Motivation and Compensation

Performance Management
Author: Ivana hov

Finann management, May 2009

This material is part of a series of articles focused on performance management where Deloitte experts introduce individual components of the integrated performance management system in companies. This article deals with motivation and compensation.
The cornerstone of a companys success is a well-defined and implemented corporate strategy which the whole company lives. Those living the strategy are individuals, individual human beings. If employees do not feel closely connected to the strategys values and direction and motivated to fulfil the companys designated goals, the company is not likely to successfully reach its goals. (For ease of use, employees in this article shall mean all persons working in a company and influencing the attainment of its goals, i.e., all employees from senior management to ordinary employees, temporary workers, self-employed persons, sub-contractors and others.)

Through the performance management system, the performance expected of employees is given a concrete shape.
Employees help to achieve the companys goals by performing assigned jobs. If the company has an integrated company-wide performance management system in place, employee performance is no longer a nebulous concept but rather a set of clearly defined expectations (goals) to be met by an employee in a given position. To determine the expectations, the companys strategic goals are broken down in detail to the level of ordinary employees. Employees then seek motivation to meet the designated goals in which the company is able to help them by setting attainable conditions and measures. Hence, the performance of employees corresponds to how the work and rewards (both financial and non-financial) meet the employees needs.

What kind of motivation works well?

Motivation and motivational tools available to companies are of a financial and non-financial nature. Motivation can also be negative or positive. At first glance it could seem, indeed, that financial motivation, i.e., financial rewards for employees performance, is the right driver of employee performance and that the higher the financial reward, the higher the work commitment and employees performance. Yet, the results of surveys and experiments have shown for years that this is not always the case. Financial motivation is meaningful to employees only to a certain extent; once the motivation reaches a certain amount, it no longer influences the employee. This is not a suggestion that companies should disregard the financial remuneration of employees. A well thought out and fair compensation system aligned with success in fulfilling the designated goals (as described below) is the basis of social peace in the company and surely motivates employees to deliver the required performance. However, attention should also be paid to non-financial motivational tools. The harder it is to define and grasp these tools the more significant a role they play in motivating employees. In broad terms, they can be included under corporate culture. Why does an employee who gets two comparable job offers with identical financial compensation prefer one offer over the other? The reason is often the corporate culture which the employee expects in the company of his or her choice.

Who is expected to take care of employees motivation in the company?

It is of course the HR function. The HR function is expected to cooperate actively in promoting the integrated performance management system, know the employee population and provide ideas and tools to motivate them. The HR function is also expected to act as a sponsor in creating the financial compensation system and provide input in making strategic decisions. However, there is a BUT! Indeed, the HR function can be expected to set rules, have knowledge and provide support, yet non-financial motivation is the responsibility of management, namely senior management and line management. Management is genuinely wrong to think that except for direct assignment of

tasks to employees, which is ensured by the management, the HR function can take care of and be responsible for all other reactions of employees at work and associated with work.

Financial Compensation System

Companies with an integrated performance management system in place have their employee compensation aligned with success in fulfilling the goals of the company and often also the goals of the team and the individual. Employees compensation mirrors the employees skills, capabilities and knowledge, i.e., competencies, and the employees long term and short-term performance. Each employees quality is reflected in a certain component of the employees compensation as illustrated in Figure 1. Figure 1: Relationship between the employee and the wage the employee receives

The proportion of individual wage components of the employees to tal rewards differs based on the type of job and job description; similarly, the type of goals of individual employees differs depending on their position in the companys hierarchy. Generally, the higher the employee is positioned in the organisational st ructure, the higher the proportion of strategic goals in the overall structure of the employees goals and the greater the share of the variable wage component in the employees total rewards. The method for translating success in fulfilling his/her goals into the amount of the employees compensation including the specific proportion of individual components of the employees income is derived from a detailed consideration of the industry where the company operates, the competitive environment, the company s strategy and the applicable HR strategy. Hence, the transfer bridges between success in fulfilling goals and the amount of reward can rank from moderate to aggressive and can be used to regulate and influence the employees behaviour in meeting the goal s, see Figure 2. Figure 2: Interrelationship of performance and rewards

