Over the last two years, BT has brought in new grading and reward structures for its managers, adding to never-ending change for the telecoms giant, says Debbie Lovewell
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BT is experienced in dealing with both technological and structural change. Now about to launch a broadband TV proposition, it can trace its origins back to the days of the telegraph service. As a state-owned entity managed by the General Post Office, it was allowed to build up a national monopoly in telecommunications in the early part of the twentieth century. However, privatisation and de-regulation followed, as well as the arrival of the mobile phone and the internet. Now it faces competition from a variety of providers from NTL to The Carphone Warehouse.
Since its privatisation in 1984, BT hasn’t been allowed to stand still as increasing competition in the telecoms market and new technology have forced it to constantly evolve its product offering.
Kevin Brady, HR director of reward and employee relations, explains: “People traditionally think of BT as a telephone company. It’s a business going through significant transformation because if we focus purely on telephony, there’s a real squeeze and increasing competition. So what we’re trying to do is grow organically within a services environment [for example] managed IT services for major corporates. We’re under significant pressure from competitors who are competitive now in terms of prices.”
Planned for this year are the launches of the BT Vision broadband TV service, and a mobile phone package, which will allow customers to use mobile handsets through their broadband connection. In addition, BT will be embarking on a £10bn programme to upgrade its UK network.
This commitment to development and expansion isn’t limited to the company’s external business activities. Over the last two years, it has also introduced a new grading structure and reward framework for its 38,000 management employees. Brady was tasked with managing the project. “I was brought in to focus on the change programme. We were six months off launch when I came in so there was a nice plan, none of which held together. I had six months to refocus that and get to a point where we could deliver a pay review, [move] 38,000 people to a new structure and communicate that,” he says.
One of the main objectives behind the project was to fundamentally overhaul BT’s grading structure. A key aspect of this was to encourage staff to think about the link between reward and the skills they bring to the business rather than harking back to the old grading system which may not have accurately reflected their contribution.
“We had a grading structure that was over 10 years old with very hierarchical grades. When we came in, one of the tasks we set the HR function was to fundamentally change the way people were rewarded in terms of [not] talking about grades [but instead] what they actually did and the value they brought to the business. That’s what we’ve tried to drive through the programme by aligning to the external market [and] by communicating that to people.”
BT’s change programme was centred around six key management principles. These included equal pay, performance differentiation and linking reward to the business. It also aimed to better promote the company’s position in the market as far as its benefits and salary packages are concerned. “It’s about giving people an understanding of the total package and the value of [it]. So we put total reward statements in place. We’ve got to the stage where we’re trying to get people to understand not about [how packages compare internally] but about what’s going on outside,” explains Brady.
This concept feeds directly into another of the firm’s main aims of being clear and transparent with staff about their reward package. “We’ve published our principles, we’ve tried to be clear with people about how they’re rewarded, how their benefits stack up and what that looks like in the external market. I think it’s important we’ve communicated that and got that across to people, which for some is good news and for others not so good. It’s a real movement because instead of people talking about this line of business versus that line of business, they’re now talking about the external market. It’s a double-edged sword because it raises peoples’ expectations. We benchmark all salaries. We publish the salary ranges into the external market and we’ve got a website that in the last two years has had over a million hits. I wish I’d sold advertising on it. We could have paid for the project,” he adds.
Finally, the programme was intended to provide this group of staff with a greater level of choice and flexibility around their flexible benefits scheme Choices.
Some of the benefits options, however, are not simply offered to staff as a nice-to-have. By including its own products and services in the plan, BT has been able to create new revenue streams for the business as well as establishing a further marketing device. Brady cites its broadband offering as a prime example. “If you look at what we offer [for example] in broadband, there’s actually some commercial value there for us. When you’re offering that to employees and you’ve got 32,000 people taking broadband as a benefit, you’re then creating advocates to go out and sell your product as well as individually benefiting from that themselves. So we tried to push that.”
Paul Farrell, head of flexible benefits at Aon Consulting, says that this type of reward overhaul is becoming more of a trend among employers. “It is increasingly common for two reasons. The first is that companies are increasingly horrified, not only about the amount of money they spend on reward, but on top of all of that is the relative ignorance of staff on the value of what they’re getting.”
However, he adds that employers should be wary of restricting the programme to only cover some groups of employees.
