Summary
Offsets are described as one of the most effective tools to attract and align people with organizational goals. This article, based on the experience and analysis of the work on compensation applied to various Chilean companies, summarizes the main trends observed in the Chilean market and comments on the best practices being developed in our country.
Each trend is individually described, making it possible to access a specific reading of those aspects that most interest the reader. The observed trends are as follows:
- Evolution from a traditional administration to a shared risk management. Greater professional handling of the subject. Application of proven job evaluation systems, as a basis of internal equity. Improvement of market remuneration surveys, as an axis of external competitiveness. Increasing statistical methodologies for the design of job structures and calculation of optimal remuneration structures. Progressive introduction of variable income systems. Different remuneration positioning policies according to hierarchical level. Increasing retention strategies for executives and key people. Decreasing collective bargaining and reduction of remunerations and benefits historically guaranteed.
Contextualization
The current state of development of most companies, where access to capital, technology, information, and production goods and services progressively cease to be differentiating factors, seems to be showing something that was obviously not conceptualized but in recent years: people are the most relevant asset of an organization, who generates results or losses, and on whom the sustainability of a company depends to a great extent. Talent currently moves capital (Ridderstrale and Nordstrom, 2000).
This finding adds to the fact that the globalization of business and its impact on increasing increases in competitiveness, have resulted in the need to make cost adjustments to maintain a reasonable level of profitability, making these adjustments compatible with the maintenance of the people who they concentrate the intellectual capital of an organization.
It is necessary to match cost control strategies with talent retention strategies, demanding a balance between short-term requirements and maintaining the business over time.
Compensation strategies are among the cost control strategies that make profitability, cost reduction, maintenance of key personnel and competent performances compatible.
Historically, compensation was seen only as an administrative function of payment of remuneration, typical of accountants and whose only requirement was to comply with labor and tax laws.
Even today we see that there are difficulties in accessing professional compensation training, which is why it is achieved in practice or in postgraduate studies.
This becomes even more complex when it is the professionals in the human resources areas who usually have to make decisions and give guidelines on how to pay, at what level, with what salary to hire, how to give salary increases, how to reward outstanding performance and how to generate an incentive system.
Despite the lack of knowledge generated by the above, the organizational reality imposes inescapable needs that are faced daily: how to align the compensation structure with the values and goals of the business? How to attract and maintain the right staff? How pay equitably and competitively? How to clearly associate remuneration and successful performance? How to stimulate staff to develop new skills? And how to link remuneration with activities that provide added value? (Flannery et al, 1997).
Underlying these questions are the 4 objectives that the compensations fulfill and that allow us to understand it as a professional activity, and which we detail in another article (Fernández and Baeza, 2002). These objectives are:
- Strategic alignment Internal equity External competitiveness Performance management
Organizations may or may not carry out professional compensation management to achieve the aforementioned objectives, which does not eliminate the effects this has on workers.
There are effects associated with how remuneration is administered, which can be managed based on business goals or left to chance. If the latter occurs, the probability of regretted staff turnover, union conflicts due to unequal remuneration, increased staff costs, and misalignment between what the organization requires and the demonstrated performance of the workers significantly increases.
In Chile, before 1990, compensations were mainly associated with the development of market remuneration surveys that were used as the sole criterion for managing salaries and, in some cases, with the development of salary bands according to job levels, focusing on the external competitiveness of compensation. Although these techniques are basic, few companies used them.
From 1990 to date, compensation management has become increasingly important. Its introduction was imported from the headquarters of international companies, to be later incorporated into large national companies. Some medium-sized companies are professionalizing their compensation management and in SMEs, where there is mostly no intentional management of human resources, there is only administrative work associated with legal compliance and the settlement and payment of remuneration.
Compensation trends
In this context, a series of compensation trends can be identified and characterized, which describe the current reality and allow us to forecast how this function will continue to be developed.
The nine trends we have observed in our compensation work in recent years are as follows:
- Evolution from a traditional administration to a shared risk management. Greater professional handling of the subject. Application of proven job evaluation systems, as a basis of internal equity. Improvement of market remuneration surveys, as an axis of external competitiveness. Increasing statistical methodologies for the design of job structures and calculation of optimal remuneration structures. Progressive introduction of variable income systems. Different remuneration positioning policies according to hierarchical level. Increasing retention strategies for executives and key people. Decreasing collective bargaining and reduction of remunerations and benefits historically guaranteed.