The horizontal and vertical axes illustrate the percentage success in fulfilling the goals and the amount of the reward, respectively. Rewards can often be paid only when a certain value in fulfilling goals is reached, i.e., when knock out criteria are met. The knock out criteria for the payment of rewards of all employees is usually established at the company-wide level. Once the company achieves its main, usually financial goals, only then can the rewards of individual employees be considered. Under step 2, the knock out criteria are applied to the individual performance of employees. Under an interim step, the knock out criteria can be established for the performance of individual organisational departments or teams. Once the fulfilment of goals reaches a certain level, the higher value of goal fulfilment is no longer translated into a higher reward, ie a reward cap. The reward cap should protect the company against excessive fulfilment of goals which might not be covered by a proportionally higher amount of financial funds, for example, in the case of qualitative goals. If the planning process and goals are established correctly in the company, its employees should not exceed their goals by tens of percents. Such a situation rather points to incorrectly established goals of the employee rather than to his or her excessive success.

Non-financial Motivation
As mentioned above, while the non-financial motivation of employees is less tangible, it is very important. Nonfinancial motivation is defined by corporate culture and corporate values. It begins with direct and open communication and atmosphere across the company and continues with providing constructive feed back to employees and adopting a personalised approach where possible. Non-financial motivation includes basic company values such as ethical approach, loyalty, empathy, courage, leadership and team spirit. Non-financial motivation runs through the whole process of goals setting and evaluation. It allows and even expects the employees to take part in establishing their own goals. This is the counsellors approach to the official and ongoing employee evaluation. Other non-financial motivation drivers of employees which the company and management can use include: power decision-making opportunities responsibility; self-fulfilment opportunities; strong and clear vision of the company; relationships in the group; certainty; recognition praise; feed-back; and respect relationship to authority. It is the role of managers, in line with the principles of the personalised approach to employee performance management, who are in day-to-day contact with their subordinates, to recognise, assisted by HR, the main motivation drivers of their subordinates. However, non-financial motivation is not only about approaching employees fairly. Non-financial motivation drivers also include things like having attractive and diverse work, ongoing learning, taking part in corporate development and enjoying opportunities for career and/or professional growth. However, the latter is on the edge of the financial motivation drivers because, for example, while MBA studies can be attractive nonfinancial motivation for employees, they incur rather significant costs for the company, and thus, are considered financial motivation from the companys perspective.

In this context it is good to know that the generation currently entering the labour market the so called generation Y, is largely interested in the opportunities of developing their professional skills and career.

Benefits of the Integrated Performance Management System for HR

The performance management system can be considered, without exaggeration, as the key HR process. Many other areas and processes of human resources management benefit from the outputs provided by a wellestablished performance management system. Regular employee evaluation and monitoring, for example, enable identifying an above-average performing talent and developing the talent management programme. Clearly designated expectations from individual employees allow easier definition of the required employee educational activities and employee educational system.

Conclusion
While the accounting theory sees employees as costs, they actually are one of a companys most important assets and should be treated as such and in line with the accounting theory, i.e., developed and improved or at least maintained. The last issue of the Performance Management System series will deal with IT support for performance management. The previous issues were focused on creating and implementing the strategy and translating it to the performance system. Attention was paid to the method of defining and evaluating strategic goals and short-term goals established under the budget and plan as well as to the establishing of the economic structure so as to monitor the differences between the plan and reality and transforming this data into information for managerial decision making and management. The last article was focused on the establishment, measurement and systematic improvement of processes using performance indicators.

Deloitte
From Wikipedia, the free encyclopedia

Deloitte Touche Tohmatsu Limited

Type

UK private company, limited by guarantee

Industry

Professional services

Founded

London, England, U. K. (1845)

Founder(s)

William Welch Deloitte

Headquarters

30 Rockefeller Plaza, New York City, New York, U. S.

Area served

Worldwide

Key people

Stephen Almond (Chairman) Barry Salzberg (CEO)[1]

Services

Assurance Tax Advisory Consulting Financial Advisory Enterprise Risk Other

Revenue

US$ 34 billion (2012)

Employees

193,000 (2012)

