Pay Model Review Report

Transcription

Aon Hewitt
Consulting
Prepared for
Ervia Board
Prepared by
Jackie Waller
Martin King
Duncan Brown
Caroline McCamley
Guy Blackwell
Date
28 August 2015
Risk. Reinsurance. Human Resources.
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Table of Contents
Executive Summary
1
1: Terms of Reference
3
2: General Approach
5
3. Methodology
6
4. The External Environment
8
5. Detail of the Current Pay Model
17
6. Pay Model Effectiveness Review
21
7: Additional Inputs
40
8. Conclusion and Recommendations
41
Appendix 1
Summary of Submission from GoU
43
Appendix 2
Glossary of Terms Used
45
Appendix 3
CV's of report authors and contributors
46
Appendix 4
Management Interviewees
47
Appendix 5
References and Sources
48
Appendix 6
Companies included in market assessment
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Executive Summary
Executive
Summary
We are pleased to present the final report of the independent review of the pay model at
Ervia.
Our experience suggests that most organisations benefit from a review of reward and
performance practices every 24 months or so. The last 24 months have been tumultuous
for Ervia and Irish Water in particular, and the decision by management not to award the
PRA in Irish Water in 2013 and 2014 has impacted staff both financially and in terms of
confidence in the pay and performance model and organisation trust. We therefore
believe that this review is both necessary and timely.
This report sets out the background to the pay model in the context of the external
environment, and provides detailed findings of the internal review, which includes input
from senior management, staff and unions. The output from interviews with managers
and other employees is included in a separate annex from the main report. Keeping this
output from the interviews separate from the main report is done to protect the
confidentiality of those interviews. The material in the annex is provided to ensure the
client is fully briefed on all aspects of the reviewers' findings but is not for publication
beyond that.
The report also contains recommendations for changes which we have found to be
required.
The key areas we would wish to highlight from the following pages are:
•
Evidence shows that that the success of pay approaches is based not on best
practice but on ‘best fit’ for an organisation. That is, pay arrangements need to be
tailored to the goals, circumstances and culture of an employer.
•
That being the case, our report finds that the design of the pay model and the
performance process which supports it are fully compatible with Ervia's stated desire
to promote a high performance culture whilst controlling costs to create a
sustainable business.
•
The pay model does deliver value for money and sustainability; specifically it
provides appropriate controls and robust management of pay levels and does not
encourage or enable excessively high levels of pay.
•
Median employee pay in Ervia broadly equates to the market lower quartile. There is
no evidence that a so called richly rewarded 'bonus culture' is in operation.
•
Pay levels in Irish Water are lower, in many cases, than in other parts of the Ervia
group. This is because most employees in Irish Water have been recruited into the
organisation on the 2012 Ervia pay ranges, rather than having been transitioned
from more generous previous pay arrangements.
•
Furthermore the pay model and clear link to the performance management approach
are designed to engender a high performance culture with service levels and safety
as key elements in driving corporate and business performance scorecards.
•
The design of the performance approach and the link between pay and performance
- in particular the balance of corporate performance elements (Ervia as a whole), the
business unit performance elements (Irish Water, Gas Networks Ireland etc.) and
individual performance elements - is appropriate to the organisation’s aims of
encouraging a high performance culture.
•
The pay model as designed in Ervia is appropriate for a “start-up” utility such as Irish
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Water.
•
A “dual” approach with two pay models(one for Irish Water and one for the rest of
the organisation) operating in the same organisation is likely to be counterproductive
and should be avoided. It would create confusion and division and would be
particularly difficult for people who work across all areas of the Ervia group.
•
Our research and previous experience points to the advisability of single pay model
being applied across a single entity. We therefore recommend the continued
implementation of the complete pay model, including PRA, across Ervia.
•
However, whilst the design of the model is appropriate and robust, there is some
requirement to work on refining and improving its operational delivery. We therefore
provide recommendations focused on improving the operation of the current model.
Signed: Jackie Waller, Aon Hewitt
Signed: Martin King, &|Ampersand
th
Date: 28 August 2015
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1: Terms of Reference
A.
Background
A new market based reward structure was designed and implemented in Bord
Gais Eireann in 2013, following negotiations with the Group of Unions (GoU),
and a ballot of all staff. The new structure represented a fundamental change
for all employees, and a move away from time-served pay increments to a
performance driven approach. The new structure applied in all divisions and
to all employees of the company, including Irish Water, Group Services, Major
Projects and Networks. Some of the most prominent changes were:
•
•
•
•
•
Requirement for all pay ranges to be externally benchmarked
End of automatic pay progression to a model based on performance
and market position
End of emphasis on fixed pay in favour of introducing an element of
“pay at risk”
Performance management for all employee levels
A pay freeze until 2016
As a subsidiary of Bord Gais Eireann, this pay model was implemented in
Irish Water on its set up in 2013. In 2014, Irish Water has faced much
political, public and media scrutiny, during which the concept of paying
employees ‘bonuses’ whilst introducing charges for the provision of water
services has not been received well publicly. While the new pay model
contained an element of ‘pay at risk’, this was not accepted by the public or
media commentators, and the perception of a ‘bonus culture’ in Irish Water
damaged the company’s reputation and mission.
The element of employees pay described at the time as ‘pay at risk’, was the
annual Performance Related Award (PRA), which was designed to be linked
to annual performance evaluations and paid to employees on assessed
performance. However, as a consequence of the media/public disquiet, the
Company decided not to pay the PRA pay element to staff in Irish Water, for
the years 2013 and 2014. This decision impacted on other employees of the
Group in addition to those in Irish Water, because of the nature of the Group
performance scheme. It was from this point that employee disquiet and
concern, throughout the Group, reached serious proportions. The events
surrounding the non-payment of the PRA has undermined morale,
organisational trust, and the entire concept of the performance related pay
model. There are some preliminary indications that staff retention may also
have become affected.
The response from the individual unions, represented by the Ervia ICTU GoU,
was, while measured, exceptionally strong in their unwillingness to accept
what was presented to them as a ‘fait accompli’. The unions commenced
consultations with their members.
There are emergent ‘core’ issues for staff affected which have become quite
crystallised, in terms of their own individual contracts, the value of a
performance reward model which can have its implementation halted, the
‘promise’ proffered on employment and then ‘broken’ shortly afterwards, and
questions now arising about the system itself.
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Both from the perspective of the multiple stakeholders, and particularly the
employees, the Ervia Board determined that these complex issues should be
addressed in 2015, and the Terms of Reference for the consequent review
are set out here.
B.
Terms of
Reference
Aon Hewitt, supported by Irish based &|Ampersand, will carry out a review of
the Pay Model with a focus on the following elements:
1.
An assessment of the current model against:
a. The previous incremental model that existed in Ervia (Bord Gais),
b. Other pay models in the market – particularly those in semi-states
or utilities and in doing this validate its suitability for a commercial
semi-state.
2.
Assess how well the model has been implemented?
a. This is a critical test of the value of the pay model in delivering
performance at an individual, business unit, and company level.
b. This will need to be reviewed throughout the entire company
including Irish Water
C.
Timeline for
Completion
3.
Assess the suitability of the Pay Model to Irish Water in its start-up
phase. It has not yet been fully established, and it is in its first year of
setting targets and delivering against those. It has also only started the
evolution from fully subsidised funding to a mix of customer revenue
and Government funding.
4.
Recommend the appropriate pay model for Irish Water in its start-up
phase and what pay model adjustments, if any, might apply once it
achieves stable operations in the next two to three years.
Objective: end June 2015
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2: General Approach
A: Stakeholders
Because of the wide range of interested parties and stakeholders, the review
was designed to locate the particular Pay Model in Ervia in its proper context.
Inevitably, we address and answer questions concerning media assertions on
the appropriateness of the actual levels of pay, and on the reward culture itself.
These questions have to be answered in the context of suitable comparative
pay models, levels and reward thinking.
How well does the pay model actually work? Is it based upon a real system of
performance assessment of an orthodox and robust variety? Does it need
improvement, and if so in what respects? Is the reward model, its salary levels
and the system of evaluation suitable for a commercial semi-state company,
and in particular this company?
B: Irish Water
The disquiet which prompted the decision not to pay the 2013 and 2014
Performance Related Awards in Irish Water, also affected the rest of the Ervia
Group. The pay model in Irish Water is the pay model which was agreed by the
company (then Bord Gais) and the Group of Unions (GoU), and which was
subsequently extended to Irish Water. Ervia operates as a group, one of whose
components is Irish Water. This review examined the pay model for Ervia as a
whole, and evaluated how it had been working prior to being extended to Irish
Water. This provided useful data on the functioning of the particular model.
If we establish that the reward model in Ervia is in fact suitable for the specific
Irish Water context of;
a)
b)
c)
d)
A commercial public sector organisation
A national utility in 'start up' mode
A newly established organisation with significant ongoing changes
An organisation which has limited control, of its own destiny,
then we can determine whether the model itself has been installed and is being
operated effectively.
C: Reward
Systems and
Models
In order to ensure that the system in operation in Ervia is presented, discussed,
and analysed in an appropriate context, the review set out to provide the
stakeholders with some background on the history and context of performance
pay models.
The report therefore outlines the following:
1. Recent academic thinking on reward approaches
2. An analysis of reward design trends in the wider environment of
US/UK/Europe
3. The state of 'incremental' approaches to reward
4. Reward models in 'start up' environments
5. Performance pay approach take up in Ireland, across sectors
6. Reward approaches in the Irish public sector generally, having regard
to Government’s reform and modernisation policies, including the Civil
Service, organisations covered by Croke Park and Haddington Road
Agreement, and Commercial semi state entities, recognising that Ervia
is in the commercial public sector.
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3. Methodology
A: Methodology (General)
A number of data sources were utilised to assess the external environment and
context for the Ervia pay model, as well as the appropriateness of actual pay
levels. Key data sources we refer to are:
1. Aon Hewitt Total Compensation Measurement database: This
proprietary database collects data on reward levels and practices for
700+ positions in 180 countries. Our 2014 database includes data
across all industries for 8,664 organisations globally, 3,459
organisations in Europe, and 70 organisations in Ireland.
2. Aon Hewitt Employee Engagement database: This proprietary
database includes employee research data from over 4,400
companies, in 68 industries, representing 164 countries and 24.66
million employees.
