Master of Business Administration- MBA Semester 4 MU0015 Compensation Benefits - 4 Credits (Book ID:1336) Assignment Set- 1 (60 Marks)

Q1. Describe flexible workforce in detail. Thanks to the changing employment situation, today, the average workforce of an organisation is far different to that of a few years ago. More and more companies are going for different kinds of employee engagements like temporary staff, consultants, freelancers, contractors, sub-contractors and so on. This brings with it its own particular sets of advantages and disadvantages for organisations. Managing the flexible workforce of a company needs a different set of policies and strategies. Let us now discuss some of the key reasons or trends for the emergence of flexible workforce below: Retention of women employees: Over 60 % of women opt out of fulltime work within 6-8 years of employment, but 93% of these women want to return to work parttime. Companies that tap into this talent pool by accommodating their request for flexibility in working hours will create a competitive advantage in the labour market. Retirement of baby boomers: Companies in certain sectors will face a significant skilled labour shortage with a huge number of experienced people eligible for retirement in the next ten years. Many of these baby boomer (people born between 1945 and 1965) employees, however, would prefer working in a flexible capacity rather than going for retirement. Many companies would prefer to retain them on flexi-hours engagement, as they prove to be highly beneficial, especially in the absence of a proper knowledge management system. The Retention of the voluntary workforce: In certain high-tech sectors, many highly skilled employees no longer have to work as they would have earned and saved enough for a life time and are leaving because they are unhappy with a lack of worklife balance. Companies are ready to accommodate their need for flexibility in working hours rather than losing out on highly skilled workforce. Challenges of global teams: Today, due to globalization, more and more people are required to work continuously in order to communicate and collaborate with colleagues around the world. Due to this, people are experiencing a feeling of burnout and employers have no option but think beyond 9 to 5 and implement flexible schedules to accommodate these challenging logistics. Let us now discuss some of the different types of work arrangements that accommodate a flexible work force below: Job sharing: Here, the full time job is split between two co-workers and benefits are given in proportion based on the number of hours put in by each employee. Daily flexible choice: In this the log-in and log-out time may vary daily. Open flexible choice: In this the employees can choose the total number of hours required to complete the specific task. Compressed week choice: Here, employees have a choice to work for less than five days in a week. Comp-off: In this, the employees can extend their timings on busy days and use that later for compensatory time off. After discussing the different types of work arrangement that accommodate a flexible work force, let us now discuss the types of locations: Satellite options: These are remote work centres like satellite work centres which are provided by the employers. Telecommuting: Employees work from home for a few days in a week via telecommunications and then work out of office on the remaining days. Teleworking: Employees work from home on all the days of the week via telecommunications. This flexi-time

arrangement has a lot of benefits for both the employers and the employees. The benefits for the employees are: Provides an opportunity for workers who are disabled. Working parents can meet

absenteeism. Improves employee job satisfaction, job performance and work quality. Reduces costs related to environmental requirements, time, space, employee safety, relocation of the employees, and productivity. Helps in retention of voluntary workforce, women and baby boomers. Companies can terminate contingent workers services more easily. With respect to compensation and benefits paid to the flexible workforce, most companies pay an hourly wage, which is fixed on the basis of the complexity of work as well as the skill sets of the employee. No amount of paid leave, insurance and legally required benefits like gratuity and retirement benefits are paid.

