HUMAN RESOURCE MANAGEMENT ASSIGNMENT ON CASE STUDY OF

REMUNERATION AS AN ATTRACTION FACTOR NAME:

Question 1: Critically discuss the importance of organizational remuneration strategy. Developing a pay or remuneration policy is one of the most important decisions that an organisation will make. The remuneration policy ensures that an organisation is able to attract and retain the staff that it needs in order to do its business. In addition, it provides the basis on which to determine an appropriate rate of pay for each job in the organisation; a rate of pay that is fair, consistently applied across all jobs, and that is competitive with market trends. Compensation Strategy is one of the most important strategies in the HRM Function as it influences the costs of the organization and potential bad decision can lead to very serious damages to the organization. The compensation and benefits strategy is derived from the overall HRM Strategy and it has to be fully aligned. When the HRM Strategy sets the main objectives for the HRM Function, the compensation and benefits strategy has to follow. When the overall HRM Strategy states the low cost of services and employees, the compensation and benefits strategy cannot target the highest salaries at all levels. The compensation and benefits strategy sets the general rules for the compensation and benefits area in the organization and the owners and leaders of the area. In some organizations, the compensation and benefits department is just a support department for the line management. In other organizations the compensation and benefits manager is a very powerful employee in the organization with the right veto. The compensation and benefits strategy sets the position of the organization on the job market and defines the items in the total cash in the organization and their role. The role of different components of the compensation is very important as the role of the compensation components can differ. For example, the role of bonuses can be primarily in performance reward or the retention of the employees and the organization has to decide. The compensation and benefits strategy has to reflect the reality in the industry and the surrounding job market. The compensation strategy can set the wish to pay the lowest possible salaries, but the HRM Function and the organization have to respect the reality on the job market. The compensation strategy needs a strong support from the top management as it sets strong limits to the daily operation of the line management and they usually do not fully agree with all the aspects included in the compensation and benefits strategy.

It is important for an organisation to define how it is going to determine its remuneration or pay levels. This is referred to as a remuneration strategy. The Remuneration Strategy formally presents the organisations position on the following:_ The level at which salaries will be positioned in relation to the market; (this is sometimes called benchmarking) _ The basis on which salaries are structured (i.e. total cost of employment OR basic salary plus add-on benefits) _ Incentive schemes and other reward structures; _ Benefits _ Annual salary increases and how these are determined; Remuneration strategy is always linked to the overall business strategy. It plays a critical role in contributing towards an organisation achieving its business objectives. It does this by positioning the organisation so that it can procure the level of skills necessary to effectively meet its strategic objectives.

Question 2: Describe what types of incentives can be included in an organizational remuneration strategy. Incentives can be used as additional rewards for staff over and above their basic pay. The most widely used incentive is the annual bonus. This bonus becomes an incentive when it meets the following criteria: _ It is discretionary and therefore NOT guaranteed _ The value of the bonus is linked to the achievement of certain performance levels _ An assessment is required before the bonus can be awarded. Typically, a bonus of this nature has a maximum level and is calculated on a percentage of annual salary. Other sorts of incentives include: _ Once-off award for excellent performance _ Participation in exchange programmes, overseas visits, training programmes or other such activities. A key factor in the success of incentives is the extent to which the overall targets and potential rewards are communicated to the organisation. When talking compensation, one has to think of both direct and indirect compensation.

