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‘HR Needs To Speak The Business Language’

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While money may make the world go round, it is often the non financial aspects of remuneration and reward that make employees stick around in the corporate labyrinth. So believes Sridhar Ganesan, Managing Consultant, Mumbai Operations and Rewards Practice Leader, Hay Group, a global consulting firm that has worked with companies in over 48 countries. Having worked with a number of Indian businesses over the years, he emphasises on the need for companies to invest in interventions that would enable efficient human resources management. The HR model is still evolving but has come a long way in India.
 
In an interview with Businessworld Online’s Alokita Datta, Ganesan talks about understanding  the importance of understanding  an employee’s life cycle and how the rewards architecture of a company should be designed, the need to integrate HR with the core line of business , working with Indian family businesses and the need to adapt business models in accordance with local contexts.

When you talk of employee rewards and incentives, how do you distinguish between the two?
Incentives are actually a part of the reward structure. Reward is a much more holistic concept. Rewards in themselves can mean the different ways in which an organisation can develop a pay philosophy for an individual. In that some things are given as (s)he performs the role which can be the fixed pay and then there are others which he can be given when (s)he performs on certain targets which are variable, for which he can get a variable pay or an incentive. So an incentive is subsumed in the overall reward structure.

How important are the non financial aspects of reward programmes and how should they be designed and understood from the employee (and employer’s) points of view?
To begin with we should classify non financial. In the rewards philosophy there are two aspects of non financial incentives: one is that which doesn’t come into the employee’s hand. For instance, within the rewards structure of an organisation, there are cash and benefits. The latter are facilities given to an individual in the job that he is performing, they can be around insurance, travel etc. But they are monitisable to what constitutes a salary package. This is the tangible part of the rewards programme.  The other part is where India is still evolving; the proxy for the value that an individual gives to an organisation or his commitment and engagement that an employee brings to an organisation is the number we call cost to company (CTC). Typically, however there is the concept of employee life cycle which becomes important when we are doing consulting work.  It is essential to realise that different people in different points within their life cycle will want different things: both in terms of rewards as well as the total value proposition.  For example,  If I am a 22 year old who has joined a company the intent is find out what is my cash in hand, the disposable income in hand I can use to satisfy some of my aspirations. As you move ahead in the organisation over the years to say middle management level, the whole expectation of rewards doesn’t just revolve around cash in hand: it is about how the company will take care of me in case of medical emergency. I have got married, have a family, how do I handle expectations of that nature? Do I have a flexible work arrangement? Issues such as these and others become a very important part of the overall value proposition.

Multinational organisations such as Proctor &Gamble are very competitive pay masters but the employees who stay there do so not just because of the money they get but because of the ecosystem the company creates vis-a-vis  pay and work culture. Most firms I have worked with are still focusing on the sub optimal criterion of number. It is important to realise that to create an engaged workforce, these additional things become more important and will create more stickiness in the organisation that merely salary numbers. For an employee who is 55 years old, for instance, what is really going to excite him is the benefit plan the company is offering, medical plan for instance. When we do consulting assignments with organisations, we ask employees to look more holistically where obviously the tangible number is important but other plus factors should also be considered in totality. Training doesn’t need to be monitised into the employee’s salary, but a complete calendar of training, which would include skill enhancement, soft skill development which takes him/her to a new level of performance has to explicitly mentioned and factored into the value proposition that the employer gives. Then the whole ball game of why I want to join a company will change.

You have described how the reward architecture should be at the time of hiring a new employee. What about people who have been working within the organisation for a couple of years (and could be saturated professionally)? How should their performance be incentivised?
Working in or above mid level management, you have been there, been an individual contributor now you are managing teams and have been performing a certain job function for some time now.  Rewards here, also need to be systematised. Plans around quality of work, succession and career planning and how that can happen in a systematic rather than autocratic manner become pivotal. In the Hay Group, we talk of a concept called spectrum where we say that the whole Hr management in a company, what we call organisation effectiveness, is an integrated picture that needs to be looked at in a continuous manner. It should end with the recruitment guy saying I have hired him and so my job is over or the compensation person saying that the package has been drawn out and his job is also over therefore. Then the talent management person would decide what to do with the employee. At the end of the day all these things need to add together and in our scheme of things it is a continuum. That starts with why someone joins a company, at some point it will be how the salary trajectory moves or what the enabling factors around the company are which enhance performance: new jobs, new challenges.  All of these things together will help an employee stick, where rewards becomes one of the components, not the only one. If this process is not looked at in continuum then there will be sub optimal actions where there will always be gaps and silos which will ultimately affect the employee and create discontent and finally attrition.

