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Porus P. Munshi

Get the best out of your human assets by training, mentoring and motivating people, and then sit back to see the profits grow.

The head of one of India's largest IT companies is reputed to have said that 75-80 per cent of his assets go home after 6 pm. He was of course referring to the people who work in the company. That's a far cry from the days of the brick-and-mortar companies when assets were viewed solely as land, plant and machinery, materials and inventory. Today, many companies, including those in the traditional manufacturing sectors, are looking at people as their real key assets. Companies have always realised the importance of having the best people. But while this was important a decade ago, it's crucial now. Gestation periods and lead times are constantly shrinking. Getting innovative products of the highest quality at the cheapest price out to the market, and in the shortest possible time, is becoming non-negotiable. And you can't really do this without good, skilled people who are comfortable with constant change, new processes, products and services.

Many of the skills required to thrive in a fast-paced, constantly changing environment will have to be created in joint on-the-job training efforts between employers and employees. Educational institutions are falling behind in their ability to deliver cutting-edge skills. Newer knowledge makes older skills obsolete. To get people with newer skills and knowledge, companies will either have to invest in their training or recruit them from other companies.

The first step is of course to recruit the best talent that money can buy. We don't look for average performers to make up a cricket or a football team. We're always looking for the best in our sports teams; why should it be any different for companies?

Next comes training and mentoring, pushing responsibility and accountability down the line, and giving people the freedom to make mistakes. This is the enabling part. The next stage — constantly rewarding superior performance and constantly weeding out the non-performers — is where the majority of companies fall behind. If this crucial `Performance Management', is not done, people just aren't going to be motivated enough to develop their talent and give their best. Bringing out the best in people involves enabling and rewarding at all levels in the organisation. The present organisational structure, based as it is on the military model of climbing one rung after another, really negates excellence and only brings out the `Peter Principle' in full force. The Peter Principle is that everybody is promoted to his level of incompetence. Because climbing the next rung of the ladder is necessary for advancement, everybody — even those without the requisite competencies — wants to climb the next rung. Those who lack the competencies for the next level, under-perform until they're finally shown the door.

Investing in people involves far more than hiring and training. True investing involves investing both time and money in strategy and processes for constant employee development. For true Performance Management and excellence at all levels, each rung has to have champions and talent. It takes years for talent to develop. And ironically, in the current system, just when that happens the person is pushed up into a different role where he/she may or may not perform. To obviate this, organisations really need to consider moving to a role-based structure with flatter hierarchies and higher rewards for top performers within roles. This necessarily entails a broad band of pay scales within roles and large overlaps between one grade and the next.

Let's take an example. A few years ago in the hotel industry, a senior steward/supervisor's salary was about Rs 2,500 a month and an assistant manager's (the next grade), about Rs 4,000. Conventionally, to earn more, the steward would need to be promoted to the next level. But in reality, a good senior steward could earn anywhere between Rs15,000 to Rs 20,000 by way of tips.

Perfect performance based variable pay. The assistant manager, being out of the tips bracket, had to be content with Rs 4,000 a month. What was interesting was that when the stewards were offered promotion as assistant managers, many of them refused, as this would entail a steep drop in earnings. Many excellent stewards stayed stewards and got better and better at their jobs, while the managerially inclined ones accepted the promotion with the drop in earnings because they saw themselves as having the competencies required to climb the ladder and again make about 25,000 and more after proving themselves. This really frees the organisation from the usual relentless pressure to promote people whether they deserve it or not.

While I don't suggest that such large overlaps should exist between one role and the next, I do suggest that the overlap should be sufficiently large to make an individual at the top of one role think carefully about wanting to move to the bottom of the next role. The suggested drop in earnings could be anywhere in the vicinity of 40-70 per cent.

At a leading consulting firm, if a top financial consultant wants to move to a managerial role, he initially has to take a drop in salary of about 70 per cent. If he proves himself, he of course goes on to earn considerably more. P.Shivanand, Managing Director of Bangalore-based Accord Consultants swears by broad banding and overlapping and in a recent assignment to set up a performance management system that can motivate non-managerial employees, this model was used to very good effect.

Not only do broad banding and overlapping motivate employees who see themselves as being in dead-end positions, they also slow down the relentless move to the next level among those who are more organisationally mobile. They force the individual to ask what exactly motivates him/her to move to the next role. Earlier, the only way to earn more was through promotions. With broad banding and overlapping, this is no more the case. Since earnings can be high, the individual can now pursue excellence and satisfaction at his/her current role.

Broad banding within roles is what most professionals do. Doctors, accountants, lawyers, consultants all follow the broad banding principle where you are paid depending on your level of performance. As competence and skill levels increase to world-class standards, the earnings increase too.

Moving to broad banding may mean that the organisation pays more for newer roles than at present. But the only way you're going to reach excellence is by having excellent people in each role. If one role is seen as just a stepping-stone to the next, you're never really going to have excellence in any role. The good people will want to move on to different roles, and the indifferent will stay on to present roles because they can't move on. A further benefit of broad banding is that once role rationalisation sets in, a number of useless hierarchical layers can be discarded.

To conclude, to really get the best out of your human assets, you need to hire the best, spend time and money in training and mentoring them, and finally, set up a Performance Management system that really works

The author is a Chennai-based HR consultant.

The author is a Chennai-based HR consultant.

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