Seven Layers Communication Hierarchy:

Hierarchical Levels at Telenor Pakistan:

Hierarchical Levels: There are seven hierarchical levels as the size of the organization approaches 2500 to 3000 employees. Roles and responsibilities are clearly defined at the time of joining the organization; employees are selected against defined criteria. Roles can be added later but employees have a fair idea about their job responsibilities from the beginning. Seven layers do not create communication or motivation problems due to the open culture. There are no instances of de-motivation though in certain areas like Customer Relationship Department or Customer Service Centre different customer queries and complaints can raise frustration levels. Managers in these departments intervene to solve problems. Whenever an employee has a new idea, he/she is encouraged to

approach the management and share it with them. Idea drop boxes are also placed at various locations where employees leave their suggestions. The Communications Department works out if the ideas can be implemented and then discusses them with the employees. There is also a formal platform at the group level known as SEED where innovation is encouraged and new ideas about revenue concepts and cost efficiency can be discussed. Employees are welcome to participate and submit their ideas. If the ideas handed in are feasible then they are implemented in the organization (at country level or global level, depending on the nature of the proposal). Employees are then rewarded financially for their helpful contributions.
37

Span of Control:
Span of Control is determined by the role and job responsibilities of managers. It varies from department to department. On average, the span of control is 4-5 people under a manager.

Integrating Mechanism:
Cross-functional teams are a major integrating mechanism. Further there are temporary project teams. No ad-hoc committees have been formed to date. Team-building is enhanced by Away Days when members of different divisions and departments take some days away from work to meet other geographically spread employees of Telenor. Sometimes the whole department goes away from work for 2-3 days to have fun. Employees get to know those with whom they have communicated before but not met in person. Formal team evaluation does not exist. Employees on teams, for instance finance teams, are rewarded individually.

Centralization and Decentralization:

Apart from STRATEGY, all other functions are de-centralized. People at Telenor Pakistan are motivated to take their responsibilities especially in cross functional projects. Managers in each department oversee that the employees take up their roles and duties and their performance is monitored accordingly. If an employee is loosing focus from his core job by taking added responsibilities, he/she is instructed to readjust his/her priorities.

Standardization and Mutual Adjustment:

At Telenor Pakistan, the level of standardization and mutual adjustment varies across functions. Generally strict obedience to rules is
38

not required as long as results are not affected. As long as individual responsibilities and deadlines are met, there are flexible hours of work. Work is important instead of the number of hours worked. Employees can select their work timings which can even be from afternoon to evening.

Instead of being bound by office hours, a sense of responsibility is inculcated in them to achieve self-assigned goals. This brings a sense of comfort in working in such organizational structure. Rules and procedures are present to control the behavior of employees and to facilitate smooth working of the organization. A level of standardization is required to be maintained in certain vital functions such as Budget Control. SOPs are documented in the case of the financial control or HR related policies. Genuine requests from external customers are taken into account by the CRO (Customer Relationship Officer) at Service Centers. The CRO does all he/she can or is possible within authority to process the request or complaint. If the customers request is beyond the authority of the CRO, then managers are there to aid the customer or provide some sort of nonmonetary compensation to appease him.

It and Empowerment:
The level of empowerment differs across departments and divisions, depending on the nature of work. It varies according to the style of management of functions; more empowerment in CRO and Sales and Marketing than in People Excellence. IT increases the level of empowerment. Within the network service of the Telenor in Pakistan, there is a (inter and intra net) portal system used to communicate information efficiently. An online HR MS System, H2H (Here to Help), is being used
39

internally. This locally built system was launched last year but is still not well integrated at present.