How receptive are Indian companies to the idea of realigning HR as a concept and department and what are the ways in which they are going about it?

It is important to understand that the HR model is evolving. David Ulrich brought forth the concept of Hr being a business partner which is very critical concepts. What we are saying is that HR is as much a line function as any other because it is a true enabler for a business to achieve its results.  This means that when you align various sub areas within HR: whether it is acquisition of talent, talent management, reward recognition or operations ( hiring and retirement policies), there has to be a common thread integrating them rather than them working in their own compartments.  Most of the companies I have worked with function in compartments, which means that the HR person has no idea of what they all are delivering as a function.  As a rewards guy, my deliverable is only increments hence I need to see what happens in the market and give the right increment so that people do not leave. But is salary the only reason people leave? Maybe career planning is a bigger issue than salary? If salary planning, succession planning and other aspects are linked together, the effect will be magical. That is an evolution that Indian organisations are going through.  About 20 years ago the HR department was an administrative payroll department. Now we have HR specialists who make expertise related comments and analysis. What is important is that expertise people also talk to each other and make interventions which are holistic in terms of what is offered to the employee at the end of the day. There is a tremendous link between what the top bosses of a company want what HR is driving as a culture and results from employees. HR needs to speak the business language and companies should make the HR language understandable to the business. It is a two way communication. The HR person should not be seen as the principal of the school but rather as someone who will help the line manager in achieving his targets. Only then will it be symbiotic and not confrontational.
 
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How do you tangibly measure an employee’s level of engagement with a company…
We believe in the two concepts of engagement and enablement together. Engagement would include how an employee feels about his company, will he refer it to other people, and things of that nature. Enablement would mean what are the opportunities the organisation he works with provides him , the work atmosphere; all the non financial benefits. So enablement and engagement together is what creates employee commitment.  It makes an employee say this is my company and I am here for good.

Isn’t that commitment to one’s organisation dwindling in some ways? People who stay in one particular organisation for a couple of years are often thought to have lost out to others who’ve moved on, so to speak…
At the end of the day if as an employee you decide to stay in an organisation for a longer time, there is some value you are drawing from your organisation and are hence still there. What becomes critical from an engagement framework, for the company, is to understand that in micro detail and see  how your feeling (for the organisation) can be cascaded to the rest of the employees who may find longer tenure to be a negative factor.  Often companies invest time in action planning where they control the group that has been in the organisation for a long time, do a focal group study to try and understand some of the things that make them stay on, find those attributes and then try and see if they can through their interventions, instil those attributes in the minds of the rest of the workforce as well. A lot of companies conduct employee engagement surveys but at the end of the day they are done because they are in the KRA (key result areas) of the human resources department and a report needs to be made. I think surveys of this nature are a fantastic way to find out the pulse of the people and help you prioritise. Once the survey is completed you come up with 20 dissonance points, you prioritise the two things you will focus on in the coming year and doing them in a sustained manner is a fantastic way forward. But doing a survey just for the sake of it is a dismal waste of financial resources.

When we do our engagement studies we spend a lot of time doing action planning of the results. Once the results come we do action planning on what we will prioritise and go back to the client six months later to find out what is going right and what is not. The whole orientation of using a study to make an organisation stronger in terms of processes and people is becoming a very big order of the day.

At what point in the process does the consultant come and what is the exact modus operandi you follow?
Our engagement and enablement survey becomes like a diagnostic to understand different levels and sections of employees. Even before those surveys would have been administered, we would have understood from the senior management team what the basic climate of the organisation is. So we have out hypotheses in place that we want to test; we make sure we divide the population in such a manner that we are able to test those hypotheses. When we do our action planning these hypotheses are presented to the senior people who make a difference in the company who will bear the responsibility of implementing action in their respective functions and departments. Our job is to facilitate that process, make sure it is concise and implementable. Six months later we do a review to check whether an intervention is required, do we need to take a focus group and find out if there are still some issues that need to be addressed. It is possible that we may get inputs that there is an issue around role clarity, for instance. That would mean we would conduct an intervention with the company to create better role clarity for the operating model that is delivering value for the organisation.

