Summaries the recent trend of reward systems in India. Analyze it with respect to your
organization or an organization you are familiar with and discuss its impact on productivity. Describe the organization you are referring to.
Rewarding employee performance and behaviour is an important part of HRD. Appropriate rewards not only recognize and motivate employees, but also communicate the organization’s values to the employees. Rewards may be given to individualists as well as to teams, departments and other units within the organization. Rewards reinforce specific behaviors, thereby arousing and sustaining specific motives. Consequently, what is rewarded in an organization influences the motivational climate.
The only way employees will fulfill your dream is to share in the dream. Reward systems are the mechanisms that make this happen. “However, reward systems are much more than just bonus plans and stock options. While they often include both of these incentives, they can also include awards and other recognition, promotions, reassignment, non-monetary bonuses (e.g., vacations) or a simple thank-you.
RECENT TRENDS – A FEW EXAMPLES
It’s an annual affair at Genpact to identify 35 star leaders within the company and fly their families on a vacation. This is apart from regular ritual of recognizing high performing leaders in every board meeting. Even as salary levels soar and are a given in the current war for talent, more and more companies are fumbling for the ideal mix of non-compensation rewards to retain leaders.
Retaining and rewarding leadership is a hot button issue facing most organizations. Increasing complexity of hiring leadership talent in the face of burgeoning market demand is bringing companies under pressure to retain their top talent. “The only way to reward and retain top leadership is by sharing the success of the company with them,” says Piyush Mehta, senior V-P, Genpact.
It is common to see firms ring fence their senior executives by devising long-term wealth certain opportunities in the form of retention pay, deferred bonus plans, stock options and shadow options. Companies are arriving at a reward system, which is linked with the company’s performance.
As a business leader in Accenture moves higher, the variable component in his compensation goes up. “Equity has been quite effective as a leadership reward system. Conversely too, it works well as it makes leaders conscious of the fact that they carry the weight of the organization,” says Rahul Varma, senior HR director, Accenture India.
Employee stock plans offered by Indian firms in the past few years have been able to create the right setting than that MNC counterparts, says K Sudarshan, managing partner, EMA Partner International. “Key employees feel a lot closer to centre of action with a belief that they are making a difference to the fortunes of the organization as opposed to large MNCs where the India business is still a small percentage of their overall numbers,” he says.
The attractiveness quotient for Indian companies is increasing all the time. Even though we see emergence of several “employee millionaires”, analysis caution, relying on generous compensation as the only strategy for retaining your key resources is a sure shot recipe for disaster.
There is interplay of multiple factors which makes the organization a preferred destination for top talent and creates a long-term sustainable employer brand. That’s why the best employers need not necessarily be the best paymasters.
“First and foremost is to create a sense of ownership and belonging to the organization. Successful organizations have a culture which supports and encourages entrepreneurial behaviour, the freedom to make informed business decisions and above all eliminates the fear of failure,” says Mr Sudarshan. This will work only if it goes hand-in-hand with standard compensation levels in the industry.
HR fraternity believes ICICI Bank has done well on both fronts. They have provided great opportunities to their stars plus have locked in their key people with significant stock options. It also helped that ICICI bank is growing more rapidly when compared to HDFC Bank and there is a great passion at work one can experience with senior people in ICICI group.
“HDFC Bank has largely adopted the ESOP route to reduce fixed cost but this has backfired in the long term because people moved on once the stocks vested and their exit barriers significantly reduced,” says a head of headhunting firm.
Bharti has largely taken the compensation route both fixed as well as long-term wealth creation opportunities for their people. Hutch has always retained their key people on the basis of the work culture and freedom to operate though the compensation levels have always been pegged lower than Bharti and Reliance.
Aditya Birla Group has built a great sense of belonging for their leaders and has always been looked upon with the larger picture in mind. The chairman Kumar Mangalam Birla says a company executive also deploys his personal touch with his key managers who are valued.
“There is a great sense of security built in for key people,” adds a senior HR consultant who has worked with the group. The Tata Group has always institutionalized the group and managers are empowered to take critical decisions like no other business house and there is a deep sense of loyalty to the group at senior levels.
An ambitious business leader, believe HR fraternity, is constantly evaluating headroom for professional learning and growth and it is critical that the organization is capable of creating such opportunities. This keeps senior managers motivated with fresh challenges all the time. “Today, there’s a need to customize rewards – both monetary or otherwise – to suit individual’s specific needs,” says Mr. Mehta of Genpact.
REWARD SYSTEM IN MY COMPANY: COGNIZANT
A company gifting a small mug or a T-shirt with its logo may not be a very big thing for an employee who has decided to leave the organization. But, for those staying on, such gifts can make a lot of difference.
Giving instant gifts to reward employees is catching up. Cognizant Technology Solutions with large software development centers in India, have used the instant reward scheme to motivate their employees.
‘Outwehing Others’
Wahl Cognizant is an incentive scheme for Cognizant’s employees. The instant reward is for contributing to the company, above and beyond the call of duty or for any exceptional performance.
The scheme follows Cognizant’s earlier incentives for employees, such as iPods, cruises to the Bahamas, chartered trains to Pondicherry and chartered flights to Malaysia.
Designed on the lines of a frequent flyer programme, Wah! helps Cognizant employees to earn reward points that can be accumulated and redeemed against Cognizant merchandise ranging from denim shirts to signature coffee mugs, watches to jackets, or even a DVD player.
On its employee information portal, Cognizant publishes the reward points that employees can obtain for the efforts that they put in, beyond their core work definition. For example, works such as training, knowledge harvesting, recruiting, participation in quality audits and assessments and external certifications quality for reward points based on certain defined parameters.
“Wah! has been a big hit in Cognizant, so much so that it is one of the projects to be expeditiously institutionalized after being piloted in Hyderabad. It simply has outwahed every other spot reward and recognition programme attempted by Cognizant earlier.