Direct compensation includes employee wages and salaries, incentives, bonuses, and commissions. Essentially, direct compensation is the money an employee receives in return for their effort and skills. Indirect compensation includes benefits supplied by the employer, and non-financial compensation including: employee recognition programs such as employee of the month, offering jobs that employees find personally rewarding and fulfilling, organizational support, a desirable work environment, and flexible working hours. These are the areas that many would not initially consider part of a compensation program but are highly valued by employees and as such are still very important to consider. Base pay is not the only means of compensating employees. In fact, other incentives are often what employees remember most and what sets you apart from other employers. By linking incentives to desired performance, you: _ Motivate employees to excel; _ Demonstrate that employee contributions are valued; and _ Draw a direct correlation between performance and financial reward. Commissions Commissions are the payment of a percentage of the proceeds of a sale, and are typically provided to sales staff. For example, automobile sales personnel are typically paid by commission; the more they sell the more money they will make. Bonuses Bonuses are provided to employees who meet a certain standard or quota, or to those who have completed a project. For example, a customer call-centre representative who answers more than 200 phone calls in a month might receive a cash bonus. Profit Sharing Profit sharing means sharing some of the business profits with employees, either in cash, shares, or as a deferred payment (e.g. placed in an RRSP or in trust for the future). Cost Reduction Incentives Cost reduction incentives are used to reward employees who come up with ways to reduce costs for the company. The savings should be used to fund the incentive amounts. Special Awards

Special awards can be provided to employees for many reasons. Employees can be given gifts for years of service or teamwork. Gifts can also be given for the most exceptional employee, on a regular basis, or on an ad hoc basis to recognize recent extra efforts. For example, many employers give employees a Christmas bonus.

Question 3: Describe by giving a case study a real world organizational remuneration strategy by evaluating its effectiveness.

The following information highlights McDonald's benefits for Staff (e.g., home office, division or region office) employees located in the United States. Highlights of McDonald's Corporation benefits for U.S. Restaurant Management and Crew employees can be found on the USA Careers site. McDonald's benefits program is designed to attract, retain and engage talented people who will deliver strong performance and help McDonald's achieve our business goals and objectives. For McDonald's Corporation U.S. employees at corporate, division and region offices, our many benefits are organized into four categories: Your Health and Protection Our health and insurance benefits

Medical Vision supplement plan Dental Flexible spending accounts Short and long term disability Employee and dependent life insurance Accidental death & dismemberment (AD&D) Travel and business travel accident insurance

Your Pay and Rewards Our compensation, reward and recognition programs

Base pay Incentive pay Company car program Recognition programs

Investing in Your Future Our savings, investment and financial management programs

Profit Sharing and Savings Plan (includes our 401(k) feature) MCDirect Shares Mc$ave Credit union Financial planning services

Helping Balance Your Work and Life Our work/life benefits

Vacation Holidays Anniversary Splash Sabbatical program Summer Hours Leave of absence Alternative Work Approach Adoption assistance Child care discount Educational assistance Matching gifts program Employee Resource Connection Auto and home insurance group discount program International Fitness Club Network

All in all, our benefits programs provide our McDonald's Corporation employees with a valuable and compelling package. We believe you'll find there's a lot to gain from being part of the McDonald's team. (Adapted from: http://www.aboutmcdonalds.com)

In my opinion, this organizational remuneration strategy is effective as McDonald's maintains the competitiveness of the base pay through an annual review of both external market data and internal peer data. In our corporate, division and region offices, McDonald's has a broad banding compensation system. Broad banding allows

for flexibility in terms of pay, movement and growth. Incentive pay provides the employees with the opportunity to earn competitive total compensation when performance meets and exceeds goals. For their corporate, division and region offices, the Target Incentive Plan (TIP) links employee performance with the performance of the business they support. TIP pays a bonus on top of employees' base salaries based on business performance and their individual performance. Long term incentives are granted to eligible employees to both reward and retain key employees who have shown sustained performance and can impact long-term value creation at McDonald's. The company car program provides eligible employees with a company car for both business and personal use. If eligible, employees can choose from a variety of vehicles, depending on their level within the company. The program covers the cost of insurance, maintenance and repair. Their recognition programs are designed to reward and recognize strong performers. For their corporate, division and region offices, these include the Presidents' Award (given to the top 1% of individual performers worldwide) and the Circle of Excellence Award (given to top teams worldwide to recognize their contributions for advancing our vision). Therefore, I think this company provides both direct and indirect incentives which can satisfy the employees job satisfaction.