Website

Deloitte.com/global

Deloitte Touche Tohmatsu Limited /dlt/, commonly referred to as Deloitte, is one of the Big Four professional services firms along withPricewaterhouseCoopers (PwC), Ernst & Young, and KPMG. Deloitte is the largest professional services network in the world by revenue and by the number of professionals. Deloitte provides audit, tax,consulting, enterprise risk and financial advisory services with more than 200,000 professionals in over 150 countries. [2] In FY 2012-13, it earned a record $32.4 billion USD in revenues.[3] In 2012, it was reported that in the UK, Deloitte had the largest number of clients amongst FTSE 250 companies.[4] Its global headquarters is located in New York City, United States.[5]
Contents
[hide]

1 History

o o

1.1 Early history 1.2 Recent history

2 Global structure 3 Name and branding

4 Services 5 Staff 6 Criticisms 7 Sponsorship 8 Notable current and former employees

o o

8.1 Business 8.2 Politics and public service

9 See also 10 References 11 External links

History[edit]
Early history[edit]

Offices in Los Angeles

In 1845 William Welch Deloitte opened an office in Basinghall Street in London. Deloitte was the first person to be appointed an independent auditor of a public company, namely the Great Western Railway.[6] He went on to open an office in New York in 1880.[6] In 1896 Charles Waldo Haskins and Elijah Watt Sells formed Haskins & Sells in New York.[6] It was later described as "the first major auditing firm in [the] country to be established by American rather than British accountants."[7]

In 1898 George Touche established an office in London and then in 1900 joined John Ballantine Niven in establishing the firm of Touche Niven in the Johnston Building at 30 Broad Street in New York.[6] At the time, there were fewer than 500 CPAs practicing in the United States, but the new era ofincome taxes was soon to generate enormous demand for accounting professionals. On 1 March 1933, Colonel Arthur Hazelton Carter, President of the New York State Society of Certified Public Accountants and Managing Partner of Haskins & Sells, testified before the U.S. Senate Committee on Banking and Currency. Carter helped convince Congress that independent audits should be mandatory for public companies.[6] In 1947, Detroit accountant George Bailey, then president of the American Institute of Certified Public Accountants, launched his own organization. The new entity enjoyed such a positive start that in less than a year, the partners merged with Touche Niven and A. R. Smart to form Touche, Niven, Bailey & Smart.[6] Headed by Bailey, the organization grew rapidly, in part by creating a dedicated management consulting function. It also forged closer links with organizations established by the co-founder of Touche Niven, George Touche: the Canadian organization Ross and the British organization George A. Touche. [6] In 1960, the firm was renamed Touche, Ross, Bailey & Smart, becoming Touche Ross in 1969. [6] In 1968 Nobuzo Tohmatsu formed Tohmatsu Aoki & Co, a firm based in Japan that was to become part of the Touche Ross network in 1975.[6] In 1972 Robert Trueblood, Chairman of Touche Ross, led the committee responsible for recommending the establishment of the Financial Accounting Standards Board.[6] He led the expansion of Touche Ross in that era. In 1989 Deloitte Haskins & Sells in the USA merged with Touche Ross in the USA to form Deloitte & Touche. The merged firm was led jointly by J. Michael Cook and Edward A. Kangas. Led by the UK partnership, a smaller number of Deloitte Haskins & Sells member firms rejected the merger with Touche Ross and shortly thereafter merged with Coopers & Lybrand to form Coopers & Lybrand Deloitte (later to merge with Price Waterhouse to become PwC).[8] Some member firms of Touche Ross also rejected the merger with Deloitte Haskins & Sells and merged with other firms.[8]

Recent history[edit]