Wah! was piloted at Cognizant’s Hyderabad development centre in early 2005 and was institutionalized across all of its development centers in India early this year. Till date, 8,250 of the company’s associates have been awarded Wah! points that can be redeemed for Cognizant branded merchandise.
As one enters any of Cognizant’s offices, the branded merchandise is prominently displayed to remind and motivate employees to earn the gift of their choice, he says. This motivation prompts them to excel and take advice interest in contributing to multiple areas such as certification, quality or training. Even prospective applicants or interviewees notice the array of gifts that adorn the reception area.
Showing posts with label reward system. Show all posts
Showing posts with label reward system. Show all posts
Tuesday, May 17, 2011
Explain what is reward system?
Explain what is reward system? Describe the reward system of your organization or any organization you are acquainted with. How financial reward systems have been helping in improving organizational performance? Explain with example.
Ans. Reward System : -
Since positive consequences are so important to employee behaviour, reward systems become critical to employee performance and organizational success. The organization may have the latest technology, well thought out strategic plans, detailed job descriptions, and comprehensive training programme, but unless the people are rewarded for their performance related behaviours, the ‘up-front’ variables or the rules that govern their behaviour have little impact. In other words, going back to skinners original conception, the antecedent cues have power to control or provide rules for behaviour only if there are reinforcing consequences. As one behavioural management consultant points out : -
A company is always perfectly designed to produce what it is producing. It is has quality problems, cost problems, productivity problems, then the behaviours associated with those undesirable outcomes are being reinforced. This is not conjecture. This is the hard, cold reality of human behaviour.
The challenge for management is to understand behavioural reality, eliminate the reinforces for the undesirable behaviours, and more importantly and effectively, reward the desirable behaviour. Thus, organizational reward systems become the key, often overlooked, factor in bringing about improved performance and success.
When anyone mentions organizational reward systems, money comes quickly to mind. Monetary reward systems do play a dominant role. As organizations in recent years have become leaner and more efficient, monetary rewards have become very limited and increasingly are just not available. More and more interest is now being given non financial rewards.
In the past, most reward systems were geared to the individual. With the emergence of teams in most of today’s organizations, systems are being revamped to reward teamwork. A good example is Behlen Manufacturing in Columbus, Nebraska. The 1100 mostly production employees are organised into 32 teams. Some of these teams have only a handful of members, while others have as many as sixty. Although each individual receives a base pay component, which comes to about $8 an hour, the rest of the compensation is variable and is determined in a number of different ways, including how one’s team is performing.
The centrepiece of the manufacturing company’s variable reward plan is gain-sharing, an increasingly popular form of compensation whereby all members share a usually fixed percentage of the documented savings or performance gain accomplished by the team. Behlen employees can earn monthly gain-sharing of up to $1 an hour when their teams meet productivity goals. The CEO explained this team reward system as follows: “If you’re in a group that makes stock tanks, for example; from the start of the process to the end of the process, overall shifts, all month long, if the team achieves certain levels of productivity, each of its members is rewarded anywhere from Ocents to $1 an hour for every hour worked in that area . “Documentation of the gains is based on actual pounds of products, so that everyone on the team knows exactly how well they are doing. Another part of the company’s variable reward system involves profit sharing. Employees receive 20 percent of the profits. In recent years this has resulted in everyone’s getting a profit-sharing bonus equivalent to three week’s salary. Still another part of the reward package is the employee stock ownership plan. Each employee receives company stock equal in value to 2 percent of his or her base salary each year. Senior managers in the company participate in the same reward system as the workers, receiving the same proportional benefits. In the case of managers, performance is calculated on the gross margin of their business unit before selling and administrative costs are deducted.
HELP OF FINANCIAL REWARD
Money as a Reward
Despite the tendency in recent years to downgrade the importance of money as an organizational reward, there is ample evidence that money can be positively reinforcing for most people and, if the pay system is designed properly to fit the strategies, can have a positive impact on overall organizational performance. The downgrading of money is partly the result of popular motivation theories, such as Maslow’s hierarchy of needs, plus the publicity given to surveys that consistently place wages and salaries near the middle of the list of employment factors that are important to workers and managers. In terms of Maslow’s well-known hierarchy of needs, money, is often equated only with the most basic requirements of employees. It is viewed in the material sense of buying food, clothing and shelter. Money has a symbolic as well as an economic, material meaning. It can provide power and status and can be a means to measure achievement. In the latter sense, money can be used as an effective positive reinforcement intervention strategy to improve performance.
New Pay Techniques : -
The standard base pay technique provides for minimum compensation for a particular jobn and is a type of continuous reinforcement schedule. Pay by the hour for workers and the base salary for managers are examples. The technique does not reward above average performance or penalise below average performance, and it is administered on a continuous basis controlled largely by the job rather than by the person performing the job. A variable pay technique is an intermittent type of reinforcement schedule and attempts to reward according to individual or group differences. It is more human than job controlled. Seniority is a traditional variable pay plan which recognises age and length of service differentials. The increasingly popular merit pay and individual or group incentive plans attempt to reward contingently on the basis of performances.
1. Commissions beyond sales to customers : - As with all the new pay plans, the commissions paid to sales personnel are aligned with the organization’s strategy and core competencies, specifically, besides sales volume, the commission is determined by customer satisfaction and sales team outcomes such as meeting revenue or profit goals.
2. Rewarding leadership effectiveness : - This newly emerging technique is based on factors beyond just the financial success of the organization, it also includes an employee satisfaction measure to recognise a manager’s people management skills.
3. Rewarding New Goals : - Besides being based on the traditional profit, sales, and productivity goals, rewards under this approach are aimed at all relevant employees (top to bottom) contributing to goals such as customer satisfaction, cycle time, or quality measures.