Conflict Resolution:
When different departments work together in an organization, their interests may differ due to functional and structural differences. Due to these variations, conflicts among departments are inevitable. The issues are not taken to the top management and there is no coordination post in the organization which can facilitate the departments to increase coordination with each other. Whenever a conflict arises among functions, the heads or managers from those functions sit together and discuss the source of conflict. They try to resolve all their differences amicably. There are always conflicts between the technical and commercial divisions which they mostly solve between themselves. If, however, a major issue arises which they are unable to resolve themselves then it is taken to a level higher. The management then discusses the reason for the conflict, addresses the concerns of both the parties and then arrives at a conclusion which is in the interest of all departments

Recruitment Process
Telenor, unlike other organizations, having unique online recruitment process. A candidate can only apply online for job, rather going and submitting the resume physically. Jobs are advertised on their website. Candidates have to fill in the online application form regarding their personal information. After submitting their personal information, their resumes are sent to HR department. The HR Department then forwards their resumes to recruitment department of HR, where their data base is collected and evaluated. The recruitment department makes a shortlist of candidates which are sent to their relevant department. The relevant department then evaluates the selected candidates and makes further shortlist of candidates. The list of these candidates is sent to the Head of Department, providing him with the information in detail of each selected candidates. Then the list of short listed candidates is sent to Head of Department for further analysis or interpretation. After sending list of short listed candidates to Head of Department, the interview schedule is prepared for the candidates. In their final comprehensive interview, the selected candidates are evaluated on the basis of their job knowledge and their personal skills. While analyzing their personal skills, the Telenor manages will make an overview on their academics and past experience regarding the relevant field. After conducting their interview, they rank the candidates on the basis of their job knowledge and personal skills which includes their academia, communication skills, past experience in relevant department and etc. After ranking they will offer the contract to the best suitable candidate. In this contract, they will mention the salary and are the terms
51

and conditions of the job. If the terms & conditions are acceptable or suitable for the candidate, he/she will join the job. Otherwise the company will go for the best possible alternative. In their recruitment process, the Telenor will first hire the employee for specific prohabitional period. If the company is satisfied with the performance of the candidate, they will turn the status of candidate as a permanent employee and he will become the part of Telenor Family

Recruitment Procedure

Advertisement

Job Requirement

HR Department

Database

Recruitment Department

News Paper Ads

Replacement Department

Department Head

Interview Schedule

Job Knowledge

Personality

Ranking the candidates

Offer to Selected candidates

Telenor Employee

In-depth Swot Analysis:

In order to find what are the strengths, weakness, opportunities and threats faced by telenor Pakistan. How can they increase their market share in Pakistan Cellular Industry? Following Is the SWOT Analysis of telenor Pakistan.

Strengths of Telenor:
Network Quality and design Superior Customer Care Financial Strength Excellent Coverage & Distribution Contract with Siemens & Nokia Brand Image of Quality Superior Product quality for customers Better Customer relationship than competitors Extra Features and services Committed And Efficient Staff Products innovations ongoing Good reputation among customers Good packages according to the target market Management is rational and understanding the situation Low Price VAS as Compared to the Competitors
54

Weakness Of Telenor:
Less time in market as compared to other cellular companies ,like mobilink. Less coverage as compared to the competitors like mobilink Less experienced employees than competitors Seth Organization Not able to capitalize on start

Oppurtunities Of Telenor :
A developing market Mergers joint ventures or strategic alliances Extension to overseas Low Cellular market penetration Decline of major competitors E-Commerce Usage Mobile Number Portability IMEI System Technologically better environment New Launches More customers on newer products introduced
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Threats Of Telenor :
Emerging companies in market Unstable political Conditions MNP Mobile Number Portablility Wireless Technology at Boom New companies entrance in the telecommunication market High Public Expectations Low Prices of competing brands Propagandas attacking

