Whether or not executives earn too much and, if so, how to address executive remuneration practices, are two questions that continue to nag at global society.
“The pressure is even greater in South Africa, where inequality, poverty and unemployment are more pronounced,” says Martin Hopkins, Master Reward Specialist and past president of the South African Reward Association (SARA). The King IV Report on Corporate GovernanceTM recommends several approaches to governing executive reward. One is to give investors a greater say through remuneration voting. But what is it and what material effect does such a vote offer? What remuneration voting means King IV calls for executive remuneration in each company to be disclosed to investors through a remuneration report that has three parts: a background statement, an overview of the remuneration policy, and an implementation report. Further, shareholders are given the opportunity to pass a separate non-binding advisory vote on the policy and the implementation report. If 25% or more of the voting rights exercised by shareholders are against the remuneration policy or the implementation report, or both, the remuneration policy should specify the measures committed to by the board to respond to this voting outcome. These measures should include investor engagement and addressing objections and concerns, although King IV does not specify what format they should take or how they should be implemented. King IV is not enforceable by law; it is simply presented as a framework for good corporate governance. However, its influence is “given teeth” when its recommendations are adopted by regulators with the power to enforce them. This is true of the Johannesburg Stock Exchange (JSE) Listing Requirements, which makes certain of its practices mandatory for publicly traded companies. So, within the JSE's purview, remuneration voting is compulsory, not optional. Even so, a non-binding advisory vote by shareholders has no legal effect on the adoption of the remuneration policy or the implementation report. It simply allows the organisation's management and remuneration committee to gauge sentiment towards their provisions. That said, the vote serves as a powerful barometer of the company’s governance quality and of investor confidence. Should shareholders have more power? The effect of giving shareholders more say in how much executives earn is widely debated. They have a strong economic interest in good governance as well as a moral obligation towards equitable pay. At the same time, giving investors too much power may unduly affect the ability of the Board to govern and management to operate the company effectively. Investor activism can be a powerful force for good, but ultimately the directors need to balance the needs of many stakeholders and make balanced decisions that are overly influenced by any single voice. Measures to provide for increased shareholder power are currently being debated by various interest groups, with measures such as a binding vote on the remuneration policy and/or the implementation report and the so-called “two strike” rule being considered. The binding vote means that the directors must adhere to the provisions of the approved policy and may not apply their discretion to vary the policy terms without shareholder approval. The “two-strike” rule would mean that in the case of two successive votes of more than 25% against the remuneration policy or implementation report the members of the Remuneration Committee would have to step down from the committee for at least two years, and be replaced by other members of the Board. There is diverse practice on remuneration voting in developed and developing countries, with a binding vote on the remuneration policy at a 50% threshold in place in the UK, which is viewed as being reasonably effective, and non-binding voting practices in the US and Canada. Australia has adopted the “two-strike rule” with limited success. Reward perspective Hopkins notes that while there is a great deal of emotion regarding executive pay it's also important to recognise that it is not at all clear that executive pay can be dramatically reduced without damage to the ability of business to generate shareholder value and create jobs. Market forces mean that any one company within a country can’t dramatically reduce executive pay without immediate loss of skills and leadership. If regulations in a country systemically reduce all executive pay then mobile highly skilled executives may well move to other countries which have no such regulations. Many companies aspire to pay their executives in line with their contribution to business profitability and reward them against agreed performance milestones. King IV was developed to reign in excessive remuneration practices, not prevent companies from fairly rewarding employees for their contribution and performance. “Organisations should also look at the other end of the pay fairness equation, with increasing focus on the pay gap and how this should be measured and addressed”, says Hopkins. Together with caution in respect of executive pay, measures to increase the pay of the lowest paid staff, whilst remaining economically competitive is another important reward factor to consider. “This is a complex issue”, concludes Hopkins. Business leadership cannot disregard calls from many quarters to address these issues, but must also seek to balance the views of multiple stakeholders with the pressing need for economic growth and job creation. ENDS MEDIA CONTACT: Rosa-Mari Le Roux, 060 995 6277, rosa-mari@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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COVID-19 has brought greater stress to the world of work.