4. Pay for Knowledge workers in teams : - with the increasing use of teams, pay is being linked to the performance of knowledge workers or professional employees who are organized into reengineering, product development, inter-functional, or self-managed teams.
5. Skill Pay. This technique recognises the need for flexibility and change by paying employees based on their demonstrated skills rather than the job they perform. Although it is currently used with procedural production or service skills, the challenge is to apply this concept to the more varied, abstract skills needed in the new paradigm organizations (e.g. design of information systems or cross-cultural communication skills).
6. Competency Pay : - This approach tries to go beyond skill pay by rewarding the more abstract knowledge or competencies of employees such as those related to technology, the international business context, customer service, or social skills.
• A recent laboratory study of merit raise is at least 6 to 7 percent of base pay, it will not produce the desired on employee behaviour.
• Beyond ascertain point, increases in merit raise size are unlikely to improve performance.
• When merit raises are too small, employee morale will suffer.
• Cost-of-living adjustments, seniority adjustments, and other non-merit components of a raise should be clearly separated from the merit component.
• Smaller percentage raises given to employees at the higher ends of base-pay ranges are de-motivating.
A recent comprehensive review of the more popular gain-sharing plans was generally positive about their results, but it also noted that gain-sharing is still used mostly by large companies (e.g. Inland container, Eaton, GE, Whirl pool, and Ingersoll-Rand) and pointed out some of the problems involved. A study conducted first in 1989 and again in 1993 found that about two thirds of the gain-sharing plans were flops because of employee lack of confidence in how the payout was calculated, the overselling of the plan, the lack of support from middle management, and changes in the production process and personnel policies. As these gain-sharing plans mature and become increasingly important in the team based workplace, they can still be an effective reward system. For example, a recent field experiment found that a gain-sharing program even a short-lived one, can stimulate and sustain long-term performance.
Ans. Reward System : -
Since positive consequences are so important to employee behaviour, reward systems become critical to employee performance and organizational success. The organization may have the latest technology, well thought out strategic plans, detailed job descriptions, and comprehensive training programme, but unless the people are rewarded for their performance related behaviours, the ‘up-front’ variables or the rules that govern their behaviour have little impact. In other words, going back to skinners original conception, the antecedent cues have power to control or provide rules for behaviour only if there are reinforcing consequences. As one behavioural management consultant points out : -
A company is always perfectly designed to produce what it is producing. It is has quality problems, cost problems, productivity problems, then the behaviours associated with those undesirable outcomes are being reinforced. This is not conjecture. This is the hard, cold reality of human behaviour.
The challenge for management is to understand behavioural reality, eliminate the reinforces for the undesirable behaviours, and more importantly and effectively, reward the desirable behaviour. Thus, organizational reward systems become the key, often overlooked, factor in bringing about improved performance and success.
When anyone mentions organizational reward systems, money comes quickly to mind. Monetary reward systems do play a dominant role. As organizations in recent years have become leaner and more efficient, monetary rewards have become very limited and increasingly are just not available. More and more interest is now being given non financial rewards.
In the past, most reward systems were geared to the individual. With the emergence of teams in most of today’s organizations, systems are being revamped to reward teamwork. A good example is Behlen Manufacturing in Columbus, Nebraska. The 1100 mostly production employees are organised into 32 teams. Some of these teams have only a handful of members, while others have as many as sixty. Although each individual receives a base pay component, which comes to about $8 an hour, the rest of the compensation is variable and is determined in a number of different ways, including how one’s team is performing.
The centrepiece of the manufacturing company’s variable reward plan is gain-sharing, an increasingly popular form of compensation whereby all members share a usually fixed percentage of the documented savings or performance gain accomplished by the team. Behlen employees can earn monthly gain-sharing of up to $1 an hour when their teams meet productivity goals. The CEO explained this team reward system as follows: “If you’re in a group that makes stock tanks, for example; from the start of the process to the end of the process, overall shifts, all month long, if the team achieves certain levels of productivity, each of its members is rewarded anywhere from Ocents to $1 an hour for every hour worked in that area . “Documentation of the gains is based on actual pounds of products, so that everyone on the team knows exactly how well they are doing. Another part of the company’s variable reward system involves profit sharing. Employees receive 20 percent of the profits. In recent years this has resulted in everyone’s getting a profit-sharing bonus equivalent to three week’s salary. Still another part of the reward package is the employee stock ownership plan. Each employee receives company stock equal in value to 2 percent of his or her base salary each year. Senior managers in the company participate in the same reward system as the workers, receiving the same proportional benefits. In the case of managers, performance is calculated on the gross margin of their business unit before selling and administrative costs are deducted.
HELP OF FINANCIAL REWARD
Money as a Reward
Despite the tendency in recent years to downgrade the importance of money as an organizational reward, there is ample evidence that money can be positively reinforcing for most people and, if the pay system is designed properly to fit the strategies, can have a positive impact on overall organizational performance. The downgrading of money is partly the result of popular motivation theories, such as Maslow’s hierarchy of needs, plus the publicity given to surveys that consistently place wages and salaries near the middle of the list of employment factors that are important to workers and managers. In terms of Maslow’s well-known hierarchy of needs, money, is often equated only with the most basic requirements of employees. It is viewed in the material sense of buying food, clothing and shelter. Money has a symbolic as well as an economic, material meaning. It can provide power and status and can be a means to measure achievement. In the latter sense, money can be used as an effective positive reinforcement intervention strategy to improve performance.
New Pay Techniques : -
The standard base pay technique provides for minimum compensation for a particular jobn and is a type of continuous reinforcement schedule. Pay by the hour for workers and the base salary for managers are examples. The technique does not reward above average performance or penalise below average performance, and it is administered on a continuous basis controlled largely by the job rather than by the person performing the job. A variable pay technique is an intermittent type of reinforcement schedule and attempts to reward according to individual or group differences. It is more human than job controlled. Seniority is a traditional variable pay plan which recognises age and length of service differentials. The increasingly popular merit pay and individual or group incentive plans attempt to reward contingently on the basis of performances.