Deloitte Office Building in Downtown Chicago

At the time of the US-led mergers to form Deloitte & Touche, the name of the international firm was a problem, because there was no worldwide exclusive access to the names "Deloitte" or "Touche Ross" key member firms such as Deloitte in UK and Touche Ross in Australia had not joined the merger. The name DRT International was therefore chosen, referring to Deloitte, Ross and Tohmatsu. In 1993 the international firm was renamed Deloitte Touche Tohmatsu to reflect the contribution from the Japanese firm,[6] as well as agreements to use both of the names Deloitte and Touche. In 1995, the partners of Deloitte & Touche decided to create Deloitte & Touche Consulting Group (now known as Deloitte Consulting).[9] In 2000, Deloitte acquired Eclipse to add Internet design based solutions to its consulting capabilities. Eclipse was later separated into Deloitte Online and Deloitte Digital.[10] In 2002, Arthur Andersen's UK practice, the firm's largest practice outside the U. S., agreed to merge with Deloitte's UK practice. Andersen's practices in Spain, the Netherlands, Portugal, Belgium, Mexico, Brazil and Canada also agreed to merge with Deloitte.[11][12] The spin off of Deloitte France's consulting division led to the creation of Ineum Consulting.[13] In 2009, Deloitte purchased the North American Public Service practice of BearingPoint (formerly KPMG Consulting) after it filed for bankruptcy protection.[14] The firm also took over the UK property consultants Drivers Jonas in January 2010.[15] In 2011, Deloitte acquired DOMANI Sustainability Consulting and ClearCarbon Consulting in order to expand its sustainability service offerings.[16] In January 2012, Deloitte announced the acquisition of bermind, Inc., an innovative mobile agency. [17] The acquisition is Deloitte's first entrance into the mobile application field
[18]

On 11 January 2013, Deloitte acquired

substantially all of the business of Monitor Group,[19] the strategy consulting firm founded by Harvard Business School professor Michael Porter, after Monitor filed for bankruptcy protection.[20]

Global structure[edit]

Deloitte Centre in Auckland, New Zealand.

For many years, the organization and its network of member firms were legally organized as a Swiss Verein. As of 31 July 2010, members of the Verein became part of Deloitte Touche Tohmatsu (DTTL), a UK private company, limited by guarantee. Each member firm within its global network remains a separate and independent legal entity, subject to the laws and professional regulations of the particular country or countries in which it operates.[21] This structure is similar to other professional services networks which seek to limit vicarious liability for acts of other members. As separate and legal entities, member firms and DTTL cannot obligate each other. Professional services continue to be provided by member firms only and not DTTL. With this structure, the members should not be liable for the negligence of other independent members. This structure also allows them to be members of the IFAC Forum of Firms[22] which is network of accounting firm networks.

Name and branding[edit]

While in 1989, in most countries, Deloitte, Haskins & Sells merged with Touche Ross forming Deloitte & Touche, in the United Kingdom the local firm of Deloitte, Haskins & Sells merged instead with Coopers & Lybrand (which today is PwC).[23] For some years after the merger, the merged UK firm was called Coopers & Lybrand Deloitte and the local firm of Touche Ross kept its original name. In the mid-1990s however, both UK firms changed their names to match those of their respective international organizations.

While the full name of the UK private company is Deloitte Touche Tohmatsu Limited, in 1989 it initially branded itself DRT International. In 2003 the rebranding campaign was commissioned by Bill Parrett, the then CEO of DTT, and led by Jerry Leamon, the global Clients and Markets leader.[24] According to the company website, Deloitte now refers to the brand under which independent firms throughout the world collaborate to provide audit, consulting, financial advisory, risk management, and tax services to selected clients.[25] In 2008, Deloitte adopted its new Always One Step Ahead (AOSA) brand positioning platform to support the existing Deloitte vision: To be the Standard of Excellence. AOSA represents the global organizations value proposition, and is never used as a tagline. The recent launch of the Green Dot ad campaign also aligns with Deloittes brand strategy and positioning framework.[26]

Services[edit]

Deloitte offices at Tower 200 of theRenaissance Center in Detroit.

Deloitte member firms offer services in the following functions, with country-specific variations on their legal implementation (i. e. all operating within a single company or through separate legal entities operating as subsidiaries of an umbrella legal entity for the country).[27]

Audit and Enterprise Risk Services: Provides the organization's traditional accounting and audit services, as well as offerings in enterprise risk management, information security and privacy, data quality and integrity, project risk, business continuity management, internal auditing and IT control assurance. [28]

Consulting: Assists clients by providing services in the areas of enterprise applications, technology integration, strategy & operations, human capital, and short-term outsourcing.

Financial Advisory: Provides corporate finance services to clients, including dispute, personal and commercial bankruptcy, forensics, e-discovery, document review, advisory, capital projects consulting and valuation services.[29][30]

Tax: Helps clients increase their net asset value, undertake the transfer pricing and international tax activities of multinational companies, minimize their tax liabilities, implement tax computer systems, and provides advisory of tax implications of various business decisions.[31]

Other Services: provides specialized services to clients in the fields of International Financial Reporting Standards (IFRS), clients with interest in China and Japan, and others.[32]

Public Sector: Deloitte is one of the leading providers of state benefits eligibility systems and is widely recognized as an industry leader across the United States for Medicaid Eligibility Systems. [33]

Staff[edit]

Current Deloitte office in Toronto. New office will be located in the East Tower ofBay Adelaide Centre, scheduled for completion in 2015.