3. Aon Hewitt Salary Increase Survey 2014/2015: The 27th annual Aon
Hewitt Global Salary Increase Survey conducted in June and July of
2014 contains 12,690 data submissions from organizations in services,
manufacturing and multi-service industries across 120 countries. The
Ireland report contains data from 130 companies.
4. Aon Hewitt European Variable Compensation Measurement Survey:
This survey covers data from 48 companies across 21 industry sectors
in 15 European countries.
Data gathering
The process to gather and analyse information from Ervia for this review
involved four main elements:
1. Structured interviews were conducted with senior leadership and
functional management in Ervia and its operating divisions (Irish Water
and Networks). A total of 18 Senior Executive and Management
interviews were conducted. A list of those interviewed can be found in
the appendix. The output from these interviews is included in a
separate annex from the main report. Keeping this output from the
interviews separate from the main report is done to protect the
confidentiality of those interviews. The material in the annex is
provided to ensure the client is fully briefed on all aspects of the
reviewers' findings but is not for publication beyond that.
2. Trades Unions were advised of the planned approach and invited to
give their views and input. A formal submission was received from the
nd
GoU on 2 March.
3. Employee input was gained through a review of feedback transcripts,
provided by Ervia, and through 48 structured interviews with a
randomly selected sample of employees across the organisation,
including a selection of trade union nominees. The output from these
interviews is included in a separate annex from the main report.
Keeping this output from the interviews separate from the main report
is done to protect the confidentiality of those interviews. The material in
the annex is provided to ensure the client is fully briefed on all aspects
of the reviewers' findings but is not for publication beyond that.
4. A data request to Ervia requested information on current/historical
reward practices and data. Data was collated, analysed and checked
by Aon Hewitt.
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Reward Effectiveness Model
The functioning of the current pay approach is assessed through the Aon
Hewitt 'Reward Effectiveness Model'. The model is adapted from the approach
researched and presented by Armstrong, Brown and Reilly in their book
Evidence Based Reward Management (Armstrong M, Brown D, Reilly P (2009)
Evidence Based Reward Management) and considers the following elements:
1. Is reward manageable, controllable and affordable?
2. Does the approach to reward drive the achievement of employer
goals and support employer values?
3. Does the approach to reward motivate staff, suit their perception
and differentiate appropriately according to contribution?
4. Does the approach to reward provide competitive remuneration to
attract and retain?
5. Does the approach to reward relate appropriately to the roles and
activities delivered within the organisation?
6. Does the approach to reward integrate appropriately with other HR
processes?
7. Is the approach to reward flexible, can it adapt to changing needs of
the organisation?
8. Does the approach to reward reflect the market situation and
changes, does it match customer requirements?
B: Methodology –
Data Collection
(Public Sector)
It was important to establish the general direction of Government policy in
respect of pay, performance and reward in the public sector. This was
necessary in order to establish the parameters within which semi state
organisations can act generally, and, in relation to Ervia, whether its pay model
conforms with the general policy thrust in Ireland and how its compares with
other public sector / semi state and utility models. The Terms of Reference
additionally required that the examination of the pay model be conducted with
reference to “other pay models in the market – particularly those in semi-states
or utilities”.
A representative sample of such companies was contacted, where their pay
data was not already to hand/public domain. All companies contacted were
exceptionally generous with their time and disclosure of data to us. The
requirements imposed on us in our use of their data was, in all cases, a
confidentiality, an organisational anonymity, and a sensitivity which would
ensure a respect for the salary ranges of the employees of the companies
contacted.
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4. The External Environment
A: Research and
recent thinking
on pay
approaches
Management thinking around HR and Reward approaches has been
influenced, over the last twenty years, by the increasing dominance of freemarket political and economic ideologies in Europe. Since the early 2000's,
'best practice' approaches to people strategies have tended toward an
emphasis on talent management; focusing on ‘top talent’ with greater emphasis
on its sourcing externally, and also on the concept of strategic rewards, using
reward more proactively to drive business strategy rather than to view it as
purely a cost line (Brown and Armstrong, 2006).
This thinking has been impacted since 2008 by economic pressures, and
associated austerity measures which particularly affected the public sector.
These pressures led to an extreme focus on cost management, including pay
freezes, moves to limit 'fixed' pay, and a focus on pensions and benefits cost
reduction.
However, since 2011 there has been evidence of a shift away from an extreme
cost focus, again toward reward policies that more positively engage
employees and develop their talent. The research evidence indicates a shifting
balance: from low to added value pay, from fixed to variable rewards, and from
a focus on technical design to paying more attention to reward delivery,
emphasizing line manager involvement and more open employee
communications. (Brown, 2012).
All of the dimensions of this so called ‘new pay’ approach (Schuster and
Zingheim, 1996) can be shown to have some basis in evidential research.
For example, research studies on market related pay suggest paying below the
market rate is likely to have detrimental effects, such as increased employee
attrition (Pfeffer and Sutton, 2006). But, paying over-market rates does not
appear to be associated either with attracting higher calibre staff or increasing
performance.
Furthermore, a UK research report conducted in 2009 (eReward, 2009), found
that 74% of organisations rated pay schemes relating to individual
performance, competence or contribution, as either highly or reasonably
effective.
% Respondents
Highly effective
2%
Reasonably effective
72%
Not very effective
13%
Totally ineffective
1%
Can’t assess/Too early to tell
11%
Source eReward, 2009
The research record on variable/at risk pay is generally positive, and more so
than for other types of pay management. For example, Thompson (2000) in
manufacturing industry, and Brown and West (2005) in customer service roles,
found strong associations between the use of performance related variable pay
and business performance, while other studies have shown performance pay is
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particularly engaging for high performing individuals (WorldatWork, 2004 and
Cully, 1999). Another meta-analysis found more than 80 studies where HR
practices, including pay for performance and employee share plans, are
associated with high business performance (Combs et al, 2006).
There are several aspects driving the relative effectiveness of variable pay
plans, specifically in improving business performance, including realistic goals,
management support and ability to impact results.
Factors contributing to the success of variable pay plans
Factors contributing to success
Rank
Realistic goals/targets
1 (63%)
Support of execs and management ensuring effective execution
2 (46%)
Employee ability to impact results
2 (46%)
Link to performance management
3 (44%)
Employee understanding of plan objectives
4 (27%)
Appropriate award sizes
5 (23%)
Source: Aon Hewitt 2014 a
However, all of this research suggests that there are no universally successful
pay and reward ‘best practices’ or approaches. Instead, success is based on
‘best fit’ (Brown and Armstrong, 2006). That is, pay arrangements need to be
tailored to the goals, circumstances and culture of an employer. And it is the
mix of work and HR practices, including pay and rewards, rather than any
individual pay plan, that is associated with high performing organisations
(Combs et al, 2006 ).
Studies on market based, performance related reward models generally
suggest:
-
-
-
-
A 'match' of reward practices to the organisational culture is critical, as
is the quality of performance management and similar reinforcing HR
processes;
An open and trusting, high communication culture seems particularly
important for the approach to be effective (Brown and West, 2005),
especially as some aspects of this pay approach appear, inadvertently,
to reduce understanding and communications on reward practices
(Sweeney, 2011 and Hutton, 2011);
Do it properly or don’t do at all – in some cases compromises in the
public sector seem to have neutered the potential effectiveness of the
approach, with tiny pay differentials the only reward for the highest
performers;
It is important to take account of the wider cultural and economic
context e.g. acceptance varies by country (these approaches are rarer
in Asia, for example, where paternalist, strongly hierarchical models of
pay still predominate).
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B: Reward Trends
in Europe
Throughout Europe, and across both private and public sectors, evidence
shows that employers have been moving away from general and collectively
negotiated pay awards and semi-automatic fixed cost increases, towards more
individual and flexible terms and conditions, and have put performance
improvement and performance-related rewards at the top of their rewards
agenda. (Aon Hewitt, 2012a).
The recent recovery in labour markets in some countries, has also served to reemphasise the importance of market competitiveness (Aon Hewitt, 2014b).
Reward Strategy Priorities 2012 (Europe)
Rank
Rewarding & motivating high performers
1
Ensuring pay/incentives are tied to performance
2
Retention of key staff
3
Getting the most from Total Reward
4
Staff engagement morale
5
Source Aon Hewitt (2012a)
The 2008 financial crash and recession also helped to encourage growth in the
incidence, coverage and levels of variable pay throughout Europe (Aon Hewitt,
2014a). In the main this has been driven by a desire to reduce the costs
associated with fixed pay, whilst maintaining the ability to attract and retain
suitably qualified staff.
The table below shows actual and target levels of performance related awards
by employee level, in some key European countries, as a percentage of basic
pay. Target levels are quite consistent, ranging from around 20% at more
senior manager levels to 5 or 10% at more junior levels. Actual payments
however vary more significantly as they reflect company / individual
performance.
Percentage of actual and target performance related payments by
employee level, Europe 2013
Actual 2013
Target 2013
JobLink Level
9: Senior Manager
8: Department Manager
7: Experienced professional / Manager
6: Career professional/ Junior Manager
5: Intermediate professional/Snr supervisor
4: Entry Professional/Supervisor
3: Administrative/Support
35%
30%
25%
20%
15%
10%
5%
0%
9
8
7
6
5
4
France
3
9
8
7
6
5
Germany
4
3
9
8
7
6
UK
5
4
3
9
8
7
6
5
4
Sweden
JobLink Level by Country
Source: Aon Hewitt (2013)
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C: Incremental
Progression
Models
Evidence from the UK shows that performance and contribution now drive base
pay progression, in most organisations in all sectors, with flat rate increases
and service-related increments becoming rarer, although they remain more
prevalent in the public than private sectors. This change is driven by
organisations wishing to take greater control of employee costs, as well as
being a natural consequence of the change in reward thinking, to focus on
individual contribution rather than length of service.
Source: CIDP Reward Management Survey 2013
D: Reward in a
Start Up
Environment
Research on how reward programmes can encourage growth and innovative
behaviour in 'start ups' is a controversial, contradictory field, although generally
it seems to support an orientation towards higher levels of incentivisation and a
longer-term orientation.
Some researchers have argued that rewards need to reflect the different stages
in company and product life cycles. Bruce Ellig (2001), ex GE and Pfizer,
argues that senior management packages need to vary through the life cycle:
Reward
Start Up
Growth
Maturity
Decline
Base Salary
Annual Performance
Award
Low
Low
Moderate
High
Moderate
High
High
Moderate
LTI
High
High
Moderate
Low
Benefits
Low
Low
Moderate
High
Perquisites
Low
Low
Moderate
High
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E: The employee
perspective
When employee attitudes are also taken into consideration, then satisfaction
with pay tends to be driven by the perceived fairness of reward, and an
understanding of how it is derived. Many studies continue to show that
perceived internal fairness is a stronger driver of engagement and pay
satisfaction than external market competitiveness (Compensation Round Table,
2006). Perceptions of the desirability of performance related pay do vary
significantly by type of work, country and sector.