1. Commissions beyond sales to customers : - As with all the new pay plans, the commissions paid to sales personnel are aligned with the organization’s strategy and core competencies, specifically, besides sales volume, the commission is determined by customer satisfaction and sales team outcomes such as meeting revenue or profit goals.
2. Rewarding leadership effectiveness : - This newly emerging technique is based on factors beyond just the financial success of the organization, it also includes an employee satisfaction measure to recognise a manager’s people management skills.
3. Rewarding New Goals : - Besides being based on the traditional profit, sales, and productivity goals, rewards under this approach are aimed at all relevant employees (top to bottom) contributing to goals such as customer satisfaction, cycle time, or quality measures.
4. Pay for Knowledge workers in teams : - with the increasing use of teams, pay is being linked to the performance of knowledge workers or professional employees who are organized into reengineering, product development, inter-functional, or self-managed teams.
5. Skill Pay. This technique recognises the need for flexibility and change by paying employees based on their demonstrated skills rather than the job they perform. Although it is currently used with procedural production or service skills, the challenge is to apply this concept to the more varied, abstract skills needed in the new paradigm organizations (e.g. design of information systems or cross-cultural communication skills).
6. Competency Pay : - This approach tries to go beyond skill pay by rewarding the more abstract knowledge or competencies of employees such as those related to technology, the international business context, customer service, or social skills.
• A recent laboratory study of merit raise is at least 6 to 7 percent of base pay, it will not produce the desired on employee behaviour.
• Beyond ascertain point, increases in merit raise size are unlikely to improve performance.
• When merit raises are too small, employee morale will suffer.
• Cost-of-living adjustments, seniority adjustments, and other non-merit components of a raise should be clearly separated from the merit component.
• Smaller percentage raises given to employees at the higher ends of base-pay ranges are de-motivating.
A recent comprehensive review of the more popular gain-sharing plans was generally positive about their results, but it also noted that gain-sharing is still used mostly by large companies (e.g. Inland container, Eaton, GE, Whirl pool, and Ingersoll-Rand) and pointed out some of the problems involved. A study conducted first in 1989 and again in 1993 found that about two thirds of the gain-sharing plans were flops because of employee lack of confidence in how the payout was calculated, the overselling of the plan, the lack of support from middle management, and changes in the production process and personnel policies. As these gain-sharing plans mature and become increasingly important in the team based workplace, they can still be an effective reward system. For example, a recent field experiment found that a gain-sharing program even a short-lived one, can stimulate and sustain long-term performance.
Summarise the recent trend of reward systems in India.
Summarise the recent trend of reward systems in India. Analyse it with respect to your organization or an organization you are familiar with and discuss its impact on productivity. Describe the organization you are referring to.
Ans. The various incentive plans can be classified into-two groups:
(a) Individual Incentive plans, and
(b) Group incentive plans
• Halsey premium plan:-
Halsey premium plan is a simple combination of time and speed bases of payment. Under this plan, a minimum time wage is guaranteed to every worker. A standard time is fixed for the completion of a job. If a worker performs his job in less than the standard time fixed. The slow worker is paid the time wages and the efficient worker is paid some bonus in addition to the time wages. The bonus is in proportion of the wages which he could have earned during the time saved.
• Rowan plan:-
The Rowan plan is a modification of the Halsey plan. It also guarantees the minimum time wages and does not pernlise a slow worker. A standard time is fixed for completion of a job and bonus to a worker on the basis of time saved. Here, the bonus is that proportion of the wages for the time taken which the time saved bears to the standard time. Efficiency is thus measured as,
As the time saved increases, time taken will be reduced and as such the bonus would increase at a diminishing rate. This will check over speeding and overcome the major drawback of Halsey plan.
• Emerson’s Efficiency Plan:-
In his plan, Emerson suggested guaranteed wage payment to all workers on time rate basis. In addition, bonus or extra payment was suggested to those who prove to be efficient. For determining efficiency, standard output per unit of time or standard time for the job is determined. Efficiency is to be measured on the basis of comparison of actual performance with the standard fixed.
• Bedeavx Point Plan:-
In this plan, the minute is the time unit described as the standard minute and accounted as Bedeavx point B. In determining the Bs, the time of operation and the time of rest are taken into account. Thus, B may be defined as a fraction of a minute of effort plus a fraction of a compensating rest always aggregating unity. The standard time for each job is fixed after undertaking time and motion study and expressed inn terms of B. The standard time for a job is the number of Bs allowed to complete it.
DELFI SOFTWARE
• Incentives:-
A Sales Department: The company has a sales force of 10 sales Engineers. They report to the sales Managers who in turn reports to the sales Manager who in turn reports to the Direction (Marketing).
The company makes its sales targets and accordingly distribution it among sales. Engineers catering to different territories. Since most of the business comes straight to the company from OEM manufacturers, so every engineer is given an approximate target of 2.5 lakhs per month and is offered 5 percent commission on his total sales. There is no incentive on sales less than Rs 1 lakh. The Branch Managers (sales) receives 2 percent commission of the total sales made by his engineer. On an average an engineer is able to make a monthly sale Rs1000 per month as incentives. The Branch Manager similarly receives approximately Rs 4000 as incentives/month.
B. Service Department:-
The company has a servicing team of ten engineers whose qualifications are similar tot he sales engineers. Servicing engineers have the benefit of an incentive scheme which is based on the following parameters.
1. Response Time and Breakdown Time.
2. Number of preventive Maintenances done per month.
3. Number and values of spare parts consumed.
4. Number of complaints received per month.
A service engineer has to give a response time of more-than 80 percent with in the Time limit given by the company. After a lot of hard work and optimum use of spare parts one service engineer is able to get a monthly incentive of Rs 250-300 per month. If the number of spare parts used crosses a certain limit, it affects the incentive amount of the engineer.