Q2. Define internal equity and explain its importance. American capitalist J.P. Morgan is reputed to have had a rule that he would not invest in a company whose CEO was paid more than 50% above the executives at the next level. He reasoned that, if the CEO was paid more, he wouldn't have a team but only courtiers. One corrective approach for addressing excessive compensation that we like is what we call the "internal pay equity check" following the Dupont and Intel models of checking for "internal pay equity" at various levels within a company to ensure that the CEO's compensation has not gotten out of line within the company. Compensation committees should direct their HR people to provide a comparison chart that goes back to the 1980s (when the gaps began to get out of line) comparing the gaps in compensation levels within the company between the CEO and NEOs and senior and mid-level executives, down to the rank and file (and including all components of compensation, e.g., SERPs and perks and accumulated option and restricted stock gains, etc.) as a framework to bring the CEO's (and, in some cases, NEOs') total compensation back in line. - Why implement it: Jeff Immelt and other CEOs are now speaking out for more boards to implement internal pay equity for two key reasons: (1) restore fairness internally and to address growing internal disaffection and disconnect between the CEO and a company's senior managers and (2) as an important benchmark to avoid excesses, which is why ISS guidelines were recently revised to focus on "internal pay equity disparity." Regarding excesses, many boards have been lulled by data and surveys into assuming that their CEO's compensation is "in line." An internal pay equity analysis should reveal whether a CEO's compensation has gotten out of line internally, notwithstanding the external data and surveys (which typically only compare each pay element one at a time, instead of taking into consideration total compensation). - How to use it: By conducting an internal pay equity analysis, a company can see whether - and where - its CEO's compensation has gotten out of line. At many companies, a quick glance at the cash component may give the impression that the ratios are not out of line and that a 1.5 or 2x ratio between the CEO and, say, the CFO exists. This is why it is so important to check against all pay elements. At many companies, the two components that will need an adjustment are the equity component and the post-employment provisions (followed next by perks). At a number of companies, it may also be necessary to focus on amounts accumulated from past grants or to be earned from outstanding incentives, which can help uncover additional ongoing inequities or unintended amounts/outcomes. - What is the correct ratio: Companies will have different structures and cultures, so one shoe may not fit all. (J. Pierpont Morgan used a 1.5x ratio as the test for companies he would invest in.) A key reason for conducting an historical internal pay equity analysis -going back several years - is to see what a company's ratios were before they started getting out of lineand to ascertain what events or elements may have gotten the company off track. For some companies, this may require going back as long as 20 years. This historic analysis can help a board determine what the proper ratio should be for a particular CEO.

- What is the correct amount: Many boards grapple with the question: "how much?" Internal pay equity provides an objective way to address that difficult question. For example, if a company has determined that the proper ratio between its CEO's total compensation and the CFO's is 2x, but in fact, when adding in the equity and other components, the CEO's compensation is above 2x - the board will now have an objective "benchmark" to bring the CEO's compensation back in line.

Q3. What are the major issues related to repatriation? Repatriation (from Late Latin repatriare) is the process of returning a person back to one's place of origin or citizenship. This includes the process of returning refugees or soldiersto their place of origin following a war. The term may also refer to the process of converting a foreign currency into the currency of one's own country. The forced return of a person to a country where he faces persecution is more specifically known as refoulement. The term repatriation refers to bringing the employees who are on an international assignment back to the home country. It is very important to manage repatriation of employees in a very careful way. A poorly managed repatriation can lead to a feeling of frustration and cynicism in the employees. These feelings can be worse than the culture shock experienced in the first weeks of the assignment. It requires transparency in repatriation policy, sharing information on the career progression path, degree and support from the organisation during the international tenure and so on. Many organisations develop and share documented guidelines with respect to overseas assignment, so that the employees understand the rules and regulations and also know what to expect. Expatriate managers often return to the home office with a wealth of experience and perspectives. Yet, poor repatriation processes are blamed for underutilizing talent, losing human capital, and discouraging skilled managers from accepting overseas assignments (Gregersen and Black, 1995). Often the impact of repatriation for the employee is far greater than that of the original move to the host location. The move abroad is usually exciting, involving a promotion or at the very least, an increase in peer status. Also, the day to day impact of life in the new culture is more keenly felt by the spouse and children, who interact with it on a far more personal basis. Moreover, the employee will be chosen for a particular skill set, which are generally appreciated by the new team as an asset. As the project comes to an end, the expatriate starts the closure process of the post, probably handing over to a locally based team or manager. At this point, home country HR should be back in touch with the employee, to start the career planning for the home move. However, most companies provide no post assignment guarantees, and this has a dual impact on the employee. Firstly, they will feel deeply insecure since they may have taken their family away from extended family and friends, interrupted education programmes and careers, and for what? To return home with no job? Another issue is the change in living standards. While settling down in a foreign country, they would have been offered financial incentives for the family to relocate from generous housing allowances to the payment of school fees. On returning home, these are taken away and the lifestyle that the family has become used to is radically reduced. This is particularly a factor for Europeans coming home from the USA, where living standards are very high in comparison with the cost of living in most European cities. It is the children of expatriates that the impact can be the most pronounced, and the most dramatic, especially for teenagers caught between school systems, deep friendships and hormonal angst! Where the assignment has been a long one, there is the risk of the child becoming a Third Culture Kid far more familiar with the host culture than the home one. For them the return is a far greater challenge, as they are already at home and will be going somewhere completely foreign. Not only will they face a profound culture shock, they will also struggle with a sense of loss of identity as they leave their friends and peers behind.

