Variable pay incentive is real motivation behind retaining employees: Lavanya Nalli

Lavanya Nalli, vice-chairman, Nalli Group, explains how Darwinian HR practices have helped the company retain their best talent.

Lavanya Nalli is a believer in Darwin’s concept of survival of the fittest. In fact, the vice chairman of the 90-year-old family-run Nalli Group attributes the company’s Darwinian HR practices for the long tenure of its employees (about eight years).

“The real motivation for them to stay in the business is our variable pay incentive structure,” she tells ETPanache over a call. “The strongest employees — ones who contribute the most to the organisation — sometimes make their entire monthly salary in variable pay, especially during the high season.”


In his theory of evolution, Darwin had shared the idea that species adapt and change by natural selection with the best suited mutations becoming dominant.

One size doesn’t fit all
According to Nalli, the incentive structure separates the high performers from the ones that don’t fare so well. “It is more energising than competitive,” she says. “Employees look at the variable pay they’ve received and say, ‘Okay, this is how much room I have to grow’. It’s like a commission structure. As much as you sell, that’s what you take home.”

So, does the system breed unhealthy competition? “There is no such thing as unhealthy competition,” says Nalli. “We don’t pit employees against each other.”

Employees are encouraged to measure their contribution to the organisation’s common goal instead of against their peers’ contribution. “We also do regular inspections and store rotations so that no employee feels like they are not being given a fair advantage. If you still haven’t been able to bump up your variable pay to at least the group average, then you need to reconsider [your role],” she adds.

According to the fifth-generation businesswoman, some employees take the dip in variable pay as a personal challenge and choose to be mentored by a tenured employee. “Some opt to leave, which we are fine with because the talent that remains are those that contribute the strongest to our growth,” she says. “That’s how we have built a leadership bench at every level.”