Result:-
1. Since the per month income of a sales engineer is more than that of a service engineer, the satisfaction level in the sales department is naturally higher.
2. Due to those income disparities the job turnover in the service department is higher than in the sales department.
3. The sales personnel have no defined upper limit on sales incentives and these keep on increasing percentage wise with an increase in sales. But there is a defined limit on incentives received by the service engineer which results in further disparities in the income level of the two.
Ans. The various incentive plans can be classified into-two groups:
(a) Individual Incentive plans, and
(b) Group incentive plans
• Halsey premium plan:-
Halsey premium plan is a simple combination of time and speed bases of payment. Under this plan, a minimum time wage is guaranteed to every worker. A standard time is fixed for the completion of a job. If a worker performs his job in less than the standard time fixed. The slow worker is paid the time wages and the efficient worker is paid some bonus in addition to the time wages. The bonus is in proportion of the wages which he could have earned during the time saved.
• Rowan plan:-
The Rowan plan is a modification of the Halsey plan. It also guarantees the minimum time wages and does not pernlise a slow worker. A standard time is fixed for completion of a job and bonus to a worker on the basis of time saved. Here, the bonus is that proportion of the wages for the time taken which the time saved bears to the standard time. Efficiency is thus measured as,
As the time saved increases, time taken will be reduced and as such the bonus would increase at a diminishing rate. This will check over speeding and overcome the major drawback of Halsey plan.
• Emerson’s Efficiency Plan:-
In his plan, Emerson suggested guaranteed wage payment to all workers on time rate basis. In addition, bonus or extra payment was suggested to those who prove to be efficient. For determining efficiency, standard output per unit of time or standard time for the job is determined. Efficiency is to be measured on the basis of comparison of actual performance with the standard fixed.
• Bedeavx Point Plan:-
In this plan, the minute is the time unit described as the standard minute and accounted as Bedeavx point B. In determining the Bs, the time of operation and the time of rest are taken into account. Thus, B may be defined as a fraction of a minute of effort plus a fraction of a compensating rest always aggregating unity. The standard time for each job is fixed after undertaking time and motion study and expressed inn terms of B. The standard time for a job is the number of Bs allowed to complete it.
DELFI SOFTWARE
• Incentives:-
A Sales Department: The company has a sales force of 10 sales Engineers. They report to the sales Managers who in turn reports to the sales Manager who in turn reports to the Direction (Marketing).
The company makes its sales targets and accordingly distribution it among sales. Engineers catering to different territories. Since most of the business comes straight to the company from OEM manufacturers, so every engineer is given an approximate target of 2.5 lakhs per month and is offered 5 percent commission on his total sales. There is no incentive on sales less than Rs 1 lakh. The Branch Managers (sales) receives 2 percent commission of the total sales made by his engineer. On an average an engineer is able to make a monthly sale Rs1000 per month as incentives. The Branch Manager similarly receives approximately Rs 4000 as incentives/month.
B. Service Department:-
The company has a servicing team of ten engineers whose qualifications are similar tot he sales engineers. Servicing engineers have the benefit of an incentive scheme which is based on the following parameters.
1. Response Time and Breakdown Time.
2. Number of preventive Maintenances done per month.
3. Number and values of spare parts consumed.
4. Number of complaints received per month.
A service engineer has to give a response time of more-than 80 percent with in the Time limit given by the company. After a lot of hard work and optimum use of spare parts one service engineer is able to get a monthly incentive of Rs 250-300 per month. If the number of spare parts used crosses a certain limit, it affects the incentive amount of the engineer.
Result:-
1. Since the per month income of a sales engineer is more than that of a service engineer, the satisfaction level in the sales department is naturally higher.
2. Due to those income disparities the job turnover in the service department is higher than in the sales department.
3. The sales personnel have no defined upper limit on sales incentives and these keep on increasing percentage wise with an increase in sales. But there is a defined limit on incentives received by the service engineer which results in further disparities in the income level of the two.
Monday, May 16, 2011
Discuss the relationship between motivation and reward system in an organization.
Discuss the relationship between motivation and reward system in an
organization. What is gain- sharing and cite an organization where it is
practiced effectively. Briefly describe the organization you are referring to.
Answer. Motivation in simple words may be understood as the set of forces that
cause people to behave in certain ways. It is a process that starts with a
physiological deficiency or need that activities behaviour or a drive that is aimed at
a goal or an incentive.
The concept of motivation occupies a central place in the discipline of
Organizational Behaviour. It is a concept, which has received the maximum
attention from the academicians and researchers alike. Since a motivated
employee is highly productive and highly quality oriented, the managers are also
interested the concept of motivation.
Most people understand the concept of intrinsic satisfaction or intrinsic motivation,
i.e. when an activity is satisfying or pleasurable in and of itself. Naturally, these
17
activities are things we like and want to do. For most of us, intrinsically enjoyable
activities are things like eating, resting, laughing, playing games, winning, creating,
seeing and hearing beautiful things and people, being held lovingly, having sex,
and so on. To do these things we don't need to be paid, applauded, cheered,
thanked, respected, or anything--commonly we do them for the good feelings we
automatically and naturally get from the activity. Intrinsic rewards also involve
pleasurable internal feelings or thoughts, like feeling proud or having a sense of
mastery following studying hard and succeeding in a class.
Many, maybe most, activities are not intrinsically satisfying enough to get most of
us to do them consistently, so extrinsic motivation needs to be applied in the form
of rewards (positive reinforcements), incentives, or as a way to avoid some
unpleasant condition ("negative reinforcement" or punishment). Examples: You
work doing an ordinary job for pay. You study for good grades or to avoid failing or
to prepare for a good future. You do housework to get a clean, organized house
and/or a spouse's appreciation or to avoid her/his disapproval. A teenager comes
home from a date on time in order to avoid being grounded. These are all activities
that are commonly sustained by external pay offs, not because you love working,
studying, cleaning, and coming home early.
