easily implementable actions
that can be taken
• These are:
1. Rationalising grading structures to enable efficiencies and de-
layering;
2. Making performance a part of reward communications
3. Useing the Career Model for jobs in clear career paths
4. Adopting the Dynamic Model of reward for Senior Manager pay
• These changes are a first step towards moving to modern and
more flexible reward structures

18. MERCER 18
1. Rationalising grading structures
• Existing grades
combined into
broader Levels
• Current grades
become Pay Zones
within these Levels
to retain control of
costs
• A standardised Job
Catalogue used to
limited the number
of different jobs
10,000
15,000
20,000
25,000
30,000
35,000
40,000
45,000
50,000
Level 1
(G
rades 1
and
2)
Level 2
(G
rades 3
to
5)
Level 3
(G
rades 6
to
8)
Level 4
(G
rades 9
to
11)
Level 5
(G
rades 12
to
16)
£'BaseSalary
Zone 5
Zone 4
Zone 3
Zone 2
Zone 1
Min

19. MERCER 19
2. Making performance a part of reward communications
• Ensure that
performance has
potential pay
consequences for
all employees
• Reward
employees at the
top of pay ranges
with non-
consolidated pay
Progressing
through pay
ranges
At the top of
the pay
ranges
4 Outstanding
1% Non-
consolidated
3
Above required
standard
2 Required standard
1 Needs improvement
Unsatisfactory
Performance Outcome
No additional
payments
No increment
Increment

20. MERCER 20
3. Aligning pay with career development
Newly defined
Capability Levels
SCP
Point
£
35 29,236
36 30,011
37 30,851
38 31,754
39 32,800
40 33,661
41 34,549
42 35,430
43 36,313
44 37,206
SeniorSocialWorker(Grade10)
Current
approach
Advanced 2
1% Non-consolidated
1% Non-consolidated
SocialWorker(Grade9)
Advanced 1
Established
Developing
• Create linked grades to
enable employees to
progress based on their
personal development
• Movement between levels
within linked grades should
be based on individual
competence, assessed
against role-specific
criteria
• At higher levels
progression should also be
based on business need
Careerdevelopment

21. MERCER
4. Adopting the Dynamic Model of reward for senior managers
21
Senior
Manager
roles circa
2005
High job
complexity/
flexibility
Low job
complexity/
flexibility
Pay
determined
by job size
Pay
determined
by individual
capability
Senior
Manager
roles circa
2015
Senior
Manager
roles 2013
• Individual capability
needs to become
part of pay
determination for
more flexible and
complex roles
• This requires a
Dynamic Model
of talent
management
and reward which
varies pay for
different levels of
individual capability

22. MERCER
Questions and discussion
22

23. MERCER
Daniel Hibbert
Principal
Mercer
Tower Place
London, EC3R 5BU
+44 (0) 20 7178 5520
+44 (0) 7557 031371
daniel.hibbert@mercer.com
Contact details
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