Q4. What are the factors to be taken into account to ensure an optimum compensation package for executives? There are a lot of factors to be taken into account to ensure an optimum compensation package for executives. In this section, some of the important criteria are elaborated. Strategy criterion This refers to the correlation between the organizational strategy and the performance of its executives. The difficult work is to come out with a model which balances between organizational strategies and employee performance. One of the biggest expenses for an organization could be the rising cost of employee compensation. On the other side, it cannot be neglected because the employees performance is directly related to compensation. Therefore, some of the important steps to be taken into account are Creating incentives based on the product life cycle. Relating compensation to organizational strategies. Following a simple compensation strategy. Role criterion Hierarchical positions and organizational roles have a contributing effect on executive compensation design. Executives act as figureheads, and hence they should be compensated more than others in the lower rungs. However, organizations are now experimenting with structures to respond to the changing environment. It may be essential at times to sacrifice the traditional hierarchical structure. In such cases, executive compensation may not be aligned with the figurehead roles. Sometimes the pay is based on functional aspects and not on the role or position. For example, pilots are not paid a high compensation package for their position, but for their functional aspects. Therefore, the roles and responsibilities of the job is an important aspect in deciding the executive compensation. Behavior criterion The actions and the processes followed by executives while performing their jobs reveal their behaviour. This criterion is associated with the monitoring mechanism, and executives usually try and do a subjective analysis of the business decisions. Hence executive compensation based on behaviour criterion is quite sensible. However, executive behaviour is difficult to measure and all the aspects of the observed behaviour cannot be expected to meet a specific outcome. Hence, behaviour criterion has not received much attention from the corporate world. Size There is a general opinion that the size of an organization plays the most influencing role while designing executive compensation, while on the contrary, it is not. It is the performance of the organisation which is the most important criterion which influences executive pay package. Market The marginal productivity theory of Roberts (1956) argues that a market forces, that is, supply and demand for executive talent determine executive pay. This theory considers the services of executives like any other input for running a business operation. The theory argues that the value

of the input (executive compensation) is determined by the intersection of supply and demand in the labor market. Peer compensation The social comparison theory (OReilly et al. 1988) assumes that the compensation of selected peers plays a role in designing executive pay. Often board members of an organization consider themselves as a referral point in their executive pay recommendations

Q5. How does compensation effect employee satisfaction? Not much, according to a meta-analytic study of 92 separate studies recently published in the Journal of Vocational Behavior (Judge, T.A., et. al. 2010. The relationship between pay and job satisfaction: A meta-analysis of the literature. 77: 157-167.) The authors concluded: level of pay had little relation to either job or pay satisfaction. This indicates that within an organization, those who make more money are little more satisfied than those who make considerably less. Moreover, relatively well paid samples of individuals are only trivially more satisfied than relatively poorly paid samplesThe results of this review the first quantitative review to appear in the literature suggests that earnings are only weakly satisfying to individuals even when they confine their satisfaction to an evaluation of their pay.(p. 162) Wow. For employees, these findings suggest that if you want a good job (one you are satisfied with), then pay should not be at the top of your shopping list. Other things like interesting and autonomous work and leadership that is more relational than transactional are better predictors of job satisfaction. For employers, the authors suggest three important implications (p. 163): 1. Dont mistake satisfaction with motivation. Pay can be used to motivate workers, even if it cannot be used to satisfy them. 2. Having a satisfied workforce is important, but being a pay leader, by itself, is not a good strategy for improving the job satisfaction of your workforce. Look to other things like better supervision, a better work environment, and jobs designed to be engaging. 3. A policy of high pay dispersion does make sense if the most highly paid workers are the ones you want to retain. High pay is potentially satisfying to the extent that an individual worker looks at her/his colleagues that are paid at or above market levels and perceives a significant difference. Be careful with number three. If you are going to adopt such a policy, make sure the requirements for achieving significantly higher pay are unambiguous, available to all, and consistently applied. Nothing will poison a satisfied workforce faster than the perception of unfair and disinterested management practices.

Q6. Ms.Deepa Mehra is the VP-HR of Induslink Network. She is assigned the task of finding a new CEO for the company and fixing the compensation. What are the trends that she will have to look into before finalizing the compensation package for the CEO? Base Salary & Benefits: An executives compensation package is usually built around a base salary, the amount of which will depend on the company, the industry and the economy. A well-drafted executive agreement spells out the details of salary and medical benefits, along with corporate expense and travel policies.

Bonuses: A pay for performance approach can motivate leaders of operating groups or divisions within the company. However, any bonus policy should be clearly communicated and reflect the actual method of bonus determination: for example, if bonuses are reserved for senior management only and awarded at the sole discretion or whim of the Ceo, then implying that all employees will be bonused on quarterly sales targets will lead to confusion and resentment. wellarticulated policies can help avoid any misunderstandings.

