Business leaders have a lot on their minds at the moment and reward is certainly right up there. No one knows yet what the full extent of the pandemic’s impact will be, but current attitudes remain pessimistic: our March 2020 pulse survey found that 73% of respondents in ASEAN countries and 66% of respondents in APAC countries think the pandemic will have a negative effect on them.
In this environment, recalibrating reward in a way that supports the wellbeing and motivation of individuals, while protecting the business for a post-corona recovery, is critical to both the short and long-term survival of the business. Our recent webinar discussed how to develop an agile reward response in the current crisis, offering guiding principles for sensitively managing employment costs as well as offering insight into the unique challenges of executive compensation and rewarding sales employees in this environment.
Principles for managing reward through uncertainty
There’s no one way through this crisis for organisations and the waves of impact are being felt differently throughout the region. With no way of knowing how and when conditions will stabilise, organisations need to consider how they will reward performance, recognising that conditions will likely be very different in the latter half of the year.
One thing that is certain is that organisations must maintain and work within the trust of their employees – and more broadly their customers and the wider community. Failing to do so can result in discouraged and unmotivated employees, decreased productivity and damage to the employer brand. This can become very costly once the market bounces back – and the competition for top talent becomes fierce.
Navigating these uncertainties is undoubtedly difficult, but these guiding principles can help organisations manage their response:
- Communication: Most organisations will make changes and it’s essential that the communication of these changes is timely, clear and transparent. Answer critical questions upfront: Why do we need to make changes? What are we intending to address?
- Alignment: For all changes, consider how they align to your EVP. In particular, think about how they will be experienced by employees and how the impact of the changes could alter the social contract between your organisation and employees.
- Integration: To ensure any changes are implemented smoothly, they must be integrated with other people programs (including performance management), otherwise there’s a risk that implementation will be disjointed with run-on effects for engagement and motivation.
Be proactive on executive compensation
The early impact of the pandemic on executive compensation is varied across industries. As with wider reward changes, adjustments to executive compensation need to maintain good faith. This will likely mean reducing executive and board compensation, including through suspending grants for executives.
When it comes to implementing share option plans, organisations need to consider the impact of issuing shares at a significantly discounted price. Some organisations are looking at the average share price over a wider time frame or granting shares at the same price as last year.
For executive performance reward going forward, the focus will likely shift to mitigating and minimising value disruption in the specific context of the organisation’s peer group companies. Including relative performance measures in executive compensation plans will ensure they are more robust both now and beyond this initial phase of the crisis.
Sales compensation in times of crisis
Managing reward for sales employees through the pandemic is an exercise in balancing long and short term thinking. The starting point, however, should be to retain your sales force wherever possible; laying off sales people at the height of the crisis may result in a far longer tail and delayed recovery when conditions stabilise if your organisation is left without enough people to meet demand.
There are a range of actions that can be taken to help maintain motivation and engagement for your sales teams through the pandemic. We see these four areas as the starting point:
- Adjust threshold targets: Not many individuals will be able to reach pre-corona threshold targets in current conditions. Consider dropping thresholds on primary measures from, for example, 80 down to 55 or 60.
- Lower targets for excellence: Top performers still need to be recognised, but top performance means something different now. Lower targets in line with thresholds means you can still recognise excellence throughout the crisis.
- Increase accelerated payment levels: Once individuals hit critical targets, accelerate pay outs to maintain motivation.
- Find new ways to reward: Introduce spot awards and special incentives for behaviours that focus on continued business development or show leadership.
Learn more about how agile reward strategies can help keep your talent motivated, engaged, and aligned with business objectives through crisis, read: Employing agile reward strategies for a volatile world.
Watch on-demand: Our experts discuss and share learnings on the challenges and impacts of the current global situation.