Question 4: What other human resource functions must also be in place to enhance employees job satisfaction? Human resource management department responsibilities can be broadly classified by individual, organizational, and career areas. Individual management entails helping employees identify their strengths and weaknesses; correct their shortcomings; and make their best contribution to the enterprise. These duties are carried out through a variety of activities such as performance reviews, training, and testing. Organizational development, meanwhile, focuses on fostering a successful system that maximizes human (and other) resources as part of larger business strategies. This important duty also includes the creation and maintenance of a change program, which allows the organization to respond to evolving outside and internal influences. The third responsibility, career development, entails matching individuals with the most suitable jobs and career paths within the organization.

Human resource management functions are ideally positioned near the theoretic centre of the organization, with access to all areas of the business. Since the HRM department or manager is charged with managing the productivity and development of workers at all levels, human resource personnel should have access toand the support ofkey decision makers. In addition, the HRM department should be situated in such a way that it is able to effectively communicate with all areas of the company. Employee development is a human resource function in which employees are encouraged to increase their basic skills and obtain additional career development training. This development is often used to increase job satisfaction and retention. Employee development is commonly offered as an employee benefit and is generally used to recruit and retain highly skilled workers. While all of these aspects of employee development are vital to the human resource strategy, it is essential to consider each as a tool for overall organizational development.

Significance

In a rapidly changing world, employees and organizations alike must take steps to remain competitive. Employees must develop marketable skills to give themselves an edge in the job market, while organizations must develop employees to compete with other organizations within the same industry. Employee development is a fundamental duty of the effective manager. Managers and supervisors must encourage employees to pursue both personal career development goals and those learning goals identified by organizational leaders.

Strategy

While employee development is an essential element of the human resource strategy, it is important for a company's development programs to be in alignment with the organization's overall strategy. Organizational strategy generally originates at the executive level as an abstract strategy for aligning the day-to-day activities of the organization with the company's mission statement. Executives set specific and measurable goals which must be met by managers and supervisors at the functional level. It is vital for HR leaders to link human resource strategy to the overall organizational strategy to ensure employee development also promotes organizational development.

Assessment

It is essential to assess employee skills to determine where gaps exist. Before organizational leaders can set development goals, they must first assess the organization's core competencies to determine which skills are most important to the development of the organization as a whole. They must also determine where skills are lacking. For example, if the organization appears to be lacking strong leadership, then one goal might be to implement leadership development training. If managers identify issues with team dynamics, they may choose to implement team building programs to encourage employees to work together more effectively.

Return on Investment

Effective employee development strategies generate a positive return on investment, which is a common bottom-line goal of any organizational development strategy. The retention of highly skilled employees saves the organization a great deal of money which would otherwise be lost to high turnover. Highly developed employees also contribute to the overall effectiveness of the organization to compete with others within its industry. Additionally, organizations are better able to implement organizational developments when workers maintain the skills necessary to implement change.

In a nutshell, a good compensation plan can increase employee satisfaction and motivation, resulting in increased production and employee retention rates. This can have a spin-off effect, resulting in positive public relations and customer satisfaction. With the increase in competition, locally or globally, organizations must become more adaptable, resilient, agile, and customer-focused to succeed. And within this change in environment, the HR professional has to evolve to become a strategic partner, an employee sponsor or advocate, and a change mentor within the organization. In order to succeed, HR must be a business driven function with a thorough understanding of the organizations big picture and be able to influence key decisions and policies. Human Resource Management (HRM) is the term used to describe formal systems devised for the management of people within an organization.

These human resources responsibilities are generally divided into three major areas of management: staffing, employee compensation, and defining/designing work. Essentially, the purpose of HRM is to maximize the productivity of an organization by optimizing the effectiveness of its employees. This mandate is unlikely to change in any fundamental way, despite the ever-increasing pace of change in the business world.

(2501 words)

Bibliography
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