Published on March 16, 2016
1. Remuneration Brought Back to Basics Erste Group Bank AG Michiel van den Berg Head of Group Remuneration and Organization Effectiveness 16 March 2016 1
2. Outline of the session 16 March 2016 2 The Past Considerations 2012 2014 2015 Roadmap
3. Remuneration – 5 years ago 16 March 2016 3 Salary increase decision by a manager is a black-box. Board Members did not know what direct reports earned and how salaries relate to the market. Narrow salary bands. Salary differences of up to 4 times between employees on the same job. Lack of benchmark data. No structure and no explainable difference in total reward.
4. Issues in focus – performance, reward, work environment 16 March 2016 4 Business needs and priorities change faster than annual goals assigned to employees. Real-time discussions with employees are more valuable than year-end evaluations. Focus, direction and intensity of performance discussions is currently more on the past than on the future. Job, skill and performance rating instead of creating an environment to engage, develop and perform. Discussions focus more on execution of today‘s priorities instead of the future. Limitations in access, transparency (understanding) and availability of information/knowledge.
5. Remuneration – further considerations 16 March 2016 5 01 Reward develops with the person. Person’s experience and qualifications influences current reward position.02 See reward as an investment – rather than a cost – based on fit and potential of the person.03 Give rewards that people value (based on their needs in stage of life).04 Reward value-driven business decisions that bring both profitability and sustainable growth.05
6. Target – „remuneration in a nutshell“ 16 March 2016 6 Specific and annually updated „merit increase“ proposals and guidelines from HR to business. Salary increase is a decision by manager based on contextual data. From To Descriptions in salary bands and e.g. performance/development matrixes. Contextual salary bands. Calculated and distributed salary budgets. PEREX / FTE / Headcount cost management. Salary increases for all (or at least majority of employees – water can approach). Salary increase for selected individuals.
7. Learnings 16 March 2016 7 Transparency in the process is essential. Easy access to required data allows for flexible decisions. Contextual data supports discussion regarding the future fit of the person as opposed to having a strong focus on the amount of salary increase. A specific group of managers will never learn it, regardless of guidelines.
8. Roadmap 16 March 2016 8 Context Accessibility Transparency Many rules and guidelines for salary increases and bonus decisions Context data for salary increases and bonus decisions Context data for Total Reward decisions 2011 2015-16 2017-18
Title: Simple rewards in a complex world ... reward system is motivating enough, but a more formal evaluation would be an improvement for the system. 28
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