Background: The global leading technology conglomerate has branches and offices in more than 190 countries. Working in this industry requires particular skills, and having suitably qualified, highly motivated employees is a key success factor for companies. Companies strive to build employee loyalty and motivation while maintaining cost discipline. One effective way to improve employees' identification with the firm and its shareholders is to create an equity culture, in which employees become co-entrepreneurs. In the past, the company had used share-based compensation mainly for managers. It now wanted to include other employees so that they, too, could participate in the success of the company. With this in mind, it decided to introduce a compensation tool based on shares specifically for this broader target group.
| Share-based compensation is an effective instrument for establishing a company-wide equity culture and at the same time promoting long-term thinking and actions on the part of employees. Worldwide implementation is a balancing act, requiring the optimum use of resources. This has been possible thanks to on-site support from hkp///.Head Equity Services
Task: An interdisciplinary team was set up that included experts in compensation, legal issues, tax, accounting and communication. The initial job of this team was to draw up a possible design for the share-based compensation tool. This included examining issues related to measuring performance, financing, eligibility for participation and distribution principles, all of which were to be discussed in the light of current market practice. It was very important that the team should work closely with all relevant stakeholders, including them early on in the process. To enable efficient planning and subsequent implementation in the more than 190 different countries where the company operated, specific issues needed to be discussed with both local and global experts. The full group then had to discuss the results and give their approval.
Role of hkp/// group: During the development of the share-based compensation tool, an expert from hkp/// group took on an internal role in the steering committee. His tasks included central project management, preparing workshops, developing and evaluating suggested designs, and selectively supporting individual work streams. His physical presence on-site meant that he could act as a point of contact, embodying the project within the organization. It also made it possible to access the hkp/// team of experts as and when necessary – they were an important resource for clarifying technical issues and getting hold of data on current market practice. As a result, it was possible to ensure an efficient design and implementation process, a targeted communication concept and the provision of support for the rollout itself.
Challenges: The design of the new compensation tool had to fulfill various objectives, some of them seemingly contradictory. It was vital that the tool boosted employee motivation, so the process had to be transparent and easy to understand, as well as properly communicated. At the same time, the company itself had to be completely on board and excessive complexity avoided (e.g. too much administration at the level of individual employees) so as to prevent excessive costs arising from the global implementation. In other words, the process had to be efficient from an accounting, tax and administrative perspective. Moreover, the new compensation tool had to add value for existing shareholders, too.
Solution/outlook: Mastering this balancing act required repeated approval rounds with internal specialists and support from the experienced hkp/// team in Frankfurt. At the start, a shared vision was established and the various implications discussed from a legal, accounting, administrative and shareholder perspective. Subsequently a shared-based compensation system was designed that was transparent for employees and which tied in neatly with the compensation system used for managers.
The communication process consists of two stages. At the start of the year, the overall system is introduced to employees and the decision-making process discussed in detail, in advance. This enables a compromise between efficient administration and communication. After the design phase, the project focuses on reaching agreement with employee representatives, defining administrative processes, training staff and communicating the new system to the global workforce. At the end of the performance period, all employees worldwide can be included in the share-based compensation system and in this manner participate in the success of the company both short and long term.
"The project demonstrates that coordinating a critical project on this scale with implications for the entire group, culminating in worldwide implementation, goes beyond the resources of a normal HR department. As a trusted partner to the client, we were able to provide the necessary staff and expertise in the form of flexible on-site support."
Dirk Filbert, hkp/// Partner
The hkp/// group develops and maintains compensation networks and studies. The necessary IT infrastructure and administration set-up provided follows the highest standards in relation to data security and competition law requirements.