Bibliography :
www.google.com www.scribd.com www.ask.com www.telenor.com www.telenor.com.pk www.pta.gov.pk www.zong.com.pk www.wikipedia.com www.mobilinkgsm.com www.ufone.com www.ntcpk.com/paktel.htm www.waridtel.com/

management is also concerned with the interrelated processes of work, management, development and reward. It can become a powerful integrating force, ensure that these processes are linked together properly as a fundamental part of the human resource management approach which should be practiced by every manager in the organization (Armstrong, 1994). The organization has operated successful because of good performance management systems. The Performance Management is the fruit of an organizational structure, its teamwork, its employee motivation and its employee involvement. Teamwork Performance management is often treated as if it were just a matter between managers and the individuals reporting to them. But it can also enhance teamwork by asking teams to identify interdependencies and set team objectives and by getting their members jointly to review progress in

achieving them. Teamwork can also be enhanced by setting overlapping objectives for different members of a team (Armstrong, 1994, p. 27). In a team-based organization, the performance not only of the teams as a whole but also of their individual members needs to be managed and managed very well if tall performance (consistently competent, ethical, and motivated behavior that always produces the best results) is to be reached and sustained (Brumback, 2003). In most instances, when organizations say they want teams, what they really want is teamwork. That is, they want people within a work area to cooperate with one another, to make decisions together, and to work together toward a common goal or objective (Humphrey & Stokes, 2000). In the end teamwork will gain greater performance results because people are working together rather than independently of each other. There are a number of characteristics that are often observed when a group of individualsworks as a team: shared job duties, cross-over of skills, flexibility in substitution, desire to involve everyone, equal sacrifice and commitment, understood and supported overarching purpose. In order to be successful, the leaders need to encourage and support your frontline employees to work together, to be unified in purpose and action. The word synergy is often associated with teamwork, because as the people in a group develop an environment of giving and receiving and as they share ideas develop working together relationship, their combined action produces results that are greater than they could achieve if each were working alone (Humphrey & Stokes, 2000). The capability of a group reflects members effectiveness at using their skills and experience to accomplish the work in their area. Maturity reflects group members effectiveness at making decisions that consider work needs and employees needs and abilities and that are sound from a practical and business perspective. Maturity is not reflected by a group that makes decisions based on selfish desires or the most convenient solution. Finally, the drive of a group reflects members motivation and enthusiasm for learning and achieving greater performance results (Humphrey & Stokes, 2000). Teamwork is essential for competing in today's global arena, where individual performance is not as desirable as a high level of collective performance. In knowledge based enterprises, teams are the norm rather than the exception. A critical feature of team in our company is that employees at the management level have a significant degree of empowerment, or decision-making authority. Aside from the required technical proficiency to enhance teamwork within the organization Employee Motivation Motivation is one of the critical links between the organization and the individual. That link is expressed in productivity, satisfaction, and personal involvement. Motivation consists of avariety of forces that direct behavior toward a goal (Garrison & Bly, 1997). As the trend continues to shift toward self-managing teams, employees cannot be expected to turn into motivated self-managers overnight; they need to be given the proper tools through development and training programs. When employees appear to be unmotivated, managers will need to size up the leadership situation, identify and understand what is happening, and formulate a response. Knowledge about the theories of motivation, discussed in the previous section, should help managers identify and understand the motivational problems they face. In this section, possible methods to motivate employees are described. One reason these motivation methods are widely used is the fact that they have strong foundations in motivation theory and research. For example, empowering employees is based in part on self-efficacy namely, on the idea that people differ in their estimates of how they will perform on a task. Therefore, building their skills and self-confidence by empowering them should bolster their self-efficacy and thus their motivation. 1. Pay for Performance:Pay for performance is probably the first thing that comes to mind when most people think about motivating employees. Pay for performance refers to any compensation method that ties pay to the quantity or quality of work the person produces. Similarly, behavior