Equity & Stock-Options: equity refers to an ownership stake in the company, whereas a stockoption is an opportunity to buy shares in the company at some later date at a pre-determined price. Compensation based on equity or stock- options encourages executives to take a personal financial interest in the long-term growth of the company. executives will be motivated to build the company to the extent they are personally invested as part owners. while this form of compensation is not for every company, it can be a useful tool to attract and retain talent. Companies should make a distinction between equity ownership and stock-options, and should be mindful of securities regulations and tax issues. Consider a plan that addresses both short and long-term incentives, and, if stock-options are appropriate, addresses vesting periods, exercise periods and option pricing. one more important point: once someone is a shareholder in your company, it can be difficult to remove them as a shareholder, so make sure the decision to offer equity or stock-options is carefully considered and discussed with your advisors.

Employment Issues: independent directors may sit on the board without being employees, but executives at the operating level are typically full-time employees of the company. A carefullydrafted executive employment agreement often addresses salary and bonus compensation, employment policies, termination provisions, confidentiality, non- competition, and nonsolicitation.

duties of directors and Officers: Sitting on a board of directors is not about cigars and woodpaneled rooms anymore. the task has become increasingly complicated and involved. directors tend to committees, read reports, and become active advisors. with this authority comes a number of important duties: the duty to act honestly, in good faith, and in the organizations best interest. the corporations failure to abide by certain legal obligations including deducting and remitting employee source deductions, environmental damages, securities infractions, and in some cases intellectual property infringement can lead to personal liability for directors. ignorance is not a defense - so directors and officers need to be actively informed. Directors and officers also owe special fiduciary duties to the company, including the duty to avoid being in conflict of interest with the company. A directors indemnity and d&o insurance can help mitigate some of these risks.

Intellectual property Issues: what would you do if the VP of Sales walked out the door with trade secrets such as customer lists, access to business plans, and pricing margins: all of which would be valuable to competitors? the ownership of inventions and trade-secrets is an important consideration for all businesses, not just technology companies. Both executives and their companies need to turn their minds to iP issues such as confidentiality, invention assignment and trade-secret protection protocols. intellectual property infringement by the company can also tag directors with personal liability.

corporate Ethics: Consider the case of an executive who accepts a free five-star vacation from a vendor, and then concludes a major purchase from that vendor. Even if there was no conflict, the perceived conflict itself can be detrimental to both the organization and the executive, as well as the relationship with the vendor. Carefully-drafted conflict of interest and corporate ethics policies address issues of hospitality and corporate gifts, and provide protocols for directors in disclosing and managing conflicts.

Say on pay: Say on Pay refers to shareholder approval of executive compensation. the Canadian Coalition for Good Governance published an updated Say on Pay policy for public companies and in 2010 a number of Canadian public companies began conducting such votes. the current trend is to permit shareholders to play an oversight role on the companys general approach to executive compensation; however, the specific details of compensation packages are left to the boards determination.

Master of Business Administration- MBA Semester 4 MU0015 Compensation Benefits - 4 Credits (Book ID:1336) Assignment Set- 2 (60 Marks)

Q1. What is CTC? What are the components of CTC? The Cost to Company refers to the total expenditure a company would have to incur to employ you. It includes monetary and non-monetary benefits, such as monthly pay, training costs, accommodation, telephone, medical reimbursements or other expenses, borne by the company to keep you employed. The total CTC as need not be the actual salary in hand at the end of the month. It is simply a sum of various components put together. Components of CTC Companies, offer various attractive components in the CTC to retain and boost the morale of the employees. Where some salary components are fully taxable some are fully tax-exempt. The composition of your CTC and a few of its components could be grouped as below. 1) Fixed Salary This is the major part of your CTC and forms part of your monthly take home. It commonly consists of: Basic Salary: The actual pay you receive for rendering services to the company. This is a taxable amount. Dearness Allowance: A taxable amount, this is paid to compensate for the rising cost of living. House Rent Allowance (or HRA): Paid to meet expenses of renting a house. The least of the following is exempt from tax. Actual HRA received 50% of salary (basic + DA) if residing in a metropolitan city, or else 40% The amount by which rent exceeds 1/10th of salary (basic + DA) Conveyance Allowance: Paid for daily commute expenses. Up to an amount of Rs 800 per month is exempt from tax. 2) Reimbursements - This is the portion of your CTC, paid as reimbursements through billed claims. Meal coupons: Many companies provide their employees with subsidized meal coupons in their cafeterias. Such costs incurred by companies in the form of subsidies are included in the CTC. Meal coupons are tax exempt provided it is not in the form of cash. Mobile/Telephone Bills: Telephone or mobile expenditure up to a certain limit is reimbursed by many companies through a billed claim, and is a taxable amount. Medical Reimbursements: Paid either monthly or yearly, for medicines and medical treatment. The entire amount is taxable. However, up to Rs 15,000 could be tax exempt, if bills are produced. 3) Retirement Benefits - This is available to you only on retirement or resignation. Provident Fund: Employers contribute an equal 12% to the provident fund account. This