However, global research by Aon Hewitt provides clear evidence there is a link
between business success, employee engagement and strong performance
pay approaches. The Aon Hewitt Global Best Employer Study 2012 identified a
clear difference in perceptions of the link between performance and pay, for
employees at Best Employer organisations (identified as organisations with
both highest employee engagement and strongest business results) versus
lower performing organisations.
Percentage of employees with positive perceptions:
Source: Aon Hewitt 2012b
F: The Reward
Environment in
Ireland
Our analysis of the reward environment in Ireland generally, indicates that
reward practices and trends are not significantly different from those in other
Western European economies. Across sectors, both international and Irish
owned organisations are likely to have reward systems driven by market and
performance.
For example, Price Waterhouse Cooper (2015) shows key drivers of salary
increases in 121 Irish companies:
Key Driver
%
Respondents
Inflation (CPI)
42%
Company Performance
72%
Individual Performance
80%
External Benchmarking
74%
Other
8%
*Other includes Position, national pay agreements, group policy and public sector policy.
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The Aon Hewitt Ireland Salary Increase Survey Winter Update, published in
January 2015, and covering 74 companies in Ireland, shows the major
consideration when setting salary budgets to be:
Market Competitiveness
60.40%
Business
Performance
28.30%
Inflation/
Consumer Prices
9.40%
Other
1.90%
Source Aon Hewitt (2015)
An analysis of the Aon Hewitt database of private sector companies in Ireland
also indicates that performance related pay, delivered through an annual
performance related award, is common practice.
Prevalence and amount of bonus by employee level
Median
Actual PRA
as % of
base
Median
Target
PRA as
% of
base
Max
PRA as
% of
base
29%
25%
50%
Executive
100%
Median
actual PRA
€
44,131
Management
90%
11,328
15%
15%
36%
Professional
75%
3,820
8%
10%
17%
Support
55%
1,511
5%
6%
16%
Employee
Level
% of
Companies
Source: Aon Hewitt ( 2014c)
The improving economy in Ireland is slowly having an impact on pay increases.
Aon Hewitt (2015) indicates that median pay increases of 2.2% are expected in
2015. The survey also shows that only 11% of companies are reporting that
they expect a pay freeze this year, compared to 20% in 2013 and 15% in 2014.
The same survey indicates that 14% of companies are expecting to increase
recruitment activity in 2015 compared to 2014.
G: Reward
Approaches in
the Irish Public
Sector
Irish Government Policy in respect of Performance and Reward
The direction of Government policy and approach to the management of the
Public Sector has been characterised as one of “evolving reform” (Rhodes &
Boyle, 2012:13). Public service reform, and performance management in
particular, have increasingly occupied a central place in the management of the
public sector agenda. This position is not inconsistent with the increasing
implementation of performance management concepts and practices in the
public administrations of a growing number of countries. Implementation has
been at differing rates, is at various stages or to varying degrees, but relative
prominence has been determined by drivers of similar origin or economic need.
After Ireland’s recent ‘tiger’ years, a series of examinations and reports on
aspects of economic life, and in particular the public sector, have been
commissioned and can be individually itemised (see Reference List), but all
have been reform focused, and point to the need to install the management of
performance.
In 2002, the PA Consulting Group report criticised the ‘outward facing’ focus of
public sector reform policy up to that time, and pointed to the requirement for a
more ‘internal management’ attention on a range of areas, specifically including
‘Human Resources’, and with a particular emphasis on the evaluation of
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organisational outputs/outcomes in relation to managed resource
deployment/inputs.
Murray went further, and pointed out that the reform of the human resource
system, which he stated as being fundamental to the inception of reform,
“remains unfinished but very urgent” (2001:19). In 2008, the OECD
underpinned this imperative, specifically identifying the necessity to “develop
organisational and individual performance management” (OECD 2008:5).
Government established a task force after the OECD Report, whose purpose
was to identify responses and recommendations for implementation. The
Report of the Task Force on the Public Service (2008, November)
recommended the establishment of performance related targets for all
branches of Government, together with the management structures required to
achieve the targets set. It is clear that a modern system of staff objective
setting, and the management of their performance, are a necessary part of the
managerial structures required in this endeavour.
The Government’s review and Third Report on their own progress on the
Organisational Review Programme (DPER 2012), identified the prioritising,
coordination of work, and the communicating of objectives for staff, as the
factors presenting challenges for many public sector organisations. Again, the
issue of performance management was specifically identified.
It has been reflected in recent public discourse, that what have been described
as the so-called ‘soft’ performance management systems are not fully accepted
as part of an organisation’s ‘hard’ (real) tool kit. The discussion concerning
perceptions about the PMDS system, adds to lack of public belief in such
systems generally. Practitioners, on the other hand have different views. Lack
of appreciation or understanding, or an inappropriate reputation can combine to
undermine what Public Policy has determined is a fundamental component of
public sector reform.
Both the Croke Park and Haddington Road (Public Service) Agreements
sought to extend/improve performance behaviours and measures. They were
building on a foundation where the “focus to date in Ireland has been on
performance reporting, rather than managing for performance”, ... when
“greater certainty for senior managers and more efficient programme delivery”
are the desired outcomes (OCED 2008 13-14).
The PMDS system was referred to in an earlier paragraph. It was, and remains,
an example of one effort to manage performance in the public service. After
some initial concerns this five point evaluation system was revamped in 2012,
but it remains a subject of criticism and has produced some
surprising/disturbing statistical output. Recent reporting indicates that some
“line managers are not realistically assessing the performance of staff (Frawley,
IRN#13, 2015). According to DPER’s analysis of the distribution of ratings over
the four years 2010 - 2013, 99% of civil servants received a ‘3 or above’, a
distribution not approaching a ‘normal’ distribution. The DPER Report (2014) on
the years 2010 – 2013 again confirms the media / public / observer doubts that
this performance system is accurate / transparent and/or properly managed. In
the current recession malaise, with the negativity surrounding the quality of the
management of governmental institutions, yet another component has been
added to what has emerged as the ‘bonus culture’ debate. Unfortunately,
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linking a performance management system to poor management practice(s)
can taint all performance systems, and in certain media reports would appear
to have done so.
The Commercial Public Sector
While not a functioning part of the Civil Service proper, the individual
organisations and companies in this sector come under / have a reporting
relationship to their respective ‘governing’ Departments.
During the course of this review, a range of these organisations were examined
and/or interviewed. The basis of the provision of information and data to us was
on the most strict non-disclosure basis, arising in all cases from a commercial
sensitivity, and discretion concerning its own staff policies. We undertook not to
disclose data which would identify any individual organisation.
Some of the organisations reviewed had initially gone the PMDS route. One
company interviewed described what for them became a ‘box ticking’ rigmarole,
a set of behaviours which brought the management of performance into
disrepute. Their current plans are, following a suitable gap, to introduce a more
market based, relevant system, with monitoring/oversight and regular outside
review.
Other companies reviewed have had their plans to introduce, or extend an
existing performance system delayed by some urgent, company threatening or
compelling financial circumstance. Most such organisations have confirmed to
us that implementation planning is back on the current agenda.
Where performance systems of reward operate, all companies examined
operate a five point, ‘three conversation’ system (i.e. objective setting, mid-year
progress review, and end of year annual appraisal/assessment).
In summary, we found that the organisations examined fall into three categories
of reward positions. They can be categorised as (a) early or complete adopters
of ‘performance evaluated reward’ models, (b) partial implementers or delayed
starters of a performance model, and (c) operators of incremental systems.
(a)
Early or complete adopters of ‘performance evaluated reward’ models.
The companies falling into this categorisation have embraced the
performance/reward approach, introduced a banded system of pay with
job families of roles banded together, and performance rewarded on an
individual evaluated basis. In the main, the companies who can be
categorised as early adopters have installed reward systems not all that
dissimilar to the Ervia model.
(b)
Partial implementers or delayed starters of a performance model,
A number of companies, in this categorisation, have either decided to
install a performance linked reward system for senior staffs as a first
stage, or have had their plans to install such a system throughout the
organisation overtaken by some serious financial or urgent / threatening
set of circumstances, which required addressing first. When crisis or
financial events had been managed, and in some instances widespread
organisational restructuring had been completed, the organisations
returned to the planned performance/reward agenda, and are now
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proceeding with delayed plans to implement a performance / reward
model.
(c)
Operators of incremental systems
A significant number of organisations, by far the largest category, continue
to operate incremental salary systems. The Civil Service proper, the
municipal sector, and a variety of state and non-commercial bodies make
up this category. Some of the organisations examined operate
approaches to evaluating and reporting on employee performance. Most
are constrained in terms of linking performance to monetary award. We
saw some small evidence of a linkage of performance to additional leave,
as opposed to pay. The rate of progress, in the wider non-commercial and
civil service, towards fully fledged performance reward systems will be
markedly slower than in organisations with a commercial mandate, and
who are governed by an independent board.
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5. Detail of the Current Pay Model
A: Overview
The pay and performance model as described within Ervia and as agreed as in 2012 is
set out in this section.
B: The market
based structure:
managing basic
pay
The basic salary structure
Pay Grade
Minimum Salary
Midpoint Salary
Maximum Salary
C
65004
81255
97506
D
49960
62450
74940
E
42600
53250
63900
F
31800
39750
47700
G
23800
29750
35700
Managing pay within the salary range
The market median reference point is used as the basis to pay for proficient
performance. A range of 80% to 120% exists around the market reference point for each
role to reflect the stages of development of a typical role holder. Within this range, there
are three zones: Developing, Competent and Advanced.
Salary Range Movement
Although a pay freeze is in place at Ervia until 2016, the future planned approach to
reviewing the pay ranges is documented in the pay model document which states:
'These salary ranges will be reviewed annually and may be adjusted to respond to
economic and market conditions. To conduct this exercise, Bord Gáis (and the GoU) will
agree the companies in the Market to be surveyed, will reference the general industry
market in Ireland, and will use Towers Watson General Industry survey (which is
published annually) to do so.'
