In an organization, the compensation department aims to achieve internal consistency, market competitiveness, and individual contribution. Market influence is the greatest challenge to a company’s competitiveness. Performance evaluations can be subjective or objective. Different organizations use different reward strategies to motivate their employees.
Compensation is the payment received by an employee for the work done or contribution made to the organization. This practice is well organized and it balances the work-employee relationship affording monetary and non-monetary privilege to employees. It is an inherent part of human resource management that stimulates the employees and recuperates organizational effectiveness.
What are the three main goals of the compensation department?
The three main goals of the compensation department are as such:
Internal consistency
Market competitiveness
Individual contribution
Internal consistency: Internal consistency enhances the relative value of each job among other jobs within a company. It is the extent to which performances account the same characteristics, skills or quality. Active internal consistency depends upon the job analysis and evaluation of jobs. In compensation, analysis of job helps to figure out or define the skill levels, compensable job factors, environment of work and level of education required. Job evaluation helps in figuring out the value of each job as compared to other jobs in an organization. This process is effective and useful because at times job titles are misleading which makes it difficult to know about each job in detail. It also establishes the correct payment for each particular job.
Market competitiveness: It deals with the retention of best qualified employee. A company must focus its attention to the customer perspective and should also keep an eye on its competitors. It should also develop important and suitable resources. It motivates the workers to achieve higher performance level in work sphere and also helps in figuring out the structure of compensation.
Individual contribution: The importance of individual contribution is recognized by developing pay grades and ranges that advance the retention of their prized employees. Every employee does different jobs; one may have more knowledge or professional experiences and because of such disparities, the HR professionals assigns the pay grades within the pay structure. Pay grades are provided in such ranges that it covers the minimum qualification to the highest, and allows incentives to the employees.
What are the contextual factors influencing the company’s competitiveness?
The contextual factors that pose greatest challenges to the company’s competitiveness are:
Market influences
Controlling labor cost
Differences in organizational structures
Multinational operations
Market influence: Market influence is the greatest challenge to a company’s competitiveness. In a highly competitive labor based market, companies try to attract the best quality individuals for employment and retain them by offering lucrative wage and highly beneficial packages. This kind of benefit packages are very competitive and influence the labor market.
Controlling labor cost: In a corporation’s budget labor cost often constitutes the major part. In a compressed economy, companies are faced with a dead pool of funds. The amount paid to the employees is much lower than the labor cost, considering recruitment, training, turnovers, infrastructure and the effect of the above mentioned things in productivity.
Differences in organizational structures: A major problem is the difference among the organizational structures of various companies. As there is difference in the organizational structure it leads to a difference in compensational package and designation thereby results into employee dissatisfaction. The company has to maintain equal levels of employee which they fail to do.
Multinational operations: The needs and expectations of the employees of various countries should be balanced and satiated by the multinational corporations. Compensations should balance with local laws and customs against the global policies.
Are subjective performance evaluations better or more feasible than objective ratings?
Both subjective evaluations and objective ratings have their merits as far as performance evaluation is regarded, objective ratings secure the individual that there is no chance of partiality and every worker is paid according to their work or position of job, whereas while responding to their own incentives and preferences the managers prefer subjectively evaluating performances. The centrality biases and leniency biases are positively affected by the strong employee-manager relationship. It is affected by the information gathering costs in a positive way. It is found that the performance evaluation biases affect the current performance ratings as well as the future incentives.
How motivational are profit sharing plans?
Many organizations share their profits with their employees as recognition of their good performance. In most such organizations, it is considered as a variable benefit for the employee. However, it is seen that profit sharing is not always as effective as it seems.
Most employees do not see the small dot in the big picture - that is - their individual role in the performance of the company. Therefore, they are not quite able to accurately translate how their good performance results in the bonus pay that they receive. Hence, profit sharing just becomes like any other entitlement. Over time, employees tend to forget that they actually need to do anything to receive their share of the extra money.
Describe, with reason, three jobs for which the pay-for-knowledge pay concept is inappropriate.
Bus driver: The responsibility of a driver is to drive within acceptable safety and other parameters following a specific route on a specific time. This job role does not provide scope for intangible skill enhancement calling for pay-for-knowledge gradation.
Restaurant dishwasher: The dishwasher just needs to clean the dishes quickly and in a hygienic way, without breaking too many. This job role does not require a lot of skill development.
Hand packer: The hand packer needs to pack whatever he or she is packing. It does not involve any more strategy than that and the role does not therefore call for any high end skill enhancement.
References:
1. Social Security Disability (2008). Unskilled, Semi-Skilled and Skilled Work – What Do These Terms Mean? 5 April 2008. Retrieved from web. http://humanresources.about.com/
2. Morrow D. B. (2010). Strategic Workplace Solutions. Understanding the role of base pay. 13 June 2010. Retrieved from web. http://www.strategic-workplace-solutions.com/services/articles/compensation-basics
3. NSPS and Strategic Compensation. Compensation theory and design principles and the market. 18 May 2007. Retrieved from web. http://www.cpms.osd.mil/ASSETS/778280F9345B413BBAC62D7ED260F363/NSPS%20and%20Strategic%20Compensation%20-%20DERLS_May07.pdf