Trend 1: Evolution from a traditional administration to a shared risk management.
The current business scenario is characterized by uncontrollable dynamics, by acquisitions and mergers of companies as strategies to increase market share and the consequent disappearance of the smallest players, by sustained efforts by themselves and by the competition to achieve ever higher returns. difficult to achieve with their natural effect of decreasing prices and sales margins of products and services, by systematic efforts to reduce costs, and by increasingly aggressive competition.
All of the above is aggravated by a growth of the economy lower than expected and budgeted by companies, which has translated into a perception of crisis from 1998 to date, and an unemployment level with rates close to 10%. In fact, the composition of this unemployment has hit the professional and executive segment much more strongly than the crisis of 1982, which accentuates the feeling of difficulties among those who run the companies.
This supposes a high business risk and uncertainty in the short-term results, preventing predicting the medium-term commercial and financial results, which does not make it possible to ensure the stability and sustainability of companies and jobs in the long term.
Among the strategies assumed by companies to face this adverse scenario is the reduction and control of fixed costs, and personnel costs are a relevant portion of operational expenses. Verifying the need to reduce personnel costs does not determine the strategy to follow to do so. In fact, the simplest and short-term strategy implemented by many companies has been to lay off staff, due to its immediate impact on results.
However, other companies have envisioned the need to protect the investment they have made in recruiting and training staff with their learning effects and developed intellectual capital, while keeping staff competent. This supposes a longer term vision, since it delays showing an improvement in the results but allows to maintain the internal strengths to give sustainability to the business over time. As the cost pressure persists, the strategy developed has been to vary the remuneration, which can be well or poorly conceived.
Variabilizing remuneration is a difficult task since workers and their union groups tend to interpret it as a company strategy to maintain their profits at the expense of personnel. When some company tries to establish equities with the logic of "one party wins and the other loses", the probability of success is minimal and the possibility of internal conflict increases. This is a misconception of variable income and we tend to observe it in companies whose executives have a traditional vision and administration of the contribution of workers, in the sense of being the “workforce”, that non-strategic or thinking part that should only to work.
Another vision is one that conceives the profitability and sustainability of organizations as dependent on people's work. It implies a comprehensive vision of the contribution of people to the success of the company, which means giving it an organizational scope and depth that institutionalizes the management of people as one of the strategies on which the results are based.
As the descending logic of the balanced scorecard proposes, the economic results of a company are anchored in good management with customers, which in turn is successful if it is based on efficient internal work processes, which in turn depend on competent and adequate technology. In ascending words, it is people who develop efficient processes that allow commercial management that ensures good financial results (Kaplan and Norton, 2000).
Therefore, the variability of remuneration is not in the first instance a matter of business strategy, but rather responds to an anthropological conception of the unique and irreplaceable contribution of people to organizations. It is required to migrate from a conception of people as labor to a concept of these as a substantial contribution to organizational achievement, which merits a management of people (Fernández, 2001). This implies building win-win strategies, based on the realistic progress of the organization, and on the need to share successes and loss of results. Conceptually, a company-worker alliance is required from the contribution of their own work, in a collaborative and participative management approach (Estévez, 2001).
In turn, it is necessary to develop a growing executive awareness in understanding that remuneration determines behaviors and that professional compensation administration is one of the most powerful tools to align people's performance with organizational goals (Fernández and Baeza, 2002).
Today there is a growing risk-sharing management, where the uncertainty that companies experience is assumed by both them and their employees. The concept of a company that ensures work and remuneration regardless of its results is giving way to a scenario where individual compensation is associated with the company's progress (Mc Adams, 1996). This means a shared risk in two ways: sharing profits, with a profitability floor for the company, and sharing losses, with a fixed income floor for employees.
The risk-sharing management implies strong challenges for the executives of the companies, their workers and for the labor relations, since it implies building agreements and formulas of income and stable and clear variable incentives, whose application and calculation procedures are simple for the employees., and easily administrable for companies. These agreements are built based on the trust and credibility of win-win strategies, clearing the ghosts of ephemeral short-term convenience agreements and imposing a challenge to change the criteria of executive discretion.
