Asia Pacific—Organizations in Asia are progressively realizing that their critical assets are fast evolving into their most expensive assets, and they are rethinking their compensation strategies in the search for competitive advantage, according to the Managing Compensation in Asia 2008 report released by Hewitt Associates, a global human resources services company.  The report stated that, given the changing nature of Asian talent, compensation is becoming more important to the new-age employees.

One of the primary findings of the report states that, in order to come out a winner in a competitive market, organizations will have to create innovative compensation strategies to attract, motivate, and retain high quality talent.

Nishchae Suri, Principal, Hewitt Associates, said, "Asian talent has unprecedented ambitions of fast track growth and the willingness to toil for it.  Sustaining 'satisfaction' is a huge challenge as companies report increasing difficulty in keeping employees happy through compensation alone. 

"The success of compensation programs in the future will depend on whether organizations are ready to take on 'bold bets' that include personalizing compensation and communication for employees, focusing on differentiating pay for high performers, and developing metrics that can calculate returns on the compensation investment."

Customized and personalized compensation

Traditional, one-size-fits-all compensation programs are not expected to work in the next generation of talent management. A workforce that's in short supply, empowered to switch jobs and is more demographically and lifestyle diverse, will require and, in many cases, demand that organizations take more than one approach to compensation.

In the next generation of talent management, organizations will use consumer marketing technologies to customize total rewards packages.  Through personalized web portals, organizations will offer compensation menus that are tailored to both groups of and even individual workers.  Options offered will go beyond the traditional flexible benefits fare to include choice in work assignments and location, time and money for training, and working time flexibility.

Suri adds, "Organizations will increasingly offer workers customized rewards menus, giving employees their total cost of remuneration and allowing them to design the specifics of their rewards packages. Going even further, they might even let employees determine their own compensation levels and keep compensation amounts in check by providing detailed financial information upon which employees will be encouraged to base their salaries.  Another key step for next generation HR practices for companies will be developing more personalized incentives by using assessment tools to determine what motivates individual employees."

Tailored communication

Similarly, employee communications will also be customized in the next generation of talent management.  In addition, with the aid of technology, organizations will gather worker information and use it to create communications that resonate with specific group or individual needs. Rather than sending a generic mailing to all employees, organizations will increasingly use employee segmentation technologies to target communications for groups of employees based on different factors, such as an interest in 'saving' or 'years until retirement'.

Organizations will also turn to sophisticated HR technologies to easily and cost-effectively manage customization. In addition, strategic and systematic outsourcing of non-core HR functions will give many organizations access to the latest customization technologies while freeing the HR team's time to develop customized rewards menus and communications content.

Development of metrics that drive compensation return on investment (ROI)

Just as customer relationship management data can help a company develop detailed sales, marketing, and pricing strategies for its products, human capital data can be analyzed to support critical workforce strategies.  In time, organizations will be leaving traditional workforce metrics and reporting, such as number of hires, attrition rates, and performance ratings behind, and linking compensation, engagement, and productivity and attrition data to provide a clearer picture of the talent environment.

With the primary focus of all their efforts on optimizing performance, organizations will have dedicated teams that are granted access to every piece of human capital data across the company, facilitating analyses on everything from employee engagement and productivity to achieving the right mix between in-sourcing and outsourcing.  Organizations will also closely examine the correlation between promotion rates, employee engagement, attrition, and employee performance. 

Increased focus on high value employees

Increasingly, companies will "differentiate" among their best and worst performers in visible, dramatic ways to motivate top talent to deliver excellence.  One of the most valued modes of showing appreciation will be through pay.  The other most valued type of reward will be recognition in the form of praise or certificates, privileges, special projects or training, and promotions.

Organizations will develop a compensation strategy that catches top performers' attention and sends a signal to mediocre performers, establishing well-defined rules for performance that make clear how the rewards are gained, challenge the entitlement mentality, and optimize the organization's compensation investment by using variable pay incentives instead of focusing on base pay increases.

"This, of course, does not mean that organizations will neglect their medium performers, a group that forms the bulk of the employee population.  Organizations will adopt a more inclusive approach to pay – rewarding top performance through higher pay and encouraging medium performers by linking their performance objectives to higher stakes," says Suri.

About Hewitt's Managing Compensation in Asia 2008 Report

Founded on Hewitt's ground-breaking research and backed by world-class data, Hewitt's report, Managing Compensation in Asia, links the economic trends to the current talent market, profiling the new-age employees and detailing out their talent needs.  The report further highlights the compensation trends and issues in Asia, current pay practices, and the new and evolving practices of leading organizations.  Crafted from face-to-face interviews with compensation professionals in the region, this report uniquely links data-driven insights with real-time experiences, providing a road map for compensation in the future. 

About Hewitt Associates

For more than 65 years, Hewitt Associates (NYSE: HEW) has provided clients with best-in-class human resources consulting and outsourcing services. Hewitt consults with more than 3,000 large and mid-size companies around the globe to develop and implement HR business strategies covering:  retirement, financial and health management; compensation and total rewards; and performance, talent and change management. As a market leader in benefits administration, Hewitt delivers health care and retirement programs to millions of participants and retirees, on behalf of more than 300 organizations worldwide. In addition, more than 30 clients rely on Hewitt to provide a broader range of human resources business process outsourcing services to nearly a million client employees. Located in 33 countries, Hewitt employs approximately 23,000 associates. For more information, please visit www.hewittasia.com.

Managing Compensation in Asia 2008, report now available.