8/2/2019 Compensation Session 1 Ppt
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Business today is dynamic, with a steadily increasing pace of
change. Timely and actionable information is the best way to
combat the elements. Every organization needs three types ofresources e.g. FINANCIAL RESOURCES, HUMAN RESOURCES
and TECHNOLOGICAL RESOURCES.
No organization can achieve success without its employees. Success
and failure of business somehow depends on the employees they
have. Until and unless a worker is satisfied, he cannot beproductive. Employee satisfaction is important for its humanitarian
value and for its financial benefit (due to its effect on employeebehavior), and the most important tool for this is the best suitable
COMPENSATION PLAN.Although, there are other forces which drive employee
performance,but
COMPENSATION IS THE CRUCIAL OF ALL.
8/2/2019 Compensation Session 1 Ppt
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EMPLOYEES IN COMPANIES WITH
COMPETITIVE COMPENSATION PLAN:
Believe that the organization will be satisfying in the
long run
Care about the quality of their work
Are more committed to the organization Have higher retention rates, and
Will be more productive.
8/2/2019 Compensation Session 1 Ppt
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Concept of compensationCompensation is not the cut-and-dry subject it used to be.Once you had to worry only about an employee's base salary
or, at most, a base salary and commission. Today, you need to
think in terms of compensation packages including salaries,
stock options, employee stock ownership plans, pay-for-performance plans, bonuses, profit sharing, commissions, non-
cash rewards, variable pay, and much more, i.e., you need to
be more innovative.
Attribute it to what you will - the Silicon Valley effect, a boom
economy, unparalleled competition for skilled workers, the
increasing value of IPOs and stock options - but there's noquestion that compensation has become a more complicated
and strategic issue for employers.
To recruit, retain, and motivate the best employees, you need
to understand compensation and reward plans and how they
relate to your company's growth.
8/2/2019 Compensation Session 1 Ppt
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Why should companies consider changing the way they
approach compensation and benefits?
In todays complex environment, rewards management requires
many of the same specialized competencies necessary to run a
stand-alone business, including:
Skilled operational and HR resources to select and administer
plans, negotiate contracts, manage vendors and monitor service
levels
Experienced tax, legal and risk management professionals to
navigate U.S. and international employment laws and regulations
successfully
Sophisticated finance and accounting capabilities to keep the
books, file taxes, manage investments and liabilities, and run
rewards programs cost-effectively
8/2/2019 Compensation Session 1 Ppt
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Clearly, companies dont actually have to spin off their rewardsprograms into separate legal entities to improve the way they are
operated.
But many of them do need to change the way they approach rewards
management
and this will require a change in perception amongexecutives and other employees at all levels of the organization.
8/2/2019 Compensation Session 1 Ppt
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Food for thought for CEOs and HR Executives :- To
determine if they could benefit from rethinking their
approach to compensation and benefits management?
Are there concerns about the overall effectiveness or compliance
of your rewards programs?
Are your companys average health care costs per employee
greater than $6,000 or are your overall annual health care cost
increases greater than 10 percent?
Are new FAS 123 rules compelling you to investigate executive
compensation costs, and will you incur larger than expected
expenses in 2005 as a result?
Do your pension contributions as a percent of free cash flow
exceed 25 percent?
Are you struggling with managing the financial and credit risks
of your rewards programs, as evidenced by issues with your
liquidity and credit rating?
8/2/2019 Compensation Session 1 Ppt
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ORGANIZATION COMPENSATION DECISIONS
Compensation decisions are typically micro (individual) or macro (total
organization) focused. Although organizations are under no constraint to
separate these decisions, a course of study should. In practice, most
unsophisticated organizations make the decision on compensation level (howmuch to pay) and compensation structure (relationships to competitors) at the
same time. More administratively advanced organizations realize that
individual decisions within a proper administrative structure are more
consistent, fair, and cost-effective over time.
STRATEGIC COMPENSATION LEVEL DECISIONS
Most employees are aware that some employers pay more than others for thesame type of skill in the same market. The actual cost to employers of employee
service is total hourly compensation plus benefits. Unfortunately, labor cost per
unit is not Information that is easily obtained by employers. It must be
estimated from in-house information on the average productivity of employee
groups and organization units and from the average pay of these groups.