What is at stake is the coherence between organizational discourses on the new role of human resources and day-to-day management practices (Fernández, 2002), long-term credibility, and the construction of a solid corporate culture, which in recent Research has been described as one of the fundamental differentiating factors between good companies and outstanding companies in their long-term results (Collins, 2001).
Trend 2: Greater professional handling of the subject
Although in Chile the human resources agenda is still incipient, especially in small and medium-sized companies, there is a growing trend of professionalization in the management of human resources of various organizations, concentrating their actions on large and medium-sized private companies, and in some state institutions (Acuña, 2002; Raineri, 2002).
This trend is also replicated in compensation management, finding that awareness of the importance of compensation as one of the main strategies to align people's work with business goals has grown in various companies.
Typically they are companies with more than 300 workers with combined organizational structures (for example, functional structures and staff areas; functional areas, by business, product or distribution channel, and holding; functional staff and areas organized by processes, among others) and a high number of different positions, which initially address the issue as a way to reduce the problems generated by:
very different remuneration from positions of similar responsibility and the internal perception of salary inequalities, due to the pressure of salary increases, and due to the needs to define hiring salaries, structure systems to associate performance evaluation with income increases, and to rationally manage salary increases.
These organizations have evolved from traditional payment, which normally follows the criteria of labor law, the market, the cost structure, or "as little as possible", towards a professional management of compensation. Gradual progress is made from "the act of paying" to "what you want to pay", changing the traditional instrumental nature of compensation to a strategic sense.
This evolution is observed in the conformation of multidisciplinary human resources areas, with high levels of professionalization, and increasing conceptual and instrumental compensation training. The issues already established relate to the need for a payment that reconciles internal equity and external competitiveness, and the use of professional compensation tools, which we will describe later.
It is observed that a few companies already have organizational designs in which there are management, sub-management or compensation departments, which reflects this trend of consolidation and legitimization of the subject.
It is also interesting to highlight the vision of the moral sense of compensation that some executives comment, who consider that through professional management of compensation organizational values are linked to the concrete work of people (Burr, 1993). Thus, the design of the compensation system must adjust to these values, which generally have to do with equitable and fair payment to similar initial responsibilities, payment for responsible results, payment for excellent and quality performance, and payment for group goals, anchoring collaboration and teamwork as organizational values.
Trend 3: Application of proven job evaluation systems, as a basis for internal equity.
There is a marked trend in the growing awareness of associating remuneration with the contribution of each position to the results of a company. This has its counterpart in the finding that many salary decisions are only based on the comparison with market remuneration, which, while maintaining external competitiveness, can also establish remuneration inequalities due to seasonal factors.
For example, if an Accountant General was hired in 1996, the market salary was higher than the current one, due to the conditions of full employment and the consequent higher remuneration. If that same accountant is hired in 2002, the salary will be lower and internal inequity and potential problems will be installed by having different hiring salaries in the same position. This is the risk of paying considering only the market criteria.
It follows that optimal remuneration is a correlation between the relative importance of each position in relation to organizational results (internal equity) and the levels of remuneration in the comparative market (external competitiveness).
The job evaluation systems are multiple, from qualitative (ranking, pairwise comparison) to quantitative (factor comparison, point system), observing a massification of the point system created by Edward Hay in 1952 (Rock, 1972). This system allows evaluating all positions through common factors (responsibility, problem solving, competencies, and working conditions) using point matrices that give a numerical value associated with each position and that describes the relative location in the organizational structure.
The merit of the Hay system is its proven and successful application in many and diverse organizations around the world, and its survival after 50 years of application, which demonstrates its effectiveness and adjustment to organizational reality.
Job evaluation systems are complex and those organizations that have attempted to design their own systems know this well. For this reason, there is a certain resistance in some companies to undertake this work, as it is considered difficult and initially costly, without observing the advantages of equity, transparency, low regretted turnover, favorable work environment, and control of the cost of remuneration that is deducted from the application of the evaluation of charges. In other words, the political will of top management is required to legitimize the criterion of internal equity as one of the pillars of professional compensation management.
A recent idea regarding the evaluation of charges suggests that this should be carried out no longer by factors such as those determined by Edward Hay, but by the ability to add value to each charge to the company. This is in line with the tendency to value the management of organizations through the EVA (economic value added), which although it is an interesting idea, must be reflected in concrete evaluation systems, applicable and effective over time, so as not to fall in the temptation to host possible fashions.
