How Management Can Manage Its Dependency over Certain Employees - Assignment Example

RUNNING HEAD: PERFORMANCE Performance [The Writer’s name] [The name of the Institution] Table of Contents Executive Summary 3 The report gives a brief discussion over compensation management and pay plan which is a most basic unit for any organisation. This report also provides a brief overview of the salary portion of compensation. The objective of job analysis is to obtain information about a job and summarize it in a manner that sets it apart from other jobs within the organization. Typically, such information is obtained through an interview with the supervisor and/or job incumbent and/or by completing a questionnaire. The focus is on reporting relationships within the organizational structure as well as on the principal responsibilities. Therefore, it is important to obtain information on the responsibility for specified tasks. 3 1.0 4 1.1 4 Reasons for Denying Pay Increases 4 2.0 6 Management Can Manage Its Dependency over Certain Employees 6 3.0 8 Compensation Incentive Plans 8 4.0 10 When You Offer Sales Incentives in Your Pay Plan 10 5.0 12 To Build A Solid Foundation for A Plan 12 5.1 13 Understand Organisational Capabilities 13 5.2 14 Incorporate Human Capital Initiatives 14 5.3 15 Communicating the Plan 15 5.4 16 Plan Reviews 16 Reference List 18 Executive Summary The report gives a brief discussion over compensation management and pay plan which is a most basic unit for any organisation. This report also provides a brief overview of the salary portion of compensation. The objective of job analysis is to obtain information about a job and summarize it in a manner that sets it apart from other jobs within the organization. Typically, such information is obtained through an interview with the supervisor and/or job incumbent and/or by completing a questionnaire. The focus is on reporting relationships within the organizational structure as well as on the principal responsibilities. Therefore, it is important to obtain information on the responsibility for specified tasks. 1.0 Typically, the amount of salary an individual receives is a function of the value of the individual's responsibilities to the organisation and how well the individual is meeting the responsibilities. The value of the individual's responsibilities is typically determined by job analysis, job evaluation, salary surveys and the resulting salary structure adjustments. (Arthur, 2004, p. 670-88) Individual pay actions result from promotion and how well the individual performs the assigned tasks. In this case I’d have not given Angelo the pay raise because he has not performed as he has performed in the past. Promotional increase guidelines are just as important as merit increase policy. Few companies structure their pay programs to properly compensate the promoted individual. 1.1 Reasons for Denying Pay Increases Some professionals object to granting an upgrade increase for the following reasons: • There was no change in the job, only in the “organisational context;” • The incumbent did nothing to earn the upgrade; • The incumbent did not have to compete to be considered for the job. Some organisations post new or vacant jobs internally and allow employees to apply for (“bid on”) and receive consideration to fill them; • A higher salary grade is a sufficient reward because it improves an employee’s eligibility for merit increases; and • Employees whose skills have been in high labor-market demand do not experience a pay reduction when their skills are no longer in demand. Too often a promotion is rewarded with a flat percentage increase (e.g., 10%) even though the same logic that applies to merit increases also applies to promotional adjustments. (Arthur, 2004, p. 670-88) For an individual receiving a significant increase in responsibilities, a 10% increase may still be far short of the new job's pay minimum. Conversely, it may be a modest organisational change, and therefore 10% would be overly generous (e.g., pay is already well within the middle one-third of the new job's pay grade). (Arthur, 2004, p. 670-88) Remember that position in grade is the company's best assessment of the individual's worth in relation to the marketplace and other individuals within the company. To test the quality of the adjustment, one could ask, "What would I offer this individual to accept this job if he or she came from another company?" Under such an examination, most internal promotional pay actions pale by comparison. A well-thought-out promotional pay policy is essential to retaining internal equity, not to mention its value during a period of federal pay controls when promotional increases are usually easier to accomplish than merit adjustments. (Drago, 2005, p. 507-32) Some experts think that project to higher grade, with no raise in pay, is an enough reward for sitting, because they will be at an inferior position in the new income limit, giving them a better access for pay expansion in a performance-based system. In these type of systems, the worker’s place in the income limit is one of three principle for giving pay boost performance point and time since final boost are the further two. (Drago, 2005, p. 507-32) Other experts think a comparatively smaller income growth than is usually given upon endorsement or a one-time total pay is enough incentive. These places have worth only if one thinks that work promotion have small rate to the company and engage less worker involvement than regaining to the old job, which normally progress a full salary upgrade. As told, it is hard to carry these opinions without differing other growth behaviour and employee compensation rules. (Swabe, 2008, p. 17-23) Thus, there is lesser strong point for taking growth income value any varied from other promotional upgrades, which normally involves a full wage value and project to the new rank and choice. 