Selling the change programme to staff was not easy. BT’s workforce demographic in the UK is typically long serving with an average age of 44 years. Convincing staff of the need for the reward restructure was a challenge at times. “We’ve got a mature workforce that is long serving, which brings us benefits in terms of the service focus ethos because that’s really what we’re about as a company, focusing on customers who get continuity and understanding. In terms of change and changing benefits, the workforce can be a little conservative. In terms of understanding the external market and what goes on, a lot of people have only ever worked for BT.
“Early on, people understood the communications and emotionally didn’t buy it. Intellectually they could understand it but emotionally they [couldn’t]. But we’ve seen a shift now in terms of the emotional engagement, which to me is a positive sign because if you’re trying to manage change you’re trying to get people to see the value. In the past, we never really talked about reward. It was almost too difficult to talk about reward. We’ve actually gone out and engaged and begun to make people aware. When you’re changing the grading structure or you’re telling somebody that their bonus level is going to change it’s more challenging because unless it’s going up people aren’t very happy,” says Brady.
Once the change was complete, however, BT’s annual employee attitude survey recorded an eight-point increase in its scores around how staff rated their reward package.
The wheels of change have not stopped turning yet, however. Brady is currently involved in pay negotiations with the unions, which he is hoping to complete before moving on to a new role as HR director for HR strategy and operations in BT’s Global Services division at the beginning of this month.
And this is all taking place alongside the company’s in-house audit to ensure it complies with age discrimination legislation ahead of October’s deadline. It is currently in the process of ensuring its pension scheme is compliant and reviewing the company’s natural retirement age. But, as Brady explains, being perceived to be ahead of the game on such issues is central to BT’s brand image. “That just adds to BT’s brand reputation, which is that we are forward-thinking, we’re progressive and those are the messages we’re trying to get across to people. This is a fast dynamic organisation [so] to put [these] types of change in is a real selling point.”
Kevin Brady joined BT as a graduate 13 years ago, during which time he has undertaken a variety of roles. For the last two-and-a-half years, he has been the company’s HR director of reward and employee relations.
Career development has proved to be a big pull for him. “I was a classic graduate [as] I thought ‘I’ll stay for two years and then I’ll get a job elsewhere’. I think the company’s just given me opportunities over that time to grow and develop. I’ve worked in all the lines of business at some point during my career,” he explains.
Most of the roles Brady has held have been generalist HR positions, although he did gain some reward experience before moving to this position. He believes that his loyalty to the company is partly responsible for his rapid promotion through the ranks. “I think when I was appointed I was the youngest group reward director in the FTSE 100. In terms of career development, talent and bringing people through, that speaks volumes about the company that it’s prepared to take a degree of risk in terms of the appointments process. From a career development perspective, going from a graduate to sitting around a table of a FTSE 20 company in 13 years sounds like a long time but if I’d moved around, the chances are I may not have got to where I have.”
He is now set to become HR director for HR Strategy and Operations in BT’s Global Services division.
Employee case study
Lucy Davies has been a senior service manager for BT Wholesale for just over two years. She particularly values the company’s sharesave scheme, which she joined a year ago.
“I put £150 a month into that. I’ve gone for the three year [option] because it means I can tap into my savings at an earlier opportunity.”
Under the terms of the scheme, she will be able to buy shares back at the rate of £1.93 a share once the plan matures. She is hoping to use the savings to fund home improvements and travel to locations such as South America and Botswana.
Davies also appreciates the company’s healthcare benefits. “I have the opportunity to include my partner and that’s great. I haven’t needed to use it yet, but it’s a safety net.”
The way the scheme is delivered has also influenced the way that it is perceived by staff. “The good thing is you can do it online so it is all user-friendly,” adds Davies.
Pension: Closed defined benefit scheme, which has 75,000 members. Defined contribution scheme open to all staff. Matched contributions between 4% and 10%.
Healthcare: Private medical insurance offered as a core benefit to 17,000 management employees. This is extended to an additional 11,000 managers and professionals through the flex scheme. Dental plan and critical illness insurance are also offered through flex.
Work-life balance policies: A wide variety of flexible working arrangements, including job share and part-time roles. The company has 47,000 home workers.
Holiday: 22-32.5 days as standard. Entitlement increases with service. Management can buy up to five extra days through flexible benefits programme.
Company car: BT buys cars outright, which are offered to 17,000 management employees. Cash alternatives are available.
Voluntary benefits: Discounts available on BT products, holidays, life assurance, dental care, financial planning and car products.
Share schemes: Sharesave and profit sharing schemes.