What is relevant is to verify the existence and effective use of techniques for evaluating proven charges in Chile, in which the internal equity of compensation is established.
Trend 4: Improvement of market remuneration surveys, as an axis of external competitiveness.
Any analysis of compensation requires having market information to determine the degree of competitiveness and positioning of the remuneration of each organization.
The remuneration surveys available in Chile are provided by international auditing companies and by some local consultants, who have made improvements in the reliability of the information, the size of the sample of companies and positions, the inclusion of the effect of variable income on the total compensation, the presentation of results according to specific markets, and better analysis of the compensation structure.
Notwithstanding these improvements, there are challenges to the quality of compensation surveys. They are as follows:
Improve the reliability of the information: it is a general comment among the executive users of remuneration surveys, that the information may be real in middle and administrative positions, but not at the executive level. Unfortunately, few companies provide complete information regarding the level of executive compensation and, above all, variable incentives and benefits. This prevents its reliable and valid use in the executive segment, where by necessity other compensation comparison strategies and retention of executives and key people have been developed. The potential problem continues to be how confidential the consultants' use of the information provided is, so when in doubt, companies provide partial or no information.
Generate remuneration surveys based on job evaluation, to guarantee a professional approval of the same. The great flaw of current surveys is that they do not grade remuneration information according to the impact and weight of each position within their own company. Therefore, together with the collection of information on remuneration, rapid methodologies should be developed for evaluating the positions surveyed, which, although it requires great initial work, will make it possible to carry out a professional approval of positions, and not as is currently done, which is by approximation, with a high degree of error based on generic responsibilities of the positions, and without evaluating the magnitude of the impact of the responsibilities of each position on the economic results of the organizations.
Valuing benefits: although there are reports of benefits, they are summaries of the statistical frequency of their presence or absence, and they do not value in money the existing benefits or the percentage with respect to the total annual gross remuneration. Although it requires work because it requires making specific valuations according to charges, it is a necessity to have the total cost of benefits.
Take a look at total compensation: in addition to the above, the remuneration surveys must provide the total cost of compensation for each position, since it is the criterion that companies use to make their budgets and manage their personnel costs. The gross annual cost of guaranteed fixed remuneration, variable income and incentives, and benefits must be clearly determined. This is the only way to have an effective total compensation look.
Refine structural analyzes of compensation: current surveys place a high emphasis on the cost of compensation, over the concepts and distribution of compensation (what to pay). It is required to specify how the total compensation structure is composed, detailing the percentages of fixed income, variable income and benefits, and opening each of these variables in the assets and payment items that compose them.
Trend 5: Increasing use of statistical methodologies for the design of charge structures and calculation of optimal remuneration structures
The methodological rigor and the use of descriptive and inferential statistics as a design tool for charge and remuneration structures, position compensation management as one of the most reliable strategies, of quantitative management and directly related to the goals of companies, from which the human resources area contributes to the success of organizational achievement.
The methodological applications in the area of compensation are as follows:
Remuneration surveys for general and specific markets.
Analysis of remuneration positioning. The most frequent analyzes are the total positioning of the company, by job category, by job groupings (executives, supervisors, professionals and technicians, and administrative and operators), by functional areas, and the analysis of correlation and equity between behavior. of internal remunerations and those of the comparative market.
Determination of the number of categories of a charge structure s: once the charge evaluation has been carried out, it is necessary to construct the categories of the charge structure. For this, the concept of minimum perceptible increase is used, which establishes that the perceptual differential between one object and another to be identifiable, must be at least 15%. Therefore, technically the charge structure will have as many categories as 15% intervals exist between the maximum and minimum value of the charge evaluation.
The 'payment by job category' is assumed, in which the same salary band is established for a group of positions with similar responsibilities. Although this is the generalized practice, some companies carry out 'pay per charge', in which, according to the regression formula and the specific evaluation score of the charge, the optimal remuneration for said charge is determined.
Statistical regression as the basis for calculating the internal structure of optimal remunerations. Since there are 2 numerical interval variables - evaluation points of charges and market remuneration - the calculation of the optimal remuneration is determined by correlating both variables. For simplicity, some companies divide their positions into 3 or 4 groups and for each of them calculate linear regressions, however technically appropriate is to calculate a polynomial regression for the entire data set.