modification emphasizes that people will continue behavior that is rewarded, and pay for performance plans, of course, tie rewards directly to behavior (Sims). 2. . Recognition: Being recognized for a job well done and not necessarily just financially makes a lot of sense in terms of motivation theory. Immediate recognition can be a powerful reinforcer, for instance, and can provide some immediate outcomes to counterbalance the employees inputs or efforts. Recognition also underscores the performance-reward-expectancy link, and it helps appeal to and satisfy the need people have to achieve and be recognized for their achievement (Sims, 2002). 3.Empowering Employees: Today, organizations are increasingly empowering their work teams. Empowering does not just mean assigning broad responsibilities. Teams also need the training, skills, and tools to allow them to do their jobs, such as in consensus decision making. Firms like Saturn also make sure their managers actually let their people do their jobs as assigned (Sims, 2002). 4. Goal-Setting: Managers and employees need to understand each others goals. In addition, managers are responsible for helping employees in setting goals or objectives. With a clear understanding of explicit goals or objectives, managers and employees can work together to achieve specific outcomes. Several attributes of goals are especially important for improving performance: goal specificity, goal difficulty, and goal acceptance (Sims, 2002) Motivation is the force that drives employees towards a common objective. Employees are motivated with performance incentives, team spirits, achievement recognition, open line communication, respect, trust and involvement. Employee Involvement Today an increasing number of organizations see the potential advantages of having more frontline workers involved with growing the company. Although different companies may define employee involvement somewhat differently and use various means to obtain it, many employee involvement efforts involve the formation of natural work teams. As employee involvement efforts take on team like dynamics, supervisors must have the skills necessary to build and grow teams. Frontline leaders will recognize the difference between a group of people and a real team. They will actively grow their teams, understanding the stages every team will experience and knowing how to develop individuals into members of a high-performance work team (Humphrey & Stokes, 2000). Empowerment and Delegation Theoretical Framework The model as depicted in Figure 1 shows that performance is an outcome of both organizational and human activities but the most important contributing factor is human resources. Motivated staff is productive and can perform well. Therefore, performance management can satisfy a number of the fundamental aims of HRM, to achieve sustained high levels of performance from the organizations human resources; develop peopleto their full capacity and potential; establish an environment in which the latent potential of employees can be realized. Performance management is also concerned with the interrelated processes of work, management, development and reward. It can become a powerful integrating force, ensure that these processes are linked together properly as a fundamental part of the human resource management approach which should be practiced by every manager in the organization. Figure 1 Theoretical Framework
Corporate Performance Effectiveness

Performance Improvement

Team Effectiveness
Team grown in capacity Individual members learn

Employee Involvement
Empowerment / Delegation

Individual Motivation
Goal Setting/Performance Appraisal/ Reward System/
Coaching & Training

Research Methodology The research process is iterative. The processes of data collection, analysis and drawing and verifying conclusions are collapsed into one evolving, reduction process (Miles & Huberman, 1994) enabling insight into employee motivation. Data in this research consists of interviews, executive notes of interviews, questionnaires, organizational documents ofvarious types, researcher notes and observations. The researcher chose to record notes of all interviews which provide the best data for analysis. In this research, such data collection provided the best means of validating the information gathered and in facilitating ongoing reflection and assessment (Denzin and Lincoln 1994). The researcher was able to observe some limited, informal and formal conversations and meetings. While observation did not form an important part of the data collection, it did provide additional input. While interviews are typically classified as structured or unstructured, interviews in this research were semi-structured. These initial questions changed based on the interaction between the interviewees and the researcher, as well as based on the emergence of new ideas, and is an accepted qualitative methodological process (Yin 1989; Stauss and Corbin 1998). This investigation is designed as an action research conducted in the real situations. There are three stages in this research, 1) the diagnosis stage, 2) the ODI stage and 3) the evaluation stage. Phase I: Diagnosis Situation Analysis/ Assessment (Pre-ODI) - The diagnosed situation assessed here is the transition of Pasupat Realty Co., Ltd. to C.I.T. Property Consultants Co., Ltd. Human Resource Management is considered a priority. This research will analyze the current situation of the company. This research will also analyze the employees capabilities, competence and attitude.