employers contribution though received only on retirement or resignation, is an expense incurred by the company every month and thus is included in the CTC. Gratuity: Companies manage gratuity through a fund maintained by an insurance company. The payment towards the gratuity annually is sometimes shown in CTC. 4) Other Benefits and Perks Leave Travel Allowance: It is the cost of travel anywhere in India for employees on leave. Tax exemption if allowed twice in a block of four calendar years. Medical allowance: Some companies offer medical care through health facilities for employees and their families. The cost of providing this benefit to the employee could also form part of CTC. Contribution to Insurance and Pension: Premiums paid by companies on behalf of employees for health, life insurance and Employees Pension Scheme, could form a part of the CTC. Miscellaneous Benefits: Other perks which companies include under CTC could be electricity, servant, furnishings, credit cards and housing. 5) Bonus: This is the benefit paid on satisfactory work performance for employee motivation. Though this amount is not assured to the employee, most companies include the maximum amount that can be paid as bonus, to the CTC. The two types of bonuses that are normally paid out are: Fixed Annual Bonus: Paid on the basis of employee performance, either monthly or in most cases annually, it is a fully taxable amount. Productivity Linked Variable Bonus: Complete bonus amount is paid only on 100% achievement of target, nevertheless it still is included as part of your CTC.

Q2. What are the elements of compensation? The primary elements of a compensation package are: i. Base Pay: Base Pay is the fixed rate of compensation that an employee receives for performing the standard duties and assignments of a job. Employers need to ensure that base-pay programs are designed to reveal market practices within their identified competitor group. To achieve this organisations must first identify their competitive market. This can be achieved by considering different factors, including the nature of the industry, geographic location, total employment and annual revenue. Next, they need to conduct an assessment of market pay practices for similar jobs within the recognized competitor group. This assessment should involve the duties, skills, and impact levels of each job evaluated that is, each job of similar size and scope. Then a pay structure for managing the competitive base-pay levels for the jobs throughout the organization should be developed. Pay structues typically consists of series of pay ranges or bands that reveal competitive rates of pay for specific jobs, as well as allowing room for salary growth. Jobs of similar value from both the market point of view and an internal point of view are together. Then a competitive pay range is developed around the market rates for the particular jobs. ii. Variable Pay: Performance based variable pay continues to achieve momentum as a more successful way to identify and reward employees performance. Also known as pay-perperformance, variable pay is popular in todays corporate world. By including percentage of variable pay in the compensation plan, organisations ensure that two people with different efficiency levels do not get the same benefits. By doing this the company rewards productivity and hardwork and motivates the under-performers to work hard. Once limited to senior management levels, the incentives and bonus plans are redesigned to reward the achievement of specific company or employee performance objectives. In a variable pay plan the size of award varies among the employees and from one performance period to another, based on levels of achievements measured, as well as against pre-established company and employee performance targets. Amounts are usually calculated as a percentage of base-pay depending on Job category and position. Rewards are normally paid in cash on an annual, semi-annual or quarterly basis depending on the plan design. Plan designs range from sales-commission types to individuals incentive or bonus plans or team awards. The main idea of these programs is to reward innovation and hard work and to discourage mediocrity in performance. iii. Skill and Competency-based pay: Skill-based pay offers employees extra compensation when they have new skills especially recognized by the company as essential to achieve a competitive advantage. Skill-based pay can be particularly useful for employees who like their current jobs are looking for new challenges. Competency-based pay is more widespread than skill-based pay because the criteria cover not only measurable skills but also knowledge, performance behaviours and personal attributes. It helps out employees to grow in the company and helps them to close the knowledge gaps needed for creative moves. iv. Long-term incentive compensation: Long-term incentive compensation vehicles, such as stock-options plans and other deferred-compensation plans, which are not usually to reward performance, are achieving plans appreciate employees based on company performance over a long term that is typically three to five years. Stock-option plans are common form of long-term

compensation at public organisations. In most private companies, incentives that reflect stock plans are used for key employees. Long-term compensation plans can be valuable preservation tools for the success of an organization. They help to focus on driving and improving the key employees to achieve the financial performance of the company over a longer term.