As a global consulting firm working with businesses across the world, how do you adapt Hay Group’s working model to accommodate the specificities of the Indian business climate?
In India, most of our clients are family owned businesses and that plays a humongous role in how we approach assignments and clients. They include first generation entrepreneurs who have started their enterprises from scratch and who realise as they start scaling up that it is becoming so big that they need to institutionalise business processes to sustain growth in the long term. This is where people like us come in saying how we can enable an organisation which can sustain the growth they aspire to. This is culturally very different from what happens in the West because we Indians love a lot of fuzziness in the way we work. We like things to be cloudy and interventions such as these make things very clear and cut away the ambiguity. This basically means that before we start an intervention, we spend a lot of time with the promoters, owners, their children who are part of the business to explain to them what kind of change implications they will need to be ready for. There can be a situation where a person working with them for the last 25 years, currently has no relevance in terms of value addition to the organisation. In an European context,  such an individual will be fired but in the Indian context one can never do that. Firing in India is quite difficult unless it is an MNC where you have a global mandate to fire but in the Indian organisation that will not be possible.  Therefore when we are consulting, we can’t use the same cookie cutter approach: individual not performing or adding value and so remove. In India, we have to work with the promoter to find out what are other avenues this particular individual with his competencies can explore.  Can he be a sounding board for the promoter to develop new types of businesses? Or growing in new areas? Thus, the way we will find solution for assignments in India will be very different because of the cultural context. The family owned business will have have to feel that we will be teaching them, in the next 4-5 months, how they will handle change by handholding them through the process.

We work with a lot of family owned businesses where the promoter still speaks only in Hindi, tends to be conservative, culturally strong and traditionalists in terms of business. We do a lot of culture diagnosis to find out the strong points of the company so that we can leverage these strengths and create an organisation that celebrates this culture rather than deeming what they do wrong. A lot of mentoring is required especially with senior members of the business and family to see how they can use the strengths of their business to make it stronger. Weaknesses are minimised and not eliminated immediately. This is how we work with family-owned businesses which are a completely different play from how we deal with MNCs.

But even MCCs coming to India will have to adapt  their business model…

There is a challenge in localising policies. A company from the UK would be very clear: only XYZ can be dome and that is it. Now that this has been defined we need to help the client by keeping XYZ paramount but also localise it so that it can be applicable in India. Case in point, designations: India is a country that loves designations. However, if you go to a European company you will only find a general manager, who is the managing director of the company; manager, who manages the functions of a department. In India a manager would be a junior or middle manager. So when a European company starts operations in India, they don’t understand positions like VP, Senior VP. We ensure that their designation structure (which for them is holy) is followed in India but also also create a map between what they follow in terms of jobs and accountability and what fits in India by creating a common language system. That's how we localise MNC polocies.

In family-owned businesses, on the other hand,  making people digest the implications of change and implementing it in bits and pieces rather than an overhaul is the primary concern.

When it comes to succession planning in family owned businesses, every generation would have differences of opinion about a range of issues. How do you then reconcile the differences between a first generation entrepreneur and his Wharton MBA son for instance while keeping the overall values of the business in place?
That is a very valid issue that we often face. We work with a lot of companies where they have a governance family council which comprises promoters, their children and the intent there is to bridge the gap between a very highly educated son and a first generation promoter who has established the business from scratch who will be very strong operationally but is still a frog in the well.  Family councils provide the platform where such differences are discussed in a very dignified manner and considered by facilitators like us. The next level of journey needs to have this kind of dialogue. The biggest focus area for us is to enable the Indian family-owned businesses to reach their growth trajectory whether in India or internationally.

Are you working with Indian multinationals are setting up operations in potentially new markets? A lot of Indian (particularly FMCG) companies are expanding their businesses in Africa…
Yes, Africa is like the next growth frontier for most Indian companies. This is exactly what happened to the multinationals when they came to India. But Africa and India are similar. South east Asian countries are mostly emerging markets so what I do in India and Malaysia (as a management consultant) will be very similar. They are culturally sensitive and family oriented. When a company goes to Africa the Indian company would want certain processes to be the standard. I worked very closely with a company that has  huge operations in Africa and we are helping then understand country specific cultures. What the multinational from the UK had to fix in India, the Indian company has to fix in Africa in order to succeed.