o°e PEOPLE WANT 10 GET RECOGNIZED FOR WHAT THEY DO FRANK ZWECKER, Vice President, Global Compensation & Benefits, Lenovo, talks about the rapid evolution of the Compensation & Benefits space, the impact of startups on the ecosystem and the components of a flexible rewards strategy | By Vikas Arora © pecpiematters irene 207a career spanning two decades in Compen- sation & Benefits space, Frank Zwecker has ‘worked with lading consulting firms like Ernst & Young asan Associate Director (international Compensation) and Dell as Director (Comp & Benefits) He currently holds the Position of Vice President, Global Compensation and Bonefits function of Lenovo. Inthis exclusive interview, rank shares his ‘views on the paradigm shift in the compensation & benefits ecosystem. From the dotcom bubble of the 1800s, fo getting to torms with the renewed startup boom and competing in the ever intensifying war for talent, he talks about the emergence and establish ‘ment of innovative ways lke equity based long: term incentives, pay for performance, and flexible benefits © Inyour career trajectory, how have you seen the compensation and benefits space evolve, espe- cially in the past25 years? @ The emergence of the technology sector and the Increasing war for talent has shaped the compensa tion and benefits scenario the way itis today. ‘Companies have become much more aggressive than they were in the past. The ratio between the sal ary of a CEO and someone atthe entry level has gone ‘up fo almost 500 times from 2025 times in te past. ‘This is because ofthe rise inthe use of equity based compensation methods like restricted stock, and stock options. Technology companies started this ‘rend and other industry segments had no option tt ta eaet. Nobel had hear of stock options or restricted stock units before, but they became the key differentiator of organizations in no time. Promoted ‘sa tool to align management rewards with share- holder interests, these became the vehicles to deliver Inuge value to management andthe broad employee population in growing organizations, Thoy also gave ‘companies access to talent and became a must have value proposition for them. ‘The last two decades also saw the increase in the relevance of pay for performance. Companies ‘started challenging the conventional system of ‘compensation and questioned why shouldn't the ‘people who create more value to the organization be paid accordingly? Paying fr performance isnot a ‘new concept but companies are starting to question ‘whether past differentiation, for example through merit increases and annual bonuses, has been suff: ciont. Companies are now leveraging new compensa tion elements for a much significant differentiation {in the recognition of thelr top talent. People want to get recognied for what they do, an the rise of equity and pay for performance has led to value directed behavior in the compensation space. ‘Benefits onthe other hand, have become more tallored to different employee groups. Itisn’tso ‘much so about providing more, bt providing ‘employees with the opportunity to select the benefits [package that fis their specific needs and wants. It is important to recognize that employee priorities change based on lifestyle, family and cultural ffin- sty There are clearly some generational difer- ences as wel, (© Whatin your experience works and what ‘doesnt when formulating compensation strat- gy? Can youexplainin the context of Lenovs? © Lenovo has changed significantly over the last fw yoars, and has moved from being @ pure PC company to encompassing Mobile, Enterprise, Cloud, Services and mueh more than just dovices, ‘What we have realized Is that aoneslzefts- all approach doesn’t work in compensation and benefits Such an approach leads to complex and convoluted program. Lenavo asa company with ‘multiple business verticals, carefully shapes ‘it businessstrategies and operating models to ‘succeed in the respective markets. For instance, ‘Lenovo's enterprise business and mobile business ‘oth have ifferent competitors; both businesses ‘operat in different industries, have different eco ‘nomics, and also require different kinds of talent ‘and leadership. Using asingle compensation model doesn't work effectively across all the verticals because ‘the business strategy foreach of them is different ‘and we cart ignore the nuances require. In the Therise of equity and pay for performance has led toa value-directed behavior in the compensation space ‘end, we hat to realize that by having a universal approach, we could not keep our employees haps. So insteadof trying to fi ital into one we thought we will differentiate ‘© Could you explain how you devised a unique strategy fr each of your business vertical? (© We classified our business into different parts and we checked each business for various aspects like profitability, business objective, rapid growth, re. Now foreach classification, the compensation ‘nd incentivizing approach is different. For exam ple, if the priority of a more mature hardware ‘busines is focused on maximizing profits while continuing to grow —in the incentive plan, profit contribution would be a leading metric defining the payout In another business, ifthe primary objective isto grow the market share and become atop player we would specifically incentivize the contribution tothe topline in that business. "Tho compensation strategy stm from the bush ness