Phase II: Identify, Develop & Implement ODI (ODI) - The research identified, developed and implemented the organization intervention which are appropriate for the company. The required interventions are in terms of teambuilding, Human development, goal setting, performance appraisal, adjusted reward systems, coaching and training Phase III: Monitor & Evaluate Desired/Expected Results (Post-ODI) - The interventions were closely monitored todetermine the level of employee involvement, employee motivation after the ODI. Its results would be analyzed and evaluated with job satisfaction, organizations growth and corporate performance effectiveness. In this research, there are 3 instrumental tools in the forms of questionnaires, interview and observations. The Questionnaire covered the following areas: Employee satisfaction survey; Organization Communication; Team work; Employee motivation; Employee involvement (Empowerment & delegation); and Employee performance Evaluation. A second important measurement technique was the individual or group interview. Interviews were the most widely used technique for collecting data in OD. They permit the interview to ask the respondent direct question. Further probing and clarification was, therefore, possible as the interview proceeds. The flexibility was invaluable for gaining private views and feelings about the organization and for exploring new issues that emerge during the interview. The researcher will observe by walking casually through a work area and looking around or by simply counting the occurrences of specific kinds of behaviours. Observations can range from complete participant observation, in which the researcher becomes a member of the group under study, to more detached observation, in which the observer is clearly not part of the group or situation itself and may use videotape and other methods to record behaviours (Cummings & Worley). The researcher did not use significance testing in the quantitative analysis. Reasons for this are that the issue of verification in qualitative research differs from the same issue in quantitative research. Consensus amongst qualitative researchers, however, remains elusive. For example, Denzin and Lincoln (1994), suggest trustworthiness and authenticity are more appropriate than reliability and validity, as understood in a positivistic sense. It is the credibility of sense-making that the researcherseeks. The philosopher, Popper, proposes that the aim of science is to find satisfactory explanations (Popper and Miller, 1985), and that these explanations need to meet a number of criteria, including the need for the explanations to properly relate to the matters they purport to explain, for the explanation to meet some minimum standards of truthfulness and for the explanation to be testable. Furthermore, the explanations are satisfactory when they cannot be shown to be false (Popper and Miller, 1985). In this sense verification is linked to falsifiability, and that this makes good science. Popper believes that a theory is falsified only if we discover a reproducible effect which refutes the theory (Popper and Miller, 1985). So, the action research undertaken in this thesis uses intervention to explain phenomena in ways acceptable to qualitative research scholars. Its construct validity is manifested via the multiple sources of evidence used to verify an explanation through the triangulation of data. In this case, it is reasonable to expect another researcher, working with the same set of data, would arrive at a similar explanation. Internal validity is manifested in the credibility and authenticity of what data arises from interviews, observations, records, questionnaires, etc., as these provide the truth value of the data collected. The researcher is concerned to establish that the account provided rings true (Miles and Huberman, 1994). Design/Development of ODIs As a result from Pre-ODI diagnosis, the company realized that at the individual level, some employees had less competency and poor performance. The ODI tools targeted for improvement are the goal setting, performance appraisal, reward systems, coaching and training, career planning and

development. The company expected Post ODI to provide higher effectiveness and better performance of individual employee. At department (team) level, there was less motivation and poor team working. The ODItools targeted for improvement were more employee involvement as a team, the goal setting, performance appraisal, reward systems, coaching and training. The company expected Post ODI to provide higher motivation and better team effectiveness. At the organizational level, the company realized the need to have all employees involvement which was resulted in strength and unity of the company. The Post ODI was expected to result in better corporate performance.

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What is Compensation Management

What is compensation management? What are its effects on an organization. Read on to get all your answers...