Salary range width according to human resources policies: although the definition of the salary band width depends on administration criteria, experience indicates that the most effective is to establish a starting or hiring income of between 75 to 80% of the midpoint of the band, and determine a maximum income that is between 15 to 25% higher than the highest real income paid to a position in the category, as this guarantees flexibility to the remuneration structure and allows increases in remuneration for those who they earn more within the band.
Use of merit matrices as a tool for increasing fixed income: the merit matrix allows determining the percentages of salary increase, associating two variables: result of the evaluation of the performance and position of a person's income in relation to the average remuneration of your salary band (so it indicates whether you are under or overpaid with respect to the optimal internal remuneration). In this way, percentages of remuneration increase are established according to the total cost of the company, which are distributed assigning the highest increases to those who show outstanding performance and the highest underpayment with respect to the average of their salary band, and thus decreasingly. This allows performance, external competitiveness and recovery of wage inequalities to be reconciled.
Salary adjustment plans: once the internal structure of optimal remuneration has been determined, companies must determine who is underpaid and overpaid, in order to implement a contingent salary adjustment plan that combines performance criteria, pay gap, and turnover potential sorry.
Trend 6: Progressive introduction of variable income systems.
At the beginning of the article, we discussed the current business context and the reasons why the variability of remunerations, the decrease in fixed personnel costs, and the compensation associated with the company's results, become imperatives of economic times and work that we live.
Due to the globalization of business, the introduction of variable income systems is a world trend, as we confirmed at the 9th World Congress of Human Resources held in May 2002 in Mexico.
Technically, variable income is conceived as:
- A motivating and directing element of people's performance. A way of sharing risks and profits. A cost control strategy. An effective way of engaging people with business results. A factor of organizational coherence between executive discourse and work practice.
Introducing variable income systems requires adequate financing, through current cost replacement mechanisms. Generally, variable income is financed with:
Increased productivity and / or sales: there are more than a few companies that, determining the yields and historical rates of productivity or sales, agree with their workers a variable incentive for increases in these variables above the historical standard. This is assumed that increases are dependent on people and their performance, and should not be associated with technological improvements or unmanageable market conditions for employees.
Reductions in operational cost: in all companies, but with greater relevance in those that work with commodities and in which the price tends to be inelastic in generating greater demand, one of the focuses is the reduction of operational costs. For this, the cost of production of products or processes is determined in some period of time, and it is agreed with the employees how the savings generated by a better operation of equipment, raw materials, inputs and processes will be shared. This type of variable incentive financing, like the previous one, is based on having efficient, clear information systems that enjoy the credibility of the people affected by the variable income.
Decrease in fixed income: perhaps the most difficult way is to reach agreements in which workers accept a decrease of a small percentage of their fixed remuneration, due to the conviction that their work will allow them to achieve higher levels of remuneration by achieving goals that the variable incentive is associated. Again, the simplicity of the incentive formulas, access to reliable management information, and the perception that improvements are dependent on the performance of people and teams, are the factors that facilitate the success of this strategy.
Substitution of benefits: A commonly used practice in collective bargaining has been to substitute benefits of little use and coverage among workers, or benefits not associated with performance (for example, seniority and title assignments), by variable incentive systems. Although this strategy has not been relevant in terms of cost reduction, it has been relevant in terms of corporate culture, since the ideas of compensation associated with performance, variability of remuneration, meritocracy, and employability.
Freezing of fixed income increases and allocation of the budget for real annual increase in remuneration to the variable incentive system.
As it can be deduced, the logic of the variable incentive system is that the performances and results above the historical average allow to achieve a significantly higher remuneration (“if I work better, I earn more”), existing a company profitability floor. In other words, once certain base results have been achieved, the variable incentive begins to be paid.
The factors that are considered as part of the variable incentive formulas are determined based on the identification of the value chain of each company, paying for good results in the critical factors of business success (Belcher, 1991). Therefore, there may be as many incentive systems as there are key areas or processes.
The application of variable income is widespread in commercial and productive areas, where there are measurable indicators of easily obtainable results, and where we observe a gradual replacement of the sales commission or production bonus systems, to more comprehensive systems that include effective collection, Proportionate sale of product mixes, product quality, production line efficiency, rejection or return rates, unit costs, and accident rates, among others.