8/2/2019 Compensation Session 1 Ppt
8/24
NON-MONETARY COMPENSATION CAN INVOLVE
DIVERSE CONSIDERATIONS
When conditions are right, employees derive non-monetary compensation from
those aspects of the employment experience that provides value or satisfaction
without necessarily delivering a measurable reward. Said differently, non-
monetary compensation is nothing more complicated than psychic income. It
rewards the employee in some uniquely psychological way, largely unrelated to
salary or employee benefits.
A firms ability to deliver meaningful non-monetary compensation depends on
the answers to some very important questions:
- Culture of the office- project characteristics
- nature of the process
- working conditions
- location of the office
8/2/2019 Compensation Session 1 Ppt
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Every firms answers to these questions will differ, as every
employees decision about whats important also will differ.
There are no absolute rules about whats right, just varying
degrees of appropriateness.
The essential question about monetary vs. non-monetary
rewards is not an either-or question. The best firms endeavor
to deliver both. In the end, every employee makes a subconscious
calculation of the two:
monetary income + psychic income = total income
When available in reasonable quantities, psychic income helpsthe design professional see a clear path toward advancement and
satisfaction. Most designers are able to make rational decisions
about the trade-off between professional satisfaction and
economic reward. Ultimately, most design professionals willchoose the option that provides the highest total income.
8/2/2019 Compensation Session 1 Ppt
10/24
How to create incentive plans that are in
line with your corporate strategy?
Incentive compensation plans are designed to motivate sales and
service professionals to achieve goals and strive for excellence. But the
disturbing truth is that these same compensation plans are often in
opposition to the corporate strategy and CRM initiative. The effect isthat employees willlose sight of what's important: their customers.Compensation is the first litmus test for a company's seriousness about
the customer.
Pay for the Results You Want
Share Ownership
Keep It Simple and Up-to-Date
8/2/2019 Compensation Session 1 Ppt
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Have You Selected the Right
Compensation Plan?
Getting your compensation plan to align with corporate CRM goals
also means implementing the right plan. Here are four types ofvariable compensation plans from Compensating the different types of
Industry:
-Gain sharing
- Reward employees for achieving pre-established goals
- Management bonusplans- Tie compensation plans with performance
8/2/2019 Compensation Session 1 Ppt
12/24
HR-2010,
INNOVATEOR
STAGNATE!
8/2/2019 Compensation Session 1 Ppt
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Engagement and innovation are the hallmarks of all
successful organizations. Continually engaging yourworkforce will yieldgreater productivity, less turnover and
significant contributions to the organization.
Types of Innovative Compensation Practices
Innovative compensation practices encompass cash compensation
and recognition plans. The following are examples of innovative
cash compensation or recognition plan options .
a)Individual incentives
b)Team or group incentives
c)Bonuses
d)Spot awards
e)Special cash recognition
f)Special non cash recognition
g)Company Owned Life Insurance (COLI)
8/2/2019 Compensation Session 1 Ppt
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ISSUES1. Create a plan that can be flexible to the needs of the college.
2. A plan that is nurturing to employees of longevity.
3. A plan that can recognize individual and team performance.
4. A plan that creates incentive for higher and/or additionalperformance.
5. A plan that is flexible with work schedules and work places.6. A plan that rewards special qualifications and requirements.
7. A plan that encourages advancement.
8. A plan that doesn't just follow the rules, but can be a leader in
compensation plans.
8/2/2019 Compensation Session 1 Ppt
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SUGGESTED ACTIONS
a)Pay bonuses for job performances.b) Budget a lump sum for a team function and divide it
among members.
c) Include all employee groups in a compensation plan(i.e. supplemental).
d) Offer more flexible work schedules and work places.
e)A broader schedule may give better average for hours.
8/2/2019 Compensation Session 1 Ppt
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THE BEST LAID COMPENSATION PLANS...
Compensation plans come in a million varieties - and each one's a disaster
waiting to happen.
