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Business today is dynamic, with a steadily increasing pace of change.

Timely and actionable information is the best way to combat the elements. Every organization needs three types of resources e.g. FINANCIAL RESOURCES, HUMAN RESOURCES and TECHNOLOGICAL RESOURCES. No organization can achieve success without its employees. Success and failure of business somehow depends on the employees they have. Until and unless a worker is satisfied, he cannot be productive. Employee satisfaction is important for its humanitarian value and for its financial benefit (due to its effect on employee behavior), and the most important tool for this is the best suitable

Although, there are other forces which drive employee performance, but



Believe that the organization will be satisfying in the long run Care about the quality of their work Are more committed to the organization Have higher retention rates, and Will be more productive.

Concept of compensation
Compensation is not the cut-and-dry subject it used to be. Once you had to worry only about an employee's base salary or, at most, a base salary and commission. Today, you need to think in terms of compensation packages including salaries, stock options, employee stock ownership plans, pay-forperformance plans, bonuses, profit sharing, commissions, noncash rewards, variable pay, and much more, i.e., you need to be more innovative. Attribute it to what you will - the Silicon Valley effect, a boom economy, unparalleled competition for skilled workers, the increasing value of IPOs and stock options - but there's no question that compensation has become a more complicated and strategic issue for employers. To recruit, retain, and motivate the best employees, you need to understand compensation and reward plans and how they relate to your company's growth.

Why should companies consider changing the way they approach compensation and benefits?
In todays complex environment, rewards management requires many of the same specialized competencies necessary to run a stand-alone business, including: Skilled operational and HR resources to select and administer plans, negotiate contracts, manage vendors and monitor service levels

Experienced tax, legal and risk management professionals to navigate U.S. and international employment laws and regulations successfully
Sophisticated finance and accounting capabilities to keep the books, file taxes, manage investments and liabilities, and run rewards programs cost-effectively

Clearly, companies dont actually have to spin off their rewards programs into separate legal entities to improve the way they are operated. But many of them do need to change the way they approach rewards management and this will require a change in perception among executives and other employees at all levels of the organization.

Food for thought for CEOs and HR Executives :- To determine if they could benefit from rethinking their approach to compensation and benefits management?

Are there concerns about the overall effectiveness or compliance of your rewards programs? Are your companys average health care costs per employee greater than $6,000 or are your overall annual health care cost increases greater than 10 percent? Are new FAS 123 rules compelling you to investigate executive compensation costs, and will you incur larger than expected expenses in 2005 as a result?

Do your pension contributions as a percent of free cash flow exceed 25 percent?

Are you struggling with managing the financial and credit risks of your rewards programs, as evidenced by issues with your liquidity and credit rating?


Compensation decisions are typically micro (individual) or macro (total organization) focused. Although organizations are under no constraint to separate these decisions, a course of study should. In practice, most unsophisticated organizations make the decision on compensation level (how much to pay) and compensation structure (relationships to competitors) at the same time. More administratively advanced organizations realize that individual decisions within a proper administrative structure are more consistent, fair, and cost-effective over time. STRATEGIC COMPENSATION LEVEL DECISIONS Most employees are aware that some employers pay more than others for the same type of skill in the same market. The actual cost to employers of employee service is total hourly compensation plus benefits. Unfortunately, labor cost per unit is not Information that is easily obtained by employers. It must be estimated from in-house information on the average productivity of employee groups and organization units and from the average pay of these groups.


When conditions are right, employees derive non-monetary compensation from those aspects of the employment experience that provides value or satisfaction without necessarily delivering a measurable reward. Said differently, nonmonetary compensation is nothing more complicated than psychic income. It rewards the employee in some uniquely psychological way, largely unrelated to salary or employee benefits.
A firms ability to deliver meaningful non-monetary compensation depends on the answers to some very important questions: - Culture of the office - project characteristics - nature of the process - working conditions - location of the office

Every firms answers to these questions will differ, as every employees decision about whats important also will differ. There are no absolute rules about whats right, just varying degrees of appropriateness. The essential question about monetary vs. non-monetary rewards is not an either-or question. The best firms endeavor to deliver both. In the end, every employee makes a subconscious calculation of the two: monetary income + psychic income = total income When available in reasonable quantities, psychic income helps the design professional see a clear path toward advancement and satisfaction. Most designers are able to make rational decisions about the trade-off between professional satisfaction and economic reward. Ultimately, most design professionals will choose the option that provides the highest total income.

How to create incentive plans that are in line with your corporate strategy?
Incentive compensation plans are designed to motivate sales and service professionals to achieve goals and strive for excellence. But the disturbing truth is that these same compensation plans are often in opposition to the corporate strategy and CRM initiative. The effect is that employees will lose sight of what's important: their customers. Compensation is the first litmus test for a company's seriousness about the customer.