Deloitte high rise building offices inNicosia, Cyprus

Deloitte offers its staff a variety of career models to choose from based on their preferences, geographic location and business need. These career models also vary for each function. Traditional titles for Consulting are "analyst" through "principal", FAS has "associate" through "partner", and the delivery-focused track features "specialist" through "specialist leader". Deloitte hires entry-level personnel to client-facing functions through their graduate recruitment programs at selected universities. The organization is consistently rated by Fortune as one of their "100 Best Companies To Work For".[34] In 2007 and 2009, Deloitte was rated the number one place to launch your career by BusinessWeek.[35][36]

Criticisms[edit]
Disputes involving Deloitte include:

Adelphia Communications Corporation The Securities and Exchange Commission announced on 26 April 2005 that Deloitte had agreed to pay $50 million to settle charges relating to Adelphia's 2000 financial statements.[37]

Guangdong Kelon Electrical Holdings Company Limited Investors have claimed that there was a failure to alert them to the company's poor financial position.[38]

Haringey Council Refresh Project A local government IT project in the UK, in which costs rose from 9 million to 24.6 million. Deloitte were consultants on the project, despite being employed at the same time as the council's auditors.[39]

Los Angeles Unified School District (LAUSD) The firm implemented the SAP HR system for LAUSD for $95 million and because of faults in the system, some teachers were underpaid, overpaid, or not paid at all.[40] As of 31 December 2007 LAUSD had incurred a total of $140 million in payments to Deloitte to get the system working properly.[41] In 2008 there was some evidence that the payroll issues had started to stabilize with errors below 1% according to LAUSD's chief operating officer.[42]

State of California Courts System The firm has been working on a statewide case management system which originally had a budget of around $260 million. Almost $500 million has already been spent and costs are expected to run as high as $2 billion. No single court is yet fully operational. [43] California's Judicial Council terminated the project in 2012 citing actual deployment costs associated with the project and California's budget concerns.[44]

Australian Tobacco Industry In 2011 Deloitte was commissioned by the tobacco industry to compile a report on illicit tobacco. The Australian Customs and Border Protection Service officials called the report "potentially misleading" and raised concerns about the "reliability and accuracy" of the data. [45] When a

second Deloitte report focusing on counterfeit cigarettes was released, Home Affairs Minister Brendan O'Connor described the second report as "baseless and deceptive" and "bogus. "[46] Public health officials criticised Deloitte's decision to conduct the research, as it added credibility to the tobacco industry's effort to undermine the Government's plain cigarette packaging legislation.[47]

Canadian Bar Association In September 2003, Deloitte provided a report to the CBA that motor vehicle accident insurance claims for bodily injury had been declining since 1999 when taking inflation into account, which refuted the government's and industry's argument that general damages for soft-tissue injury had to be capped at $4,000. Within hours of release, a member of Deloitte was communicating with Insurance Bureau of Canada without the knowledge of CBA (their client) and providing confidential information. The Institute of Chartered Accountants of Alberta found Deloitte guilty of unprofessional conduct and fined the firm $40,000.[48]

Standard Chartered Iranian Money Laundering In August 2012, Deloitte was forced to publicly deny that as the official internal auditors for Standard Chartered, it helped the bank cover up suspected money laundering operations which were earning the bank significant profits by "intentionally omiting critical information".[49]

Sponsorship[edit]
The UK member firm of Deloitte was a sponsor of the London 2012 Olympics[50] and the Royal Opera House.[51] The Canadian member firm was also the official professional services supplier for the 2010 Vancouver Winter Olympic Games[52] and 2010 Winter Paralympic Games.[53] The US member firm of Deloitte is a sponsor of the United States Olympic Committee.[54] In Asia, the Singapore member firm of Deloitte was a sponsor of the 2010 Summer Youth Olympics.[55] Moreover, Deloitte sponsors many university sports teams, such as Edinburgh University Hockey Club.[56]

Notable current and former employees