Post on 11-Dec-2015
description
The main question is:The main question is:how to achieve high work how to achieve high work
performance?performance?
Job characteristics and Job characteristics and ((physicalphysical)) work environmentwork environment
++Abilities and skillAbilities and skills s
++The willingness to performThe willingness to perform
Work performance is affected by:Work performance is affected by:
Rewarding EmployeesRewarding Employees
Major strategic rewards decisions:Major strategic rewards decisions: WhatWhat to to paypay employees employees HowHow to pay individual employees to pay individual employees What benefits What benefits to offerto offer How to construct How to construct employee employee
recognition programsrecognition programs
What to payWhat to pay
Need to establish a pay structureNeed to establish a pay structure Balance between:Balance between:
Internal equity – the Internal equity – the value value of the job of the job forfor the organizationthe organization
External equity – the external External equity – the external competitiveness of an organization’s competitiveness of an organization’s pay relative to pay relative to a a pay elsewhere in its pay elsewhere in its industryindustry
A strategic decision with trade-offsA strategic decision with trade-offs
Definition of Definition of Reward Reward ManagementManagement
• This management discipline is This management discipline is concerned with the formulation and concerned with the formulation and implementation of strategies and implementation of strategies and policies, the purposes of which are policies, the purposes of which are to reward employees to reward employees fairly, fairly, equitably and consistentlyequitably and consistently in in accordance with their accordance with their valuevalue to the to the organisation.organisation.
• It deals with design, implementation It deals with design, implementation and maintenance of reward and maintenance of reward systems systems (processes, practices, procedures(processes, practices, procedures) ) that aim to meet the needs of both that aim to meet the needs of both the organisation and its the organisation and its stakeholders. stakeholders.
Philosophy of Reward Philosophy of Reward ManagementManagement
Strategic senseStrategic sense: long-term focus & it : long-term focus & it must be derived from the business must be derived from the business strategystrategy
Total Reward approachTotal Reward approach: considering all : considering all approaches of reward (financial or not) approaches of reward (financial or not) as a coherent whole; integration with as a coherent whole; integration with other HRM strategiesother HRM strategies
Differential Differential reward according to the reward according to the contribution contribution
Fairness, equity, consistency, Fairness, equity, consistency, transparencytransparency
Economic theories Economic theories (partially) explaining pay (partially) explaining pay
levelslevels Supply & DemandSupply & Demand: labor market factors: labor market factors Efficiency wage Efficiency wage theory: attraction of theory: attraction of
better employees, motivation, reducing better employees, motivation, reducing fluctuation leads to high wagesfluctuation leads to high wages
Human Capital Human Capital theory: productivity theory: productivity differences differences
Principal – Agent Principal – Agent Theory: inequality in Theory: inequality in the information leads to „agency costs”the information leads to „agency costs”
The effort The effort bargainbargain: collective bargaining: collective bargaining
Total Reward (Armstrong 2009)
All types of reward:
• Non-financial as well as financial,
• Indirect as well as direct,
• Extrinsic as well as intrinsic.
Each element is developed, implemented and treated as an integrated and coherent whole.
Transactional(tangible)
rewards
Relational(intangible)
rewards
Base pay
Contingent pay
Employee benefits
Learning and development
The work experience
Total
remuneration
Non-financial
rewards
Recognition, achievement, growth
Total reward
Components of Total Reward (Armstrong
2009)
The 4Ps of RewardThe 4Ps of Reward
PayPay Salary, bonus, shares, etc.Salary, bonus, shares, etc.
PraisePraise Positive feedback, commendation, staff-of-Positive feedback, commendation, staff-of-
the-year award, etc.the-year award, etc. PromotionPromotion
Status, career elevation, secondment, etc.Status, career elevation, secondment, etc. PunishmentPunishment
Disciplinary action, withholding pay, or Disciplinary action, withholding pay, or criticism, etccriticism, etc
Business & HR strategy
Rewardstrategy
Total RewardTotal
Remuneration
Job evaluation
Grade & pay structure
Market rateanalysis
Contingent pay
Employeebenefits
Non-financialrewards
Allowances
Performance management
DerivatiDerivation of on of TotalTotal
RewardReward
Strategic Reward Strategic Reward ManagementManagement
Where do we want our reward Where do we want our reward practices to be in a few years time? practices to be in a few years time? (vision)(vision)
How do we intend to get there? How do we intend to get there? (means)(means)
Reward StrategyReward Strategy
A declaration of intent that defines what the A declaration of intent that defines what the
organisation wants to do in the organisation wants to do in the longer term to longer term to
develop and implement reward policies, practices develop and implement reward policies, practices
and processes and processes that will further the achievement of that will further the achievement of
its business goals and meet the needs of the its business goals and meet the needs of the
stakeholders. stakeholders.
It gives a It gives a frameworkframework to other elements of reward to other elements of reward
management. management.