Pay management system
Market reference (100%)
80 – 90%
Developing
91 – 110%
Competent
111 – 120%
Advanced
Positioning and progression in the range is determined based on performance,
competence and key skills; not on length of service. Employees move at a steady pace
to an "at market" position subject to performance and competence and exceeds it where
performance and proficiency in the role justify this.
Annual salary reviews
The ability to apply salary increases is reviewed on an annual basis and the total cost of
pay increases is determined through the annual budgeting process. A key consideration
in determining salary increases is affordability and competitiveness. Salary increases are
given to employees based on a review of their current position in respect of their market
reference and their overall performance rating.
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The approach to calculating the annual increase is described in the pay model document
as:
'The Company will position itself at General Industry market median for base pay and for
performance related award awards. The factors for consideration in determining annual
pay increases across the organisation will be


market movement and
affordability.
These two factors give rise to an X factor for the Organisation. The affordability of the
organisation to pay a salary increase or not, will, as normal, be part of the ongoing IR
process.'
The matrix below summarises the approach; X% represents the agreed standard
increase each year.
Does not meet
expectations
Partially
Meets
Expectations
Fully meets
expectations
Consistently
exceeds
expectations
Far exceeds
expectations
80% - 90%
0
X%
X+1%
X+2%
X+3%
90% - 110%
0
X-1%
X%
X+1%
X+2%
110% -120%
0
X-2%
X-1%
X%
X+1%
> 120%
0
0
0
0
0
Market
position
Promotion
For employees promoted from one pay range to another, a new salary equivalent to 80%
of the market midpoint of the new range, or a 5% increase on the employee's existing
base salary, whichever is the higher is applied.
Recruitment
The pay should fall within the new defined pay range, ideally in the developing zone. The
approach, described below, should be used whenever possible.



C: Performance
Related Awards
Developing zone: candidates who are new to the role and still developing the full
skill set necessary for the position. The basic salary offered to a new hire should not
be below the minimum amount for the range.
Competent zone: candidates who fully meet the job requirements from the first day
on the job and who have already fully developed all of the skills necessary for the
position. Appointments at this level but at above the market rate will require Group
Compensation and Benefits sign off.
Advanced zone: candidates who have scarce/critical skills required by Ervia and/or
add value to the job. Appointments at this level will require sign-off by the Group
Head of HR.
An annual performance related award provided in the form of a non-consolidated
payment. All levels of employee are eligible to participate and the scheme is designed to
complement future market competitive basic salary positioning and to achieve the
desired pay mix.
Outputs from the performance management process are used to determine the
individual performance element of the pay-out and the scheme has been designed to be
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aligned with the achievement of Ervia’s business strategy.
The link between performance and payment:
Corporate Performance
 PRA are made based on a combination of corporate, business unit and individual
performance
 The indicators for the corporate performance element will be a combination of
financial and non-financial ERVIA KPI’s
 Individual payments are determined by a combination of Corporate, Business unit
and individual performance (performance rating)
Individual Performance and Payment Levels
 Target PRA amounts will be determined by Grade
 Target PRA amounts will be geared to pay market competitive levels
 Actual individual PRA amounts are determined by the combination of corporate
performance, business unit performance and the individual performance rating
Payment mechanics
The PRA reward scheme provides an annual lump sum payment when both individual,
business unit and organisational performance criteria are met. Individual performance is
determined through the performance management process while business unit and
overall organisation performance will be assessed against agreed financial and nonfinancial key performance indicators set annually in the balanced scorecard.
The performance related pay levels are captured in the table below:
Corporate Performance
Exceeds Target
Performance
Multiplier
1.1
Business Unit Performance
Exceeds Target
Performance
Multiplier
Meets Target Performance
1
Meets Target Performance
1
Based on Achieved Targets
0 – 0.99
Based on Achieved Targets
0 – 0.99
1.1
Pay Grade
Does not
meet
Partially
Meets
Fully meets
Consistently
exceeds
Far exceeds
F&G
0%
0 – 1.5%
2.75%
3.50%
4%
D&E
0%
0 – 4%
6.50%
8%
9%
B&C
0%
0 – 9%
14%
17%
19%
Payments are calculated as:
•
Individual performance x corporate performance x business unit performance.
As an example, in the case of 2014 performance a Band D employee who fully meets'
expectations in Gas Networks Ireland would receive a PRA of:
•
6.5% x 88% (Ervia achievement against balanced scorecard 2014) x 98% (Gas
Networks achievement against balanced scorecard in 2014) = 5.6%.
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D: The
Performance
Management
Process
All employees in Ervia participate in the annual performance management process
(PMS). The PMS process has four elements:
1.
2.
3.
4.
Objective setting
Ongoing coaching and review
Mid-year review
End of year review.
The key constituents of the process are:
•
•
•
•
•
•
The Balanced scorecard including key result areas
SMART objectives (What the employee needs to achieve, linked to the balanced
scorecard goals)
Competencies (The skills, knowledge and behaviours required to deliver the goals)
Development planning
Agreeing and reviewing performance
Final Ervia rating and calibration
The rating scale is set out below:
5: Far Exceeds Expectations:
Meets all requirements consistently above "fully meets" level for successful job performance.
4: Consistently Exceeds Expectations:
Meets all requirements for successful job performance and some requirements above "fully
meets" level.
3: Fully Meets Expectations:
Meets requirements for successful job performance.
2: Partially Meets Expectations:
Meets some requirements, others at least partially met for successful job performance. Some
improvement necessary.
Following feedback after the 2013 performance review process, this rating was renamed in
2014, as the previous title 'Needs Improvement' did not accurately reflect the nature of the
rating. We agree that is this is a necessary change to properly reflect the intent of the model.
1: Does not meet expectations:
Well below requirements for successful job performance. Significant improvement required.
TN: Too new to evaluate:
Employee has been in the company for 3 months or less.
The final Ervia rating is subject to a calibration process, where groups of managers meet
to confirm and agree the performance ratings for their employees. The stated aims of the
calibration process are to:
•
•
•
•
•
Calibrate (compare) employee performance within the group and identify the
performance ratings within that group.
Make sure as managers are applying similar rating standards for all employees.
Document relevant feedback on relative performance of employees from the
calibration meeting for use during the final performance review with the employee.
Review the performance profile against the distribution guideline.
The expectation is that the majority of employees will be in the 'fully meets' category
with a small percentage in both the 'consistently exceeds' and 'partially meets'
categories.
The final rating provides the direct link to pay outcomes (both base pay increases and
PRA) in the pay model, as described above.
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6. Pay Model Effectiveness Review
A: Overview
The section provides a detailed assessment of the current workings of the Ervia pay and
performance approach described in the previous section. The analysis is based on data
provided by Ervia and on outcomes of management and employee interviews. The output from
interviews with managers and other employees is included in a separate annex from the main
report. Keeping this output from the interviews separate from the main report is done to protect
the confidentiality of those interviews. The material in the annex is provided to ensure the client
is fully briefed on all aspects of the reviewers' findings but is not for publication beyond that.
The effectiveness review examines pay and performance practices across the entire Ervia
group, not solely within Irish Water, in an attempt to gain a comprehensive overview of the
practical application of the current pay model, and its comparison with the past model that
operated within the previous Bord Gáis operation. An important note here is that there are
limitations on the ability to fully test the application of the model because:
•
•
•
•
The current salary freeze means that there has not yet been an annual salary review
process within Ervia/Irish Water.
PRA has never paid out within Irish Water.
Irish Water is a new organisation, and many employees have not yet completed one
full year of the performance / pay model.
The previous incremental model existed in a very different organisation (prior to the
divesture of Bord Gáis Energy and the creation of Irish Water), and therefore has not
operated within Irish Water at all.
The commentary for each of the reward effectiveness elements is subdivided into:
•
•
B: Is reward
manageable,
controllable
and
affordable?
Internal analysis
Conclusions
This element of the effectiveness review examines the suitability of pay practices from a
financial management/affordability perspective. It examines whether the process for pay setting
and payment of performance based awards is appropriately controlled and managed.
Typically, market based, performance linked pay systems are introduced by companies who
wish to achieve greater control over pay levels. Because pay increases are directly linked to
external market forces and to company affordability, this is more within organisational control
than the year-on-year additional costs typically associated with incremental pay models which
are seen as 'guaranteed' increases in many cases and may be very out of line with market pay
levels.
Additionally, UK and multi-national experience indicates that performance-linked models are
primarily established to reward performance through non-consolidated, non-pensionable
performance related awards, which over time are significantly more cost effective than basic
pay increases which accrue year-on-year and also incur pension contributions from the
organisation. The desire to control costs in order to create a sustainable business was one of
the primary reasons cited for the introduction of the pay model at Bord Gáis in 2012.
Ervia's own analysis estimates that they are in line to achieve the original targeted savings of
€34m. We have reviewed the assumptions of that analysis and confirm that they are sound.
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Below we examine the operation of specific processes and practices related to the
management of pay levels.
Annual Salary Increase
Ervia and its predecessors have been operating under a basic pay freeze since the new pay
model was implemented in 2012, but this is expected to be lifted in 2016. However, in the wider
market the improving economy in Ireland is slowly having an impact on pay increases. Aon
Hewitt (2015) indicates that median pay increases of 2.2% are expected in 2015. Ervia are in
the minority in operating a pay freeze in 2014 and 2015. This, alongside the fact that pay
ranges in the organisation have not been reviewed since their introduction in 2012, means that
pay levels at Ervia may be falling behind market practice.
Provided below, for illustrative purposes, is an example of how an annual pay increases could
work in Ervia’s model. In this table X has been set at 2% to illustrate the annual pay increase
employees could have received based on their performance rating and position in range. The
table illustrates the key principle of the model, which is to balance paying individuals
appropriately for their contribution whilst paying within the salary range. For example a high
performer who is paid low in the salary range will get a higher increase than a high performer
who is already paid well within the salary range. Low performers and those who are already
paid above the salary range will receive no pay increase.
However, some managers and the GoU have expressed concern that the approach to
calculating 'X' for the purposes of the pay review has yet to be finalised and agreed. The GoU
have also shared their concern that they have not been consulted on the 'basket of companies'
to be used for comparison to the market.