2.0 Management Can Manage Its Dependency over Certain Employees Management can manage its dependency over certain employees by using pay rises as well as different forms of pay. Bartol & Martin (1988) presented arguments that suggest that managers who make pay allocations to subordinates are influenced by the degree of dependence on subordinates and threats to that dependence. For example, managers may provide the largest pay raises to the subordinates who are perceived to be the most likely to leave the firm (such as the computer systems analysts who are highly marketable). This framework may be useful in predicting the size of pay increases under pay delivery systems such as merit pay plans. (Bartol, 1988, p. 361-378) Job analysis, job evaluation, salary surveys and structural adjustments are all keyed to determining how much to pay a particular job. Individual pay actions are determined within this set of parameters. The range may simply have a minimum or maximum or also have incremental values. The increments may be either reference points for merit increase values (e.g., break points for lower, middle and upper one-third of range) or fixed rates for pay increases. (Wood, 2005, p. 81-96) If the latter is used, there is no opportunity to use nonlisted values. In some situations, the two approaches may be combined (e.g., fixed increments for the lower one-third or one-half of the range, with an open range for the remainder). Fixed increments are more likely to be found in hourly paid overtime-eligible jobs than in salaried positions. (Boselie, 2005, p. 67-94) Because of their importance relative to incentives, salary ranges are likely to be wider in the public sector than in the private, with the exception that salary ranges are likely to be wider at the executive level than lower in the organisation, since executives are likely to remain in their range longer (due to decreased promotional opportunities). (Wood, 2005, p. 81-96) Having described the job (or position), determined its relative value to others in the organisation, decided on the pay range for the job (position) and relative position of the incumbent within that range, it is time to determine the individual's pay. This will be based on an appraisal of the person's performance, the timing of that review and the amount of the pay adjustment. (Ellig 1982, p. 21-45; White, 2000, p. 27-36) HR experts need to be at the focal point where strategy, organisational effectiveness and human capital management converge. As a human resource professional at Focus Pointe I’ll need to take it upon themselves to have a clear understanding of the business and organisational issues as well as the future direction of the company. Strategic pay design is not a sound bite to impress management. It's the process behind pay plan design that links and binds strategy, organisation effectiveness and human capital together. (Swabe, 2008, p. 17-23) By balancing organisational, employee and business needs with a company's financial and strategic goals it is possible to develop the right pay strategy to motivate, reward and sustain high levels of performance. By finding this balance, a company can effectively use pay to execute and achieve desired business results. (Arthur, 2004, p. 670-88) Looking more directly at how people are paid, though, presented a seemingly contradictory result. When pay increases are clearly linked to performance as is the case when bonuses are awarded for achieving specific performance targets bonuses do offer greater improvement in subsequent performance than do raises. 3.0 Compensation Incentive Plans Compensation Incentive plans can to a great extent advantage both an organization and its creators, but for excellent consequences they ought to be carefully applied. (Pil, 1996, p. 423-55) Reimbursement gives a growth to a company like Focus Pointe’s reputation, enhanced association with your future; more contented associates because working smartly gives better output than of working hardly, and eventually, bigger shareholder growth. Drawback come across of applying a strategy that is not fully planned or completely worked out, and might immediately gives in short-term point at the cost of long-term value, higher revenues of manufacturers, bigger back-office expenses, firm’s disturbance, the necessity to frequently reinvest in the sales build up, and lost subject because of lack