The structure & content of The structure & content of a a
Reward strategyReward strategy Environment analysis:Environment analysis:
Macro-level: social, economical, demographicMacro-level: social, economical, demographic Industrial levelIndustrial level Micro-level: competitorsMicro-level: competitors
Analysis of the „inner environment”: Analysis of the „inner environment”: strategy, job evaluation, financial strategy, job evaluation, financial conditions…conditions…
Gap-analysisGap-analysis Guiding principlesGuiding principles Broad-brush reward strategyBroad-brush reward strategy Specific reward initiativesSpecific reward initiatives
Job-evaluationJob-evaluation
A systematic process For defining the relative worth/ size of
jobs/roles within an organisation For establishing internal relativities For designing an equitable grade
structure and grading jobs in the structure
To give an input for reward considerations
Dimensions of job Dimensions of job evaluationevaluation
Relative or measured to an absolute Relative or measured to an absolute scalescale Relative: compares jobs to one another Relative: compares jobs to one another
within the companywithin the company Absolute: compares to an „independent”, Absolute: compares to an „independent”,
external measureexternal measure Analytical or non-analytical (global)Analytical or non-analytical (global)
Analytical: measures factors or elements of Analytical: measures factors or elements of the jobsthe jobs
Non-analytical: measures the job as a wholeNon-analytical: measures the job as a whole
Market pricing – jobs are placed in pay structures entirely on the basis of external relativities, ie market rates (a method of pricing jobs but not job evaluation as usually defined)
Analytical job evaluation (point-factor rating or analytical matching) – decisions on the relative value or size of jobs are based on an analysis of the degree to which various defined elements or factors are present in the form of demands on the job holder
Non-analytical job evaluation (job classification or ranking) – whole jobs are described and compared to slot them into a defined grade or place them in a rank order or without analysing them into their elements
Types of Job EvaluationTypes of Job Evaluation (Armstrong 2009)(Armstrong 2009)
Types of Job Types of Job EvaluationEvaluation
Non-analytical Non-analytical EvaluationEvaluation
Analytical Analytical EvaluationEvaluation
• Whole job Whole job rankingranking
• Points ratingPoints rating
• Paired Paired comparisonscomparisons
• Proprietary Proprietary schemesschemes
• Job classificationJob classification
FactorFactor Level Level 11
Level Level 22
Level Level 33
Level Level 44
Level Level 55
Level Level 66
ExpertiseExpertise 2020 4040 8080 100100 120120
DecisionsDecisions 2020 4040 6060 100100 120120
AutonomyAutonomy 2020 4040 8080 100100 120120
ResponsibilityResponsibility 2020 4040 8080 100100 120120
InterpersonalInterpersonal
skillsskills
2020 4040 6060 8080 120120
60
80
60
60
100
Total score = 360
Job Evaluation: Scoring (Armstrong(Armstrong
2009)2009)
Hay proprietary schemeHay proprietary scheme AA group of role analysts, working as a panel assess the role group of role analysts, working as a panel assess the role
(from an agreed job description and information) against a (from an agreed job description and information) against a number of factors, which are known as the Hay Guide number of factors, which are known as the Hay Guide Chart Profile.Chart Profile.
1. Know – How 1. Know – How The level of knowledge, skill and experience required to The level of knowledge, skill and experience required to
perform the job successfully. perform the job successfully. 2. Problem Solving2. Problem Solving
The complexity of thinking required, both in the type of The complexity of thinking required, both in the type of problems come across and the extent to which the jobholder problems come across and the extent to which the jobholder has precedent and/or assistance in solving them (applying has precedent and/or assistance in solving them (applying their Know – How).their Know – How).
3. Accountability3. Accountability The impact the job has on the organization (i.e. the end result) The impact the job has on the organization (i.e. the end result)
and the extent to which the jobholder acts autonomously in and the extent to which the jobholder acts autonomously in achieving this.achieving this.
Wage gapsWage gaps
Wage gaps can occur in companies using Wage gaps can occur in companies using international benchmarking in job evaluation. international benchmarking in job evaluation. The cause is simple:The cause is simple: The market of top managers is usually The market of top managers is usually
international: they earn international wages, or international: they earn international wages, or they leave the firmthey leave the firm
The market of workers with little or no The market of workers with little or no qualification is local in (nearly) every case: they qualification is local in (nearly) every case: they earn local wages.earn local wages.
In less developed countries this can lead to In less developed countries this can lead to enermous wage gaps between the „top” and enermous wage gaps between the „top” and „bottom” employees.„bottom” employees.
Components of Total Components of Total RemunerationRemuneration
Base payBase pay: Base pay is the fixed compensation paid to : Base pay is the fixed compensation paid to an employee for performing specific job an employee for performing specific job responsibilities. It is typically paid as a salary, hourly responsibilities. It is typically paid as a salary, hourly (or in some situations piece rate). There is a tendency (or in some situations piece rate). There is a tendency towards market orientation and the increasing role of towards market orientation and the increasing role of qualifications. qualifications.
