Ken Charman, CEO
Total reward, some say, is the best-kept secret in a company. Even though it is typically 20 percent of an organisation’s expense, it forms the biggest category of spending, and most firms do not have a clear line of sight. Quite often, business leaders have visibility only to fixed pay, which constitutes about 70 percent of the total reward. For the remainder, they work on the assumption that this is paid pro rata. In reality items like stock options and pensions are heavily skewed.
“If you can’t see it you can’t control it, let alone ‘manage’ it to deliver the maximum return on your investment,” points out Ken Chairman, CEO of uFlexReward—a spin-out company based on Unilever’s global digital reward system.
That brings up the obvious question: why do organisations find it so hard to aggregate reward data for reporting or analytics?
The main reason is that the reward data—salary, bonus, pension, benefits, shares—resides in multiple systems, and extraction and aggregation is very difficult. Typically, companies aggregate total reward data only once a year to give employees a personal total reward statement and publish their spend on employees in their annual report because it involves a lot of manual effort. The human resources information system and the other disparate business systems that hold the data pertaining to various benefits are not integrated. The complexity escalates when a company has multiple lines of businesses spread across geographies, with mergers and acquisitions further compounding the problem.
This was precisely the predicament the multinational consumer goods company Unilever faced.
When Good Is Not Good Enough
The story so far: When Peter Newhouse joined Unilever as the new global head of reward in 2011, he observed in the company report that the group spend on reward was six billion Euros a year, but could not analyse the data beyond that surface level. It was not possible to drill down or aggregate by business, geography, or any other factor as it was a manual consolidation. Newhouse was neither satisfied nor willing to accept the fact that only fixed pay was visible for them to analyse, and that was not good enough to work on a day-to-day basis.
However, the search for a robust solution that could automate the process, show results in real time, validate the data, and also remove the dreaded spreadsheet from the equation came to nought.
There was no off-the-shelf solution available. And the reason that professionals in the HR and technology world cite is the myriad of systems where the reward data resides keep changing, making it an unstable data landscape and impossible to develop a solution. Yet, Unilever proved it otherwise by building a total reward platform in 2011 that gave them full visibility to everything that the company spends on reward. The platform was enhanced in 2017 to cover the future of work and revamped as a multi-tenant system that other firms could also adopt.
And in July, 2019 time proved ripe to bring the million-dollar idea to market. “uFlexReward was launched as a technology startup inside Unilever, providing a continuous, drillable database into any organisation’s reward spend,” says Charman.
As a global digital reward solutions provider, uFlexReward combines data from multiple reward silos into one real-time, ‘always on’ platform.
If you can’t see it you can’t control it, let alone ‘manage’ it to deliver the maximum return on your investment
The uFR platform shows every form of reward for every employee by taking an extract from the HR system that contains the eligibility data for an employee, and combining this with the rules in terms of grade, job, and country. This calculates every reward position for every employee, refreshing on a daily basis. The system documents all reward policies and exceptions in a fast, efficient, and easily maintained central inventory.
Organisations can see the total spend on reward across business units and global locations, and the underlying detail paid to every individual. “Even for a complex organisation or a new acquisition, it just takes a few weeks to enter their policies and write the links to extract the relevant data from myriad systems, consolidate, and obtain full line of sight on everything that the company or the combined entities spend on reward, and become compliant,” explains Charman.
Why Total Reward Matters
The uFR platform has become the single source of reward data for departments such as HR analytics, finance, international mobility, pay equity audits, and various other business systems that need access to accurate reward data. uFlexReward has built a suite of applications that use reward data for areas of HR and employee needs. “The important thread is always that single source of data, which has proved extremely important to Unilever. Only three things matter in HR tech—data, data and data,” remarks Charman.
