‘Compensation structure will be more agile and flexible in times ahead’

Shubha Kasivisweswaran, HR Director, SunGard

What actually goes into building a sustainable and effective compensation strategy during appraisals? 
Whatever the season, employees will stay if the work is good, the environment is challenging and healthy; and the rewards are consistent and fair; and they see a joint commitment to their future in the organisation. What is unique to the appraisal cycle is that we decide increases at this time – decision on these needs to be shaped by the organisation’s philosophy. Firms that want to build a pay-for-performance culture will differentiate by performance level; firms that have diverse teams across domains or industries are more decentralised and expect managers to own their resources; they will give broad guidelines and let managers decide individual payouts; so, compensation strategy cannot change seasonally and needs to support business drivers and structures. It is useful to have increase structures that allow you to differentiate increases for merit, for promotion and for market catch-up.
What do employees generally expect from appraisals? How do you see the expectations changing in times ahead? 
Appraisals refer to the review of work done, but in most organisations and with most employees, this is synonymous with the increases and promotions that usually follow an annual appraisal exercise. To claim that an appraisal process is successful we must be able to make the distinction between the two processes in the minds of employees. That will ensure a fair understanding of how appraisals will impact pay outcomes, but also how the appraisals will feed into career plans, personal development and overall satisfaction. Employees expect that the appraisal process will be transparent, predictable, and fair. Appraisals are not a sphere in which people like surprises – even a positive surprise actually sends the message that the employee’s ability to assess work and impact of his work is not congruent with how the organisation views that work and that impact.
What retention strategies do you put into place to retain dissatisfied employees, post appraisals? 
When we say post-appraisal outcomes, we cover salary increases, promotions, role changes, transfers etc. To deal with dissatisfaction in any of these outcomes, you must start along with the appraisal process itself. We introduced a channel for employees to raise any concerns and I believe the key to why it succeeded was because we launched it along with the appraisal process and at every stage of the process, reminded employees to raise concerns, doubts or alerts through that. This works in two ways: there are always some employees who are feeling aggrieved and this forces them to examine the issue they are aggrieved about and that usually gives them a perspective that we could never manage through discussions; the second is when a genuine issue is dealt with promptly as soon as it arises and in confidence, word spreads. This in turn, reduces the incidence of that issue for others – remember that it is usually the same set of issues that are raised again and again. Do not discount the power of peer conversations – have a process that acts as a catalyst to surface these issues and address them promptly. That will help you harness the power of peer conversations. 
How do you see compensation strategies changing in times ahead?
In the years ahead, as organisations become more agile and flexible, compensation and reward structures will follow suit. For example, I believe we will see structures where a number of components could be short-term and revisited a few times a year; for example, an employee working on a critical project receives an allowance that lasts as long as that project does and there is no stigma with its discontinuance at the end of the project. The sense of entitlement that employees have now will diminish. Also, more organisations will move to communicating a Total Compensation or Total rewards picture to employees to maximise the value from investment and also to ensure employees understand the full extent of the investment the organisation is making.