Are rewards, particularly money rewards, really motivators? The answer to this
question is YES and NO.
Money is understood to be powerful motivator for more than one reason. In the
first place, money is fundamental for completion of a task. The employee takes
pay as the reward for his or her work, and the employer views it as the price for
using the services of the employee. Second, as a medium of exchange. Third,
money is one of the hygiene factors, and improving maintenance factors is the first
step in efforts directed towards motivation. Fourth, money also performs the
function of a score card by which employees assess the value that the
organization places on their services and by which employees can compare their
18
values to others. Fifth, reinforcement and expectancy theories attest to the value
of money as a motivator. Sixth, money acts as a punctuation in one’s life. It is an
attention getting and effect producing mechanism. Money, has therefore
tremendous importance in influencing employee behaviour. Seventh, money is
easily vulnerable to manipulation. Finally, money will be a powerful motivator for a
person who is tense and anxious about lack o money. But behavioural scientists
think otherwise. They downgrade monetary rewards as a motivator. They prefer,
instead, other techniques such as challenging jobs, goals, participation in decisionmaking
and other non-monetary rewards for motivating employees.
Gain Sharing
Gain-Sharing is a financial incentive in which the performance gains of a company
(or of a particular new initiative) are shared with the employees who helped bring
about the improvement. This simple, powerful, and flexible technique can be a
cost-effective way of motivating employees and focusing them on the goals of your
company.
Gain-Sharing can take many forms, but all Gain-Sharing programs include the
following elements:
Employees are involved in a program for suggesting or making process
improvements
Performance, usually in terms of cost per unit of productivity, is frequently
measured
A portion of the financial gains from performance improvement (e.g., cost
reduction, increased productivity) is shared with employees.
Gain-Sharing provides motivation and focus
The central tenet of employee motivation states that employees will work towards
goals when they believe: (a) their efforts will lead to successful performance, and
(b) that successful performance will lead to a desirable outcome. Gain-Sharing is
particularly well-suited for leveraging this principle. Gain-Sharing (a) is centered
19
on work processes and activities that employees can impact and (b) rewards
improved performance with a percentage of the financial gains from that
improvement. Other types of organization-wide incentive plans, such as Profit-
Sharing and Employee Stock Ownership Plans involve aspects of performance
that are less directly controlled by employees (e.g., general economic conditions
and the activities of competitors can obviate the impact of employee efforts on
profits and stock price), and, thus, do not demonstrate as powerful a connection
between effort and reward as does Gain-Sharing.
Gain-Sharing also specifies the company’s priorities and signals where employees
should focus their effort. This strong focus is a very positive attribute, but it also
necessitates careful consideration of what should be rewarded. For example, if
Gain-Sharing is tied to increased speed of production, employees may focus on
speed to the detriment of quality. With Gain-Sharing, as with any other reward
system, be careful in choosing your target behaviors in order to avoid unintended
consequences.
Gain-Sharing can also be focused quite narrowly, targeting a particular workplace
initiative and particular groups of employees. In my opinion, Gain-Sharing is best
used when applied to a particular initiative with a particular group of employees.
Here are a few examples:
A manufacturing company may tie Gain-Sharing to a workplace safety initiative
by sharing a portion of the Workers’ Compensation cost savings with its
production employees.
An electronics chain can use Gain-Sharing to encourage its sales staff to sell
more extended warranties by offering higher rates of commission on the sale of
warranties.
A company can use Gain-Sharing to encourage innovation and ideas for new
products by agreeing to share 20% of the first-year revenues from the new
product with the research and development department employees involved in
that product.
20
My favorite real-life example of Gain-Sharing occurred in a beverage
distribution company that paid very high insurance premiums for its fleet of
delivery trucks and drivers because of a high number of accidents. The CEO
went to the drivers and told them that 50% of any reductions in next year’s
insurance premiums would be split evenly among the drivers. The company
did not incur a single accident for the rest of the year and reaped several
thousand dollars in savings.
Example: The Yellow Bus Company
The Yellow Bus Company operated a fleet of around 500 buses in the city of
Auckland, New Zealand. It carried people on some 25 million passenger trips each
year, covering a total distance of around 22 million kilometers annually. There
were close to 900 employees, all of whom were included in the Gain sharing
system (except for the top four executives).
Gainsharing was part of the company's strategy for integrating its team together
and achieving a common set of aims.
The former Chief Executive, Barry Turley, wrote: "Gainsharing has a simple, but
essential purpose. To involve staff in helping to improve our business". To start off,
the Company opened a special "Gainshare" account and put money into it. Every
quarter after that a share of the "Gain" earned by the company (income less costs
and necessary payments) was added to this pool and an agreed proportion was
shared out between the employees.
The amount paid to employees depended on overall company performance on key
performance indicators; and all the details of Gain-sharing at the Yellow Bus
Company were developed in a consultative way.
There were many changes introduced in the Yellow Bus Company as a direct
result of Gain-sharing. The bus operators, maintenance engineers, service staff,
21
and managers turned their attention to finding ways to make the company more
successful. The employees of the Yellow Bus Company wanted to provide the
best bus service to the people of Auckland! They were so successful that in late
1998 the company was sold to an international company, Stagecoach, for a sum in
excess of one hundred and ten million dollars. Not bad for a company that a few
years before had been losing nearly a million dollars
organization. What is gain- sharing and cite an organization where it is
practiced effectively. Briefly describe the organization you are referring to.
Answer. Motivation in simple words may be understood as the set of forces that
cause people to behave in certain ways. It is a process that starts with a
physiological deficiency or need that activities behaviour or a drive that is aimed at
a goal or an incentive.