Position in
range
Does not meet
expectations
Partially Meets
Expectations
Policy
Policy
Example
Example
Fully meets
expectations
Policy
Consistently
exceeds
expectations
Far exceeds
expectations
Example
Policy
Example
Policy
Example
3%
x+2%
4%
x+3%
5%
80% - 90%
0%
0%
x%
2%
91% - 110%
0%
0%
x-1%
1%
x+1
%
x%
2%
x+1%
3%
x+2%
4%
111% - 120%
0%
0%
x-2%
0%
x-1%
1%
x%
2%
x+1%
3%
>120%
0%
0%
0%
0%
0%
0%
0%
0%
0%
0%
Grading
Roles are placed into grades at Ervia through an evaluation using the Tower Watson approach
to job sizing. The compensation function manages requests for re-grades and all are fully
trained on the evaluation model.
Since the 1st May 2013, there were 11 requests for job grading within the Group, Shared,
Major Projects and Gas Networks which were the areas that transitioned across to the new pay
model. Six of these submissions resulted in a change of grade.
In Irish Water, there has been significantly more requests for re-grading. This is unsurprising
given that this is a new and very fast growing organisation where roles will be more likely to
change as the organisation evolves. Since the organisation as created there have been 60
request for re-grades of which 47 resulted in a change of grade.
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Performance Related Awards
The payment of the PRA is linked, through the corporate and business unit multipliers, to the
achievement of key organisational goals. The multipliers are themselves based on the
achievement of the annual goals set in the balanced scorecard.
This year, the key elements in the scorecard for Ervia as whole were;
•
•
•
•
•
Delivery of services
Manage performance to budget
Develop a financially sustainable model
Establish Ervia as a multi utility
Instil shared company values
The use of a multiplicative approach rather than an additive approach to payment of PRA does
mean that, through the pay model design, there are assurances that payments of PRA will not
be at excessive levels in the event that the organisation and its constituent elements do not
achieve key targets, financial and otherwise. So, payments based on individual performance
are inherently limited (or increased) by corporate and business unit achievement.
To illustrate we show again the example of 2014 performance of a Band D employee who fully
meets' expectations in Gas Networks Ireland who would receive a PRA of:
6.5% x 88% (Ervia achievement against balanced scorecard 2014) x 98% (Gas Networks
achievement against balanced scorecard in 2014) = 5.6%.
Whilst a multiplicative approach serves to mitigate against poor organisational performance,
many organisations also stipulate a 'threshold' level of organisational performance. A
'threshold' represents a level of performance below which no incentive is paid. Aon's research
suggests that over the last few years the use of 'thresholds' has become increasingly more
prevalent.
Finally, it is important to note that unlike employees in other business entities, employees in
Irish Water have not received a PRA since the implementation of the scheme in 2012.
Input from Senior Manager and Employee Interviews
The output from interviews with managers and other employees is included in a separate
annex from the main report. Keeping this output from the interviews separate from the main
report is done to protect the confidentiality of those interviews. The material in the annex is
provided to ensure the client is fully briefed on all aspects of the reviewers' findings but is not
for publication beyond that.
Conclusion
The pay model is robust and well managed, and there are sufficient controls in place to ensure
that the pay levels are aligned to organisation performance and therefore are affordable.
However as we have highlighted there is room for improvement in some areas:
•
•
•
The organisation should explain in more detail how the 'X' factor which will apply to
future pay increases will be defined.
The approach to the 'Basket of companies' used for external comparisons should be
clarified and confirmed with the GoU.
Consideration should be given to building in an agreed company performance
'threshold' below which no PRA will pay out.
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C: Does the
approach to
reward drive
the
achievement
of employer
goals and
support
employer
values?
This element of the effectiveness review examines whether the pay model supports
employer goals and values. Ervia have stated that their aim is to engender a high
performance culture in the organisation, and the key stated objective of their pay approach
is to 'attract, recruit, motivate and retain our talented workforce'.
The pay policy also states that: 'Our Compensation and Benefits policies and practices
aim to support the Organisation in its key values of
•
•
•
•
•
•
Safety
Performance
Service
Collaboration
Integrity
Respect'
The Performance Management System
The approach to performance management at Ervia, which aims to link employee
objectives through the balanced scorecard to business objectives (Irish Water, Networks
level), and through those to corporate objectives (Ervia level), appears sound and is
typical of approaches in the external market. The clear link to business and corporate
level objectives also helps to ensure that employees are working together across the
organisation and helps to mitigate one of the main objections to performance driven
systems; that they overly emphasise individual performance above that of the entity as
whole.
The PMS also follows market best practice in building in an expectation of required
behaviours as well as outcomes into the performance evaluation, through the definition of
expected competencies. The four competency areas are; Interpersonal, Leadership,
Business/Management, and Personal Attributes, and exactions are set for different levels
of role. However, there is no set weighting for competency evaluation in the PMS system,
managers and employees are encouraged to agree together the weighting of appropriate
competencies related to their objectives.
Managers lead the performance evaluation process for their staff. However, all business
entities in Ervia require managers to apply a 'normal' distribution curve when assigning
employees to performance ratings. This approach is typically unpopular with staff and
managers, although there are some benefits associated with using such distribution
approaches. For example, in some cases organisations will use such a system such as
this to ensure that managers make 'tough choices'. It is important however that any
required distribution system is accepted by those to whom it is applied, and that both
managers and staff accept and understand the rationale. The employee interviews clearly
indicate a non acceptance of an approach which is perceived as 'forced'. Additionally, an
important proviso to any distribution model is that it should not be applied to small groups.
Distribution curves are meant for large groups — not small teams of people.
Individual Performance Outcomes
The progression of basic salary within a pay range and the payment of annual
performance related awards are determined based on an employee's performance rating.
There are five ratings in which an employee can be assigned to ranging from the lowest
rating of 'does not meet expectations' to the highest rating of 'far exceeds expectations'.
The distribution of employee ratings for each of the four business entities are presented in
the graphs on the following page. The blue curve illustrates the distribution of the
aforementioned business entity and the red illustrates a conventional normal distribution
curve.
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The graphs above show that there is very little difference in performance distribution
across each business entity; which is not surprising as all provide an 'expected'
performance curve to managers. The only curve that looks marginally different is that of
Irish Water which has comparatively more people assigned to mid performance level ('fully
meets') and less that are 'consistently exceeding' or 'far exceeding'.
Managing pay within the pay ranges
In terms of the achievement of the reward goals for the organisation, when implementing
new pay ranges it is usual that design tries to ensure that the majority of current employee
salaries fall within the new pay ranges. However it is not uncommon for a minority of
employees to sit above the pay range maximum or below minimum due to transition from
previous pay ranges.
The pay increase model as descried in the previous section is designed to, over time,
mitigate such pay differences by to providing employees with comparatively higher or
lower pay increases relative to their position in the range until all employees move to
within the appropriate range. The dispersion of employees within Ervia's pay ranges is
illustrated overleaf.
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Generally in the higher pay ranges (E – C) the dispersion of employees within the pay
ranges are somewhat conventional with the basic salary for most employees falling within
an appropriate pay range. In pay range C in particular, the dispersion is very healthy. In
the lower pay ranges however (G – F) there tends to be a higher proportion of employees
that fall outside of the pay ranges. For some business entities this in part can be attributed
to employees with a long tenure.
By business entity there is much variation by pay range. In Networks over 70% of
employees, and in Group nearly 70% of employees, are paid above max in pay range G.
Similarly in pay range F nearly 60% of employees in Networks are paid above the pay
range max as are approximately 25% employees in Group and Shared Services. This is a
legacy of the prior pay ranges, which were more generous than the Ervia pay ranges
introduced in 2012.
Irish Water is the only business entity within the group where the vast majority of
employees fall within, rather than above, each pay range. This is because most
employees in Irish Water have been recruited into the organisation on the 2012 Ervia pay
ranges, rather than having been transitioned from more generous legacy pay
arrangements.
Input from Senior Manager Manager and Employee Interviews
annex from the main report. Keeping this output from the interviews separate from the
main report is done to protect the confidentiality of those interviews. The material in the
annex is provided to ensure the client is fully briefed on all aspects of the reviewers'
findings but is not for publication beyond that.
Conclusion
The consensus amongst managers and employees is that the system for managing base
pay increases is well designed and appropriately strikes the right balance between
company, business entity and individual performance. Analysis of pay distribution, the
PMS materials, and the performance outcomes support this view. However both
managers and employees concur that further refinement and improvement to the PMS
which underpins the pay model is required.
•
•
•
Improving the transparency of how employees have been assigned to individual
performance ratings, and providing greater communication and training for
managers on making performance decisions, should be designed to help to
alleviate many of the concerns expressed.
There are clearly concerns about the operation of the performance distribution
approach, and the calibration process that supports it. Ervia should take steps to
ensure that any system applied is clearly understood and that employees accept
the rationale for the distribution. In this regard the parties are recommended to
review the distribution approach, and if needs be seek advice in the process.
Ervia may also wish to consider building objectives around completion of PMS
into all managers performance expectations.
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D: Does the
approach to
reward
motivate staff,
suit their
perception and
differentiate
appropriately
according to
contribution?
This element of the effectiveness review examines whether the model motivates staff and
suits their perceptions. A key determinant here is employee experience and opinion. In
addition to the listening to the views of managers and staff we also conducted analysis of
how the pay model actually differentiates between employees based on contribution.
The graphs below and overleaf present the median PRA made to Ervia’s employees in
2015 for 2014 performance. The graphs are presented by pay range and by performance
rating. Irish Water is excluded from this analysis as no PRA has been paid.
As outlined previously in of this report, employee performance rating is the key factor
influencing the PRA given to each employee, and there is a very mechanistic
determination of payments linked to individual, business and corporate performance
levels. The analysis indicates that this mechanistic determination has been adhered to,
and the impact on payments to employees outside Networks can be clearly seen.
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2015 PRA (median) by performance rating and business entity - pay range G
2015 PRA (% of basic salary)
4%
3%
2%
1%
0%
NETWORKS
SHARED SERVICES
Consistently exceeds Consistently exceeds
expectations
expectations
GROUP
NETWORKS
SHARED SERVICES
NETWORKS
SHARED SERVICES
Fully meets
expectations
Fully meets
expectations
Fully meets
expectations
Partially meets
expectations
Partially meets
expectations
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Conclusion
As is the case in many other public service based organisations, non-financial rewards,
such as the opportunity to develop new skills and career progression, are more motivating
than purely financial rewards to Ervia's employees.
