March 24, 2003	Monday	Muharram 20, 1424

Time has come to revise reward systems in our companies. A positive win-win alignment with rewards and business is critical because people often come to a firm with an expectation that the deal they make at the start will remain the same throughout their work career. Since it is no longer possible, businesses must do what is necessary to help people understand why rewards must change.

The better work-force deal is a win-win deal, some thing for every one in making the pay change. The existing work-force deal in our companies is paternalistic. The new deal considers work-force as business partner. It is not adversarial but win deal. The new deal is a fair deal in which individuals get a fair share from the business arrangements as it relates to total rewards.

Companies here are facing a challenge from scarce talents. Their work-force productivity is lagging. It is becoming difficult for our companies gaining the commitment of key people. Complacency has done no good and lack of innovation in companies has declined their market share, revenues and profits. Old timers personnel managers now in the garb of HR specialists are unable to understand how they will make their companies face the fierce competition that is ahead.

There is now a clear signal for companies to revitalize the old culture and evaluate the unproductive pay and rewards system. They should introduce a critique pay and rewards system to face the fierce competition ahead owing to the new policies of WTO.

Many managers in the top management of companies are still pursuing the old time policies. They have not explored the real value of individuals. Consequently, many senior managers are far from knowing how to translate the behavioural codes in the people and how to open their locked-up thinking.

We must relate our business success to what we do to our human resource. Companies must think to develop “total reward system”. They must develop and build a case for changing rewards and for developing and communicating total pay to support the business. Our companies can no longer work with hit and trial methods.

Changing the work-force reward system is challenging. Basic pay is an important component of total rewards in companies and communicates the business value of goals associated with financial success, shareholder value, market share, customers, growth, product and service, innovation, cost management and speed.

Pay is a way of gaining understanding, commitment and acceptance of what people can do to help make a company a success. Few things get the attention of people in companies as well, as the pay does.

People accept what they understand. So people need to be involved in business and reward process to gain their commitment. Extensive education of the work force and communication with them can make them understand the business logic for a new system and the need for a balanced results to all stake-holders: the customers, the company, the workers and the shareholders.

How best to accomplish the goals and objects of rewards, it must be understandable by the work-force and only then it will lead a company towards success.

Excellent companies do a superior job when they undertake to educate their work-force on the win-win and of sharing success or lack of success with them. Microsoft, Hewlett and Packard are the examples.

It is a saying that great companies are positive places to work. They have made total pay change positive and have gained the commitment of the work-force. Many companies like Coca Cola, Gillette, IBM and Toyota have emphasized positive work relations and effective communications.

Business goals will only be a record on paper and will never be achieved unless these were aligned with business goals. Rewards can add value to a business if these are aligned with business to create a win-win partnership.

Business results that people can influence as individuals and as members of a team or group are worth viewing. This means how what people do dovetails with what the company is trying to do. Work-force must be able to view closely the measure of business success that their performance influences .

Business is becoming more interdependent.The emphasis for success has shifted from individual performance to the team, group or business unit performance which afford maximum advantage to a company. But in a country where there is a strong emphasis on individualism or ‘doing it alone’ the opportunity for individual recognition may be critical to a feeling of well-being.

To perform well, people must become interdependent and effective performers in the context of the team, group, unit or company. To create this feeling, a solid team player state of mind is required because no single person can handle every thing in terms of outcomes although the skills and competencies often rest with him.

Organizations must find out high value individuals and reward the exceptional individual performers effectively. Top performing individuals not only contribute to the achievement of goals that others share but also help in making their coworkers more effective at the same time.These are the hard facts from which great organizations gain.

Great companies not only integrate just rewards for the individual but also the rewards among people and worker groups. Integration occurs through business aligned goals that ensures that employees at all levels from the top to the bottom are moving in the same direction.

Companies focus on three different dimensions of basic pay at different times. When competencies are the centrepiece of human resource strategy, companies focus on it. In IT companies basic pay increases as soon as skills are acquired and applied. IT companies do not wait for an annual pay review because people with scarce skills and competencies can move to the other companies unless pay is kept at a competitive level for the value received.

Consistent performance over time which is the second dimension differs from performance during only one performance period that the annual basic pay adjustments typically rewards. Current and one year performance are better addressed through variable pay because rewards can be meaningful in size rather than becoming an annuity for an year-based performance.

Companies need results to meet shareholder expectations and provide a compelling future. Because people make results happen companies should reward them for achieving those results. Variable pay is flexible, adaptable, responsive, agile and is capable of rewarding a combination of individual and collaborative results as well as focusing on a host of measures and goals from financial to strategic.

Because people need to re-earn variable pay every performance period, it can provide a meaningful award for results achieved. Variable pay is an important communication tool for linking the work-force to customer goals to company needs and values and to sharing in the success of the enterprise.

Variable pay involves both cash and equity ( stocks & stock options). Variable pay can serve as a key tool for the entire work-force. Many companies like IBM and GE have adopted the reward strategy that invests in people’s skills and competencies and then rewards the work-force with a variable pay for achieving results.

Variable pay affords an opportunity to focus on results a company needs provided it is designed, implemented and communicated in a way that considers the other reward principles The basics of the reward philosophy is sound business lodgements experience in many organizations and research about what makes total reward works. It is important to determine how to get more value from the reward process and it is critical to continue to do this and remain adaptable and flexible. Managers in our companies are the best judge how far or near they are to their organization’s goal. Recommendations:

*Educate people on the reasons for changing rewards. Explain the advantages to the work force. To gain understanding acceptance and commitment of the people involve them in the change process.

*Create a win- win partnership by aligning awards with business goals.Such a situation will emerge only when a company gives a clear direction and when people continue to add value and when the company acknowledges that value.

*Engage people in understanding how their actions do affect the customer and how they can adapt to evolve customer needs.

*Use reward tools specifically what it does best. Take an over all perspective of not only total pay but also total rewards.

*Use basic pay to reward the skills and competencies, the individual’s consistent performance overtime including team results and the individuals value relative to the labour market.

*Reward the work-force for achieving results. Company needs results to meet shareholder expectations. Variable pay cash and equity creates stakeholdership and win- win relationship between the people and the company so that both share in success. Discover the miracles of variable pay. It is best suited to reward results because it is adaptable, responsive, agile and able to focus on key measures of success.