According to Dr. Mark Bussin, Master Reward Specialist and Executive Committee Member of the South African Reward Association (SARA), employers need to realise that their workforce is under immense pressure. “Protecting mental wellness in the extended workplace is as important as other occupational health and safety measures,” he says. The “extended workplace” refers to the virtually integrated on-premises, remote and work-from-home locations over which employees now find themselves spread. Mental hazards The World Health Organisation (WHO) says that “Mental health is a state of well-being in which an individual realizes his or her own abilities, can cope with the normal stresses of life, can work productively and is able to make a contribution to his or her community.” However, modern workers face a range of hazards that can severely impact their mental well-being and, by extension, their ability to do their best work. For those working from home, it may be dealing with professional pressures while caring for house-bound children. For those on-premises, it could be the risk of being in close proximity to potential COVID carriers and the threat of becoming infected. A stressful working environment, isolation, discrimination and inequality, domestic violence and many other factors can all contribute to employee distress. “Companies who do not focus on promoting mental wellness stand to lose not only profits but also their reputation as employers of choice,” says Dr. Bussin. Flexibility When the going gets tough, tough leaders get going. It’s in their nature to meet threats with tireless effort and unrelenting focus. Unfortunately, they often demand the same from a workforce not blessed with their mental fortitude. “Maintaining profits is important but driving stressed employees harder will only demoralise them and cripple their productivity,” says Dr. Bussin. Leaders need to slow down and consider how to motivate their workers intelligently. Education Organisations must educate themselves on the best approaches to creating a supportive extended workplace. First and foremost, they should institute an educational programme to help employees understand mental wellness, how to respond effectively to stress and how to develop personal resilience. “Use the same technologies that have kept companies running during lockdown to provide on-demand information and professional counselling to the remote and in-house team,” advises Dr. Bussin. Personalisation People are not equally affected by conditions and do not respond identically to pressures. So employers should avoid a blanket approach to preserving mental wellness. Instead, they need to consider the unique circumstances of individual employees and their personal capacity to cope with adversity in life. Single people working from home might benefit from being included more in virtual meetings whereas single mothers on-premises may be grateful for flexible working hours. “Creating a customised work experience around mental wellness may be the best thing employers can do right now for their workers,” says Dr. Bussin. Mental rewards Just as employers are judged by their support for equality, fairness and safety in the workplace, their reputation will now be determined by how sincerely they promote their workers’ mental wellness. Reward practitioners can help them devise a corporate mental wellness offering as a core benefit for attracting, retaining and motivating employees. “Employers unable to offer the same packages as before can make up for it by providing the peace of mind and coping mechanisms their staff earnestly need to keep going,” says Dr. Bussin. ENDS MEDIA CONTACT: Rosa-Mari Le Roux, 060 995 6277, rosa-mari@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 The National Income Dynamics Study – Coronavirus Rapid Mobile Survey (NIDS-CRAM) is a study tracking income, employment and welfare in South Africa. The report reveals that women have been hardest hit by the impact of COVID-19 lockdowns.
“Although survival and saving jobs is paramount, equal pay initiatives within organisations have not been forgotten,” says Dr Mark Bussin, Master Reward Specialists and Executive Committee Member of the South African Reward Association (SARA). “However, we need equity programmes that extend beyond the enterprise.” The current economic slump has affected women so badly, it has been dubbed the “shecession”. Job losses The NDIS-CRAM survey reports that, of the three million jobs lost between February and April 2020, two million had been held by women. Between April and June 2020, employment increased by 3.2% (220,000 jobs) for women and 3.5% (320,000 jobs) for men. Yet, in June 2020, women remained well behind men in returning to pre-COVID employment levels. Income support According to the study, 57% of those unemployed in June 2020 were women. However, they accounted for only 41% of TERS/UIF-TERS beneficiaries and only 34% of those were paid the Social Relief of Distress Grant (SRDG) in that month. Industries The report suggests a number of contributing factors to the high level of unemployment among women. For one, many industries with high female employee counts were forced to reduce staff during the lockdown. These include childcare, personal grooming and hospitality. Another is their being employed in jobs where working from home is not possible or not being able to work the same hours due to childcare needs. Childcare Women often bear the greater share of childcare and healthcare responsibilities in the family. After early childhood development services and schools closed under lockdown, many may have been unable to work effectively while caring for their family. Due to divorce, women are also more likely to live with children than men are. In the report, 67% of women and only 25% of men reported they