Its application to other areas of the company is feasible to the extent that information systems are available that provide the measurable management indicators that are the basis for calculating the amount of the incentive to pay, since the greatest obstacle is not in determining which variables incentive, but how to measure them (Becker et al, 2001).
In general, the variable incentive has been applied to management teams (Sanhueza, 2002), however, some designs are observed that incorporate all members of the organization. In this regard, some variable income payment processes that have been discussed in the media have negatively influenced, where positions are exacerbated and equity is connoted as an executive advantage of preferential benefits. This remains in the collective unconscious with a negative tonality, which makes it difficult for compensation variability agreements within organizations.
The critical success factors to be encouraged are at 4 levels: corporate, business unit, group and individual. Although current systems are predominantly individual, there is the challenge of working for incentive systems at all organizational levels, as a way of aligning individual and group performance and contribution with company goals (Chingos, 1997).
In the application of variable incentive systems, we observe resistance to incentivize due to the behavior of corporate factors and business units, in people without hierarchical authority and who have no possibility of influencing said results with their work. For this reason, the systems we have designed for people who do not occupy decision-making and executive positions are a combination of individual and group factors. The 'team compensation' methodology is still very incipient in Chile, which implies not only new forms of compensation but also new forms of organization, such as semi-autogenous groups (Gross, 1995).
Another aspect to consider in the design of the variable incentive is the periodicity of payment thereof. Since the objective is to develop an additional motivation to the usual one, it is not advisable to pay it monthly, since in a short walk it will be considered part of the monthly remuneration and will lose its incentive effect. Nor should their payment be too far apart, since there must be a temporary contingency between the good results and the compensation, which is why it is verified that the quarterly payment of the incentive, with compensation payments from the previous 2 months to optimize the tax effect, is the most chosen alternative by organizations.
Trend 7: Different remuneration positioning policies according to hierarchical level.
A finding that is not new but that constitutes a general trend is the application of different policies to position the remuneration according to the responsibilities of the position. In practice, it is observed that at the executive level most companies pay the 75th percentile or more of the comparative market, while at professional, technical and administrative levels, the market average is paid or less. The prevailing compensation policy is differentiated according to hierarchical level.
One of the effects of this differentiated policy is the great distance between maximum and minimum incomes, reaching ratios of 80: 1, which although it is part of our reality, it is scandalous for American and European executives who analyze Chilean remuneration, as they are far from the 10: 1 ratios observed in countries such as Canada, England or France.
Another interesting phenomenon to comment on from the remuneration positioning studies is executive tranquility when the organization pays globally on the market average, without deepening the analysis of salary behavior according to hierarchical areas or levels.
It is observed that there tends to be inequality in remuneration with respect to the hierarchical level of the position, where although the corporate position is at the market average, the incomes of the positions with the least impact are underpaid, the average positions are at the market average, and the executive positions are overpaid with respect to the compensation policy itself. It is important to prevent potential self-delusions as a result of the above, to open up to diagnose the inequities existing in some organizations and their potential consequences.
Trend 8: Increasing retention strategies for executives and key people
Every day, organizations and their executives become more aware that the value of companies is dependent on the management of some managers and key people (Michaels et al, 2001). Therefore, strategies are being applied to retain these people, which is not guided by the criteria of a remuneration structure or by factors of external competitiveness.
This phenomenon is associated with talent management within companies, since it is assumed that executives and key people concentrate the intellectual capital of an organization (Brooking, 1997). Talent retention strategies seek to ensure their successful performance, their maintenance in the organization, and the commitment of who is responsible for the greatest generation of value for an organization.
The recognition criteria for these people respond to what we call emotional compensation, that is, each executive, from his personal valuation framework, needs to be rewarded with what causes him the most psychological satisfaction. In other words, the analysis goes far beyond the economic and salary, and is at a higher stage related to personal satisfaction, feeling valued and respected, and quality of life. It is retention and development strategies that are being tailored to key executives and people, not the other way around.
It is interesting to comment on the Bottom Line Business survey 2000 (Ashby and Pell, 2001) where a sample of people was asked to prioritize the factors for which they remain in their jobs. The top 10 reasons were:
- Career development and learning opportunities Challenging and exciting work Meaningful work and the opportunity to 'make a difference' Outstanding colleagues Being part of a team A good boss Being recognized for a job well done Entertaining with work.Autonomy and sense of control over one's work.Flexibility in working hours and clothing.
