Tuesday, May 17, 2011

Summaries the recent trend of reward systems in India.

Summaries the recent trend of reward systems in India. Analyze it with respect to your
organization or an organization you are familiar with and discuss its impact on productivity. Describe the organization you are referring to.

Rewarding employee performance and behaviour is an important part of HRD. Appropriate rewards not only recognize and motivate employees, but also communicate the organization’s values to the employees. Rewards may be given to individualists as well as to teams, departments and other units within the organization. Rewards reinforce specific behaviors, thereby arousing and sustaining specific motives. Consequently, what is rewarded in an organization influences the motivational climate.

The only way employees will fulfill your dream is to share in the dream. Reward systems are the mechanisms that make this happen. “However, reward systems are much more than just bonus plans and stock options. While they often include both of these incentives, they can also include awards and other recognition, promotions, reassignment, non-monetary bonuses (e.g., vacations) or a simple thank-you.

It’s an annual affair at Genpact to identify 35 star leaders within the company and fly their families on a vacation. This is apart from regular ritual of recognizing high performing leaders in every board meeting. Even as salary levels soar and are a given in the current war for talent, more and more companies are fumbling for the ideal mix of non-compensation rewards to retain leaders.

Retaining and rewarding leadership is a hot button issue facing most organizations. Increasing complexity of hiring leadership talent in the face of burgeoning market demand is bringing companies under pressure to retain their top talent. “The only way to reward and retain top leadership is by sharing the success of the company with them,” says Piyush Mehta, senior V-P, Genpact.

It is common to see firms ring fence their senior executives by devising long-term wealth certain opportunities in the form of retention pay, deferred bonus plans, stock options and shadow options. Companies are arriving at a reward system, which is linked with the company’s performance.

As a business leader in Accenture moves higher, the variable component in his compensation goes up. “Equity has been quite effective as a leadership reward system. Conversely too, it works well as it makes leaders conscious of the fact that they carry the weight of the organization,” says Rahul Varma, senior HR director, Accenture India.

Employee stock plans offered by Indian firms in the past few years have been able to create the right setting than that MNC counterparts, says K Sudarshan, managing partner, EMA Partner International. “Key employees feel a lot closer to centre of action with a belief that they are making a difference to the fortunes of the organization as opposed to large MNCs where the India business is still a small percentage of their overall numbers,” he says.

The attractiveness quotient for Indian companies is increasing all the time. Even though we see emergence of several “employee millionaires”, analysis caution, relying on generous compensation as the only strategy for retaining your key resources is a sure shot recipe for disaster.

There is interplay of multiple factors which makes the organization a preferred destination for top talent and creates a long-term sustainable employer brand. That’s why the best employers need not necessarily be the best paymasters.

“First and foremost is to create a sense of ownership and belonging to the organization. Successful organizations have a culture which supports and encourages entrepreneurial behaviour, the freedom to make informed business decisions and above all eliminates the fear of failure,” says Mr Sudarshan. This will work only if it goes hand-in-hand with standard compensation levels in the industry.

HR fraternity believes ICICI Bank has done well on both fronts. They have provided great opportunities to their stars plus have locked in their key people with significant stock options. It also helped that ICICI bank is growing more rapidly when compared to HDFC Bank and there is a great passion at work one can experience with senior people in ICICI group.

“HDFC Bank has largely adopted the ESOP route to reduce fixed cost but this has backfired in the long term because people moved on once the stocks vested and their exit barriers significantly reduced,” says a head of headhunting firm.

Bharti has largely taken the compensation route both fixed as well as long-term wealth creation opportunities for their people. Hutch has always retained their key people on the basis of the work culture and freedom to operate though the compensation levels have always been pegged lower than Bharti and Reliance.

Aditya Birla Group has built a great sense of belonging for their leaders and has always been looked upon with the larger picture in mind. The chairman Kumar Mangalam Birla says a company executive also deploys his personal touch with his key managers who are valued.

“There is a great sense of security built in for key people,” adds a senior HR consultant who has worked with the group. The Tata Group has always institutionalized the group and managers are empowered to take critical decisions like no other business house and there is a deep sense of loyalty to the group at senior levels.

An ambitious business leader, believe HR fraternity, is constantly evaluating headroom for professional learning and growth and it is critical that the organization is capable of creating such opportunities. This keeps senior managers motivated with fresh challenges all the time. “Today, there’s a need to customize rewards – both monetary or otherwise – to suit individual’s specific needs,” says Mr. Mehta of Genpact.

A company gifting a small mug or a T-shirt with its logo may not be a very big thing for an employee who has decided to leave the organization. But, for those staying on, such gifts can make a lot of difference.

Giving instant gifts to reward employees is catching up. Cognizant Technology Solutions with large software development centers in India, have used the instant reward scheme to motivate their employees.

‘Outwehing Others’
Wahl Cognizant is an incentive scheme for Cognizant’s employees. The instant reward is for contributing to the company, above and beyond the call of duty or for any exceptional performance.

The scheme follows Cognizant’s earlier incentives for employees, such as iPods, cruises to the Bahamas, chartered trains to Pondicherry and chartered flights to Malaysia.

Designed on the lines of a frequent flyer programme, Wah! helps Cognizant employees to earn reward points that can be accumulated and redeemed against Cognizant merchandise ranging from denim shirts to signature coffee mugs, watches to jackets, or even a DVD player.

On its employee information portal, Cognizant publishes the reward points that employees can obtain for the efforts that they put in, beyond their core work definition. For example, works such as training, knowledge harvesting, recruiting, participation in quality audits and assessments and external certifications quality for reward points based on certain defined parameters.

“Wah! has been a big hit in Cognizant, so much so that it is one of the projects to be expeditiously institutionalized after being piloted in Hyderabad. It simply has outwahed every other spot reward and recognition programme attempted by Cognizant earlier.

Wah! was piloted at Cognizant’s Hyderabad development centre in early 2005 and was institutionalized across all of its development centers in India early this year. Till date, 8,250 of the company’s associates have been awarded Wah! points that can be redeemed for Cognizant branded merchandise.

As one enters any of Cognizant’s offices, the branded merchandise is prominently displayed to remind and motivate employees to earn the gift of their choice, he says. This motivation prompts them to excel and take advice interest in contributing to multiple areas such as certification, quality or training. Even prospective applicants or interviewees notice the array of gifts that adorn the reception area.

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