Compensation management is one of the most vital aspects of an organization. Ensuring that your top-performers are being paid well in today's competitive market ensures that there is no talent-drain from the organization. For a long time, human resource (HR) managers have been analyzing various reasons that make an employee give his 100% to the organization. Companies who have an edge over others in the market have now realized that an effective pay-structure ranks highly when it comes to retaining and recruiting employees. Compensation management, as the name suggests, implies having a compensation structure in which the employees who perform better are paid more than the average performing employees. This encourages top-performers to work harder and helps building a competitive atmosphere in the organization. There are numerous critics though, who feel that a compensation strategy to retain employees is a short term solution and an employee's relationship with a firm does not really mean only monetary gains. But, the critics do have to accept that companies which pay the highest, more often that not have the best people working for them. This was a brief introduction to what is compensation management. Before we know more about compensation management, let us take a look at the two types of compensation. Compensation Types Compensation is divided into two types, direct management and indirect management. Let us take a look at both of them one by one. Direct Compensation Direct compensation comprises the salary that is paid to the employees along with the other health benefits. These are all the benefits that form a part of your salary structure. These include the basic salary, house rent allowances, medical benefits, city allowances, conveyance, provident funds, etc. It also includes the bonuses, payments for holidays, etc. Indirect Compensation Indirect compensation can be thought of as the non-monetary benefits an employee gets from the organization. Rewards and recognitions, promotions, responsibility, etc., are some factors that induce confidence in the employees and motivate them to perform better. It also instills the faith in them that their good work is being recognized and they can boost their career opportunities if they continue to work harder. Importance of Compensation Management

As we have discussed above, compensation management is necessary to retain quality people. A good compensation management specialist helps in developing an effective compensation structure. Let us check what difference does a good compensation management make to the organization.

An ideal compensation management structure motivates employees to work hard and improve their productivity. It makes the evaluation of employee performance smoother and transparent so that there is no scope for any favoritism. Effective compensation management adheres to all the labor laws prevalent in the country so that there are no disputes between the management and the employee unions. Good compensation management reduces employee turnover and helps in creating a great atmosphere to work in the organization. Companies which do not have sound employee compensation management often have employees speculating about their performance appraisals. Compensation management ensures that an employee can compute his own compensation receivable.

Incentive Compensation Management Incentive compensation management involves rewarding and recognizing high performing employees for their superior performance. For a firm to have sound incentive compensation management, it needs to address issues associated with an incentive plan. The question often arises as how employee incentives should be paid. Whether the amount of time spent in the office should be set as a criterion for incentives or the achievement of targets is a better option. Whether it cultivates ill-will among those employees who do not get it or promotes hard-working people to keep on producing results. Most of the management thinkers feel that incentive is something that should be looked upon as a reward from the organization for putting in the extra efforts. It should not be seen as something that every employee has a right to whether they are effective or not, otherwise it will lose its importance and the firm might end up rewarding people who have made no real contribution to the organization. So, this was a bit about what is compensation management. There are various studies that are still going on in the field of employee motivation. Hope this article is informative and helps you in getting an insight to what is compensation management.

By Rahul Pandita Last Updated: 10/7/2011

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CEO Bonus Plans: And How to Fix Them

Authors: Published: Kevin J. Murphy and Michael C. Jensen November 9, 2011

Paper Release Date: October 2011 Feature: Working Papers

Discussions about incentives for CEOs in the United States begin, and often end, with equity-based compensation. After all, stock options and (more recently) grants of restricted stock have comprised the bulk of CEO pay since the mid-1990s, and the changes in CEO wealth due to changes in company stock prices dwarf wealth changes from any other source. Too often overlooked in the discussion, however, is the role of annual and multiyear bonus plans based on accounting or other non-equity-based performance measuresin rewarding and directing the activities of CEOs and other executives. In this paper, Kevin J. Murphy and Michael C. Jensen describe many of the problems associated with traditional executive bonus plans, and offer suggestions for how these plans can be vastly improved. The paper includes recommendations and guidelines for improving both the governance and design of executive bonus plans and, more broadly, executive compensation policies, processes, and practices. The paper is a draft of a chapter in Jensen, Murphy, and Wruck (2012), CEO Pay and What to Do About it: Restoring Integrity to both Executive Compensation and Capital-Market Relations, forthcoming from Harvard Business School Press.