Pay for the Results You Want Share Ownership Keep It Simple and Up-to-Date

Have You Selected the Right Compensation Plan?

Getting your compensation plan to align with corporate CRM goals also means implementing the right plan. Here are four types of variable compensation plans from Compensating the different types of Industry:
- Gain sharing - Reward employees for achieving pre-established goals - Management bonus plans - Tie compensation plans with performance


Engagement and innovation are the hallmarks of all successful organizations. Continually engaging your workforce will yield greater productivity, less turnover and significant contributions to the organization. Types of Innovative Compensation Practices Innovative compensation practices encompass cash compensation and recognition plans. The following are examples of innovative cash compensation or recognition plan options . a)Individual incentives b)Team or group incentives c)Bonuses d)Spot awards e)Special cash recognition f)Special non cash recognition g)Company Owned Life Insurance (COLI)

1. Create a plan that can be flexible to the needs of the college. 2. A plan that is nurturing to employees of longevity. 3. A plan that can recognize individual and team performance. 4. A plan that creates incentive for higher and/or additional performance. 5. A plan that is flexible with work schedules and work places. 6. A plan that rewards special qualifications and requirements. 7. A plan that encourages advancement. 8. A plan that doesn't just follow the rules, but can be a leader in compensation plans.

SUGGESTED ACTIONS a) Pay bonuses for job performances.

b) Budget a lump sum for a team function and divide it among members. c) Include all employee groups in a compensation plan (i.e. supplemental). d) Offer more flexible work schedules and work places. e)A broader schedule may give better average for hours.


Compensation plans come in a million varieties - and each one's a disaster waiting to happen. In one way, compensation plans are the hammer of the employees motivational toolkit - almost every company uses them to build revenues and reward excellence. But unlike the implements that hang from the average handyman's belt, commission plans come in millions of shapes and sizes. Instead of picking what you need from the shelf at Home Depot, you're expected to work the millions of combinations and permutations into a compensation plan of your own which is new, unique, and a disaster waiting to happen.

Countless compensation structures fail despite the best intentions of business owners.
Many plans are too complicated to be properly understood or effectively implemented. More fail when HR Managers don't explain their plans properly.

The result: Everyone comes up with their own interpretation of the rules, and forms a unique opinion of which compensation they share. Before you know it, inside work is battling with poor performances and non achievement of targets, and you're caught in the middle of the fray. Job time is wasted, morale plummets and employees start to resign. That's no way to grow a company.

But with careful design and reinforcement of cooperative relationships, you can have a commission plan that works.

Here are things to consider:

1. Keep your plan simple The more complex the compensation plan, the easier it is to misunderstand or manipulate. For example, if your employees are assigned to geographic territories, be sure to develop and communicate clear guidelines on how they can communicate to counterparts that cut across territories, and how they'll be rewarded for those sales. 2. Understand the plan and all its rules yourself Review and edit the plan with the HR manager, Departmental Heads and bring a third manager into the discussion for a different point of view. Together, you should anticipate the questions your team will have and prepare solid answers.


sure everybody knows and understands the rules

Introduce the plan a couple of weeks before you plan to implement it, giving your team a few days to digest its contents.

Then hold a group meeting to discuss it. Meet with each team to reinforce the plan and address questions and concerns that wasnt raised before the group.

Ask your people about the plan to check for understanding.


team building to ward off conflict before it

Have competing peers (for instance, inside and outside the team) meet to establish relationships and build trust. The most successful teams always engage with their other partners. Bring teams together to discuss potentially problematic accounts.


The team will behave exactly according to how the plan best rewards them
Concentrating their efforts on what pays the most. If you have a specific objective (e.g. new projects, more repeat quality checks, higher levels of client service), then you must reward the behaviors that pursue those goals.


Improve the financial standing of your business with compensation designs. Supported by the software, company can accurately plan for profit.

Improve recruiting
Using unique motivational plans gives a competitive edge in attracting a highquality, experienced sales force.

Retain/attract top producers

Manage mergers & acquisitions

Analyze another companys compensation plans to reveal their actual profitability and weaknesses. Create new compensation plans for the combined company.

Plan for the future

With Compensation Master, you gain a long-term business-planning tool that helps you analyze the impact of changes to your business before you implement them. An analysis that used to take months can now be done in minutes, allowing you to explore endless possibilities. Building in specific profit levels allows you to invest in the growth of your company and achieve other business goals.

Manage mergers & acquisitions

Analyze another companys compensation plans to reveal their actual profitability and weaknesses. Create new compensation plans for the combined company.

Plan for the future

With Compensation Master, you gain a long-term business-planning tool that helps you analyze the impact of changes to your business before you implement them. An analysis that used to take months can now be done in minutes, allowing you to explore endless possibilities. Building in specific profit levels allows you to invest in the growth of your company and achieve other business goals.

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