of excellence. (Pil, 1996, p. 423-55) The sales incentive plan at Focus Pointe is a combination plan because what happened to Angelo is often happens in the case of commission based income. The sales representative influences the customer to buy the firm's product. This position may be crucial to the organisation because it may directly control the flow of revenues as measured by sales volume, market share, product mix or number of new accounts (Ellig 1982, p. 21-45; White, 2000, p. 27-36).The sales representative can be paid on the basis of straight salary, straight commission or a combination plan which combines salary and commission (Steinbrink, 2001, p. 111-122). Of these three forms of sales compensation, the sales representatives should find the combination plan most attractive since it combines the financial security of a salary with the motivation and opportunity to generate additional earnings based on a commission (Buskirk, 2007). The combination plan should be the preferred pay form for sales representatives because it offers a risk and reward potential that is most advantageous to the majority of these employees. The resource dependence perspective suggests that the sales representative may be a critical position in the firm when it is able to control the relationship with the customer. The sales representative controls the relationship with the client when the company relies primarily on individual advertising to the client to end the sale (Eisenhardt, 1988, p. 488—511). On the other hand, when a firm spends heavily on advertising and sales promotions to influence the customer, the sales representative is no longer the primary factor that influences the customer to buy the product. The sales representative may be more of an order taker in this situation. (Eisenhardt, 1988, p. 488—511) Similarly, the firm may complement the director sales force with substitutes for sales representatives such as a telemarketing sales staff, cable television merchandising or mail order catalogues. These tactics should result in a reduced level of salience for the sales representatives and less control over the customer with respect to making the sale. When the firm is dependent on personal selling to close the sale, the sales representative is critical to affecting the flow of revenues. Management should recognize its dependency on the sales representatives by providing the combination pay plan which should be the most attractive form of pay to the sales force. (Eisenhardt, 1988, p. 488—511) 4.0 When You Offer Sales Incentives in Your Pay Plan When you offer sales incentives in your pay plan, whether they're commissions or bonuses, the implications go beyond the finance and payroll departments. Properly constructed, they can energize the sales force, communicate what's most important in terms of products or customers, help attract and retain the best salespeople, and develop a sales-oriented culture. Of course, if sales incentives aren't well thought through, the opposite can also occur. (Steinbrink, 2001, p. 111-122) Some employers go beyond total compensation statements to take a total rewards approach to benefits communication to help employees fully understand and appreciate the value of their total compensation packages. The concept of total rewards goes beyond the traditional view of benefits to include everything the employee perceives to be of value that results from the employment relationship. These total rewards packages include not only compensation and benefits but also work/life programs, employee recognition programs, and developmental and career opportunities. (Steinbrink, 2001, p. 111-122) I believe the best place to start when creating your sales pay plan is by determining what your customers want. If they would prefer more service and expertise, you might want to pay your salespeople more salary and less commission. If your customers prefer less hand-holding, or if a group other than your sales team handles customer service, then setting up a plan that offers more -- or all -- commission might be right for you. General Managers and supervisors thought the first few things on the "wanted" list would be better pay, job security and a chance for advancement. But what salespeople listed for the first three items were: acknowledgment or appreciation of the job they were doing being kept informed about what's going on; and management support. Good pay, job security and better working conditions followed these. (Buskirk, 2007) From the supervisor's standpoint, it was pretty much the same, but they thought the top three issues were good pay, promotion opportunity and interesting work. We still think that sales employees leave companies mostly for pay. (Eisenhardt, 1988, p. 488—511) Sure, most would leave if the increases in salary and benefits were high enough. But there are so many other considerations that would keep employees motivated to stay on the job. Proper salary and benefits do have a great deal to do with it, as well as providing a worthwhile sales incentive compensation plan. Hopefully, this will get them to forget about the money and concentrate on the job of improving sales productivity. Then we have to treat them right, with great respect and show appreciation for their work acknowledge accomplishments. 