However, it would seem that most employees initially 'bought in' to the concept of pay for
performance, and it was a key part of the described employee proposition at the
organisation. Currently though many employees, particularly in Irish Water, are yet to see
any real benefit from the pay for performance model. A lack of performance based reward
promised by the system has had a hugely demotivating impact on sections of the
employee demographic, with one of the biggest sources of frustration being the lack of the
clarity and communication of the situation.
E: Does the
approach to
reward provide
competitive
remuneration
to attract and
retain?
This element of the effectiveness review examines whether the pay model fulfils its aim of
being market driven. Is the pay model competitive enough to allow Ervia to recruit suitable
employees from other organisations, whilst at the same time discouraging excessive pay
levels?
The external market data we have used is Aon Hewitt's Ireland general industry survey.
The list of organisations in the database can be found in Appendix 8.
Basic pay ranges vs external market
The graph below illustrates the competitiveness of Ervia's basic salary ranges against the
external market basic pay levels.
The benchmarking analysis shows that Ervia's salary range maximum is broadly in line
with the market upper quartile for most pay ranges. In every pay range the pay range
minimum falls below the market lower quartile.
Actual basic pay vs external market
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This graph (below) illustrates the competitiveness of actual Ervia employee basic pay
levels in each pay range against the external market basic pay. The benchmarking
analysis shows that incumbent pay is weighted in most cases toward the lower end of the
market. In the lowest pay ranges (G and F) there are small minority who are paid above
the external market upper quartile, these are employees who transferred from the
previous, more generous, pay models.
Note: The ‘market data - total pay’ box ranges from the lower quartile to the upper quartile of market pay (LQUQ).
Performance related awards
With regard to performance based awards, most organisations in Aon's external market
sample provide some form of performance based award to all employees. The table below
shows target PRA award for Ervia employees in each pay range and the corresponding
market opportunity.
Ervia target PRA* (% of
basic salary)
Market target PRA (% of
basic salary)
C
14%
D
6.5%
15%
11%
E
6.5%
9%
F
2.75%
7%
G
2.75%
5%
Grade
Note: Target PRA is the assumed PRA if company, business unit and staff meet performance expectations.
This shows that the whilst the target level of PRA for Ervia employees in pay range C is
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broadly comparable to the external market, the opportunity for other employees is
significantly less.
Total annual pay vs external market
The graph below illustrates the competitiveness of Ervia's employees with respect to total
annual pay (basic salary, plus PRA) against the external market.
Note: The ‘market data - total pay’ box ranges from the lower quartile to the upper quartile of market pay (LQUQ).
The benchmarking analysis shows that the median Ervia employee total pay broadly
equates to the market lower quartile. Exceptions to this are due to transition arrangements
from prior, more generous, pay models. The low pay position is, in part, is explained by the
lower PRA opportunity available to Ervia employees, but may also be an indicator that pay
levels are falling behind the market due to the pay freeze.
Conclusion
Whilst the initial aim of the model was to be market driven, it seems that time and the
continued pay freeze, alongside lower levels/ non-payment of PRA, has eroded the
competitiveness of pay at Ervia across all areas, to the extent that this may start to
negatively impact the organisation's ability to attract and retain employees.
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F: Does the
approach to
reward relate
appropriately
to the roles
and activities
delivered
within the
organisation?
This element assesses whether the pay model appropriately reflects the types of work
being delivered in the organisation, by assessing pay levels against the external market
for specific functions, and also looking that the appropriateness of the PMS for the work
being delivered.
The graphs on the following pages show the competitiveness of Ervia's basic pay for
actual employees by job family and grade. The same external peer group as in prior
section has been used.
There are some variations in pay positioning by job family. Overall, support functions such
as HR and IT tend to be positioned lower than other professional families such as Asset
Management and Commercial, but there is considerable variation by level. The variation
may be a reflection of the tight labour market for some professions / role types, and
indicates that the pay model can be flexible in meeting market requirements for different
types of roles. However the comparative low pay positon for some roles may be a cause
for concern.
Ervia will also need to take care to manage pay going forward to ensure consistency and
parity of pay. The mechanics in the pay model for managing pay increases are designed
to enable and support this, but we would encourage regular auditing of relative pay levels
in different functions.
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Conclusion
The pay model can and does differentiate suitably for different types of roles in terms of
pay levels compared to the external market. Care does need to be taken however to
manage pay differentiation amongst different groups fairly and consistently.
•
•
G: Does the
approach to
reward
integrate
appropriately
with other HR
processes?
.
Additional training for managers, and increased experience of the PMS system for
staff, should help to alleviate employee concerns about the ability for 'routine'
roles to achieve high performance ratings. The design of the system itself does
not predicate against this.
Ervia may however wish to consider building in more specific team-based
performance objectives for some categories or groups of staff.
This element examines whether the pay model 'fits' appropriately with other HR processes
in the organisation; for example does it suit recruitment needs, does it support talent
progression and movement, and does it match suitably to performance management
processes?
Promotions
Promotional salary increases apply in Ervia. For employees moving on promotion from
one pay range to another, a new salary equivalent to 80% of the market midpoint of the
new range, or a 5% pay increase, whichever is the higher is applied.
The table below shows the proportion of employees in 2014 who moved to 80% of the
new range midpoint, and who received a 5% basic salary increase, on promotion to a
higher band. It also shows the median basic salary increase by pay range.
% of employees (received
5% basic salary increase)
% of employees (moved to
80% of new midpoint)
Median % basic salary
increase
D–C
95%
5%
5%
E–D
88%
13%
5%
F–E
82%
18%
5%
G–F
75%
25%
6%
Pay range
In the majority of grades employees received a pay increase of 5% which indicates that
most employees were already within 80% of the midpoint in the higher grade. It also
illustrates that the promotional guidelines have been strictly adhered to.
Recruitment
Recruiting managers do have the flexibility to determine appropriate new hire rates of pay
for external hires based on the competence of a candidate. Although it is not mandatory,
the guidance states that the 'developing' zone should be used.
Since July 2014, the organisation has recruited 154 external candidates across all
business entities. The table on the following page illustrates which zone each recruit has
been placed in.
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< than 80% of
range mid point
Developing
(80% - 90% of range
mid point)
Competent
(91% - 110% of
range mid point)
Advanced
(111% - 120% of
range mid point)
C
0%
10%
50%
40%
D
0%
17%
63%
21%
E
0%
20%
74%
6%
F
37%
11%
48%
4%
G
21%
3%
74%
3%
Pay range
In all pay ranges the majority of employees are placed into the 'competent' zone when
recruited and not the 'developing' zone. Although the reality therefore differs from stated
policy guidance, this is not inconsistent with the approach adopted by other organisations
externally, and reflects a requirement to pay enough to attract suitable individuals to the
organisation.
We additionally analysed the actual pay movement from previous roles (upward or
downward) that applied to employees joining Irish Water. This showed that, from the data
available, approximately 75% of individuals joining the organisation received a salary
increase on their previous role, on average ranging from 9% to 12%. Interestingly, around
14% of recruits took a pay decrease, averaging a 10% - 12%. The remainder received no
change in pay. Typical external market assessments indicate that employees will usually
expect a minimum 10% salary increase when moving from one organisation to another, so
Irish Water does not seem out of kilter.
Conclusion
The pay model itself provides appropriate supporting mechanisms for recruitment; and
allows some flexibility to position pay according to market needs, although as pointed out
in the prior section this needs to be carefully managed.
•
The approach to promotions, specifically the promotional 'cap' should be reviewed
however, and consideration given to a more flexible approach to managing
promotional pay increases.
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H: Is the
approach to
reward
flexible, can it
adapt to
changing
needs of the
organisation?
This element of the reward effectiveness review considers how flexible the pay model is to
take account of changing circumstances; for example, is there sufficient flexibility to adapt
to different market pressure or certain roles, does the model allow for changes to
performance objectives on a reasonably regular basis, and are changes to roles
recognised / managed appropriately?
Prior sections have already provided an assessment of whether the model is flexible
enough to meet different needs for different roles, in terms of both pay levels and
management of performance.
The framework for the PMS system and the training materials we have seen do
encourage regular meetings between staff and managers to review objectives. However,
the approach to ongoing coaching and mid-year review seems to be less understood and
followed than would be desirable. The experience of manages and employees seem to be
at some variance here, with managers feeling that system was flexible enough to manage
change, whilst employees felt that the system was not responding quickly enough to
change.
Conclusion
Whilst the pay model itself allows flexibility to recognise different roles, external market
environments and performance levels, the PMS approach and in particular the way is it is
implemented by managers requires some review.
•
I: Does the
approach to
reward reflect
the market
situation and
changes, does
it match
customer
requirements?
Ervia could consider introducing more frequent 'semi-formal' performance
discussions through the year and also continue to work on manager training in this
area.
This element examines whether the pay approach is suitable for market environment
which Ervia finds itself, and whether it matches customer requirements and needs.
Ervia is in a somewhat unique situation, in that the group is running a fully commercial
utility (Networks) alongside a (currently) government funded utility (Irish Water), with key
support areas (major projects shared services and all group functions) that support both
these key businesses. However, given that both business are key public utilities, the
expectations and requirements of the businesses should not be very different; reliability of
service, value for money, safety and sustainability.
Our assessment under previous effectiveness elements indicates that pay model does
deliver value for money and sustainability; specifically that it provides appropriate controls
and robust management of pay levels, and that these pay levels are not excessive or out
of line with typical payments for similar roles externally. In fact, pay levels in the
organisation are currently below market levels in most cases.
Furthermore the pay model and clear link to the PMS system are designed to engender a
high performance culture with service levels and safety as key elements in driving
corporate and business performance scorecards.
Section 4 of this report provides a more detailed analysis of the appropriateness of the
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pay model in both a general and a commercial semi state environment. This indicates that
the pay model at Ervia is typical of that within most private sector companies in Ireland
and is consistent with the direction of travel of commercial semi-state organisations,
although Ervia has adopted the model more completely than many other commercial
semi-states.
Assessment of typical pay practices in 'start ups', as shown in section 4, indicates that
moderate to high levels of performance pay often apply in start-up / growth environments
as organisations do not wish to commit to high levels of basic pay.
Conclusion
Ervia is not out of kilter with other commercial semi-states in operating a market based,
performance related, pay model, neither is the model inherently wrong for a start-up
operation.
•
However, as highlighted under several of the previous elements, the
implementation of the PMS system requires some work to improve employee
experience and perception that the model can appropriately adjust to changing
role requirements.
