Executive Summary
Jinnikins Jeans functions in a highly competitive industry, and owing to cost pressure, it has taken some cost-cutting measures, such as outsourcing the manufacturing units to low cost countries like China and Sri Lanka, and laying off employees. Recently, the company has encountered a lot of people management issues. The lay-off measure has created a sense of insecurity among the existing employees, and attrition rate has become high. Since, most of the problems that the company is experiencing are people-centric, the company should take necessary steps to restructure the reward management system for motivating employees. This paper has touched upon the current reward management system in the company and presented a set of recommendations to Jinnikins for overhauling them.
Introduction
Jinnikins Jeans operates in a highly competitive market. It has always been able to cater to the needs of the customers. However, in recent times, the company is receiving a slew of complaints from the customers as regards quality and delivery. In recent times, the competition has intensified in the market, creating a huge cost pressure on Jinnikins Jeans. In order to deal with the cost pressure, the company has taken a cost-cutting measure by outsourcing its manufacturing base to low cost destinations like China and Sri Lanka and laying off a few employees. The company has also experienced a high attrition rate with a good many employees quitting the organization, including the Marketing Director, Dinash. The management team has expressed grievances as regards the reward mechanism and job responsibility. All these management difficulties are cropping up at a time when the company is experiencing a 31% decline in revenue. For Jinnikins, the problem seems to be more with the people management than the market competition. This essay will discuss the standard reward management system a company should follow, comparing it with the present reward mechanism that is in place in Jinnikins before proposing a remedial action.
Motivation and Reward Management System
Employee motivation refers to the psychological forces that determine a person’s behaviour in an organization, his level of effort, and persistence. For the success of an organization, it is crucial to create a group of motivated employees willing to put in their best effort. This will not only improve the employee satisfaction and productivity, but will also help improve the customer satisfaction to a great degree (Sajeva, 2014). It is, therefore, important for the HR and the top management of an organization to foster an environment that boosts up the employee morale and motivation. There are several techniques to improve employee morale in an organization. The major four techniques used by the HR department include 1) job designs, 2) rewards, 3) employee participation, and 4) the quality of work life programs (Wiersma, 1992).
Job Design
The design of an employee’s job makes a great impact on his motivation level. Effective job design techniques involve designing jobs in such a manner that the jobs designed are challenging and interesting to the employees. There are four approaches to effective job design.
- Job Simplification – Job simplification refers to the method of simplifying the process of job in such a way that employees do not need to put in extra endeavor for the execution of a task. This method is found to be effective for the bottom rung of employees, such as part-time and manual labourers.
- Job Enlargement – Job Enlargement refers to a method that combines different types of task to retain the interest of the employees in their work (Pierce, Cameron and Banko, 2003).
- Job Rotation – It is a process in which employees are moved to different tasks periodically, thereby helping the employees develop cross-skills.
- Job Enrichment – Job enrichment is the most effective of all the techniques used for job design. The aim here is to enhance the actual job function by addressing the motivational factors that keep employees motivated (Wiersma, 1992).
Several studies (Campion and Thayer; Dunham; and Hackman) have found out that these job design techniques are effective and can successfully increase employee satisfaction and motivation.
Rewards
Rewards are benefits awarded to employees in exchange for their work. In several organizations across various industries, the system of giving rewards is used effectively to keep employees committed to the work and motivated to give stellar performance. In both the private and public sectors, apparently, there is a great connection between rewards and employee job satisfaction and the increased performance. Getting rewards for achieving the target makes employees satisfied with their job. Rewards make employees feel that they are valued by their employers and that the company is concerned about their career development (Fareed et al, 2013). Resultantly, the satisfaction level of employees goes up, boosting up their performance.
Rewards are of two types - extrinsic and intrinsic reward. Extrinsic rewards refer to the financial or cash related rewards, and intrinsic rewards refer to the non-financial or non-cash rewards. Extrinsic rewards include incentive payments, promotion, formal recognition, commission, bonus gifts, and fringe benefits, and intrinsic rewards include achievement, appreciation, recognition, and growth. Employees crave for both the types of rewards, financial and non-financial rewards depending on their needs. Some employees prefer financial rewards over non-financial rewards to satisfy their financial as well as material needs (Fareed et al, 2013). It is observed that the public sector employees prefer cash rewards more than the non-cash rewards.
Other Techniques
Other techniques of increasing the employee motivation include employee participation and the quality of work life programs. Employee participation techniques like quality control circles, open book management, and employee share purchase program help employees feel empowered and motivated (Eisenberger and Shanock, 2003). On the other hand, the quality of work life programs like work life balance, family support, flex time, and workplace wellness program help increase the employee satisfaction, thereby boosting up their motivation (Skemp-Arlt and Toupence, 2007).
The Current Reward Management Program of Jinnikins Jeans
It appears that Jinnikins gives a huge focus on providing its customers with great design and high quality products at an affordable price. However, there is a less structured focus paid to the employees. Trevor and George pay a lot of heed to the employees’ satisfaction parameters. Whenever they notice that the remuneration and bonus are not at par the market standard, they immediately rectify that. On an average, the company pays more than the market average. However, there is no formal process for the HR or the owners to determine the fair or benchmark standard of remuneration for an employee. Apart from the ad hoc review of salary by Trevor and George, the other processes in place for reward management are as below:
- Salary review every six months.
- Annual salary increment based on percentage.