Contingent paContingent pay: Individual contingent pay relates y: Individual contingent pay relates financial rewards to the financial rewards to the individual performance, organisation or team performance,individual performance, organisation or team performance, competence, competence, service,service, contribution or contribution or skill of individual employees.skill of individual employees.Consolidated payConsolidated pay: built into the base pay: built into the base payVariable payVariable pay: provided in the form of cash bonuses (increasing : provided in the form of cash bonuses (increasing
role nowadays).role nowadays). Employee benefitsEmployee benefits: Elements of remuneration given : Elements of remuneration given
in addition to the various forms of cash pay.in addition to the various forms of cash pay.
Contingent payContingent pay
Individual contingent pay is a good Individual contingent pay is a good motivator (but to what extent?) for those motivator (but to what extent?) for those who receive it.who receive it.
It attracts and retains better workers.It attracts and retains better workers. It makes labour related expenditures more It makes labour related expenditures more
flexible.flexible. It can demotivate those who don’t receive It can demotivate those who don’t receive
it (depends on performance measurement)it (depends on performance measurement) Can act against quality and teamwork.Can act against quality and teamwork.
Types of individual Types of individual contingency payscontingency pays
Performance-related: increases basic pay or Performance-related: increases basic pay or bonuses related to assessment of bonuses related to assessment of performanceperformance
Competence related: Pay increases related to Competence related: Pay increases related to the level of competencethe level of competence
Contribution-related: pay is related both to Contribution-related: pay is related both to inputs and outputsinputs and outputs
Skill-based: pay is related to acquisition of Skill-based: pay is related to acquisition of skillsskills
Service-related: pay is related to service-timeService-related: pay is related to service-time
Team based payTeam based pay
Pay is related to team performancePay is related to team performance It can encourages teamwork, loyalty It can encourages teamwork, loyalty
and co-operationand co-operation It can be demotivating on individual It can be demotivating on individual
level (encourages social loafing)level (encourages social loafing)
Organisaton-wide Organisaton-wide schemesschemes
Profit-Sharing Plans – organization-wide Profit-Sharing Plans – organization-wide programs that distribute compensation programs that distribute compensation based on an established formula based on an established formula designed around profitabilitydesigned around profitability
Gain Sharing – compensation based on Gain Sharing – compensation based on sharing of gains from improved sharing of gains from improved productivityproductivity
Employee Stock Ownership Plans Employee Stock Ownership Plans (ESOPs) – plans in which employees (ESOPs) – plans in which employees acquire stock, often at below-market acquire stock, often at below-market pricesprices
Employee benefitsEmployee benefits
Attractive and competitive total Attractive and competitive total remunerationremuneration
Provide for the personal needsProvide for the personal needs Increase commitment toward the Increase commitment toward the
organisationorganisation Tax-efficientTax-efficient
Main types of Employee Main types of Employee benefitsbenefits
Pension schemesPension schemes Personal (and family) security: different types of Personal (and family) security: different types of
insurancesinsurances Financial assistance: loans, house purchase Financial assistance: loans, house purchase
schemes, discount on company services…schemes, discount on company services… Personal needs: holidays, child care, recreation Personal needs: holidays, child care, recreation
facilities, career breaks…facilities, career breaks… Company cars and petrolCompany cars and petrol Intangible benfits: quality of working life…Intangible benfits: quality of working life… Other benefits: mobile phones, notebooks…Other benefits: mobile phones, notebooks…
Cafeteria systemsCafeteria systems
Definition of the Definition of the psychological contractpsychological contract
““The perceptions of both parties to the The perceptions of both parties to the employment relationship, organization employment relationship, organization and individual, of the reciprocal promises and individual, of the reciprocal promises and obligations implied in that and obligations implied in that relationship”relationship”
The The statestate of the psychological contract is of the psychological contract is concerned with whether the promises and concerned with whether the promises and obligations have been met, whether they obligations have been met, whether they are fair and their implications for trust.are fair and their implications for trust.
The Psychological The Psychological Contract FrameworkContract Framework
(David Guest)(David Guest)
The Good Employer
&The High Quality
Workplace
TheDeal
SatisfiedAnd
ProductiveWorkers
Total remuneration in Total remuneration in recessionrecession
It a good chance to rethink and renew It a good chance to rethink and renew the remuneration systemthe remuneration system
Share of contingency payment should Share of contingency payment should increaseincrease
Employer benefits, that do not need Employer benefits, that do not need short term expenditure will increase:short term expenditure will increase: Company carCompany car Saturday-year or sabbaticalSaturday-year or sabbatical (free(free time)time) Share-optionsShare-options