The above is consistent with a survey carried out in 2002 by Acción Empresarial to 461 graduate and postgraduate students from 7 Chilean universities (Factors that are priority when choosing a workplace, 2002, August 18), who estimated that the main qualities of A company to attract new professionals are:
- Good working environment. Quality of life. Company image.
When asked about the most valued of a company's offer, the competitive monthly remuneration was the most mentioned factor.
It is interesting to note that, among the most valued factors to be attracted and kept in a job, compensation strategies are not mentioned, which would indicate that at this level they operate as hygienic factors, while the factors of retention and satisfaction of people The keys have to do with corporate human resource management strategies, where a balanced compensation package is relevant as a hiring factor and, in part, as a maintenance factor, but not as a development factor.
Thus defined, key person retention strategies require much more work than the design of compensation strategies alone, and pose challenges in 3 aspects:
Ask yourself and determine what maintains and develops key people in my organization?
Implement good people management systems as maintainers and promoters of intellectual capital, in accordance with the answer to the previous question.
Design as many individual retention and development programs as there are talented people, focusing on the human understanding of what each person values as psychological satisfaction. This poses challenges of design, administration, and management of the organizational effects derived from individual development and compensation plans, which contradict the collective idea of similar benefits at the same levels of office.
Although the satisfaction factors are individual, it is interesting to mention what are the most common practices of executive benefits and key people, as they necessarily offer a framework of what companies do in the Chilean market. The most common intangible benefits are:
- Company car. Memberships in social and sports clubs. Membership in professional organizations. MBA and postgraduate studies. Life insurance. Health insurance. Stock options. Parent company fees. Representation expenses with payment. Corporate credit card for personal use. School scholarships. Pension plans. Free credit available at UF and without interest. Travel with the family. Free cell phone. Subscriptions to newspapers and magazines. Flexible working time.
The way in which the most significant benefits are granted demonstrates the tendency to grant them the same associated with permanence in the organization, so they usually accrue in an average period of time and, if the person leaves the company, they must pay the balance pending the assigned benefit (Belcher, 1991).
In closing this issue, it is necessary to consider that the focus of human resource strategies on these key people presents the risk that those who are not considered talented or outstanding may be progressively inconsiderate, without adequately weighing their contribution to organizational achievement.
Trend 9: Decreasing collective bargaining and reduction of historically guaranteed wages and benefits
Labor legislation, business practice, the secondary effects of outsourcing, unemployment rates in recent years, and the fear of losing a job have discouraged union membership, which is reflected in the decrease in unionization, which decreased from 14% in 1998 to 10% in 2000.
Despite the fact that there is greater instruction from union leaders to understand the risk-sharing scheme, whose agreements and effects are not necessarily understood by unionized people, the results of collective bargaining have been discreet for workers, reflected in the lowest increase. of wages as a result of collective bargaining in relation to the real growth of wages in Chile, in a small but sustained decrease in benefits, its replacement by variable income, and in the increase in negotiations without a strike.
A change is observed from a welfare perspective to a meritocratic perspective, with primacy of results and performance, where the role of the company is no longer to guarantee job stability, but to increase the earning capacity of the worker for future jobs, depending on the development of skills in the current job. Stability was modified by employability, transferring the uncertainty of business to people, and encouraging each of them to take responsibility for their career.
The effects of the 2001 labor reform, the possible new laws related to the essential labor flexibility that embraces the current temporary work, subcontracting and part-time practices, and the response of organizations and unions to the expected improvement are about to be evaluated. of the economic scenario, despite the decrease in the margins and profitability of most companies seems to indicate that the trend towards low unionization and a decrease in labor unrest will continue.
These 9 compensation trends reflect an important part of the organizational and compensation reality of Chile as of 2002, and serve as comparison and evaluation factors for all companies that are glimpsing the need for professional management of their compensation, and for those that they have already implemented it, it allows them to check which of their strategies and practices are on the right track or are perfectible.
The new role of human resource management in current organizations should be characterized by a multidisciplinary approach that contemplates the adaptation of different human resource processes to the key goals and strategies of companies, with compensation management occupying a priority and foundational place., being one of the most guiding, effective and contingent impact strategies in aligning people's motivations, competencies, behaviors and performance with organizational goals.
Santiago, August 2002
Bibliography and references
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