The concept of motivation occupies a central place in the discipline of
Organizational Behaviour. It is a concept, which has received the maximum
attention from the academicians and researchers alike. Since a motivated
employee is highly productive and highly quality oriented, the managers are also
interested the concept of motivation.
Most people understand the concept of intrinsic satisfaction or intrinsic motivation,
i.e. when an activity is satisfying or pleasurable in and of itself. Naturally, these
17
activities are things we like and want to do. For most of us, intrinsically enjoyable
activities are things like eating, resting, laughing, playing games, winning, creating,
seeing and hearing beautiful things and people, being held lovingly, having sex,
and so on. To do these things we don't need to be paid, applauded, cheered,
thanked, respected, or anything--commonly we do them for the good feelings we
automatically and naturally get from the activity. Intrinsic rewards also involve
pleasurable internal feelings or thoughts, like feeling proud or having a sense of
mastery following studying hard and succeeding in a class.
Many, maybe most, activities are not intrinsically satisfying enough to get most of
us to do them consistently, so extrinsic motivation needs to be applied in the form
of rewards (positive reinforcements), incentives, or as a way to avoid some
unpleasant condition ("negative reinforcement" or punishment). Examples: You
work doing an ordinary job for pay. You study for good grades or to avoid failing or
to prepare for a good future. You do housework to get a clean, organized house
and/or a spouse's appreciation or to avoid her/his disapproval. A teenager comes
home from a date on time in order to avoid being grounded. These are all activities
that are commonly sustained by external pay offs, not because you love working,
studying, cleaning, and coming home early.
Are rewards, particularly money rewards, really motivators? The answer to this
question is YES and NO.
Money is understood to be powerful motivator for more than one reason. In the
first place, money is fundamental for completion of a task. The employee takes
pay as the reward for his or her work, and the employer views it as the price for
using the services of the employee. Second, as a medium of exchange. Third,
money is one of the hygiene factors, and improving maintenance factors is the first
step in efforts directed towards motivation. Fourth, money also performs the
function of a score card by which employees assess the value that the
organization places on their services and by which employees can compare their
18
values to others. Fifth, reinforcement and expectancy theories attest to the value
of money as a motivator. Sixth, money acts as a punctuation in one’s life. It is an
attention getting and effect producing mechanism. Money, has therefore
tremendous importance in influencing employee behaviour. Seventh, money is
easily vulnerable to manipulation. Finally, money will be a powerful motivator for a
person who is tense and anxious about lack o money. But behavioural scientists
think otherwise. They downgrade monetary rewards as a motivator. They prefer,
instead, other techniques such as challenging jobs, goals, participation in decisionmaking
and other non-monetary rewards for motivating employees.
Gain Sharing
Gain-Sharing is a financial incentive in which the performance gains of a company
(or of a particular new initiative) are shared with the employees who helped bring
about the improvement. This simple, powerful, and flexible technique can be a
cost-effective way of motivating employees and focusing them on the goals of your
company.
Gain-Sharing can take many forms, but all Gain-Sharing programs include the
following elements:
Employees are involved in a program for suggesting or making process
improvements
Performance, usually in terms of cost per unit of productivity, is frequently
measured
A portion of the financial gains from performance improvement (e.g., cost
reduction, increased productivity) is shared with employees.
Gain-Sharing provides motivation and focus
The central tenet of employee motivation states that employees will work towards
goals when they believe: (a) their efforts will lead to successful performance, and
(b) that successful performance will lead to a desirable outcome. Gain-Sharing is
particularly well-suited for leveraging this principle. Gain-Sharing (a) is centered
19
on work processes and activities that employees can impact and (b) rewards
improved performance with a percentage of the financial gains from that
improvement. Other types of organization-wide incentive plans, such as Profit-
Sharing and Employee Stock Ownership Plans involve aspects of performance
that are less directly controlled by employees (e.g., general economic conditions
and the activities of competitors can obviate the impact of employee efforts on
profits and stock price), and, thus, do not demonstrate as powerful a connection
between effort and reward as does Gain-Sharing.
Gain-Sharing also specifies the company’s priorities and signals where employees
should focus their effort. This strong focus is a very positive attribute, but it also
necessitates careful consideration of what should be rewarded. For example, if
Gain-Sharing is tied to increased speed of production, employees may focus on
speed to the detriment of quality. With Gain-Sharing, as with any other reward
system, be careful in choosing your target behaviors in order to avoid unintended
consequences.
Gain-Sharing can also be focused quite narrowly, targeting a particular workplace
initiative and particular groups of employees. In my opinion, Gain-Sharing is best
used when applied to a particular initiative with a particular group of employees.
Here are a few examples:
A manufacturing company may tie Gain-Sharing to a workplace safety initiative
by sharing a portion of the Workers’ Compensation cost savings with its
production employees.
An electronics chain can use Gain-Sharing to encourage its sales staff to sell
more extended warranties by offering higher rates of commission on the sale of
warranties.
A company can use Gain-Sharing to encourage innovation and ideas for new
products by agreeing to share 20% of the first-year revenues from the new
product with the research and development department employees involved in
that product.
20
My favorite real-life example of Gain-Sharing occurred in a beverage
distribution company that paid very high insurance premiums for its fleet of
delivery trucks and drivers because of a high number of accidents. The CEO
went to the drivers and told them that 50% of any reductions in next year’s
insurance premiums would be split evenly among the drivers. The company
did not incur a single accident for the rest of the year and reaped several
thousand dollars in savings.
Example: The Yellow Bus Company
The Yellow Bus Company operated a fleet of around 500 buses in the city of
Auckland, New Zealand. It carried people on some 25 million passenger trips each
year, covering a total distance of around 22 million kilometers annually. There
were close to 900 employees, all of whom were included in the Gain sharing
system (except for the top four executives).
Gainsharing was part of the company's strategy for integrating its team together
and achieving a common set of aims.