were looking after children themselves. Lower earners With no chance of daycare, many families had to decide which parent would leave their job to take care of their children. Since women typically earn less than men, they are the obvious candidates. This situation is unfortunately a result of existing inequality in pay between genders. Within the enterprise Although the study acknowledged a large difference between male and female incomes before February 2020, it measured no significant increase in the gap between then and June 2020. “In my view, the pay gap has not worsened because of COVID. It is still around and still present at the same levels as before,” says Bussin. Conclusion The NDIS-CRAM study suggests that one possible solution is state-subsidised childcare at reopened schools. This will help women to increase their work hours and return to their previous earning potential. In addition, Bussin advises that organisations also need to do due diligence internally. “All organisations should conduct regular, thorough audits of all remuneration and HR practices to make sure that no poor practices or discrimination have crept in,” he says. ENDS MEDIA CONTACT: Rosa-Mari Le Roux, 060 995 6277, rosa-mari@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 By Nicol Mullins, chartered reward specialist and executive committee member of the South African Reward Association (SARA)
For most organisations, the importance of keeping their employees productive has never been more critical. For some, their very survival may depend on it. The way in which they structure rewards, that is, employee remuneration, benefits and incentives as a total package, has a significant influence on how well they will achieve that objective. Yet, life has changed beyond recognition, affecting workers and their perception of which rewards are most meaningful to them now. To maintain productivity, employers need to look at rewards from a completely different angle, one that considers the personal and individual needs of each employee. The value of rewards Rewards generally take the form of monetary and non-monetary compensation. In South Africa, in addition to basic pay, monetary compensation traditionally includes a retirement fund, medical cover and risk insurance, which form the basis of the total reward package. With corporate finances becoming stretched, greater emphasis on non-monetary rewards may give organisations the edge they are looking for. Specifically, this means better psychological support for employees and greater flexibility in employment conditions. Incidentally, this class of reward is exactly what many employees desire right now. For example, the ability to work from home allows exployees to save on travel while being more available to their families during these unprecedented times. However, this approach requires a change in attitude in two main areas. Firstly, employers need to think of rewards not as a cost to the company but as an enabler of productivity. It is therefore better to focus on developing rewards that encourage productivity in a given context rather than taking an approach of cutting costs across the board. Secondly, the reward offering needs to create an environment of trust. An environment of trust Giving employees greater flexibility in how they carry out their duties means trusting that they will do so to the best of their abilities. After all, if their organisation doesn’t trust them, why did they hire them in the first place? At the same time, employers can win their trust by understanding that their personal lives are severely affected by the pandemic, both emotionally and financially, and providing support where possible and appropriate. An environment of trust is one of psychological safety where employees feel cared for, trusted and valued. Without this foundation, employers will find it difficult to implement new benefits offerings simply because they will not expect them to succeed and therefore will not achieve their desired results or potential. Flexible conditions Allowing employees to work from home is one way of displaying trust. Organisations can also consider more flexible working times. Employees are undoubtedly working longer hours, so they need more frequent breaks. A quarter-day or half-day leave offering would allow them to take care of personal priorities and needs. This is also a good opportunity to experiment with shorter work weeks. Parents may need to drop their children at school, so scheduling meetings after 9 am and before 2 pm would respect that constraint. On the more practical side, a canteen on premises ensures that employees do not need to leave the building to eat. Complementing this with a play room or relaxation room will ensure they are more comfortable being at work. Communication However, the best way to develop new rewards is for employers to leverage the trust environment they creat. Instead of designing one-size-fits-all reward packages, they should realise that workers have different needs based on their specific life stage. By communicating with each staff member, they can individualise rewards that will evoke the best performance from their people. For example, should a retirement fund be mandatory or should they have the option to contribute to benefits that best suit their immediate needs? Whatever the final outcome, leaders must motivate their employees to perform like never before, and this will require them to try new, innovative and creative approaches to keep rewards relevant. ENDS MEDIA CONTACT: Rosa-Mari Le Roux, 060 995 6277, rosa-mari@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 At the recently held 2020 Reward Awards ceremony hosted by the South African Reward Association (SARA), FNB won the Reward Project of the Year award while ABSA won the Remuneration Report award.