Do US Market Interactions Affect CEO Pay? Evidence from UK Companies

Authors: Published: Joseph J. Gerakos, Joseph D. Piotroski, and Suraj Srinivasan March 23, 2011

Paper Release Date: January 2011 Feature: Working Papers

CEOs of UK firms receive higher total compensation if their companies have interactions with US product, capital, and labor markets. Moreover, the compensation package is often adopted from American-style arrangements, such as the use of incentive-based pay. Researchers Joseph J. Gerakos (University of Chicago), Joseph D. Piotroski

(Stanford), and Suraj Srinivasan (Harvard Business School) analyzed data on the compensation practices of 416 publicly traded UK firms over the period 2002 to 2007.

Published in 2010

The Psychological Costs of Pay-for-Performance: Implications for Strategic Compensation

Authors: Published: Ian Larkin, Lamar Pierce, and Francesca Gino December 28, 2010

Paper Release Date: December 2010 Feature: Working Papers

In studying pay-for-performance-based compensation systems, economic scholars often adhere to agency theory, which hypothesizes that firms should prominently use performance-based compensationit alleviates the problems of employee "shirking" and ensures highly skilled employees' desire to work for the company. However, firms use performance-based pay far less frequently than agency theory predicts. This paper posits that the psychological costs of pay-for-performance systems often dominate their benefits to firms, and proposes an integrated theory of strategic compensation that takes into account the economic and psychological benefits and costs of pay-for-performance. Research was conducted by Harvard Business School professors Francesca Gino and Ian Larkin, and Lamar Pierce of Washington University.

Why Do Firms Use Non-Linear Incentive Schemes? Experimental Evidence on Sorting and Overconfidence
Authors: Published: Ian Larkin and Stephen Leider April 21, 2010

Paper Release Date: March 2010 Feature: Working Papers

The use of "non-linear" performance-based incentive contracts is very common in many business environments. The most well-known example is salesperson compensation, though many other types of performance-based pay, including stock options, bonus systems based on defined metrics, and pay based on subjective performance, often exhibit non-linear characteristics. Research has demonstrated that non-linear incentives are highly distortionary because employees manipulate their work in order to maximize their pay. While some scholars have recommended that companies stop using non-linear incentives, little research has been done to investigate the possible benefits of non-linear schemes. In this paper, HBS professor Ian Larkin and Ross School of Business professor Stephen Leider (HBS PhD '09) explore the role that the behavioral bias of overconfidence may play in explaining the prevalence of non-linear incentive schemes. They conclude that the linearity or non-linearity of an incentive system could play an

important role in sorting employees according to their level of confidence; in addition, there may be three possible benefits to having overconfident employees.

Matching Firms, Managers, and Incentives

Authors: Published: Oriana Bandiera, Luigi Guiso, Andrea Prat, and Raffaella Sadun March 18, 2010

Paper Release Date: March 2010 Feature: Working Papers

Do different kinds of firm ownership drive the adoption of different managerial practices? HBS professor Raffaella Sadun and coauthors focus on the difference between the two most common ownership modes, family firms and firms that are widely held, namely that have no dominant owner. They find that the greater weight attached by family firms to benefits from control induces a conflict of interest between family-firm owners and high-ability, risk-tolerant managers.

Published in 2009

Shareholders Need a Say on Pay

Published: November 2, 2009 Feature: Research & Ideas

"Say on pay" legislation now under debate Washington D.C. can be a useful tool for shareholders to strengthen the link between CEO pay and performance when it comes to golden parachutes, says Harvard Business School professor Fabrizio Ferri. Here's a look at how the collective involvement of multiple stakeholders could shape the future of executive compensation.

Excessive Executive Pay: What's the Solution?

Published: September 21, 2009 Feature: Research & Ideas

Now that the worst fears about economic meltdown are receding, what should be done about lingering issues such as over-the-top executive compensation? Does government have a role? Is it time we rethink corporate governance? HBS faculty weigh in. From the HBS Alumni Bulletin.

Are Retention Bonuses Worth the Investment?

Published: September 3, 2009

Feature: Forum:

What Do YOU Think? CLOSED | 42 Comments posted

There is a time and place for retention bonuses but they should be used sparingly, wrote many respondents to this month's column, says Professor Jim Heskett. Others challenged the value of bonuses, and suggested compelling alternatives. (Online forum now closed; next forum begins October 2.)