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7: Additional Inputs
A: Additional
points of
significance
raised
Some wider items of concern have been raised to us through the management and
employee interviews, and the meetings with the GoU and their submission. These are:
•
•
•
•
•
•
A significant component in the BGE tender submission, seeking the award of the
Irish Water franchise, was the new Performance Management System which had
been recently agreed at the time with the unions.
A ‘collective agreement’ on the pay model had been freely entered into by both
parties (i.e. Company and GoU). All employees (union and non-union) were
asked by the company to ballot on the terms of the new pay model. The employee
groups, separately and jointly, accepted the terms offered/desired by the
company.
This agreement provided rights (entitlements) and responsibilities regarding
upkeep of the system, and the requirement to use procedures should
disagreement(s) arise about its operation.
It was put to us that certain contractual issues may have arisen.
The ’collective agreement’ made with unions did not provide for discretionary
‘Performance Awards’. It provided for the non-payment of performance awards
when performance was not of a suitable/designated level/standard. No other nonpayment circumstances were provided for in the collective agreement.
In halting the performance payments, the Company can be seen as having
unilaterally broken the Collective Agreement with the GoU. The GoU have explicit
and recognised procedural rights, although they have not acted, thus far, in an
adversarial manner.
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8. Conclusion and Recommendations
A: Conclusion
All the evidence we have seen confirms that the pay model in operation is suitable
for Ervia as a whole and Irish Water in particular.
•
The pay model at Ervia is typical of that within most private sector
companies in Ireland and is consistent with the direction of travel of
commercial semi-state organisations, although Ervia has adopted the model
more completely than many other commercial semi-states.
•
Ervia is not out of kilter with other commercial semi-states in operating, or
planning to operate, a market based, performance related, pay model.
•
The pay model does not encourage or enable excessively high levels of pay.
•
Actual individual pay levels at Ervia are lower than typical market levels in
most cases, exceptions to this are due to transition arrangements from prior,
more generous, pay models.
•
Median Ervia employee salaries broadly equate to the market lower quartile.
There is no evidence that a so called richly rewarded ‘bonus culture’ is in
operation.
•
The design of the performance management approach and the link between
pay and performance - in particular the balance of corporate performance
elements (Ervia as whole), business unit performance elements (Irish Water,
Gas Networks) and individual performance elements - is appropriate to the
organisation's aims of encouraging a high performance culture.
•
A 'dual' approach with two pay models (one for Irish Water, one for the rest
organisation) operating in the same organisation is likely to be
counterproductive and should be avoided. It would create confusion and
division amongst employees, and would be particularly difficult for staff who
work across all areas of the Ervia group.
However, inevitably in an organisation which is in first years of operating such a
model, there are some areas for improvement. In particular, the actual operation of
PMS requires some focus, specifically around enhanced training and support for
managers. Our recommendations therefore serve to improve the operation of the
current pay model, we do not find that there is any need or justification to replace
the current model, so recently adopted by the company and it Trades Unions, with
an alternative either within Irish Water specifically or across Ervia as a whole.
B:
Recommendations
We present our recommendations below on how Ervia could address the areas of
improvement highlighted in this report.
Pay elements
• Ervia needs to work on creating a clear and acceptable definition of how the
'X' factor which will apply to future pay increases will be defined.
• Related to the above point, the approach to the 'Basket of companies' used
for external comparisons should be clarified and confirmed with the GoU.
• The approach to promotions, specifically the promotional 'cap' of 5%,
should be reviewed, and consideration given to a more flexible approach to
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•
managing promotional pay increases.
Consideration might be given to building in a company performance
'threshold' below which no PRA will be available.
The PMS
The organisation should devote some significant effort to improving employee
understanding and manager confidence / competence in the operation of the
performance system. Specifically:
•
•
•
•
•
•
•
Improving the transparency of how employees have been assigned to
individual performance ratings, and providing greater communication and
training for managers on making performance decisions.
The company and the GOU should review the operation of the current
approach which requires managers to apply a 'normal' performance
distribution, since such practices have to be accepted by the employees to
whom they apply.
In addition, any distribution approach should also be reviewed to ensure
that distribution curves are applied to large groups rather than small teams.
Consideration should be given to building in more specific team-based
performance objectives for some categories or groups of staff.
Ervia could consider introducing more frequent 'semi-formal' performance
discussions through the year, and re-emphasise to managers the
importance of ongoing coaching an feedback throughout the year.
Ervia may also wish to consider building objectives around completion of
PMS into all managers performance expectations.
The operation(s) and functioning of the PMS, by way of inclusive
housekeeping, should be reviewed every 24 months.
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Appendix 1
Submission
from the
GoU:
Summary
Summary of Submission from GoU
The GoU submission to the review is summarised below.
Previous Model
The GoU believes that the previous incremental model should be re-instated. The
previous pay model, it is argued, had one distinct advantage over the current model,
namely, it was open and transparent. The GoU observed that the current model is
neither transparent nor fair for a number of important reasons. In particular there is a
lack of clarity of the process / methodology used to establish the annual general salary
increase amount.
Comparison with Other Pay Models in operation within Semi-state & Public
Utilities Sector
There are varying different pay models in operation within the semi-state and public
utility sector ranging from traditional incremental systems, competency models, merit
models and pay and reward models. The GoU contended that the traditional model
offers employees consistency and fairness, while the other models seek to offer pay
increases using measured criteria to apply individual pay movement and/or group
annual performance rewards (PRA’s). Due to the widespread use of calibration or
forced distribution the GoU viewed the latter models definition of ‘fairness’ as distorted,
and employees experience largely negative.
In order to validate its suitability for Ervia the current model has to be seen to be
transparent and fair. In order to achieve this benchmark of credibility and objectivity,
the annual general round increase must be determined by reference to an agreed set
of comparators. The GoU view is that there needs to be a total separation between
collectively bargained pay and performance related pay.
A Universal Pay Model
The GoU believes firmly that it is not tenable to have two different pay models in
operation within one company. There must be one single pay model, applied evenly
across the organisation.
2013/2014 PRAs
At the time of the decision to suspend the payment of PRAs for 2013 and 2014 there
was a collective agreement in place, which outlined in detail the specific
targets/conditions that employees had to meet in order to receive payment under the
pay model. The GoU will not accept anything short of the full payment of all
outstanding monies due under the existing PRA system. The credibility of any future
pay model relies on honouring the terms of the previous model.
Contracts of Employment
The contracts of employment in Irish Water should reflect the collective agreements in
place agreed between the GoU and the Management. This was not the case in respect
of the PRAs. While the Market Based Reward Model is quite specific in relation to how
allowances are to be applied, it has come to light that Irish Water contracts of
employment stated that, ultimately, the payment of these payments was at the
‘company’s discretion’. The Gou want this discretionary clause removed from
Contracts of Employment.
Comparators
The Market Based Reward Model refers to the fact that ‘salary ranges will be reviewed
annually and adjusted to respond to economic and market conditions. To conduct this
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Exercise, Bord Gais and the Gou will agree the companies in the Market to be
surveyed…….’. This has never happened. The parties need to agree ‘the basket’ of
companies that would constitute ‘the market’.
Promotions
The current guidelines relating to promotions are not working and this is leading to a
serious misalignment of pay within departments, where people are being paid at
significantly different rates of pay. The GoU recommend, at the very least, that the
principle of the previous incremental system should apply, namely, employees on
promotion were guaranteed to move to the next position on the grade to which they
were being appointed and up one point.
Pay Determination
The GoU strongly recommended the separation of collectively bargained pay as
outlined in the Proposal for the Introduction of a Market Based Reward Model (P5) of
the current model and the PRA system. This would ensure cost of living/national
agreements etc. would be universally applied. PRAs would be separated from this
collectively bargained element of pay and would run in parallel.
PRAs
The GoU identified a need to have more uniformity in relation to the % of pay across
the various pay bands related to performance. The collective experience of trade
unionists has been typically negative to performance related pay models and in
particular to what the GoU have described as the infamous ‘bell-curve’. These awards
range from 0% to 19% of annual salary depending on grade and rating. The wide
disparity between those at the bottom and those at the top undervalues and
undermines completely the stated principles and ethos behind this pay model. The
message the pay model implies is that the company’s value system is profoundly
hierarchical in nature; the more senior your position is in the company the more you
and your contribution is valued.
Conclusion
The GoU noted that any recommendations, which may emanate from the Review will
be subject to negotiations and agreement between Management and the Unions.
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Appendix 2
Glossary
Glossary of Terms Used
The terminology surrounding reward models can differ from organisation to organisation.
It will not help consideration of the findings of this report if each reader brings their own
definitions with them to the reading. Therefore we set out below some notes on
definitions we have used, in order to be clear in any discussions subsequent to the
report being issued, and for better understanding generally. Having regard to our Terms
of Reference, we felt the need to do this to avoid having points of agreement reached
where definitions were at variance, or to have disagreements on issues which, had the
definitions been clear, fewer disagreements may have arisen.
The following is a graphic overview of a typical private sector pay package, followed by
definitions of the terms used. In many organisations, items like a Shift Premium, or
particular ‘on-call’ arrangements may apply, but since they do not affect a market-based,
comparative value benchmarking or the management of annual individual appraisal
procedures, we have not described them here.
Definitions of terms:
Basic salary: annual, fixed pay. May increase annually based on market movement,
increased skills, or higher level of performance in role.
Cash Allowances: fixed allowances provided to certain employees to cover, for
example, costs of company car. Usually non pensionable. Do not usually change
annually, tend to be associated with certain roles or grades.
Guaranteed / Fixed Bonus: Guaranteed cash amount paid regardless of individual or
company performance, for example Christmas bonus. Usually non pensionable. Does
not apply at Ervia.
Performance Related Award: Additional payments which will vary year-on-year based
on company, team, or individual performance. Usually non pensionable.
Additional terms used in this report:
Market Movement: Annual change in pay levels for employees based on assessment of
data from comparator organisations.
Pay Freeze: No annual pay rises apply. Pay increases may still occur for promotion or
role changes.
Median: The median is the mid-point of a set of data. 50% of the data provided will sit
above this point and 50% below.
Pensionable: The pensionable element of pay is the amount upon which pension
contributions are based.
Pay Range: The pay range will determine the upper and lower amount of pay available
for an agreed tranche of roles.
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CV's of report authors and contributors
Appendix 3
Jackie Waller
Jackie is a Principal Consultant in Aon Hewitt’s Performance, Reward and Talent
Consulting practice based in the UK. Jackie has been with Aon Hewitt for over 18 years
and is one of our leading reward consultants.