Yolanda Sedlmaier won the prestigious President’s Award. The annual rewards celebrate the companies and professionals who design total reward solutions that attract, retain, motivate, and engage employees in a way that makes a difference to their organisations. Reward Project Award The 2020 SARA Reward Project award recognised the team from FNB that developed an Annual Salary Review (ASR) conversation guide for managers on the FNB App. Research from Gartner (Corporate Leadership Council) shows that 70% of employees want information about reward from their managers, and that communication by managers is three times more likely to positively impact loyalty to both the manager and the organisation than if it were to come from HR. The ASR conversation guide for managers is built into a section of the FNB Banking App that is only visible to employees, and offers an innovative way to provide personalised, contextual support for managers to have effective reward conversations. In an environment where the majority of the workforce is working off-campus/off-site, the ASR Guide has been essential to provide managers with as much support as possible through the annual salary review process. ASR has enabled virtual management of the annual increase process, and resulted in an increase of 100% in active App users. The other placed nominees of the 2020 SARA Reward Project of the Year award were Anglo Platinum in second place for their Team+ Performance Management and Reward project, and Standard Bank in third place for their COVID-19 Employee Support and Relief project. Remuneration Report Award The winner of the 2020 SARA Remuneration Report of the Year award is ABSA. Goldfields received 2nd Place and Vodacom received 3rd place for their submissions. This award recognises organisations for the alignment of their remuneration reporting and disclosure, against the key principles of the King IVTM governance guidelines which exemplify fair, responsible and transparent policy and practice. Submissions were evaluated by a panel of independent and expert judges across all spheres of stakeholders. President’s Award A special President's Award that honours outstanding achievement in the field of total reward was awarded to Yolanda Sedlmaier (Chartered Reward Specialist). Yolanda has been involved in SARA’s Internship Programme since its inception in 2006, and she has been the Chair of the programme since 2010. Over the past 14 years, the programme has delivered an impressive 55 new total reward professionals into the industry through the active involvement of the committee and superb support from Sponsor and Host companies. Yolanda has worked tirelessly with her team of passionate and dedicated volunteers to enhance and improve the programme, on top of her demanding roles at Deloitte and more recently Mercer. Yolanda has been described as a selfless leader who is passionate about talent development and thrives on seeing young graduates of the programme go on to lead successful, fulfilling careers. Her no-nonsense style, combined with her love and passion for mentoring graduates, has made her a highly respected total reward professional and deserving recipient of the 2020 award. ENDS MEDIA CONTACT: Rosa-Mari Le Roux, 060 995 6277, rosa-mari@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 In the current business environment companies are either surviving, or thriving.
Those who are thriving have had “strategic timing coupled with intentionality” on their side, says Nicol Mullins, Chartered Reward Specialist and executive committee member of the South African Reward Association (SARA). Their business model has been aligned to current market conditions. Their portfolio agility meant they were able to adapt to change. The ones that are now thriving disrupted their own business models when it was critical to do so. Portfolio agility A company that has nailed the concept of portfolio agility is Uber. Mullins says they have two legs to their “transport business”. Uber transports people and Uber Eats transports food. During the Covid-19 pandemic the country experienced one of the strictest lockdowns in the world. The transport of people declined dramatically, but the transport of food increased. Uber entered the business of transporting food, even before the outbreak of the coronavirus. The pandemic simply accelerated their new business. “The Uber business model illustrates the importance of having a service offering that has breadth and depth,” says Mullins. This oversimplified example serves as an indicator of how companies may want to pivot around their core business. The restaurant industry has been severely disrupted by the lockdown. Many were forced to repurpose their traditional sit-down business model. They used technology to engage with their clients. They used Facebook and WhatsApp to tell their clients they are ready to continue serving them. They started offering either take-away food or deliveries. They used the resources already available to them. Their waiters became their delivery business. That is being innovative. Companies need to remember what kept them alive during this period. Incentivise the right performance Once they recognise what is driving their performance in a positive direction they need to do more of that, faster. “That is behaviour and performance you want to incentivise,” says Mullins. Most companies are currently not in any position to offer large monetary incentives. However, it is often not the monetary incentive that add the biggest value to an employee/employer relationship. It is rather the ability of leadership to understand the employee’s current “context”. Nicol suggests that leaders look at their workforce in segments, for example as single parents, single people or older people. That will assist in assessing their real needs better, rather than following a “blanket approach”. “The best incentive to offer is often simply to ask what you can do for them.” In many instances it is simply data for their phone, or more flexible working hours. Don’t make any assumption to the level of access employees have to water, wi-fi, food, safety or security. Ask. Even more so when referring to vulnerable populations within the workforce. Create hope As business leaders acknowledge the impact of the Covid-19 pandemic, they should at the same time have a clear plan of what it is that they want to achieve. “Define reality and then create hope,” says Mullins. It was the famous Black Panther actor, Chadwick Boseman, who died of cancer at the end of August, who said: “He who has watered, be watered.” The role of a business leader is to take responsibility for those who are in their care. If you take care of employees, they in return, will take care of the business, he notes. ENDS MEDIA CONTACT: Rosa-Mari Le Roux, 060 995 6277, rosa-mari@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 The rapid shift to working from home (WFH) was an essential strategy for keeping businesses and people working when the COVID-19 emergency hit.
