BWI: Hay Group India’s Retail Sector Study Shows that Companies are more Focused on Cash-Out than Performance-In

Press release from Business Wire India
Source: Hay Group
Thursday, May 14, 2009 04:36 PM IST (11:06 AM GMT)
Editors: General: Consumer interest; Business: Accounting & management consultancy services, Business services, Retailers
Release no: 19936
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Hay Group India's Retail Sector Study Shows that Companies are more Focused on Cash-Out than Performance-In
From People to Performance: It's Time to Re-Focus Pay Practices

Gurgaon, Haryana, India, Thursday, May 14, 2009 -- (Business Wire India) -- The results of a study conducted by global management consultancy Hay Group could be a timely reminder for the Retail sector to tighten their performance pay and management practices, especially in light of the current challenging business climate.

The study revealed that compensation in the Indian Retail sector was still heavily reliant on cash compensation and not utilising the motivational incentive of other compensation instruments.

18 companies took part in Hay Group India's Manning Retail: A Compensation and Benefits Study for the Retail Sector study, including major Retail brands like Raymond, VF Arvind Brands, Lifestyle, Reliance Retail, among others, located across India and from a cross-section of formats.

The Manning Retail study report uncovered existing and emerging trends in the Retail industry, as well as some interesting insights, which include:

-- High Cash-in-hand Component: Remuneration structures have a high cash component particularly at the lower employee levels. With the variable pay component as low as 5%, there is very little leeway for Reward and Human Resource Managers to bring in a performance-linked element. While this may work in the immediate term, a high Cash component has direct impact on annual merit increases, and consequently, on long-term employee costs

-- Broad salary ranges: Organizations do not have pre-defined salary bands. Rapid growth in the sector has caused a shortage of talent. Hence, much of the hiring was candidate-based, rather than job based. As a result, organizations are ending up offering salaries disproportionate to the size of the jobs

-- Variation in salary ranges at Executive (Top Management) levels show a preference towards pay-for-person rather than pay-for-position

-- Only 18% of the participating organizations have a Superannuation Policy in force

At a Hay Group client meeting in Mumbai, Mr Naresh Mehta, Director of Human Resources at Raymond Apparel Limited commented on the findings: "Companies have to inculcate a pay for performance culture in their compensation DNA."

Mr Oscar De Mello, Country Head for Hay Group's Reward Information Services in India says, "The Retail sector has seen strong growth rates in the past five years and its employees have had salary increases of 19.2% (at the 50th percentile), even as recently as last year. Now that things are slowing down, many Retailers are beginning to experience the consequences of boom-time excesses. In order to continue to stay profitable amidst the challenges of the economic slowdown, it is important for the Retail sector to bake in a larger Performance-related element into their Reward strategy, even at lower levels of the organization. The sector must find ways to recognise and retain top performing talent without putting additional pressure on their salary bill. It will require creativity and skill besides a good understanding of the market. The good news is that it can be done. During the course of our study, we did come across Retail companies that have made significant progress in this direction."

Besides focus on performance-linked reward, the report also recommends

-- Alignment of the compensation structure across levels and to bring in a higher variable component

-- The need for manpower optimisation

-- Bring in long-term incentive plans to retain talent

-- Relook at the Benefits package and bring it in line with employee needs

-- Use market data to correct compensation anomalies and to determine a competitive reward philosophy

About Hay Group

Hay Group is a global consulting firm that works with leaders to transform strategy into reality. We develop talent, organise people to be more effective, and motivate them to perform at their best. With 87 offices in 47 countries, we work with over 7,000 clients across the world. Our clients are from the private, public, and not-for-profit sectors, across every major industry and represent diverse business challenges. Our focus is on making change happen and helping people and organizations realize their potential.


CONTACT DETAILS
Oscar DeMello, Country Head - Reward Information Services, Hay Group, +91 124 4177436, oscar_de_mello@haygroup.com

KEYWORDS
CONSUMER, CONSULTANCY SERVICES, BUSINESS SERVICES, RETAIL

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