Philips Electronics shapes perks to fit new company set-up

There is more to Philips Electronics than TVs and shavers; its perks have been revamped to reflect a new company structure, says Debbie Lovewell

Think of the company Philips and the first images that come to mind for many will be of televisions, DVD players and electric razors. But that is not the organisation’s primary business.

Callum Petrie, HR director, explains: “Everybody thinks Philips is all about TVs and shavers. But it is now predominantly a healthcare company first, a lighting organisation second, and the consumer electronics element comes in third place. That is not in terms of importance, but the shift in the number of staff. Our reliance on the competitive TV business is less, but that business is now more focused on the home and products that can make life better in the home.”

This refocusing of the business is part of a strategic corporate plan announced in September 2007. The following year, this involved simplifying Philips’ organisational structure into three sectors: healthcare, lighting and consumer lifestyle.

The past few years have also seen numerous changes in the company’s benefits package, partly to reflect its new direction. One such change was the revamp of its flexible benefits scheme this year. Nina Platt, reward manager for the UK, Ireland and South Africa, explains:

“We had had flex for eight years and were very conscious of the fact that the branding and house style of the scheme were very reflective of the Philips that we were eight years ago. We have undergone significant change in that time, including a rebranding.

“We were also looking for a new administration programme, so, as part of the process of engaging with the administration provider, our brief included a revamp, a relaunch, a repackage, and a significant step up in the communications available to staff. We were previously doing everything online. We had a PowerPoint presentation we sent out to new hires, but it was pretty limited and we wanted to significantly improve that.”

Communication challenging

Benefits communication can be a challenge within Philips because of the nature of its workforce. About 800 employees, such as its healthcare engineers and sales force, work remotely, while staff at its factory sites do not have access to email at work.

To improve communication around all of its benefits package, Philips launched personalised, paper-based total reward statements in May this year. These were sent out alongside the relaunch of its flex scheme, which is now provided by Benefex.

The statements, sent to employees’ home addresses, included a pocket-sized card outlining some of the perks provided by Philips. Petrie says: “We have been putting things on there which have been benefits for some time and employees say ‘fantastic, I can’t believe you have introduced that – it is what we wanted’. So we have kept quiet.”

Ami Foot, HR manager, people services, adds: “A lot of people do not realise the benefits were available all the time. That is why we made it the size it is, so people can put it in their pocket, in their wallet, or have it on their desk and it is always there with the numbers and contact details. These days, it is different to have something through the door for people to actually hold. That is quite important for us.”

Reward brand introduced

The launch of these communication materials also provided the opportunity for Philips to begin to introduce a reward brand, using the tagline ‘Identity – it’s all about you’, and the image of an eye. Foot says this image will be used across future benefits communications. “We are starting to almost internally brand benefits, so when people see the eye, they think of benefits.” she says. “People link it all together now, which we certainly never had before.”

But these are not the only changes to have taken place around reward. Earlier this year, Philips reviewed the independent financial adviser (IFA) it makes available to employees. As well as switching provider, it also broadened the areas on which staff could seek advice. “We have always had an IFA available to employees with which they have been able to discuss matters solely relating to their membership of the Philips pensions arrangement,” says Platt. “But we changed it this year. We broadened its scope, so employees can call the helpline or email it to have a broader discussion. For example, they could ask about the share plan, or if they were thinking of taking up critical illness cover through flex, the adviser could perhaps talk to them about how, if they have death-in-service and income protection from the company, it may not be worth their while.”

Philips has also decoupled the link between its pension arrangement and life assurance, so all employees now receive a minimum level of cover, regardless of whether they belong to the pension scheme. Staff can then opt to top up their cover via flex. Petrie says: “We thought that was quite important because, after countless roadshows to try to persuade people to take pensions seriously and make provision for later in life, we found people were not. So we thought we needed to give them life assurance because swathes of the population were not covered.”

Last July, Philips also launched its first employee share plan in the UK. “One [place] we had a hole in our offering was share ownership in the UK,” says Petrie. “For years we thought ‘we are a Dutch organisation, we are not listed on the stock exchange in the UK, so we can’t do it’. But with a bit of investigation, we found out we can do it and, more importantly, corporate Philips announced [it was] quite keen.”

Sip communication events

To communicate the share incentive plan (Sip) to staff and ensure it was as simple to understand as possible, the reward team held a launch event at each of Philips’ major sites in the UK. These included face-to-face communications, information sessions for staff to ask questions, company-funded independent financial advice, and printed and online information about the scheme. Its approach paid off, with the scheme achieving a 10% take-up in the first six months. Foot adds: “I think it engages all employees and it is something that has never been done before. It is not an easy topic to tackle and I think we were not scared to tackle it.”