For starters, Unilever provides every employee with total reward statements in real time as opposed to once-a-year statements that become outdated from the day they are issued. This proves beneficial when employees, who operate in a free market, are approached by a competitor or an executive search firm. Although the new remuneration package may seem attractive at first glance based on a one-to-one comparison between the fixed pay components, the total reward statement looked up on a mobile phone can prove that the employee is getting a better deal at Unilever. “It has proven to be a huge bonus for Unilever,” mentions Charman.
The advantages continue: The company or an employee can themselves perform side-by-side modelling of the current reward versus a future reward position and see what happens if they are promoted. Because all rewards are matched to employee profiles, the company can provide limitless analysis of pay comparisons, ratios, and alerts.
Today, in the wake of the COVID-19 pandemic, when organisations across sectors are contemplating downsizing to reduce the structural cost, their view is limited to salary, which is not the whole picture. Whereas, Unilever, with its real-time system, can see every element of reward for every employee and aggregate at any level, geography or business unit. “The digital reward platform enables Unilever to do what-if analysis, compare the results of different scenarios, and restructure without restriction,” says Charman. When companies have the line of sight on every aspect of employee reward, they can be nuanced and creative in cutting people cost as opposed to just cutting jobs. When there is still the possibility of a V-shaped recovery from the pandemic, it will be detrimental if the highly trained, loyal, and experienced resources are laid off.
Evidently, even in the pandemic scenario, Unilever had the data to avoid layoffs and continues to be well run. “It is in our interest that other businesses could better manage people cost as well,” he remarks.
Designed for the Future of Work
But what’s far more exciting is that the system is uniquely able to move into what is called the future reward in the future of work scheme of things. Going forward, every employee becomes an individual entity and will want to negotiate a flexible deal with their employer as requirements change in the varying stages of their life.
"Understanding the mechanics of how a company’s money is spent is the starting point to managing HR"
The uFlexReward system has the technical capability to allow an employee to move all the reward components into one bucket. This enables big multinationals to negotiate with top talent, allowing flexibility and personalisation in rewards similar to a dynamic startup. While employees get the deal they want, employers get to recruit the candidates of their choice. “Our system can cope without a grading and a job definition structure as well as handle the traditional grade and job family hierarchies seen in old firms,” adds Chairman. It also has a survey tool that employees can use to rate the value of rewards. “Reward has fads, at present wellbeing is hot and flexible benefits are getting cold. Without real-time feedback and personalisation, companies risk wasting millions on rewards that have gone out of fashion.”
The system is also designed to take into account flexible work options that will be a part of the future. For example, people might want to work for more than one employer, and maybe only for three days, hence the demand for flexibility has been taken into account. Moreover, since a sizeable percentage of the workforce in large organisations constitute contingent labour, it becomes essential for businesses to be able to track how they are being rewarded. But, the current HR system cannot track this because they are paid for through a purchase ledger.
However, even if the people are not on the payroll, the supplier invoice can be fed into uFlexReward’s reporting platform such that a business manager can see the total spend on labour and break it down to the individual level. “Understanding the mechanics of how a company’s money is spent is the starting point to managing HR. Then you can be really creative with how you pay people because you can account for it and be responsible for it,” affirms Charman. On a legal front, it also allows companies to monitor pay equity in their supply chain.
Selling with a Difference
While prospective customers are sold on the innovative solution, inhibitions remain in terms of buying software from a company such as Unilever, which is not predominantly into software development. To this end, uFlexReward offers a transformational approach, which is as unique as the system itself. The company provides every prospect a free unrestricted prototype so that they can build the system and realise how easy and fast it is to set up and that the benefits are for real. As a result, when prospects write their business case, it is based on evidence, using their data, policies, and structures. “We can’t afford one failed implementation. This is a mutual insurance policy,” says Charman.
uFlexReward’s evidence-based way of selling eliminates friction from the sales cycle. The company is now well on its way through the 18-month sales cycle it takes large global firms to adopt a new system in a new class of functionality.
“No rush. We want them to get their business case absolutely right!” concludes Charman.