In one way, compensation plans are the hammer of the employees motivational
toolkit - almost every company uses them to build revenues and reward
excellence.
But unlike the implements that hang from the average handyman's belt,
commission plans come in millions of shapes and sizes.
Instead of picking what you need from the shelf at Home Depot, you're expected
to work the millions of combinations and permutations into a compensation plan
of your own which is new, unique, and a disaster waiting to happen.Countless compensation structures fail despite the best intentions of business
owners.
Many plans are too complicated to be properly understood or effectively
implemented.
More fail when HR Managers don't explain their plans properly.
8/2/2019 Compensation Session 1 Ppt
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The result:
Everyone comes up with their own interpretation of the rules,
and forms a unique opinion of which compensation they share.
Before you know it, inside work is battling with poor
performances and non achievement of targets, and you'recaught in the middle of the fray.
Job time is wasted, morale plummets and employees start to
resign.
That's no way to grow a company.
8/2/2019 Compensation Session 1 Ppt
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THERE HAS NEVER BEEN A COMPENSATION PLAN
ENCOUNTERED THAT ELIMINATED ALL CONFLICTS
But with careful design and reinforcement of cooperative relationships,you can have a commission plan that works.
Here are things to consider:
1. Keep your plan simple
The more complex the compensation plan, the easier it is to misunderstandor manipulate. For example, if your employees are assigned to geographic
territories, be sure to develop and communicate clear guidelines on how
they can communicate to counterparts that cut across territories, and how
they'll be rewarded for those sales.
2. Understand the plan and all its rules yourself
Review and edit the plan with the HR manager, Departmental Heads and
bring a third manager into the discussion for a different point of view.
Together, you should anticipate the questions your team will have and
prepare solid answers.
8/2/2019 Compensation Session 1 Ppt
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3)Make sure everybody knows and understands the rules
Introduce the plan a couple of weeks before you plan to implement it, giving
your team a few days to digest its contents.
Then hold a group meeting to discuss it.
Meet with each team to reinforce the plan and address questions and concerns
that wasnt raised before the group.
Ask your people about the plan to check for understanding.
8/2/2019 Compensation Session 1 Ppt
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4)Encourage team building to ward off conflict before it
startsHave competing peers (for instance, inside and outside the team) meet to establish
relationships and build trust.
The most successful teams always engage with their other partners.Bring teams together to discuss potentially problematic accounts.
5. The team will behave exactly according to how the plan
best rewards themConcentrating their efforts on what pays the most. If you have a specific objective(e.g. new projects, more repeat quality checks, higher levels of client service), then
you must reward the behaviors that pursue those goals.
8/2/2019 Compensation Session 1 Ppt
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THIS APPROACH OFFERS MANY BENEFITS TOCOMPANIES:
Increase profitability
Improve the financial standing of your business with compensation designs.
Supported by the software, company can accurately plan for profit.
Improve recruitingUsing unique motivational plans gives a competitive edge in attracting a high-
quality, experienced sales force.
Retain/attract top producers
8/2/2019 Compensation Session 1 Ppt
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Manage mergers & acquisitionsAnalyze another companys compensation plans to reveal their actualprofitability and weaknesses. Create new compensation plans for the
combined company.
Plan for the future
With Compensation Master, you gain a long-term business-planning toolthat helps you analyze the impact of changes to your business before you
implement them. An analysis that used to take months can now be done in
minutes, allowing you to explore endless possibilities. Building in specific
profit levels allows you to invest in the growth of your company and
achieve other business goals.
8/2/2019 Compensation Session 1 Ppt
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Manage mergers & acquisitions
Analyze another companys compensation plans to reveal their actualprofitability and weaknesses. Create new compensation plans for the
combined company.
Plan for the futureWith Compensation Master, you gain a long-term business-planning
tool that helps you analyze the impact of changes to your business
before you implement them. An analysis that used to take months can
now be done in minutes, allowing you to explore endless possibilities.
Building in specific profit levels allows you to invest in the growth of
your company and achieve other business goals.
8/2/2019 Compensation Session 1 Ppt
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Thank you