Jackie has experience leading a wide variety of projects including reward reviews,
grading, base pay and incentive plan design, reward strategy, employee engagement,
and performance management. Among others, she has worked with Transport for
London, Centrica, Total, Civil Service Employee Policy Committee, GSK, Novartis,
SEGRO, Capital One, NFU Mutual, Heinz, Total, and IBM.
Martin King
For two decades Martin worked in industrial relations as a union official where he built up
extensive experience across all business sectors. His work at national, regional and local
levels, in Ireland and in Northern Ireland, gives him a unique perspective on effective
problem solving in business today. Martin established Ampersand Consulting in 1996.
He now combines consultancy work, assisting clients integrate business decisions with
people management processes, with an extensive facilitation and mediation caseload.
He is the current chair of the Central Bank Disputes Tribunal, and has an innovative
‘Adjudication’ role in a number of organisations. He was awarded an MBA in 1997
(DCU), and a PhD. in 2007 (TCD). Martin lectured on the TCD MBA Programme, on the
MSc Programme in the IMI, and in IR/ER as a member of the adjunct faculty in the TCD
School of Business.
Duncan
Brown
Duncan is a Principal Consultant in Aon Hewitt’s Performance, Reward and Talent
Consulting practice. He has more than 20 years' experience in reward consulting and
research with firms including PricewaterhouseCoopers and Towers Perrin. He also spent
five years as Assistant Director General at the Chartered Institute of Personnel and
Development. His clients have included major private sector companies such as BP,
Guardian Media Group and BA, public bodies such as the Cabinet Office, National
Health Service and Equality and Human Rights Commission, and not-for-profit
organizations such as the Cancer Research, ACCA, National Asthma Society and the
United Nations. Duncan is a leading commentator on reward issues, who has published
numerous reports, articles and books. Duncan has appeared on BBC TV breakfast and
evening news, as well as Radio 4's Today programme. He has participated on
Government taskforces concerned with pensions and human capital reporting and was a
member of the expert advisory group to the Hutton Review of Fair Pay.
Caroline
McCamley
Caroline McCamley provides a range of consultancy, facilitation and training services to
clients. Her areas of expertise cover strategic and operational planning, governance and
management leadership, organisation evaluation and design, mediation and conflict
resolution, working in both single and multi-agency contexts. Her clients include
charities, private bodies, membership organisations and public/state organisations
across a wide range of sectors. Caroline worked for almost 15 years for the Industrial
Development Authority, before establishing a consulting business in 1988, merging it
with &|Ampersand in 2012. She holds a Master’s degree in Management Learning
(Lancaster University) and a National Diploma in Industrial Relations (NCIR). Caroline
has also served on a number of state, NGO and private sector boards and is currently a
member of the Council of Gaisce – the President’s Award.
Guy
Blackwell
Guy is a consultant in Aon Hewitt’s Performance, Reward and Talent Consulting
practice based in the UK. Guy has 10 years’ experience in reward consulting and has
worked at Towers Watson previously. Guy is an experienced project manager and
consultant and has managed a wide range of reward projects including the design and
implementation of job evaluation and job architecture frameworks. Among others he has
worked with Anglo American, B&Q, BAE Systems, BP, De Beers, Direct Line Group,
Fujitsu, HSBC, Imperial Tobacco and John Lewis. He previously project managed
Towers Perrin’s European Energy, Oil and Gas and General Industry surveys.
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Appendix 4
Management Interviewees
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Appendix 5
References and Sources
Reference and
Sources
Aon Hewitt (2012a) Reward Fundamentals: Key Findings and Implications
Aon Hewitt (2012b) Global Best Employer Study 2012
Aon Hewitt 2013 Total Compensation Measurement Survey
Aon Hewitt (2014a) Variable Compensation Survey
Aon Hewitt (2014b) Europe Salary Increase Survey
Aon Hewitt (2014c) Total Compensation Measurement Ireland
Aon Hewitt 2015 Ireland Salary Increase Survey Winter Update
Brown, D. 2012 European Rewards in an Era of Austerity: Shifting the balance
from the past to the future, Compensation and Benefits Review, October.
Brown, D., and Armstrong, M. 2006 Reward Strategy: From intent to impact.
Kogan Page, London.
Brown, D., and West, M. 2005 Rewarding Service? WorldatWork Journal,
Quarter Four.
CIPD 2013 Annual Reward Management Survey
Combs, J., et al. 2006 How much do High-Performance Work Practices Matter?
Personnel Psychology, Autumn.
Compensation Round Table 2006 Driving Performance through Pay. Corporate
Executive Board.
Cully, et al. 1999 Britain at Work. Routledge, London.
Department of Public Expenditure and Reform. 2014 Performance Management
and Development System. Annual Evaluation of PMDS – Review of completion
rates and ratings distributions for 2013. Available at http:/hr.per.gov.ie/pmds2013/
Ellig, B. 2001 The Complete Guide To Executive Compensation, McGraw-Hill,
New York
eReward 2009 UK Performance Pay 2009: Survey Report
Frawley, M. 2015 Civil Service performance system needs to come up to the
mark, in Industrial Relations News, No.13, 1st April 2015. Available at
http://www.irn.ie/issues/article.asp?id=22538&issueType=1
Government of Ireland. 2010 National Recovery Plan 2011 – 2014. The
Stationary Office, Dublin.
Murray, J. 2001 Reflections on the SMI [working paper]. The Policy Institute,
48
Aon Hewitt
Consulting
Trinity College Dublin. Dublin.
Hutton 2011 Fair Pay Review in the Public Sector: Final Report. HMSO, March,
London.
OECD. 2008 Ireland: Towards and integrated public service. OECD, Paris.
PA Consulting Group. 2002 Evaluation of the progress of the Strategic
Management Initiative / Delivering Better Government Modernisation
Programme. Dublin.
Pfeffer, J., and Sutton. R. 2006 Evidence-based management. Harvard
Business Review. January.
Price Waterhouse Cooper. 2015 Reward Trends Snapshot Survey 2015
Report of the Special Group on Public Service Numbers and Expenditure
Programmes [‘An Bord Snip Nua’] 2009, July.
Rhodes, M.L. and Boyle, R. 2012 Progress and pitfalls in public service reform
and Performance management in Ireland, in Administration Vol.60 No.1, pages
31-59. Dublin.
Schuster and Zingheim. 2012 Compensation and HR practices during crises.
WorldatWork Journal
Schuster and Zingheim. 1996 The New Pay. Jossey Bass, San Francisco.
Sweeney, C. 2011 Transparency and Equal Pay Audits, Equal Opportunities
Review
Third Report of the Organisational Review Programme (ORP). 2012
Department of Public Expenditure and Reform, Stationary Office 2012, January.
Dublin
Transforming Public Services. 2008 Report of the Task Force on the Public
Service – transforming public services: citizen centred - performance focused.
The Stationary Office, Dublin, November 2008.
Thompson, M. 2000 The Competitiveness Challenge: Final Report
Wallace Bell and Hanson. 1987 Profit Sharing and Profitability, Kogan Page,
London.
WorldatWork. 2004 Paying for Performance 2003/4.
49
Aon Hewitt
Consulting
Appendix 6
Companies included in market assessment
Companies in
Aon Hewitt
Ireland
Database
AbbVie
ACI Worldwide
Acushnet
Adobe Systems
ADTRAN
Agilent Technologies
Amgen
Analog Devices
Apple
Applied Materials
Astellas Pharma
AstraZeneca
Avantor Performance Materials
Bayer
Boston Scientific
Bristol-Myers Squibb
Broadcom
Carlson Rezidor Hotel Group
Ciena
Cisco Systems
CSC
Eli Lilly
F. Hoffmann-La Roche
F5 Networks, Inc.
Facebook
First Data
Flextronics International Ltd.
Four Seasons Hotels And Resorts
Gartner
Gilead Sciences Ltd.
GlaxoSmithKline
Hanesbrands Inc.
Hilti
Hilton Worldwide
Honeywell International Technologies
Ltd.
Itron
Jabil
Jurys Inn
Kia Motors
KLA-Tencor Corporation
Marriott International
MasterCard
Mentor Graphics Corp.
Merck Serono
Microsoft
MSD Merck Sharp & Dohme
National Instruments
NCR
Novartis Pharma
Novo Nordisk
Oracle
PA Consulting
Pall
Plantronics, Inc.
Qualcomm
Red Hat
Revlon, Inc.
Salesforce.com
Sanofi
Starwood Hotels & Resorts
Symantec
Takeda
Tellabs
Teradata
Texas Instruments
TIBCO Software Inc.
UCB
United Airlines, Inc.
Varian Medical Systems
VeriFone Systems Inc.
50
Aon Hewitt
Consulting
Contact Information
Jackie Waller
Principal Consultant
Aon Hewitt Ltd
+44 (0)1727 888 394
jackie.waller@aonhewitt.co.uk
Martin King
Director
&│Ampersand Consulting
087 251 3885
mking@ampersand.ie
About Aon
Aon plc (NYSE:AON) is a leading global provider of risk management, insurance and reinsurance
brokerage, and human resources solutions and outsourcing services. Through its more than 66,000
colleagues worldwide, Aon unites to empower results for clients in over 120 countries via innovative
and effective risk and people solutions and through industry-leading global resources and technical
expertise. Aon has been named repeatedly as the world’s best broker, best insurance intermediary,
best reinsurance intermediary, best captives manager, and best employee benefits consulting firm by
multiple industry sources. Visit aon.com for more information on Aon and aon.com/manchesterunited
to learn about Aon’s global partnership with Manchester United.
About &|Ampersand
We are an independent consulting company specialising in the messy business of solving complex organisational
problems. Our expertise is in untangling issues and problems, focusing on what really needs to be addressed. At the heart
of our business, are strong values that inform how we work and what we do. We work with organisations of all sizes, in all
sectors. Whatever the task, from supporting major strategic change or whole business reengineering, to addressing a very
specific issue or situation, we provide clear thinking, thorough analysis and a creative, but practical approach to solutions
and strategies which will work and be sustainable. If we can't help we don't meddle... and when it's done – we're done. The
Ampersand team has skills, experience and knowledge working as consultants, as employees, as board members, as
volunteers and as managers, throughout the public service and private sector. We've also picked up a thing or two from
academic studies and research. For our clients this means we have an extensive and complementary set of skills which
we can call on to provide the mix of expertise that will work effectively on a given assignment.
51

Pay Model Review Report

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