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8/8/2019 Compensation in Making Hr a Strategic
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ROLE OF COMPENSATIONROLE OF COMPENSATIONIN MAKING HR AIN MAKING HR ASTRATEGIC BUSINESSSTRATEGIC BUSINESS
PARTNERPARTNER
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ValuesValues
& Culture& Culture
WorkWorkProcessesProcesses& Business& Business
SystemsSystems
IndividualIndividual
& Team& TeamCompetenceCompetence
BusinessBusinessResultsResults
StrategicStrategicIntentIntent
Organisation,Organisation,Team & JobTeam & Job
DesignDesign
Reward &Reward &RecognitionRecognition
ManagementManagementProcesses &Processes &
SystemsSystems
LeadershipLeadership
The capability of people individuallyand as teams tocarry out the strategy
The ability of leadersto mobilise theorganisation aroundthe strategy
The way in whichaccountabilities areorganised
The manner in whichbehaviour, capabilityand/or results arereinforced
The key processesthrough whichmanagementinfluences people
The way in which theorganisational normssupport thestrategy
The sequence of activities throughwhich resources aretransformed to meetcustomer needs
Approach
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OBJECTIVES OF AOBJECTIVES OF ACOMPENSATION PROGRAMMECOMPENSATION PROGRAMME
PRIMARILY TO ATTRACT, RETAIN ANDMOTIVATE EMPLOYEES OF THE CALIBRENECESSARY TO ACHIEVE THE ORGANISATIONSPRESENT AND FUTURE OBJECTIVES
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ROLE OF COMPENSATIONROLE OF COMPENSATION
Pay is not t he central issue for attracting andretaining employees .People rarely leave a job for money alone.
Instead, they leave for career advancement,technical or career challenge,communication reasons (lack of appreciation bycompany, inability to have an impact at thecompany, etc.), job security.
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W ARNING SIGNSW ARNING SIGNS
The Compensation Plan does notdifferentiate between high and lowperformers
Company Goals are not being achievedHigh performing employees are leavingEmployees do not understand and payattention to the Compensation PlanThe Compensation Plan has not beenreviewed for strategic alignment in more than3 years
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STEPS TO CREATE STRATEGICSTEPS TO CREATE STRATEGICCOMPENSATION SYSTEMSCOMPENSATION SYSTEMS
Categorize employees by job
Compare your pay to the labor market .Manage internal equity .Link pay with job performanceCommunicate how pay works .
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VARIABLE PAY SYSTEMSVARIABLE PAY SYSTEMS
Variable pay is employee compensation thatvaries with the organization's businessperformance.
Variable compensation plans continue toincrease in popularity.According to a recent survey by HewittAssociates, variable pay awards as a
percentage of exempt payroll has increasedsteadily from 4% in 1990 to almost 12% in2003 .
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F ACTORS DRIVING VARIABLEF ACTORS DRIVING VARIABLECOMPENSATION PLANSCOMPENSATION PLANS
Variable pay is counter-cyclicalVariable pay links employee goals with
the organization goalsThe employee is motivated to help theorganization do well .
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TYPES O FTYPES O F VARIABLEVARIABLECOMPENSATION PLANSCOMPENSATION PLANS
F ormal bonus or incentive plansProfit sharing plansLump sum merit awardsSpot bonusesGain sharing plansStock Plans
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STOCK PLANSSTOCK PLANSStock Option PlansStock Purchase PlansStock options provide companieswith a long term incentive andretention tool. The recipients of stock options are motivated to helpthe company perform well, so thestock will appreciate in valueAs they must wait several years to
receive the entire stock option grant,employees are motivated to remainwith the company, as long as thestock value is increasing.
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