- 28 days of holidays for the first years, and then 30 days, thereafter.
- Car loans to all the staff members.
- Performance bonus for sales and marketing staff.
Looking at the above reward management system that is in place at Jinnikins, it seems that it was designed on the basis of common understanding of the organization and the industry as a whole, with no special thought put into it. For instance, although the profit and loss of the company are influenced by the decisions taken by the top management, there is no component of a salary allocated on the basis of performance of the directors. Therefore, the directors or the management do not have any incentive to perform well. Apart from the sales and marketing team, no other department has any variable pay scheme on the basis of performance. The sales and marketing team always tries hard to achieve their target as a huge amount of variable pay and incentives are associated with performance, which, sometimes, goes as high as 100% of their basic pay. However, the three major departments of Jinnikins - design, logistics and distribution, and quality that are capable of creating a competitive advantage, do not any incentive for giving a good performance, as per the current reward management system.
Apart from fulfilling the needs of the employees through salary, there is no other mechanism for satisfying the employee needs and motivating them in Jinnikins. In fact, there is no mechanism to capture the employee feedback and grievances in the company. As also indicated in the case study that the communication approach is ‘top-down’ in Jinnikins that some employees view as a great concern. For instance, Liam, who is the new product development manager, is also performing the role of the Marketing Director (MD) because of the previous MD’s departure from the company. Liam aspires to be the permanent MD of the company. However, the owners of the company without any discussion with Liam or the HR manager (Etti) are secretly looking for an MD from outside. This clearly shows the lack of connection between the top management employees, the owners and the HR.
The technique used by the owners and the HR for employee satisfaction is higher remuneration. Also, the owners think that if they give more flexibility in terms of work hours to the employees, then it will make them satisfied and creative, creating a creative culture in the workplace. They consciously avoid the “Business School” culture in the organization as they fear it will kill creativity. However, they fail to understand that not every department in the organization needs to be creative. For instance, the design department may need to be creative, and the flex time may work for them, but more operational departments like production, distribution, and finance should have a clear and defined work hour and practice.
Furthermore, the recent lay-off action by the top management has built up a sense of insecurity among the employees about their job. In fact, the matter got worse when after the lay-off, the company recruited a lot of part-time employees in the headquarter of Jinnikins. It clearly shows the lack of redundancy planning on the part of the HR department. For instance, Lionel, who is the Production Director of the company, fears that he will be laid off as the entire production process has been outsourced to Sri Lanka, Morocco, and China.
Possible Changes and Action Plan
As seen in the above section, Jinnikins lacks a comprehensive reward management system. The first improvement made in the whole system can be made by overhauling the reward management structure. The salary system in the company should be divided into two basic areas; 1) top management, and 2) other employees.
For other employees, the company should give a base salary equivalent to the average benchmark salary of the industry. It can then give a year-end bonus based on the company profits. Also, their salary should be reviewed once in a year, and adjusted accordingly. On the other hand, the salary for the management should be more performance-oriented. The management should receive a base salary. However, a large part of their remuneration should be variable and should be paid on the basis of their department performance. For example, a Production Director will receive more variable pay if the number of quality defects is very low.
Apart from the two basic structures of the salary, the company should also introduce some performance bonus scheme for selective departments like the sales and marketing and design that are critical to the company’s success. Salary is an extrinsic need of an employee to fulfill his financial and material needs (Fareed et al, 2013). However, there is no mechanism to understand the extrinsic needs of the employees in Jinnikins. For instance, Asha, who is the senior designer for the company, has an aspiration to become a design director in the future. She is an extremely loyal and valuable employee. However, the post of the design director is occupied by Trevor himself, leaving no scope for Asha to rise to that level. There is no visibility for Asha either whether or not she will ever become a design director. Therefore, it is important for Etti to create a 360 degree feedback system in Jinnikins to perceive the pulse of the employees.
As seen in the previous paragraph, there is a lack of redundancy planning for the company. For instance, employees like Dan and Lionel are fearful that they may be laid off any time. It is, therefore, to design a redundancy plan that will not only identify the role that are in the way of becoming redundant, but will also give a clear visibility to the management well ahead of time if those redundancies can be tackled through cross-skilling effort. It will help in reduced number of employee lay-off cases.
Furthermore, Jinnikins does not have a clear job description for many roles. For instance, Lionel, who is the Production Director, has no clue about his current scope of the job. Sandy, who is the Finance Director and looks after the IT department, feels uncomfortable with the IT assignments as these are completely unrelated to finance. It would have been a good idea to give the IT assignments to someone from distribution or the sales and marketing team who use the IT functions more than anyone in finance.
Conclusion
Being in a highly competitive industry, Jinnikins due to cost pressure has employed some cost-cutting measures like the outsourcing of its manufacturing units to low cost countries and employee layoffs. In recent times, the company has encountered several people management issues. The attrition rate in the company is high, and the lay-off action has created a sense of insecurities among the existing employees. Most of the problems experienced by the company are people-centric, and therefore, the company should overhaul the reward management system to keep its employees motivated. A standard salary plus bonus package system for non-management employees and a performance based reward system for the management employees should fulfill extrinsic needs of the employees. For intrinsic needs, the company should try to build up 360 degree feedback system to capture the pulse of the employees. Based on the feedback, it should create a redundancy program, special incentive bonus, promotion and recognition scheme, and job enrichment procedure. With comprehensive reward management and performance management in place, the company should be able to come out of its current difficulties.
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