The former Chief Executive, Barry Turley, wrote: "Gainsharing has a simple, but
essential purpose. To involve staff in helping to improve our business". To start off,
the Company opened a special "Gainshare" account and put money into it. Every
quarter after that a share of the "Gain" earned by the company (income less costs
and necessary payments) was added to this pool and an agreed proportion was
shared out between the employees.
The amount paid to employees depended on overall company performance on key
performance indicators; and all the details of Gain-sharing at the Yellow Bus
Company were developed in a consultative way.
There were many changes introduced in the Yellow Bus Company as a direct
result of Gain-sharing. The bus operators, maintenance engineers, service staff,
21
and managers turned their attention to finding ways to make the company more
successful. The employees of the Yellow Bus Company wanted to provide the
best bus service to the people of Auckland! They were so successful that in late
1998 the company was sold to an international company, Stagecoach, for a sum in
excess of one hundred and ten million dollars. Not bad for a company that a few
years before had been losing nearly a million dollars
Summarise the recent trend of reward systems in India.
Summarise the recent trend of reward systems in India. Analyse it with respect to your organisation or an organisation you are familiar with and discuss its impact on productivity. Describe the organisation you are referring to.
Ans:- Human resource management is the planning, organizing, directing and controlling the operative functions of procurement, development, compensation and maintenance of human resource of an organizations goals or objectives. It is responsible fro getting the best people, training them and providing mechanism to ensure that these employees maintain their productivity affiliations with the organizations. There are many emerging issues, which are divided into two:
a) Organisational problems:
The top management often presumes that sending the managers for the HRD programmes will automatically improve their performance. This is not the fact.
b) The line managers do not show interest in developing the human resources. They argue that developing the human resources is the duty of the HRD department. This feeling is a hurdle in the process of HRD.
c) HRD receives only lip service because of the heavy expenditure involved in the development process. Lack of genuine support makes the HRD programme futile.
d) Organizations transfer administrative and industrial relations managers/ staff to HRD department without adequate training. This adversely affects the HRD programmes because the badly needed ‘ human touch’ is missing.
GENERAL PROBLEMS :
H) The HRD programmes fail due to poverty, social injustice, low quality education and illiteracy.
I) The development of HR in India is also made difficult by the high fertility rate, poor health conditions, sexual discrimination and inter group intolerance.
J) The high population growth adversely affects the qualitative and quantitative dimensions of HRD programmes. Added to this are issues like high dependent population and unemployment.
K) The unscrupulous attitude of our politicians also impairs the moral fear and behavior of HR India.
L) The differences in the religious faiths among the people is another hurdle in the HRD. Religious conflicts hinder the development of HR in India.
M) The widening gap between have and have not is also a hurdle in HRD.
N) Indians have a strong faith in the traditional methods which are linked with their religious philosophies. This generates a strong resistance to change and impairs the HRD process.
O) The Organisation We are referring to is saffron MNC organisation which function like this:-
HRD approach will assist in evolving policies which will be useful in generating job satisfaction, career development opportunities and in alleviating the sense of frustrations among the human beings. Many organisations in India have started implementing the HRD programmes. The objectives HRD cannot be achieved without an effective HRM system. Every HRD system developed by an organisation should be based on the following elements of HRM
e) It evolves a system of Human Resources Planning them.
f) Selection of the right people for the right job at right time.
g) Imparting proper training based on the principle of learning, teaching basic work skills, motion study and training to foremen.
h) Evolving suitable compensation plan
i) Evolving a good performance appraisal system.
Ans:- Human resource management is the planning, organizing, directing and controlling the operative functions of procurement, development, compensation and maintenance of human resource of an organizations goals or objectives. It is responsible fro getting the best people, training them and providing mechanism to ensure that these employees maintain their productivity affiliations with the organizations. There are many emerging issues, which are divided into two:
a) Organisational problems:
The top management often presumes that sending the managers for the HRD programmes will automatically improve their performance. This is not the fact.
b) The line managers do not show interest in developing the human resources. They argue that developing the human resources is the duty of the HRD department. This feeling is a hurdle in the process of HRD.
c) HRD receives only lip service because of the heavy expenditure involved in the development process. Lack of genuine support makes the HRD programme futile.
d) Organizations transfer administrative and industrial relations managers/ staff to HRD department without adequate training. This adversely affects the HRD programmes because the badly needed ‘ human touch’ is missing.
GENERAL PROBLEMS :
H) The HRD programmes fail due to poverty, social injustice, low quality education and illiteracy.
I) The development of HR in India is also made difficult by the high fertility rate, poor health conditions, sexual discrimination and inter group intolerance.
J) The high population growth adversely affects the qualitative and quantitative dimensions of HRD programmes. Added to this are issues like high dependent population and unemployment.
K) The unscrupulous attitude of our politicians also impairs the moral fear and behavior of HR India.
L) The differences in the religious faiths among the people is another hurdle in the HRD. Religious conflicts hinder the development of HR in India.
M) The widening gap between have and have not is also a hurdle in HRD.
N) Indians have a strong faith in the traditional methods which are linked with their religious philosophies. This generates a strong resistance to change and impairs the HRD process.
O) The Organisation We are referring to is saffron MNC organisation which function like this:-
HRD approach will assist in evolving policies which will be useful in generating job satisfaction, career development opportunities and in alleviating the sense of frustrations among the human beings. Many organisations in India have started implementing the HRD programmes. The objectives HRD cannot be achieved without an effective HRM system. Every HRD system developed by an organisation should be based on the following elements of HRM
e) It evolves a system of Human Resources Planning them.
f) Selection of the right people for the right job at right time.
g) Imparting proper training based on the principle of learning, teaching basic work skills, motion study and training to foremen.
h) Evolving suitable compensation plan
i) Evolving a good performance appraisal system.
Subscribe to:
Posts (Atom)