Published in 2008

CEO and CFO Career Penalties to Missing Quarterly Analysts Forecasts

Authors: Published: Rick Mergenthaler, Shiva Rajgopal, and Suraj Srinivasan September 24, 2008

Paper Release Date: August 2008, revised June 2009 Feature: Working Papers

(Previous title: "CEO and CFO Career Consequences to Missing Quarterly Earnings Benchmarks.") This paper investigates whether the failure to meet quarterly earnings benchmarks such as the analysts' consensus forecast matters to CEO and CFO careers, after controlling for both operating and stock return performance and the magnitude of the earnings "surprise" revealed at the earnings announcement. In particular, it evaluates a comprehensive set of career consequences such as the impact on compensation, in the form of bonus and equity grants, and the dismissal of both the CEO and the CFO, conditioned on the failure to meet quarterly earnings benchmarks.

Published in 2007

How Should Pay Be Linked to Performance?

Published: June 1, 2007 Feature: Forum: What Do YOU Think? CLOSED | 98 Comments posted

Online forum now CLOSED. Professor Jim Heskett sums up 98 reader responses from around the world. As he concludes, is there another subject as important as this one about which we assume so much and know so little?

Published in 2006

Fixing Executive Options: The Veil of Ignorance

Published: October 25, 2006 Feature: Views on News

Who says you can't rewrite history? Dozens of companies have been caught in the practice of backdating options for top executives. But this is only part of the problem with C-level compensation packages, which often motivate top executives to act in their own best interests rather than those of shareholders. Professors Mihir Desai and Joshua Margolis turn to philosopher John Rawls for a solution: Reward the execs, but don't give them the details.

Rising CEO Pay: What Directors Should Do

Published: September 13, 2006 Feature: Op-Ed

Compensation committees are under pressure to keep CEO pay high, even as shareholders and the media agitate for moderation. The solution? Boards of directors need better competitive information and an ear to what shareholders are saying, says Jay Lorsch.

The Compensation Game

Published: August 30, 2006 Feature: Op-Ed

Do CEOs deserve "star" compensation? The idea that CEO pay is driven by the invisible hand of market forces is a myth from which chief executives have long benefited, say Harvard professors Lucian Bebchuk and Rakesh Khurana.

Published in 2005

Is There an "Efficient Market" in CEO Compensation?

Published: August 1, 2005 Feature: Forum: What Do YOU Think? CLOSED | 12 Comments posted

There appears to be little or no relationship between the size of American CEO compensation awards and actual corporate performance. Will change come from the increased level of competition among global companies with significantly different approaches to the compensation of senior managers?

Published in 2003

Improving Corporate Governance with the Balanced Scorecard

Authors: Published:

Robert S. Kaplan and Michael E. Nagel July 5, 2006

Paper Release Date: December 2003 Feature: Working Papers

The authors review the key roles of corporate boards and recommend a Balanced Scorecard approach to help boards work smarter, not harder. Kaplan and Nagel recommend a three-part Balanced Scorecard program: Part 1: An Enterprise Scorecard that includes enterprise-wide strategic objectives, performance measures, targets, and initiatives; Part 2: A Board Scorecard that defines and clarifies the strategic contributions and requirements of the board, and provides a tool to manage the board's performance; Part 3: Executive Scorecards, which define strategic contributions of top management and are used to select, evaluate, and reward senior executives.

Published in 2002

How Will We Respond to the "Moment of Truth" in Option Plans?

Published: December 2, 2002 Feature: Forum: What Do YOU Think? CLOSED | 3 Comments posted

Published in 2001

Why Corporate Budgeting Needs To Be Fixed

Published: November 26, 2001 Feature: Op-Ed

Not to mince words, but corporate budgeting is a joke, argues HBS professor emeritus Michael C. Jensen in this Harvard Business Review excerpt. The problem isn't with the budget processit's when budget targets are used to determine compensation