Q3. Describe Mintzberg 5 Ps of strategy. Management expert, Henry Mintzberg, argued that it's really hard to get strategy right. To help us think about it in more depth, he developed his 5 Ps of Strategy five different definitions of (or approaches to) developing strategy. About the 5 Ps Mintzberg first wrote about the 5 Ps of Strategy in 1987. Each of the 5 Ps is a different approach to strategy. They are: 1. Plan. 2. Ploy. 3. Pattern. 4. Position. 5. Perspective. By understanding each P, you can develop a robust business strategy that takes full advantage of your organization's strengths and capabilities. In this article, we'll explore the 5 Ps in more detail, and we'll look at tools that you can use in each area. 1. Strategy as a Plan Planning is something that many managers are happy with, and it's something that comes naturally to us. As such, this is the default, automatic approach that we adopt brainstorming options and planning how to deliver them. This is fine, and planning is an essential part of the strategy formulation process. Our articles on PEST Analysis, SWOT Analysis and Brainstorming help you think about and identify opportunities; the article on practical business planning looks at the planning process in more detail; and our sections on change management andproject management teach the skills you need to deliver the strategic plan in detail. The problem with planning, however, is that it's not enough on its own. This is where the other four Ps come into play. 2. Strategy as Ploy Mintzberg says that getting the better of competitors, by plotting to disrupt, dissuade, discourage, or otherwise influence them, can be part of a strategy. This is where strategy can be a ploy, as well as a plan. For example, a grocery chain might threaten to expand a store, so that a competitor doesn't move into the same area; or a telecommunications company might buy up patents that a competitor could potentially use to launch a rival product. Here, techniques and tools such as the Futures Wheel, Impact Analysis andScenario Analysis can help you explore the possible future scenarios in which competition will occur. Our article on Game Theory then gives you powerful tools for mapping out how the competitive "game" is likely to unfold, so that you can set yourself up to win it. 3. Strategy as Pattern Strategic plans and ploys are both deliberate exercises. Sometimes, however, strategy emerges from past organizational behavior. Rather than being an intentional choice, a consistent and successful way of doing business can develop into a strategy.

For instance, imagine a manager who makes decisions that further enhance an already highly responsive customer support process. Despite not deliberately choosing to build a strategic advantage, his pattern of actions nevertheless creates one. To use this element of the 5 Ps, take note of the patterns you see in your team and organization. Then, ask yourself whether these patterns have become an implicit part of your strategy; and think about the impact these patterns should have on how you approach strategic planning. Tools such as USP Analysis and Core Competence Analysis can help you with this. A related tool, VRIO Analysis, can help you explore resources and assets (rather than patterns) that you should focus on when thinking about strategy. 4. Strategy as Position "Position" is another way to define strategy - that is, how you decide to position yourself in the marketplace. In this way, strategy helps you explore the fit between your organization and your environment, and it helps you develop a sustainablecompetitive advantage. For example, your strategy might include developing a niche product to avoid competition, or choosing to position yourself amongst a variety of competitors, while looking for ways to differentiate your services. When you think about your strategic position, it helps to understand your organization's "bigger picture" in relation to external factors. To do this, use PEST Analysis, Porter's Diamond, and Porter's Five Forces to analyze your environment - these tools will show where you have a strong position, and where you may have issues. As with "Strategy as a Pattern," Core Competence Analysis, USP Analysis, andVRIO Analysis can help you craft a successful competitive position. You can also use SWOT Analysis to identify what you do well, and to uncover opportunities.

5. Strategy as Perspective The choices an organization makes about its strategy rely heavily on its culture just as patterns of behavior can emerge as strategy, patterns of thinking will shape an organization's perspective, and the things that it is able to do well. For instance, an organization that encourages risk-taking and innovation from employees might focus on coming up with innovative products as the main thrust behind its strategy. By contrast, an organization that emphasizes the reliable processing of data may follow a strategy of offering these services to other organizations under outsourcing arrangements. To get an insight into your organization's perspective, use cultural analysis tools like the Cultural Web, Deal and Kennedy's Cultural Model, and the Congruence Model.

