Companies usually base how they pay and reward their employees on financial data. Deon Smit, Chartered Reward Specialist and Executive Committee Member at the South African Reward Association (SARA), says that corporate communications like emails or instant messages, social media posts and many other data sources should be used to provide deeper insights.

These insights can help to keep financial and non-financial elements of remuneration relevant to what employees need as motivation.

“Good data management and analytics will play a central role in developing future reward strategies. Effective reward solutions must be designed based on reality rather than assumptions,” says Smit.

“Reward practitioners must start taking responsibility to gather the right information and develop the ability to draw valid conclusions from the data available.”

Smit offers the following practical guidance:

Start with a purpose
It’s important to decide what business problems should be solved first and what data is best suited to that purpose.

“Tackle the simple business problems first and build up to the big ones,” advises Smit. “This will help you get your data and your process right at each discrete level of growing complexity.”

HR and people data will be central to efforts, but strategic, financial, and corporate communications data will also play an important role.

Be a visionary
For most problems, a large set of historical data is needed to facilitate predictive analysis and produce accurate results.

“You have to decide what you want to measure in 6 months from now, build the datasets and make sure the data is accurately captured,” says Smit. “Only after that period will you have enough to work with.”

Clean up
“One of the first mistakes companies make is to start with incomplete, incompatible or mismatched data,” reports Smit. The data collection methodology employed must be consistent to ensure there are no information gaps that could produce misleading results.

Learn
Reward practitioners should understand how datasets are constructed, how relational databases work and how unstructured data found in emails, social posts and other digital sources can be collected. They also need to evolve past Excel and embrace programming languages like R (a statistical language), Python (a general programming language) or SQL (a database query language). In addition, business intelligence and data analysis skills are essential.

This may seem unnecessary for reward programmes but Smit foresees that these competencies will be in demand in the future.

“HR will start hiring data specialists over people specialists because data will become the key to understanding workforce behaviours and motivators,” says Smit. He suggests that practitioners become self-educated to increase their value. Universities now offer numerous free courses on these subjects through MOOC (massive open online courses) platforms.

Don’t forget qualitative inputs
Although quantitative analysis - mathematical and statistical modelling - is critical, reward specialists should not overlook qualitative analysis - the study of observable behaviour or structure. “Don’t become too focused on the numbers,” recommends Smit. “They need to be viewed in conjunction with phenomena like group dynamics, behavioural psychology, generational concerns, cultural norms and other non-numerical inputs.”

Start over
Data analysis must always solve a business problem. Once the collected information has been studied and understood, reward specialists can develop innovative solutions and drive their implementation forward.
 
Smit concludes: “After a solution has been found, the cycle will start over so that another – more complex – business problem can be targeted.”

ENDS

MEDIA CONTACT: Juanita Vorster, 079 523 8374, juanita@thatpoint.co.za, www.atthatpoint.co.za  

For more information on SARA please visit:
Website: www.sara.co.za  
Twitter: @SA_reward
LinkedIn: South African Reward Association
Facebook: SARA – South African Reward Association

Recent reports have highlighted the disparity in remuneration between CEOs and workers. Consequently, many commentators have questioned the fairness of executive packages, calling for greater regulation of those salaries and benefits. According to Dr Mark Bussin, Executive Committee Member of the South African Reward Association (SARA), this is a problem domain ideally suited to the Reward Specialist.

“First,” says Dr Bussin, “one must understand how remuneration is determined at various levels.”

General workers
For general workers, a fair wage is decided through collective bargaining, striking a balance between what employers can afford and trade union negotiators are willing to accept. “It’s notable that recent increases have been in the 7% to 8% range - higher than CEOs,” reports Dr Bussin. “Companies, aware of the pay gap, it seems, are trying to close it.”

Salaried staff
For salaried staff, various factors are considered, including salary surveys, inflation, education, personal performance, and the scarcity of an employee’s skills. “Ultimately,” says Dr Bussin, “the finance department budgets for an overall payroll increase in line with inflation, currently around 6%.”

CEOs and directors
Executive salaries are more complex. Dr Bussin explains that CEOs and directors face much higher pressure than other employees. “Their track record for leading companies successfully in the face of overwhelming personal risk is why they’re engaged. As such, they command commensurate reward.” They’re usually compensated in two ways.

Fixed pay
Executive officers get a fixed salary that is mainly determined by benchmarking. This includes salary surveys and comparative studies of companies of similar size and complexity. Their pay in relation to these measurements will depend on the organisation’s remuneration policies.

Variable pay
Executive officers also receive short-term and long-term incentives. Short-term incentives are based on performance targets that, if achieved, usually result in a reward of between 50% to 100% of fixed annual salary. Long-term incentives, linked to company performance, are full shares and share appreciation - the value of the increase in share price.

Pay discrepancies
However, an ill-conceived remuneration package can reward even an underperforming executive officer. “These are the cases we see highlighted in the media,” observes Dr Bussin. “The perception that executives are overpaid is then generalised when, most often, their salaries are carefully formulated against industry norms.” 

Real or imagined, companies want to avoid any notion of biased remuneration. Dr Bussin says the King IV Report offers greater transparency by requiring executive remuneration reporting as a single total figure. “Businesses can leverage this opportunity to show that their executive officers are indeed compensated fairly.”

The Reward Specialist
A Reward Specialist should be engaged to ensure executive pay does not overstep the boundaries of sanity. At times, shareholders or the board may be desperate to turn a company’s fortunes around, making them bullish about a maverick hire. Here, the Reward Specialist offers an impartial perspective based on in-depth analysis.

“Lastly,” concludes Dr Bussin, “Reward Specialists can create a communication plan that educates employees, shareholders and the public on company remuneration policies and executive compensation, avoiding both the reality and perception of their executives being overpaid.”

ENDS

MEDIA CONTACT: Carla Coetzee, carla@thatpoint.co.za, www.atthatpoint.co.za  

For more information on SARA please visit:
Website: www.sara.co.za  
Twitter: @SA_reward
LinkedIn: South African Reward Association
Facebook: SARA – South African Reward Association
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