5.0 To Build A Solid Foundation for A Plan To build a solid foundation for a plan, it is necessary to first understand the line management business strategy, financial objectives and key business imperatives over the next several years. (Ellig 1982, p. 21-45; White, 2000, p. 27-36) Understanding where the company is now and where it is heading will provide the necessary information to construct a solid framework from which to start the design of a pay plan. In this process, it is necessary to identify the desired outcomes for the company and key stakeholders (e.g., employees, owners and stockholders, customers and partners). (Ellig 1982, p. 21-45; White, 2000, p. 27-36) Pay and benefits managers cannot make informed and competitive decisions about the total rewards package without a thorough understanding of the company's short-term and long-term goals and objectives. (Bowen, 2004, p. 203-21) To develop a pay plan that is a win-win for all parties, pay professionals must have a broad view of the business line. (Bowen, 2004, p. 203-21) For proper alignment many factors, both internal and external to your organisation, need to be considered. Most pay professionals tend to be technical experts, which is critical to being successful at their job. However, strategic pay design requires additional skills, such as strong business acumen, conceptual thinking, systemic problem solving and tactical execution abilities. Strategic pay designers must be able to discuss business issues and financial implications with senior executives. For years, human resources (HR) executives and pay managers have pleaded for "a seat at the table." (Boselie, 2005, p. 67-94) Significant strides have been made. For example, it is more common now for HR and pay executives to take leadership roles in boardroom discussions and executive-level decisions that significantly impact the business. Designing effective pay plans that align with the business is a compelling reason why it is essential for the HR team to thoroughly understand the fundamentals of the business. (Boselie, 2005, p. 67-94) Effective pay plans enhance HR's ability to support the chief executive officer's strategy to achieve results. 5.1 Understand Organisational Capabilities Second, understanding organisational capabilities and the role of pay is critical. Pay designers must ask what the core competencies necessary to gain a competitive advantage and to achieve the organisation's key goals and objectives are. (Becker, 1998, p. 53 – 101) They also must determine what role pay should play in achieving and sustaining a competitive position. These answers will provide an excellent understanding of what positions are the most critical to a company's future success and the various pay options available to motivate employees to achieve success. In this stage of plan development, designers will attach an importance level and value to the accomplishments and develop realistic performance expectations to be rewarded. (Pil, 1996, p. 423-55) It is vital to include employees and managers in this stage. Whether through focus groups or individual interviews, the feedback of employees and input from managers is critical to building an effective pay plan. Involving managers and employees increases ownership and acceptance of the pay plan. 5.2 Incorporate Human Capital Initiatives Third, aligning pay with human capital line management initiatives will help devise a plan that allows the company to successfully recruit and retain employees. Is the organisation planning a major recruitment campaign? Are there many key employees on the verge of retirement? What role should pay play in succession planning? Knowing a company's human capital plans and strategies to further develop talent and skills for the organisation's success is imperative in deciding how pay should be designed and used to support achievement of key business results. (Becker, 1998, p. 53 – 101) Additionally, the organisation's culture and pay plan development are linked, either implicitly or explicitly. The prominence of pay (emphasis on rewards to drive behavior and results, not the level of pay) within an organisation will directly influence the culture and individual behaviors. (Becker, 1998, p. 53 – 101) Being able to imagine the broad scene and think systemically is critical to designing strategic pay plans. For example: • How will people's behaviors change as a result of the new pay plan? Is this in line with our core values and culture? • Is there appropriate balance and tension between getting results and how results are accomplished? Are there consequences for achieving results by inappropriate means? • Does the pay plan attract the type of individuals consistent with the company's hiring profiles? What messages is the company sending to current employees about how they are valued? 