Page 9 - AB INBEV 2018 Model Answer 2

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production and delivering on sales –potentially resulting in the observed market share loss to
Heineken.

Remuneration strategy (base, performance and profit-related pay): A good reward strategy should
contain a balanced mix of 3 elements –base pay, performance pay and indirect pay. SABMiller is
competitive (in relation to Heineken and Diageo) at base pay (average salary), but not so much so at

performance and indirect pay. This is recognized in at least 49% (26% + 23%) of all resignations:
1 ‘There is no point in doing a good job, because you get paid no more than doing an ordinary one. Average 26%
work is tolerated here.’
3 ‘The real problem is that the pay structure does not differentiate between good, average and poor performance. 23%
This is really de-motivating.’

Remuneration strategy (indirect pay –leave days/spend on employee): Indirect pay (or employee
benefits) is provided to employees in addition to base and performance pay (e.g. health and life

insurance, pension plans, company car or leave days). Again, SABMiller performs less well than its
competitors. A failure to invest in employees is likely to contribute to poor performance and high labour
turnover; this is confirmed in at least 24% of exit interviews:

2 ‘This is the first place I have worked where learning new skills is not encouraged. There is no incentive to 24%
improve yourself. The company seems to believe that employees who gain new skills will inevitably leave,
so they discourage learning.’

Recommendation: Revisit the reward mix in SABMiller’s remuneration strategy in Nigeria and
emphasise the non-base pay components. Consider incorporating elements of our own reward mix.

Justification: At least 73% of all resignations are linked to comments that suggest base pay (annual
salary) is not the prime determinant of employee satisfaction. Furthermore, the data shows our AB

InBev reward mix is far more competitive (we have only 1% labour turnover compared to Heineken’s
8% and Diageo’s 7%).

Actions: Group HR should design and incorporate two new performance-related pay measures into
the reward mix –these should focus on reducing the possible production bottlenecks (delays) and
distribution challenges that may be impacting on SABMiller’s ability to respond to customer orders:

 Team-based bonus: designed around the average time (in days) between receipt of orders and
when the deliveries arrive at the supermarket warehouse;
 Individual bonus: based on time taken as above but each individual will be given targets for their

role in production (for BPEs) and their role in Sales (for SRs).
Group HR and Finance should consider awarding share options to BPEs and SRs as reward for long
service, to help reduce turnover and regain lost market share. Specifically, target those who have left
-especially to Heineken, and entice them with the improved reward mix to rejoin the new AB InBev.

Developed by The CharterQuest Institute for 'The CFO Case Study Competition 2018'
www.charterquest.co.za | Email: thecfo@charterquest.co.za