Integrating Performance And

CompensationWebinar Slides – February 2012

Mitch Stephens

Agenda 1: Pay-For-Performance background

Market conditions and trends 2: Products overview

Jobs, Performance, Compensation 3: Performance Review Drill Down

Role-based perspective 4: Compensation

Integrated Compensation Modeling and Calibration

5: Wrap up

Part 1 – the case for Pay-For-Performance

What is Pay-for-Performance?

Pay for performance:sometimes abbreviated "P4P", is a motivation concept in human resources, in which employees receive increased compensation for their work if their team, department or company reaches certain targets.

At least 75 percent of all U.S. companies connect at least part of an employee's pay to measures of performance.

Current trendsCourtesy of Towers Watson 2011 Talent

Management and Rewards Survey

The market: Economic uncertainty continuesMerit pay remains relatively flat

The market: Economic volatility continuesShort-term incentive funding expected to drop

from 2010 to 2011

Funding exceeded 100% last year, but is expected to drop this year

Changing conditions and working hours 65% of employers think employees have been

working more hours than normal over the past three years

53% expect this to continue over the next three years

This is especially true for senior managers and professionals

What factors attract employees?

Top Performer Employees rank base pay base pay more highly than their prospective employers.

What factors retain employees?

Employers do not completely understand what would cause employees to leave —especially the best employee

Merit pay differentiation

Successful organizations recognize the importance of segmenting the high-performing employees

Short-term incentive differentiation

Although organizations target payouts so that top performers will receive 120% more than employees who only partially meet expectations, they typically only get about 70% more.

Did you know?

Fewer than half of all employees report that high-performing employees are rewarded for their performance

Source: Towers Watson 2011 Talent Management and Rewards Survey.

Pay-for-Performance Strategy Identify top and bottom performers

Decide on the balance between objective and subjective Set clear, achievable, measurable goals and measure against them

Create a comp plan that strikes the optimal balance: Reward the best people Pay the average performers the median amount Apply real metrics to the process, not just a blanket one-size-fits-all

Clearly communicate your compensation philosophy to both managers and employees

Part 2 – HRTMS Product overview

HRTMS Product Suite Overview

• HRTMS Jobs • Job Description management tool• Manage competencies for Performance Reviews

• HRTMS Performance • Performance Review System

• HRTMS Compensation• Integrated Compensation system

Screen shot of TMS Performance

Screen shot of TMS Compensation

Part 3 – TMS Performance Drill-

DownWe will show several roles: Employee, Corporate manager, District Manager,

Executive

Corporate Employee Home Page

Edit Performance Review

Cover Page

Corporate Objectives – Self Evaluation

Skills Assessment (Self)

Summary Page showing Scores

Employee Submits Review to Manager

Email Message to Manager

Return to Home Page

Corporate Manager Perspective

The next series of slides show the corporate manager perspective

The Manager receives an e-mail when the employee “submits”

Corporate Manager: Mike Biehl

Corporate Manager Home Page

View/Edit Employee PR

Corporate Objectives Tab

Spell Check Comments

Spell Check Complete…

Set Competency Scores

Scores Update as you select values

Summary Page

Training Completion for Employee

Submit Performance Review (Approve)

Edit Email to Administrator

Home page (one less action item)

Store ManagementThe next series of slides show the District

Manager’s perspective (store managers, assistant managers).

Storeline reviews are 70% based on actual results

Storeline District Manager: Conrad Enslow

DM Reviews Store Personnel…

Customized instructions for each role…

Store Managers Objectives

District Manager’s self review

District Manager’s Sales Objectives

Blended results simplified and explained

Storeline Executive Perspective

Seeing your organization

Storeline Regional Manager: Cleo Lehew

View All Regional Storeline Employees

Sort by Store Sales Score

Drill into Details for selected employee

AnalyticsProviding actionable analytics for managers and

executives without requiring any technical talent.

Storeline District Manager: Conrad Enslow

Analytics…

Overall Rating Distribution…

Top and Bottom Performers… With drill down

Objectives, Distribution, top/bottom & rankings

Competency Rankings

HRTMS Performance: Feature Summary Simple user interface Powerful form designer Competencies, integrated with Job description module Full Goals management, including cascading and organization

goals Comments by all roles Validations and required fields Link to spreadsheets and other attachments Powerful conditional workflow process E-mail notifications Role-based access control Full integration with Job Descriptions and Compensation

Now let’s switch to compensation..

Part 4 - Compensation

Excel-based Merit/STI Compensation Module

What does TMS Compensation do?

Allows authorized managers to recommend and approve annual increases, including merit, STI, LTI, lump sum and adjustments.

Allows you to model and budget expenditures based on actual performance data

How does TMS Compensation work?• TMS Compensation is driven by YOUR Excel

workbooks

• Formulas, validations, conditional formatting, business rules are all preserved.

• Your data is stored in a secure SQL database

• Our unique web interface lets you work online without having to download the workbook• Note that download is still available

• We harness the power of Excel as our calculation engine without the downside of distributing workbooks

How do we do it?We then complete the Excel Mapping Process

We start with your Excel workbook

Almost any comp workbook can be used as the template,

including Excel 2007 format.

TMS Excel Map

Heading Cells

SubTotals

Column Profiles

Col A• Name

Col B• Manager

Col C• Incr Amt

Data BindingsFormulas,Security settingsBusiness Rules

Note that we never actually store the workbooks – we are just

leveraging the power of Excel!

Sample Excel Templates

This workbook incorporates

Merit, MICP and LTIP

Sample Excel Templates

This workbook has three main budgets:

Merit, Equity and Bonus.

Sample Excel Templates

This workbook allows for Merit %, Market Adjustment% and

Promotion%

Screen Shot – Sheet edit mode

Web demoLet’s look at the compensation system in a

browser

Typical Pay-for-Performance Process

Start performance review process

Performance Reviews reach the

compensation holding step

Calibration and Modeling

Compensation process –

Managers submit compensation

recommendations

Compensation is finalized

Employee Meetings

Calibration and Modeling phase This phase usually happens AFTER the

performances reviews are completed, but BEFORE the compensation process begins

The modeling is done using the SAME Excel Workbooks as the main process

Sample Excel Modeling workbookObjective is to determine the optimal increase

recommendations based on the ACTUAL performance review scores and available budget

Employee Performance Ratings Most companies arrive at a single score for

employee reviews (e.g., 1-5 rating) Score may be mixture of objective and subjective

elements E.g., sales results plus manager’s assessment of employee’s goals, work

behaviors, etc.

The performance rating is the key element used in the merit system, but..

Does this really capture the full picture?

The fully integrated performance review The single PR score is important, but the compensation

manager should have access to the full picture Determining this year’s merit for key players should factor

in other elements, such as: Progress towards goals Employee and manager’s comments Extenuating circumstances such as leave of absence, special projects,

unfavorable business conditions, changing trends, staff shortages, reorganizations, one-time events, and so on.

Can a single score capture these elements?

View All Employee details from Compensation

HRTMS Offers a 360⁰ perspective

Popup window shows the Employee’s Performance Review

Salary History Popup

Part 5: Summary and wrap-up

HRTMS Pay-for-Performance Summary Lowest Cost of ownership Easy to use, consistent user interface Fully integrated data structures, workflows,

authentication System of record (multiple cycles) Gives managers a compelling line of sight to

historical data that allows them to determine an employee’s long-term value and contribution

Allows you to calibrate and model based on actual data

Synchronize the PR/Comp workflow processes 

For More Information

• Bill Rost • brost@hrtms.com• 763-249-8050

• Web Site:• www.hrtms.com