But many companies are now looking at a future in which WFH becomes part of a next-generation workplace strategy designed to improve productivity while “humanising” work life and particularly performance management, says Lindiwe Sebesho, Master Reward Specialist and Exco Member at the South African Reward Association (SARA). “For some time now, HR professionals have been moving towards a less rigid, structured and uniform way of managing employees’ performance—one that incorporates team performance and tries to understand better what motivates discretionary effort,” she says. “The wholesale adoption of WFH is accelerating this trend because managers are realizing the importance of managing people by the outcomes. We can’t manage—or measure—employees now by their presence at work. “Work has to be designed to protect employees’ safety and wellbeing without compromising on the importance of achieving the desired results.” Whilst most managers have always understood that the key to success is defining clear outcomes for their teams, the current environment has put emphasis on the need to trust that employees will do what is required to deliver the right outcomes. Preliminary reports show that whilst many employees have found working from home beneficial, they have also worked harder and for much longer hours, meaning that there have been notable improvements in productivity. A survey by Deloitte shows that 70% of workers in financial services have found it a positive experience. The survey showed that the top reason for this was no commuting (76%), with more flexibility (43%), more time with family (39%) and more time to exercise (28%) also contributing. Those who reported a negative experience cited lack of personal interaction as the main reason (51%), followed by the challenges of achieving a work/life balance (41%) as the boundaries between work and home can soon be blurred when both are done in the same physical space. The majority (76%) felt they were more productive at home. Lindiwe notes the importance of building on these studies to sustain the benefits that confirm the link between increased productivity and WFH. More mature outcomes-based performance management should also drive a renewed focus on performance-based remuneration and, if productivity is indeed rising, should lead to the levels of performance required for the recovery of most businesses and the economy. At the same time, says Ms Sebesho, performance based rewards will have to be re-structured to sustain the motivation that remote workers may need. This should also lead to a review of benefits that will enhance the support that employees who work from home should receive from their employers. As a suggestion, Lindiwe advises employers to consider providing connectivity allowances (as opposed to the traditional cellphone allowance) to enable employees to access the data solutions required for the increased use of digital platforms.” “Companies will have to begin looking at compensation structures that meet the needs of WFH employees by considering broader factors such as the cost of physical office infrastructure. Whilst WFH employees who have a dedicated office can claim these expenses as a tax deduction, it seems likely that firms who want to enhance their employee value proposition may come to the party sooner rather than later,” she says. Recently, a Swiss court ordered an employer to pay part of the rent of a former employee who had worked from home, even though there had been no agreement to do so. “Corporates look set to reap significant benefits from WFH: increased productivity and greater employee retention are two, but over the longer term they could reduce the money spent on office space and the extra costs that come with real estate,” she concludes. “They need to share these benefits with employees, and SARA will have a role to play in helping them to get the balance right.” ENDS MEDIA CONTACT: Rosa-Mari Le Roux, 060 995 6277, rosa-mari@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 With the sudden emergence of COVID-19, companies once hesitant to embrace remote working arrangements have been forced to allow employees to operate from home.