5.3 Communicating the Plan A strategically designed plan can look great on paper, but if it is not communicated properly to the line management and employees, the success of the plan will be limited. In business today, change is inevitable. Pay designers must be able to market and promote valid reasons for changing the status quo. (Smith, 2003) They must not only understand why changes are strategically necessary for the success of the business, but also intelligently argue the case to senior-level executives. Like a sales team selling products and services, pay professionals have the job of selling their pay strategies and tactics within their own company. Once the plan is presented and it has been approved by management, the project is not complete. The implementation, communication and review of the plan are critical elements to the new plan's success. If done poorly, even the best designed plans will fail and the new plan's return on investment reduced. (Becker, 1998, p. 53 – 101) With pay being a topic near and dear to each employee, it can have a major impact on the morale of the staff, from entry-level employees to the executive suite. (Smith, 2003) Therefore, communication is a key element of strategic pay design. Leading companies promote the brand--the company image, mission, values and human capital programs--to employees. Frequent communication that explains how pay supports and rewards organisational and individual success is essential. (Smith, 2003) Only then can the link between business strategy, pay and other human capital programs be reinforced. More specifically, the pay team needs to effectively communicate the purpose of the plan to all employees and provide them with specific details of what is included in the plan. Assuming pay-for-performance elements exist in the plan, communication to employees must properly explain the criteria and measurement of the performance goals and report actual results back to participants during the year. Communicating plan details and providing regular performance feedback are keys to successful implementation. 5.4 Plan Reviews Every business has some type of pay plan, whether a well-thought-out strategic plan or a plan more akin to a fly-by-night approach. Each year, every business should conduct a maintenance review of its pay plan to ensure the plan is up to date, competitive and in line with company goals. Plan redesign comes in two flavors-minor adjustments or major redesign work. . (Wood, 2005, p. 81-96) The minor tweaks are just fine-tuning the existing plan and should be done each year, if necessary, when the plan is reviewed. The structure and philosophy of the plan doesn't change, but the mechanics or plan components may be modified or updated to ensure the plan is competitive and supports strategy execution that delivers business results. (Pil, 1996, p. 423-55) Major redesigns are typically done when there is a fundamental change in business. Events like mergers, acquisitions, entering new markets or new product launches are examples of reasons that often require a major pay plan redesign. Another cause for a major overhaul of a plan is when significant symptoms of a problem exist. (Pil, 1996, p. 423-55) High turnover, inability to attract good talent, or consistently not making revenue or profit goals typically signals the need for major design work. Reference List Arthur, J. B. (2004). ‘Effects of human resource systems on manufacturing performance and turnover’. Academy of Management Journal, 37: 670–88. Bartol, K. M. & Martin, D. C. (1988). Influences on managerial pay allocations: A dependency perspective. Personnel Psychology, 41, 361-378 Becker, B. E. and Huselid, M. A. (1998) High performance work systems and firm performance: a synthesis of research and managerial implications, Personnel and Human Resources Management, 16, pp. 53 – 101. Boselie, P., Dietz, G. and Boon, C. (2005) Commonalities and contradictions in HRM performance research, Human Resource Management Journal, 15(3), pp. 67 – 94. Bowen, D. E. and Ostroff, C. (2004) Understanding HRM-firm performance linkages: the role of strength of the HRM system, Academy of Management Review, 29(2), pp. 203 – 21. Buskirk J. &, R. H. (2007). Management of the Sales Force. Homewood, IL: Irwi Drago, R. and Heywood, J. S. (2005). ‘The choice of payment schemes: Australian establishment data’. Industrial Relations, 34: 507–32. Eisenhardt, K. M. (1988). Agency- and institutional-theory explanations: The case of retail sales compensation. Academy of Management Journal, 31, 488—511. Ellig, B. (1982). Sales compensation: A systematic approach. Compensation Review, 14(1), 21—45. Stanton, W. Pil, F. K. and MacDuffie, J. P. (1996) The adoption of high involvement work practices, Industrial Relations, 35, pp. 423 – 55. Smith, E. and Keating, J. (2003) From Training Reform to Training Packages (Tuggerah Lakes, NSW: Social Science Press). Steinbrink, J. P. (2001). How to pay your sales force. Harvard Business Review, 56(4), 111-122. Swabe, A (2008). 'Performance-Related Pay: A Case Study', Employee Relations 11 (2): 17-23. White, W. L. (2000). Incentives for salesmen: Designing a plan that works. Management Review, 66, 27-36. Wood, R (2005). 'Performance-based Pay as a Coordinating Mechanism in the Australian Public Service', AJPA 54(1): 81-96. 1: Read More