stratcey and our incentives plan is shaped ccorttngto what we do as a business. ll bust nesses follow some ground rules — the pay should ‘be fair anc we follow a pay for performance model Fesrusey209) peoplematters @© Can you, as an HR and Comp & Ben leader, ‘ensure employee happiness or even employee ‘satisfaction? @ The frst thing, asa Comp & Ben head, want toachieve isto eliminate distractions and take care of employees’ basic needs We do not want ‘employees to be worried about their paycheck, or whether their family wil be covered in case of Iness, et. To take care of basic needs is our frst priority: But if you ask whether this is enough to ‘make people happy, the answer will b'No’. Ibis just one element. There are many other factors that eontribute to employee happiness like work ‘environment, leadership, opportunities, quality of ‘work and work life balance etc. Asa matter of fact, T don't see compensation and benefits as the tools tokeep employees happy Instead, see them more as hyglene factors that need tobe handled in the right manner to avoid dissatisfaction and distrac: tion in employees so that they can focus onthe right priorities. © tnyour experience, what doesn't workwhen, ‘devising a compensation strategy? What's one ‘of the most common mistakes organizations ‘commit when devising compensation strategies? Idon’t see compensation and benefits as the tools to keep employees happy — these are more of hygiene factors {© Orvanizations often underestimate the impor {ance of consistency People often want faster results and change things if they don’t work. But if ‘organizations constanty tinker with the compen sation plan and keep changing things around, doesnot engender a lotof trust ‘Consider this — you putin place an annual ‘incentive plan. You sot certain goals, launch the plan and then after two quarters, you see that youtare not achieving your resuls. You feel that {your employees will be very disappointed and it ‘may impact their morale. You don't want your ‘employees to lose focus on the second haf of the ‘year so you get rd ofthe plan, revise it completely However, the reality is that the second half is ‘usualy tougher than the frst half So in the quest of trying to protect your employees, what dd you ‘eventually achieve? Minor tweaks that allow the plan to remain credible and motivational might be appropriate — but keep the core plan. Having a correct plan in place and sticking tits impor tant, in my opinion. © Inthecurrentbusinesslandscape, what do ‘yousee yourbiggest challenge as a compensa tonleader? © peoslratirs onan {@ The business landscape has changed alot now there is alot of diversity and we are ‘competing with alot of different organizations. ‘The perception of old companies has also changed as they ae strugzling with a shift in attractiveness. People now intend to work for local ‘companies and startups and compensation is the Jeast of their worries. Startups pay exorbitant amount of money to aequire talent — people at ‘midale management level are thrown a million olla at sign of. Global companies like ours have tobe profitable, the pressure of which i nt all startups have. Also, san organization witha large workforce itis also important to maintain party in pay — something which startups do not have toworry about always. The fight for talent is a big, challenge especially when wo ae transforming 2s sm organization, ‘We have recalibratod who we are competing swith and we have to devise innovative compensa. ton and benefits strategies to acquire the best of talent. We have become more aggressive in devis {ng and offering retention bonus, on how we hire traduates, and the way we use stocks. Itbecomes increasingly important for us to effectively communicate a more holistic view of ‘ur value proposition to candidates and employees. © How do you compete ina business environ- ‘ment where even a young company doesnot hold backon compensation? To the contrary, ‘many of therm pay more than the global firms? @ We rely on our core differentiators — being global profitable company of such ascale, we promote our characteristics of talent mobili ‘opportunity of working aross the globe, stability and better work life balance as our differentiator, We are witnessing startups reeling under the pressure of profitability Many of them may fold ‘and talent may get disillusioned by the aura of startups, We have already seen people coming back fom start-ups to established companies because of the poor work life balance in startups, lack of stability and their inexperience in people manage ‘ment among other things. (© Has sucha business environment spoiled talent for choices? What ramifications hasithad ‘on your organization? @ To answer that question it is important to ‘understand why people leave. If they leave for ‘money — then there Is nothing much we can do bout I. We try to retain them, but if they want ‘much more than we can offer, then there isnot alot ‘we ean do about it But some people want to leave because they ook for opportunities outside — some want to be entrepreneurs some look fora different role. We ‘generally like such behaviors. Wegive them these ‘opportunities in the framework of Lenovo. Develop {YoUF Ideas, start a new company eave your mark. ‘Weare actually looking for such talent that can become the future of our organization. and we are focused on nurturing and investing in them and, their dreams. on