“The results have been surprisingly positive, leaving some organisations to wonder why they didn’t do it sooner,” says Deon Smit, Chartered Reward Specialist and Committee Member at the South African Reward Association (SARA). Yet, there are several obstacles associated with working from home effectively and, according to Smit, reward strategies to help employers overcome them. Obstacles Firstly, many jobs still require workers to be present at their place of business, like cashiers or store assistants. Yet, even some knowledge worker positions require employees to be in the office and employers must identify those for which remote work is not feasible. The size of an employer also makes a difference. Smaller employers can adapt easier and are more agile in regards to remote work. Large employers, on the other hand, have 1000s of employees interacting across a range of complex business processes and it becomes all the more difficult when they are remotely located. This makes measuring and managing performance incredibly tough as well. Even with an abundance of online work management systems, many unusual factors impact employee performance when working from home. Further, working on remote systems or communicating on video software may prove challenging for those who are used to constant contact with their managers and team. They may need specialised training and support to get up to speed before settling back into their normal performance profile. Lastly, there’s now the inevitable requirement to deal with family affairs, children’s interruptions and a myriad of other distractions that distract employees’ attention away from their daily work tasks. Employees will often find themselves working abnormal hours to stay abreast of demands on their time between work and home. Strategies To overcome these obstacles, employers can try a number of reward interventions to address this issue. The first is to maintain a strong sense of company culture, combined with a flexible approach to working hours. Employees need to know that deadlines still exist but that the employer is sympathetic to their situation. It is also critical to implement a work management and performance tracking system that is fair and not overly intrusive. Employees working remotely should never feel over-policed or micromanaged. To enhance performance, employers should ensure their remote employees have all the resources required to complete assignments. This may include providing equipment and services that the company would otherwise have supplied in the workplace, such as a suitable office chair and desk, a suitable computer, printer or smartphone, a fast internet connection and monthly data allowances. Further, they should identify critical training their remote workers will need to work productively from home. While technical competencies like software or video conferencing may be required, the employer must look deeper. Time management, emotional intelligence, stress or anger management, mental health and even entrepreneurship may all assist employees to better manage their work time and output. With the right remuneration strategies in place, remote working becomes its own reward. “It’s exactly what younger generations of workers are looking for, their main concerns being a good work-life balance and independent decision-making. They are also often willing to sacrifice income for this type of job and may see an organisation that offers this benefit as an employer of choice,” concludes Smit. ENDS MEDIA CONTACT: Rosa-Mari Le Roux, 060 995 6277, rosa-mari@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 Authored by: Muhammed Goolab, Exco Member at the South African Reward Association (SARA)
Right now, organisations are focusing on streamlining their businesses, lowering costs, becoming more agile and responsive, and offering the same or better quality of service in a post COVID-19 world. So we will find that the way companies and employees engage will change, as will the value proposition offered to the latter. A changing approach to employment Many employers have already determined that they can function with large complements of their staff working from home, and employees are gaining increasing independence over how and where they work. COVID-19 has forced many organisations to focus on core operations in the short term, and they will inevitably turn to streamlining structures and processes. In the longer term, we may find that they prefer to employ more generalist skills inside the organisation while outsourcing specialist skills. Depending on their needs, however, they might take the opposite stance. They could increasingly tap into the gig economy as a cost-effective way of providing goods and services in instances where work is seasonal, that is, there are peaks and troughs in demand. Although giggers may have to work on multiple projects to maximise their income, the result would be a reduced permanent cost to employers. Managing organisational culture Organisations would also need to grapple with managing organisational culture in what will become an increasingly flexible working environment. Organisational culture determines what the acceptable standards are and is the glue that binds the way people function and their expected behaviour within their organisation. In a sense, the culture is about the experience of working in an organisation. So the challenge going forward will be how to develop, manage and maintain an organisational culture where large numbers of employees are working from home or under other flexible arrangements that minimise daily personal contact in a common physical environment. Rethinking pay How employees are rewarded will play a significant role within this new paradigm. The current imperatives for companies are cost reduction and job preservation. Many are cutting back on salaries and benefits by either enforcing reductions or freezing increases or bonuses. Employees may be affected for an extended period before their pay returns to pre-COVID-19 levels. Such pay interventions will also drive deeper discussions around issues of a living wage and pay equity. An unusual response may be that some employees realise that they can manage on a lower salary, and could even consider adjusting their work week to 4 days to free up 1 day for other commitments and initiatives. Remuneration policies will therefore be revised to support business recovery as the COVID crisis winds down. They will emphasise