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Human Resources- Compensation and Benefits - Essay Example

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Introduction “Our knowledge of motivation tells us that people do what they do to satisfy needs,” (Robbins, 1993, p. 581). Before they do anything, they look for the payoff or reward. As such, this report has been designed to outline a proposed reward strategy that might be adopted by the Director of Reward at Massaman International (MI), a securities trading arm of Massaman Investment Bank in London…
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Human Resources- Compensation and Benefits
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Human Resources- Compensation and Benefits

An analysis of the types of non-financial rewards that could be introduced and how this may affect retention. An analysis of the view on bonus arrangements and any recommendations in terms of required changes. Detailed recommendations to the issues raised will be given to the Director of Reward at the end of the report. 1.1 The organisation’s current reward strategy MI currently uses the extrinsic rewards strategy to compensate its employees for the contribution they make towards its viability. Basically, extrinsic rewards include direct compensation, indirect compensation as well as non financial rewards (Robbins, 1993). Direct compensation in this case includes a basic wage salary, bonuses based on performance as well as profit sharing. Apart from the high basic salaries being earned by the traders in this particular case of MI, the bank also calculate their rewards on overall profitability of the trading operation and this entails that they get anything between 30 and 50 % of what they have earned in profit for the Bank. Performance bonuses significantly contribute to the package earned by the dealers and these motivate them to put optimum performance in their operations. It can also be noted that all dealers currently attract a package of benefits including a company car, healthcare and pension contributions. Grobbler (1998) suggests that these can be awarded to the employees on the basis of their performance. The traders are treated as the most valued assets to the bank as they may leave if they are not satisfied with the reward system for their performance. As such, their rewards are designed in such a way that they will appeal to their interests which in turn can lead to their retention in the organisation. It can be observed that the major strategy used by the bank to offer rewards is based on overall profitability of the bonds that have been sold. The traders are entitled to get a certain percentage of the profit as their bonus. However, the external environment plays a significant role in shaping this strategy. The strategy is influenced by gathering and analysing competitor information so as to come up with the best reward strategy. In this case, MI tries to remain on top of other organisations hence it seeks to differentiate its rewards strategy from other competitors. The organisation is compelled to offer the best reward on the basis of the situation obtaining in the environment. The level of performance of the economy also shapes this strategy since bonuses are calculated on the basis of overall profitability of the trading operation. In the event that the bonds sold have poorly performed, this entails that their rewards will be lower which shows that the external environment has a bearing on the strategy of rewards. Though there is no direct government intervention in the operations of banks with regards to their reward systems, it can be noted that more financial institutions are becoming wary of not rewarding undue risk taking. For instance, the recent Turner report contributes to the mounting pressure for financial organisations to review their bonus systems in order to protect the interests of the shareholders. These are some of the external factors that shape the rewarding strategy by MI. 2.0 What motivates the dealing team? Since the dealing team has a very little loyalty to the ... Read More
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