Q4. How is employee benefit and labour market linked? Labour markets function through the contact of employees and employers. Labour economics looks at the providers of labour services (employees), the demanders of labour services (employers), and attempts to understand the resulting model of wages, employment, and income. In other words, from the labour market point of view, wages necessarily depends on the prevailing supply-demand conditions of the labour market. Earlier, the compensation management practices of Indian organisations focused on attracting, retaining, developing and compensation employees, not considering the labour market conditions. However, with the increase of economic activity and the subsequent increase in the competition between organisations, employee retention has taken the utmost priority. Moreover, globalisation has also contributed to the increased mobility of labour as talented and capable employees now change jobs more frequently, moving across the globe. Given the conditions, the demand and supply conditions in the labour market gain importance and organisations have to consider these factors while setting up the compensation policies. Designing compensation plans which keep pace with the demand and supply of labour is now becoming a corporate practice

Q5. What are the factors that have to be determined before preparing the salary structure? We can develop the pay structures of the employees and why is it necessary to develop a proper pay structure. Pay structure is the grouping of pay grades or pay bands. There can be more than one pay structure in a compensation plan. For instance, there may be one pay structure for service and maintenance positions, one for sales positions and one for managerial positions. Or, the organisation may have just one structure for all positions. The process of developing the pay structure deals with internal and external analysis to assess the compensation package for the specific job profile. As discussed in the previous unit, job description provides in-depth knowledge about the job profile and its worth. For more information on job description, refer to unit 4 Compensation Management and Job Design. Pay structure helps in analysing the employees role, value and status in the organisation. It also helps in the assessment of incentives. If the organisation is paying very less to employees, then it may lose valuable employees. If the organisation is paying high, then it may be unwisely spending company resources. The main goal of developing a pay structure is to manage and demonstrate an organisations compensation philosophy and to reflect and support the advancement of the companys culture. An effective pay structure also helps to attract and retain the efficient employees. An organisation's pay structure is a visible demonstration of its compensation philosophy and plan. Pay structure is a tool, which is developed logically and communicated effectively to make the employees more motivated towards the job. The following three factors have to be determined while developing a pay structure: The proper data for establishing the relative value of a particular job to the organisation. The proper pay range for a job with the defined value to the organisation. The value of each job position within the specified pay range. Once the above factors are determined, pay structures can be developed through the following steps: 1. Group the jobs with those that have a similar value in the organisation. 2. Measure these groups to find out the number of pay ranges needed to group the jobs on the basis of their value to the organisation. 3. Create a salary range that has a minimum point, a mid-point and a maximum point for amounts allotted within the range and determine the pay for each job grouping. An organisations compensation philosophy and pay strategy determines the approach that should be taken to allocate pay across job ranges. Factors to be considered are:

ment opinions. A successfully developed pay structure identifies career development in addition to promotion. It demonstrates and pays for the business results on which an organisation places value. An effective pay structure is worth the time and attention. It pays to get it right. How an organisation structures its base salary program is basically a matter of organisational philosophy, although marketplace practices are very essential to consider in highly competitive situations. In structuring this base pay program, several options are available: Organisations can use a single rate structure in which the employees performing similar jobs will receive the same pay rate. Organisations can use a tenure based approach which focuses on from how long an employee has been employed in a particular job. Organisations can also use a combination of a tenure-based plan and a merit-based plan. For example usually employees begin their job at a fixed rate, and then progress to higher rates during their first year based on the number of years spent in the job, then any additional pay increase is awarded only on the basis of performance. Organisations can use a pay system based on productivity. An example for this would be an employee who is paid only a sales commission. An increasingly popular option is some form of base pay with an incentive opportunity, either based on individual, team, unit, or company performance.

Q6. Mr.Senthil is the HR Manager of First Source Pvt. Ltd. He found that many of the employees have been doing the same work for a long period of time. He decided to enrich some of their jobs. List some of the strategies which can be used by Mr.Senthil to enrich jobs in organisations. Job enrichment is a way to motivate employees by giving them increased responsibility and variety in their jobs. Many employers traditionally believed that money was the only true motivating factor for employees and that if you wanted to get more work out of employees, offering them more money was the only way to do it. While that may be true for a small group of people, the majority of workers today like to work and to be appreciated for the work they do. Job enrichment allowing the employees to have more control in planning their work and deciding how the work should be accomplishedis one way to tap into the natural desire most employees have to do a good job, to be appreciated for their contributions to the company, and to feel more a part of the company team. Job enrichment has two separate dimensions which contribute to an employee's behavior at work. The first dimension, known as hygiene factors, involves the presence or absence of job dissatisfacters, such as wages, working environment, rules and regulations, and supervisors. When these factors are poor, work is dissatisfying and employees are not motivated. However, having positive hygiene factors does not cause employees to be motivated; it simply keeps them from being dissatisfied. The second dimension of Herzberg's theory refers to motivators, which are factors that satisfy higher-level needs such as recognition for doing a good job, achievement, and the opportunity for growth and responsibility. These motivators are what actually increase job satisfaction and performance. Job enrichment becomes an important strategy at this point because enriching employees' jobs can help meet some of their motivational needs. There are basically five areas that are believed to affect an individual employee's motivation and job performance: skill variety, task identity, task significance, autonomy, and feedback. Job enrichment seeks to find positive ways to address each of these areas and therefore improve employee motivation and personal satisfaction. Skill variety involves the number of different types of skills that are used to do a job. This area is important because using only one skill to do the same task repeatedly can be quite boring, typically causing the employee's productivity to decrease after a period of time. However, using a variety of skills in a job will tend to keep the employee more interested in the job and more motivated. One way businesses are focusing on this area is through job rotation, that is, moving employees from job to job within the company, thereby allowing employees a variety of tasks in their work and helping prevent boredom. While this process can be costly to the company because employees must be trained in several different areas, the cost tends to be balanced by the increase in morale and productivity. Job rotation also gives each employee the opportunity to see how the different jobs of a company fit together and gives the company more flexibility in covering tasks when workers are absent. However, while job rotation is a good way to enrich employees' jobs, it can also hinder performance: Having to know several different jobs in order to rotate, can prevent employees from becoming proficient at any of the jobs. Therefore, the advantages and disadvantages of job rotation as an enrichment strategy have to be carefully weighed.