variable pay elements, both to manage costs and as a tool to increase productivity that is aligned to the organisation’s objectives. As the structures of companies evolve with the changing ways of working and possible technology solutions, many lower skilled jobs will start to fall away and those employees will need to repurpose themselves. This will lead to organisations embarking on a reskilling drive to better position themselves for a post COVID-19 economy. In summary Employees will increasingly seek longevity and sustainability in their employers, and companies will need to review and adjust their employee value proposition. This includes reevaluating traditional benefits and implementing those more easily adapted to a flexible working world. What has become apparent in the short term is that employees are looking for greater holistic health benefits that focus both on their physical and mental wellbeing. These will, however, evolve into lifestyle benefits that support flexible working. ENDS MEDIA CONTACT: Rosa-Mari Le Roux, 060 995 6277, rosa-mari@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 By Nicol Mullins, Chartered Reward Specialist and Exco Member, South African Reward Association(SARA)
COVID-19’s most lasting effect may be prompting us to think differently. For me, this global crisis provides a heaven-sent opportunity to rethink the way we look at remuneration and, more broadly, work. Some companies are already thinking differently, as shown in a dipstick survey recently conducted by SARA (our COVID-19 Remuneration Actions Survey). It shows that 41% of respondents have implemented senior staff pay cuts, and some companies are cutting short-term (27%) and long-term incentives (23%). Twenty-five percent of respondents have still not made a decision about short-term incentives, and 43% are pondering long-term incentive cuts, so presumably some of these might also elect to cut executive pay or put incentives on hold. These are prudent measures designed to preserve cash against an uncertain future, but they also send a powerful message to the whole organisation: We are in this together, and we will make sacrifices to keep everybody’s job safe for as long as we are sustainably able to. But there’s also plenty of increased news report frequency around organisations considering, or implementing retrenchments. Bizarrely, this approach is often welcomed by the market, and stocks often rise when retrenchments are announced. I would argue that this is simply indicative of the short-term thinking that bedevils our economic system, a finite mind-set opposed to an infinite mind-set. If you think about it, retrenchments are negative because they result in a catastrophic loss of institutional memory and valuable skills, amongst several other negative knock-on effects. The company is weakened, and ill-placed to take advantage of more favourable economic conditions when they come. We are always hearing about the war for talent and how long it takes to get people trained and productive. Getting rid of the people so laboriously acquired and trained can never be positive if one takes a long term view, as any board and exco must. It also sends a highly negative message that people are expendable in the quest for short-term gain. What if, rather, the approach evident in our survey was taken further? What if the company’s leaders levelled with staff and said, “We need to cut still more costs”? Retrenchment and employment are not alternatives, they are the ends of a long continuum. Most people would take a pay cut of some kind to retain their job, and the sense that the company is a family that looks out for its members would be enhanced. Such a company would come out of the lean times with the skills it needs to grow—and, more important still, a workforce with the right attitude. This question of attitude is crucial. Companies spend millions surveying “employee engagement” and trying to improve it because an engaged employee is a productive employee and one who will willingly volunteer additional discretionary time and effort towards company success. The way companies approach this crisis—retrenchment or coming up with a shared solution—will play a large part in driving better employee engagement and ultimately long-term sustainability and success. Playing the long game In fact, wouldn’t it make sense to rethink our whole approach to remuneration? One thing that’s struck me forcibly over the past months is the role of medical and nursing staff in fighting COVID-19. They are performing an essential role at great personal cost with a high risk of infection and stressful working conditions. In terms of the conventional approach to remuneration, assumed to be governed by supply and demand, they should be commanding higher pay. But those working on the COVID-19 frontline are not being paid extra (Cuban doctors excepted, perhaps) because, at base, they and their employers have a shared purpose: saving lives. Compare the conventional, friction-filled remuneration negotiation in which employees negotiate the highest possible pay, while companies seek to get the skills they need to fulfil their strategic objectives at the best possible price. But when there’s a shared purpose between employees and their employers, the remuneration discussion takes place on a different level. In fact, if people feel that their purpose in life is aligned with what their employer wants them to do, or that their job gives them a purpose, their primary focus will not be the size of their salary but rather the satisfaction they get from doing their jobs. Such employees will “go the extra mile”, will apply their minds to improving the business and, yes, will take pay cuts when necessary to preserve the company—and the jobs of themselves and their colleagues. Organisations and employees that align themselves around a shared purpose rather than financial targets are in a better position to adapt to what everybody agrees is a highly volatile, uncertain, complex and ambiguous (VUCA) business environment. They have resilience built into their DNAs because their people are united in pursuit of a common goal. Such companies will survive COVID-19 and prosper again; for the rest, the future is not so certain. ENDS MEDIA CONTACT: Rosa-Mari Le Roux, 060 995 6277, rosa-mari@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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March 2023
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