The Sip was also used to ease the integration of acquired healthcare business Respironics into Philips by demonstrating the benefits that were available to staff.

Ensuring parity of benefits between employees has become increasingly important to the company and is a marked departure from its previous approach. Petrie explains: “Over the last 10 years, the link between [an employee’s] position in the organisation and the benefits they receive has diminished. That has been a conscious decision. We are trying to open up benefits for all.”

Philips’ more equitable approach to reward is closely linked to its emphasis on employee engagement, which underpins every element of the organisation’s reward strategy and has risen firmly onto its management agenda. “It is really getting the company to focus and value the importance of employee behaviour,” says Petrie.

“It is putting the issue of engagement on the management agenda and giving that some commercial kudos as well. The more engaged our employees are, the better company we become.”

Talent management strategy

In turn, this supports Philips’ talent management strategy. Platt says its reward package is aimed at putting the company in a strong position to retain talented staff as the economic climate picks up. “In the recent economic climate, talent retention has not been that much of an issue because of the situation [employers found] themselves in,” she says. “Our approach has been that we are sexing up the foundations now, so when things do improve – which they will – if employees do get a phone call from a competitor, they really think twice [about it] because of what we, as Philips their employer, can provide for them, over and above the standard things that all good [organisations] provide.”

Given the tight economic conditions of the past couple of years, Philips has had to achieve this without increasing costs. Platt says: “We wanted to improve things and make things better in an easy-to-use, easy-to-understand way, not overcomplicating things, but also, clearly, a lot of companies are in a situation where the economic environment is tight. That is no different for us. So we are trying to improve things without increasing the cost, and sometimes reducing costs and getting much better value for money in terms of what we are offering employees.”

 

Philips at a glance

Royal Philips Electronics was founded in the Netherlands in 1891 by Anton and Gerard Philips. Initially known as Phillips and Co, the organisation started out manufacturing carbon filament lamps. Since then, the company has diversified its product range significantly, moving first into medical technology, followed by consumer electronics in 1925 when it became involved in the first experiments involving televisions and 1927 when it began producing radios. In 1939, Philips produced its first electric shaver.

Other products that have featured significantly in Philips’ portfolio include: the compact audio cassette, integrated circuits, compact discs and optical telecommunication systems. In 1972, the company co-founded the PolyGram music recording label with Siemens.

Having become known primarily as a consumer electronics manufacturer, on 1 January 2008, Philips simplified its organisational structure by forming three sectors: healthcare, lighting and consumer lifestyle. The move was part of its strategic plan to further grow the organisation with targets for increased profitability.

The company now employs about 116,000 staff in more than 60 countries worldwide. Of these, around 2,200 are employed in the UK.

In the three months to June 2010, it reported a net profit of 262 million euros (about £220m), compared with reported losses in 2009.

Career histories

Callum Petrie, HR director, UK, Ireland and South Africa, joined Philips in 1999. He spent the first 11 years of his career at Tate and Lyle, which he joined through a graduate training scheme in an HR role focused on industrial relations. At Philips, Petrie is most proud of his work around increasing the prominence of employee engagement.

Nina Platt, reward manager, UK, Ireland and South Africa, began her career with IBM as an HR assistant after graduating. Three years later, in 1997, she moved to Unisys’ global networking business, where she held the generalist HR positions of HR adviser and HR manager. Platt joined Philips in 2000 in a generalist HR management role in Philips Semiconductors (which it has since divested). In the four years she held this role, Platt was given the opportunity to gain some experience in reward, and when she returned from a year’s maternity leave, she moved to work solely on reward.

Since then, Platt says her biggest achievement was the introduction of the company’s stakeholder pension plan to replace its previous trust-based defined contribution (DC) pension scheme.

Ami Foot, HR manager, people services, began her career as a payroll officer with Tiny Computers. When the company went into liquidation, she joined Philips Medical Systems in 2001, initially as an HR administrator. In the nine years since, Foot has a held a variety of HR roles, progressing upwards. In her current post, Foot is responsible for people services, including certain benefits, such as Philips’ flexible and voluntary benefits schemes. However, she is most proud of the launch of the share incentive plan last year.

 

The benefits at Philips

Pension

• Defined benefit scheme, closed to new members.
• Stakeholder plan for all staff, with 12% employer contribution.

Healthcare

• Private medical insurance, dental cover, critical illness insurance and personal accident insurance available through flexible benefits scheme.
• Life assurance available as core benefit, which can be topped up via flex.