Task identity is a matter of realizing a visible outcome from performing a task. Being able to see the end result of the work they do is an important motivator for employees. One way to make task identity clearer is through job enlargement, which means adding more tasks and responsibilities to an existing job. For example, instead of building just one component part of a humidifier, a team of employees builds the entire product from start to finish. When using job enlargement as an enrichment strategy, it is important that enlarging the job gives the employee more responsibility and more variety, not just more work. Task significance involves how important the task is to others in the company, which is important in showing employees how the work they do fits in with that done in the rest of the organization. If employees can see how their work affects others, it will be a motivator to do the best job they can. Many companies take new employees on a tour of the company and provide training sessions on how each part of the company works together with the other parts. In order to accept and handle responsibility, it is important that employees know how the various areas of the company work together; without this knowledge, it is very difficult for them to handle decision-making responsibilities. Putting employees from different areas of the company into planning teams can also help them see the significance of the tasks they perform. Autonomy involves the degree of freedom, independence, and decision-making ability the employee has in completing assigned tasks. Most people like to be given responsibility; it demonstrates trust and helps motivate employees to live up to that trust. Responsibility can also help speed up work processes by enabling the employee to make decisions without having to wait for management approval. Autonomy is a very important part of job enrichment because it gives the employee power and a feeling of importance. A type of job enrichment that restructures work to best match the employee to the job is job redesign. Job redesign can focus on combining existing jobs, forming work groups, and/or allowing closer contact between employees and individual suppliers or customers. The idea behind job redesign is to match employees with a job they like and are best qualified to perform. Self-managed teams are a type of job design whereby employees are grouped into teams and given certain guidelines to follow as well as goals to accomplishand then left alone to accomplish those goals. Self-managed teams demonstrate the company's faith in the employees and give employees a feeling of power and pride in the work they accomplish. Feedback describes how much and what type of information about job performance is received by the employee. It is one of the most important areas for motivation. Without feedback, employees have no way of knowing whether they are doing things correctly or incorrectly. Positive feedback helps to motivate employees by recognizing the efforts they have put into their work. While monetary rewards for doing a good job can be a strong incentive, sometimes saying "you did a really good job on that project" can mean just as much. Corrective feedback is also important because it lets employees know what areas need improvement There are many different types of job-enrichment activities and programs that companies can implement to encourage worker participation and enhance motivation. The team atmosphere is one way to enrich jobs. Grouping employees into teams and allowing the team the freedom to plan, make decisions, and accomplish their goals gives employees a feeling of importance and responsibility. It can also help employees come up with creative ideas on ways to improve work

activities by giving them the opportunity to work closely with others. Asking for and encouraging employees to give input on company strategies and plans is another way to enrich jobs. Often times employees have the best input because they are the ones actually performing the activity on a daily basis. Holding company award ceremonies can also help to enrich jobs and motivate employees by recognizing individual employees for their contributions to the company. The purpose of job enrichment is to improve the quality of an employee's job and therefore motivate the employee to accomplish more. However, in order for job enrichment to work, the employee has to desire and accept new ways of accomplishing tasks. Some employees lack the skills and knowledge required to perform enriched jobs, while others are quite happy doing routine jobs because they feel the current work situation is relatively stress-free. It is likely that these types of employees would not like job-enrichment activities and would not accept the new way of doing things. Therefore, asking for employee input and keeping communication lines open is essential to the success of job-enrichment programs.