At the start of the third week in May, Ken Charman, CEO of uFlexRewards, found himself in a meeting with the CFO of Unilever. The consumer packaged goods giant is not known as an enterprise IT software company, but in 2018 it created uFlexRewards, an enterprise software spin-out business.
Clearly, uFlexRewards needs to deliver shareholder value. But on that day, this was not the reason for Charman’s conversation with the CFO, Graeme Pitkethly.
According to Charman, Pitkethly was interested in how Unilever could embrace digital ideas. In 2016, it spent $1bn buying men’s grooming products startup Dollar Shave, which provides an online service selling shaving products to customers on demand. “Unilever acquired this online digital market for razors on demand, but we want to create new digital markets,” he says.
Charman says Pitkethly asked about the situation where there is someone who is very creative, who leaves the company to create a startup and gets venture capital funding, based on knowledge from the parent company. “Graeme wants to be able to fund them, and be able to pay them a reward, in the same way as if they had left the company to set up a startup,” he says. “We need something that gives freedom and control, to break out of the rigid straitjacket of grades.”
It is this idea of changing how a company thinks about grading and rewarding its staff that has been the journey Charman has been on at Unilever, leading to the uFlexRewards enterprise software business.
So how did a 63-year-old retired IT businessman find himself heading up a Unilever spin-out business and speaking to the company’s CFO about entrepreneurship? Charman says: “I am 63, looking out over the fields, thinking I should be cutting hay. Why am I renting an apartment in London and running an IT business? It’s in the blood – it’s there for a lifetime.”
A few years back, when Charman was in his mid-50s, he sold Simulstratto, a strategy management business, to Deloitte.
He then decided to take a course at Oxford University to study why IT projects fail and, in 2012, he took on the role of independent chairman for a failing IT project at Unilever. “I took the theories from university to get the project back on its feet,” he says. “It was a classic competitive tender. All the vendors bid too low.”
“We need something that gives freedom and control, to break out of the rigid straitjacket of grades”
Ken Charman, uFlexRewards
In Charman’s opinion, the customer, Unilever, was also partially to blame, because the complexity of the project was not fully understood.
The Unilever project involved developing a global employee rewards programme – a new area for everyone, according to Charman. “No one knew how complex it would be,” he says.
Applying the theory of relational contracting, Unilever invited 20 software development shops to pitch, says Charman. “We chose three and part-funded a three-month prototype using agile methodologies.”
Working on the prototypes in an agile way meant that Unilever people were also present during project stand-up meetings. Two other blue-chip firms were also closely involved in assessing the prototype projects, says Charman.
“The people we had along were executive vice-presidents of global rewards at both of these companies,” he says. “The reason they were there is that no company in the world had a real-time database that could do real-time analysis of the full cost of an employee or business unit, or provide a salary ratio comparison between male and females across the whole business.
“Organisations normally had to manually dip into many subsystems, because rewards are not centralised. A rewards systems has to include benefits like shares, pensions, incentives and, obviously, salaries. It skews the comparison if you leave anything out.”
The other reason for inviting the two other businesses to help Unilever make its decision was due to unconscious bias. This is a good practice recommended by Daniel Kahneman in his business strategy book Thinking fast and slow.
Nature of work is changing
Looking at events such as the World Economic Forum, there seems to be a growing realisation among global leaders that the nature of work is changing. People who join global organisations no longer expect a defined career path through the organisation. Some may have two or more jobs and spend only part of their time at the company. This has an impact on how such people should be recognised in a rewards system.
Discussing how human resources (HR) systems are generally run in blue-chip firms, Charman says organisations today tend to buy an HR software package such as Workday and populate it with a catalogue of 50,000 job roles defined by skills. Within each role, there is usually a hierarchy of positions, from apprentices and trainees to managerial, right up the organisation, and a career path that maps onto a company’s grading structure, combining salaries, bonuses, pensions and other benefits.
But he says: “In the new economy, companies want to be more dynamic. Many areas of work are team-based, bringing people together who have the skillset to achieve a particular task. We don’t need a whole accountant – just a few hours of their time.”
This causes problems, because HR systems, cannot easily adapt to situations where an employee may have a set of skills suited for one project, and then use another set of skills in a different project. “HR systems struggle,” says Charman. “I need to query across the whole HR database, which has granular data on skills.”
Papers presented at events such as the World Economic Forum suggest that employees are increasingly multi-skilled. A project manager or team leader may draw on a skill even it is not the primary role of a team member. This makes it difficult to reward individuals, because the HR skillset is rigid. For instance, how is the reward package for a software developer who has worked in presales calculated?
With its global rewards programme having been in production for five years, Unilever realised in 2017 that the scheme needed modernising because of this shift in attitude to employment.
A new system was needed that could create a reward plan out of a query, says Charman – but Unilever found that, at the time, nothing existed in the market.
Enterprise spin-out business
As a result, the software for the company’s new global rewards programme had to be built rather than bought off the shelf.
When Unilever began to evaluate IT suppliers for this new project in September 2017, Charman was asked to chair the selection process and then develop a go-to-market plan.
In February 2018, after the IT supplier for the new project had been selected, the company saw an opportunity in providing this platform to other blue-chip organisations and Charman was asked to head up the new company that would develop and sell the software to other businesses.
“Unilever wants to lead the field in sustainability and responsible capitalism,” he says. “Peter Newhouse, Unilever’s global head of reward, was seeing more and more interest from his peer network.”
As a result, the company decided to re-engineer Unilever’s global rewards system so that it could be deployed at other organisations that faced similar challenges.
Discussing how Unilever decided it had a viable enterprise software business, Charman says: “Unilever decided to venture into enterprise IT. Was there an economic argument that another company would buy this system? To find out, we did interviews with peer organisations, experts and CTOs and ran surveys to determine if there was market interest.”
The research revealed that major corporations recognised a need for such a system.
Digital Total Reward Platform
Unilever spun out uFlexRewards to sell the new platform, now called the Digital Total Reward Platform. When asked why Unilever decided not to sell the platform to another software company, Charman admits that his primary concern remains IT project failures. Given that he ended up joining Unilever to bail out a failed project, Charman says he was concerned that a failed deployment would damage Unilever’s reputation.
“We cannot afford to have projects go wrong,” he says. “Enterprise IT sales do not always strictly adhere to the truth. It’s like playing poker. People on the other side of the table exaggerate. Our reputation to peer companies is on the line. It has to deliver against the sales expectations we have set out. ”
To achieve this, uFlexRewards will only allow companies to buy the system if they commit to putting serious effort into developing a prototype. In Charman’s experience, reward schemes are generally run by individuals around the world who understand their own spreadsheets. The prototype itself is developed for free by uFlexRewards.
Charman says this needs to cover the rewards programmes in two countries – one considered to have the best rewards programme in the organisation, and the other considered to be the worst. “We will build out the whole system for those two countries,” he says. “This will provide evidence of the effort required and the cost and technology risk involved.”