Compensation Management

Elements of Reward Management

Chapter 2

Performance & Compensation Management by Shah M Saad Husain

 HUMAN RESOURCE MANAGEMENT
Employer/Organizational Objectives
Organizational Structure
Job Identification, Analysis & Design
Job Specification (Before Joining)

Job Description (After Joining)

Tasks, Activities, Responsibilities, Accountabilities
Power (Financial/Administrative)

Reporting Structure
Manpower Planning, Recruitment, Induction
Training & Development

Employee Objectives JOB Employer Objectives

Work (Scope & Depth) Growth in
Growth in Services
Goods & Services
Family & Self
Customer Satisfaction
Profession Employee Employer
EMPLOYER
EMPLOYEE Revenue Generation
Career Relationship
Profits
Security
Performance Return on Equity (ROE)
Social Status Compensation &
Management Expansion of Business
Rewards
Corporate Reputation

Performance Evaluation Salary

Increments Benefits
Bonus Facilities and Perks
Incentives Allowances
Career Development Professional, Career, Societal
Ultimate Potential Recognition
Internal + External (Mkt) Equity
Organizational Performance Management
Goals Performance
Mission Measures Results
Vision Objectives and
Values Strategies Competencies Success

Strategic Plan
Individual Performance Management

Training and
Performance development Individual
Expectations: Performance Results
SMART Goals Assessment and
Coaching Success
Competencies
Feedback Reward
Communication Corrective or
disciplinary
Performance & Compensation Management by Shah M Saad Husain action
PERFORMANCE MANAGEMENT PROCESS

Corporate Goal
Setting & Alignment

$
Rewards
Ratings Calibration
Goals Flow Down

Organization
Goals,
Final Review Priorities, Setting
Imperatives, Expectations
Behaviors
Development
Process

Perform, Monitor,
Feedback
Mid-Year
Review
Performance & Compensation Management by Shah M Saad Husain
 Achieving the Aims
Aims of reward management are achieved by developing
and implementing reward systems that
are founded on the basis of a reward
philosophy
operate in accordance with the principles of
distributive and natural justice
function fairly, equitably, consistently and
transparently
are aligned to the business strategy
fit the context and culture of the organization
are fit for the purpose and help to develop a high-
performance culture

Performance & Compensation Management by Shah M Saad Husain

 Reward Management

Ensures that the contribution of people to the

organization is recognized by both financial
and non-financial means

It is about the design, implementation and

maintenance of rewards systems (strategies,
policies and processes)

Overall objective is to reward people fairly,

equitably and consistently in accordance
with their value
Performance & Compensation Management by Shah M Saad Husain
 Aims of Reward Management

Reward people according to the value they create

Align reward practices with business goals and with
employee values and needs
Reward the right things to convey the right message
about what is important in terms of behaviors and
outcomes
Help to attract and retain high-quality people the
organization needs
Motivate people and obtain their engagement and
commitment
Develop a high-performance culture

Performance & Compensation Management by Shah M Saad Husain

Elements of a Reward System
 Elements of a Reward System

Starting point of the reward system

Identifies the business drivers and set out the business

goals

Drivers may include; high performance, profitability,

productivity, innovation, customer service, quality,
price/cost leadership, need to satisfy the stakeholders

Performance & Compensation Management by Shah M Saad Husain

 Elements of a Reward System

Flows from analysis of the business drivers

Critical question is how to support business drivers by

reward systems in order to achieve goals of the
business

Reward strategy defines long-term intentions; Pay

structure, contingent pay, employee benefits, steps to
increase engagement and commitment and adopting a
total reward approach

Performance & Compensation Management by Shah M Saad Husain

 Elements of a Reward System
;

Levels of pay

Achieving equal pay

Approaches to contingent pay

Use of job evaluation

Use of market surveys

Flexing benefits

Performance & Compensation Management by Shah M Saad Husain

 Elements of a Reward System

:
The amount of pay (fixed salary or wages) that
constitutes the rate of the job

It may vary with the grade of the job or level of skills

required

It is influence by external and internal relativities

Levels of pay may be determined by collective

bargaining

Performance & Compensation Management by Shah M Saad Husain

 Elements of a Reward System

Additional rewards related to performance, contribution,

skills or experience

May be added to the base pay, ie consolidated

Described as variable pay if not consolidated ( ie cash

bonuses)

Include pensions, sick pay, insurance cover, company

cars and a number of other perks

Performance & Compensation Management by Shah M Saad Husain

 Elements of a Reward System

Allowances are paid in addition to basic pay for special

circumstances (eg living in London) or features of
employment (eg working unsocial hours).

Main types of allowances are location allowances,

overtime payments, shift payments, working conditions
allowances and stand-by or call-out allowances

Consists of the value of all cash payments ( base pay,

contingent pay and allowances)

Performance & Compensation Management by Shah M Saad Husain

 Elements of a Reward System

Consists of the financial rewards represented by total

earnings plus total employee benefits

Performance & Compensation Management by Shah M Saad Husain

 Elements of a Reward System

A systematic process for defining the relative worth or

size of the jobs within an organization

Its purpose is to establish internal equity

It does not determine the level of pay directly

It can be analytical or non-analytical

Is based on the analysis of jobs or roles and leads to

the production of job descriptions and role profiles

Performance & Compensation Management by Shah M Saad Husain

 Elements of a Reward System

Is the process of identifying the rates of pay in the

labor market for comparable jobs

Its purpose is to establish external equity

Jobs maybe placed in a graded structure according to

their relative size and the pay is influence by market
rates

Pay ranges attached to grades provide scope for pay

progression based on performance, competence,
contribution or service

A spot rate structure may be used for all or some of the

jobs
Performance & Compensation Management by Shah M Saad Husain
Elements of a Reward System

Performance management processes;

Defines individual performance and contribution

expectations

Assesses performance against expectations

Provides regular constructive feedback

Results in agreed pay plans for performance

improvement, learning and personal development

Provides non-financial incentives

Informs contingent pay decisions

Performance & Compensation Management by Shah M Saad Husain
 Elements of a Reward System

Do not involve any direct payment and often arise from

work itself eg, achievement, autonomy, recognition,
scope to use and development skills, training, career
development opportunities and high-quality leadership

Is the combination of financial and non-financial

rewards available to employees

Performance & Compensation Management by Shah M Saad Husain

 ASSIGNMENT # 4

1. Select a business firm. Examine its industry

position, product mix, customer profile, SWOT,
etc.

2. Write its Business Objectives and Goals

3. List and describe the Drivers

4. Explain how you will design a Reward Strategy to

achieve the Goals of the Organization

Performance & Compensation Management by Shah M Saad Husain