FMCG Sector: On the Road to Revival
Graph 3
When compared to other industries, consumer products
emerges amongst the most aggressive when it comes to
diff erentiating salary increases for key talent vs. the overall
population. Firms in the FMCG space are seen to have a
formal process of key talent identifi cation which is a pool
of high performers, high potential and critical roles.
Graph 4
As reducing costs to ramp up the bottom line continues
to be the business prerogative, pay diff erentiation more
so basis sustained performance than current performance
only, will be the top agenda item of rewards managers
across the board.
Rewards & 'Pay at Risk'
The other critical lever that the compensation managers are
using to reinforce the performance and rewards linkage is
'Pay at Risk'. Over the years, an increasing portion of the
salary is being parked in the variable pay kitty - annual
bonus and Long-Term Incentives (LTI). While the pay
mix has remained more or less constant at the junior
management, the signifi cant shift towards variable pay
and LTI can be observed at the senior levels. In addition
to using long-term incentives as a retention hook, there
is an increased focus on the element as a means of wealth
creation tool for the senior and top management. LTI as
a percentage of Total Cost to Company has increased
from 17% in 2012 to 26% in 2014 for top management.
Stock options and restricted stocks are the most prevalent
vehicles of LTI for the major players in the sector.
In recent times, vigorous variable pay plans have
become a pre-requisite for any reward mechanism to be
successful. While majority of the fi rms in the sector are
seen to have a cap on the maximum variable payout,
this on an average goes as high as 150-180% of target.
Rewarding talent for exceptional performance and
thereby setting performance benchmarks not only
inspires individuals to work hard and achieve professional
goals, but also acts as a compelling tool to curb mediocre
or humdrum performance.
Variable pay was and will continue to be an important
component of compensation in the FMCG sector across
management levels. Though the form of variable pay is still
restricted to individual performance, a few companies are
now exploring other forms of cash bonus that promote
higher accountability and retention such as Company Profi t
Sharing, Deferred Cash Plan and Team/Group Awards.
Are Benefits Making a comeback or is
Cash Still the King?
Over the last few years, organizations have become
increasingly conscious about the importance of benefi ts as
one of the major retention tools. Firms have matured to the
Graph 5
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