towerswatson.com Transforming Life Medtronic aligns global total rewards with EVP
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1 towerswatson.com Transforming Life Medtronic aligns global total rewards with EVP
2 Transforming Life Medtronic aligns global total rewards with EVP By Lucie P. Lawrence In 1949, in a 600-square-foot garage in northeast Minneapolis, an electrical engineering graduate student and his brother-in-law established a medical equipment repair shop. Their goal: To transform the lives of patients. Ken Fairchild, director of U.S. compensation, Medtronic, Inc. That s exactly what they did. Today, Medtronic, Inc., has grown into the world s largest independent medical technology company, serving patients and physicians in 120 countries. This success is due in large part to the company s simple mission: to research, design, manufacture and sell products that alleviate pain, restore health and extend life. However, with 41% of the company s revenues outside of the U.S., it recently became time to focus on Medtronic s evolving global culture. The company needed to expand on its 60-year mission. While Medtronic had multiple reward philosophies worldwide, it needed one clear and consistent reward philosophy that would be flexible for all of its local offices. It had been 15 years since the company last evaluated its philosophy, and the working world had dramatically changed. It was imperative for us to develop a truly glocal globally applicable and locally relevant reward philosophy that was compelling, appropriate and easy to understand and that would motivate employees to fulfill our mission to serve patients, says Dawn Galas, Medtronic s total rewards philosophy project manager. At the same time, Medtronic wanted to revise its compensation structure to make it less U.S.-centric and create a governance framework to allow managers to make good decisions and implement these decisions more efficiently. Medtronic turned to Towers Watson (Watson Wyatt at that time) for assistance. Towers Watson had the tools, as well as the best process to meet our specific needs, says Galas. 2 towerswatson.com
3 About Medtronic, Inc. The world s largest independent medical technology company Approximately 40,000 employees around the world Serves patients and physicians in 120 countries from 270 locations Revenue of $15.8 billion for fiscal year 2010 Celebrating the 60th anniversary of carrying out the company s mission Provides products and therapies to support physicians in the cardiovascular, neurological, diabetes, spinal, and ear, nose and throat specialties Strategy at Work 3
4 (Left to right) John Bremen, Towers Watson managing director and leader of rewards, talent and need caption information here communication in North America; Ken Fairchild, director of U.S. compensation, Medtronic; Sue Kanne, Towers Watson account director; Dawn Galas, Medtronic s total rewards philosophy project manager; and Marlies Noll, director of international compensation and benefits, Medtronic Medtronic s Project Goals The Medtronic HR team strived to develop a total rewards philosophy that would be: A platform for making strategic reward decisions A driver of performance and engagement Globally consistent Clearly communicated Relevant to specific employee segments and markets Externally competitive and internally equitable Flexible and sustainable Supported by a clear governance process 4 towerswatson.com
5 A Miracle Is Born In addition to repairing medical equipment, Medtronic co-founder Earl Bakken also built custom medical equipment for clients, such as C. Walton Lillehei, M.D., a heart surgeon at the University of Minnesota Hospital. Lillehei frequently treated infants with congenital heart defects and used a pacemaker after surgery during the healing process. These pacemakers were large, AC-powered boxes that had to be plugged into outlets. One night, during a power outage caused by an electrical storm, a pediatric heart patient died. Desperate, Lillehei turned to Bakken for a battery-powered alternative. Within four weeks, Bakken had created the world s first battery-operated, external cardiac pacemaker and one of the world s most important medical breakthroughs. Reaching out Before the work began, it was important to strategize and clarify the HR team s goals and objectives. We could have sat in a room, had an all-day brainstorming session and developed the philosophy ourselves. But why would we do that? asks Ken Fairchild, director of U.S. compensation. Building a successful philosophy meant reaching out and learning about the needs and wants of employees, the leadership and the organization as a whole. To accomplish this, the team structured the project around four critical areas: a competitive analysis, key stakeholder interviews, employee surveys and a human capital return on investment (HCROI) analysis. The first step was to complete a current-state review and market analysis to determine the company s competitiveness in the areas of compensation and benefits. We conducted a high-level compensation and benefits analysis in 10 countries, focusing on specific employee segments, including Medtronic s sales and scientific employees, says Sue Kanne, Towers Watson account director. We then analyzed Medtronic s global governance practices using an assessment tool with information from one hundred multinational companies. Strategy at Work 5
6 Employee Value Proposition and Total Rewards What Are They? An employee value proposition or EVP is the employment deal. It explains what employees can expect to receive from their employer in return for their performance on the job. Total rewards are the monetary and nonmonetary returns provided to employees in exchange for their time, efforts and results. Next, Towers Watson conducted interviews with executives, business leaders and board members to understand their vision of Medtronic s total rewards, as well as the impact of business and human capital strategy on the company s employee value proposition (EVP) and total rewards philosophy. Another crucial component of the project was a total rewards and engagement pulse survey for sales, scientific and other randomly selected employees in 10 countries, as well as those considered high-performing and high-potential. Responses were compared to global benchmarks revealing the overall satisfaction and understanding of Medtronic s compensation and benefits and the perceived value of specific compensation and benefit components. The survey enabled us to understand which rewards employees value and the potential impact of reward changes on engagement, productivity and financial performance, says Marlies Noll, director of international compensation and benefits. The survey data also showed interesting variations between employee segments for the top three reasons employees choose to join, stay at or leave Medtronic. The team gained important insights from learning what Medtronic employees around the world value most. Employees were forthcoming with their comments, and feedback from the survey demonstrated distinct differences among regions in terms of which rewards employees appreciate. It also provided the team with useful information on what to communicate to employees regarding their benefits. The last piece of the puzzle was an in-depth analytical process using HCROI analysis, which looked at Medtronic s competitive total rewards data in combination with Towers Watson industry data. The analysis enabled the team to look at employee perceptions about the competitiveness of Medtronic s benefits against the potential impact of human capital programs on employee 6 towerswatson.com
7 engagement, attraction and retention, productivity and performance, and business results. Additionally, the analysis outlined potential opportunities to better align program spending with returns in the areas of employee engagement, productivity and retention. Out of these analyses came a synthesis of findings, a detailed description of the implications of what we learned and a priority list of potential actions for Medtronic to take based on these results, says John Bremen, Towers Watson managing director and leader of rewards, talent and communication in North America. A work in progress The result of the HR team s efforts is a new global total rewards philosophy. But Medtronic isn t going public with its outcomes just yet. Before the launch, HR is refining its compensation structure and creating a new governance framework. The HR team then plans to introduce the philosophy to employees as the framework for which compensation program changes are communicated. We need to put this in strategic context and make it significant for employees by drawing connections between the EVP and fulfilling the company s mission, says Galas. We first must show employees what they ll see as a result of the philosophy because the philosophy is only as good as our actions to back it up. Sage Advice Medtronic s HR leadership team offers the following recommendations for companies approaching a revamp of their total rewards philosophy: Find a true partner. You and your consultants must work together as a solid team. Understand what you re trying to achieve at the very beginning. Pay attention to your data. All elements of the data tell a story Be open to constant editing. Reach out to employees and leadership in order to build a meaningful and successful philosophy. Follow up with all employees and managers who provide feedback. Thank them, and show them how their comments have been used. Strategy at Work 7
8 About Towers Watson Towers Watson is a leading global professional services company that helps organizations improve performance through effective people, risk and financial management. With 14,000 associates around the world, we offer solutions in the areas of employee benefits, talent management, rewards, and risk and capital management. Copyright 2010 Towers Watson. All rights reserved. NA towerswatson.com
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