CASE 6
Case #6
Kerkko Jahnukainen
Learning materials
Ch. 10 Managing Compesation
Employees compensation (pay) consists of three components
It's important to design a compensation system witch rewards employees accordingly.
- enables firm to achieve its strategic objectives
- is molded to fit firm's unique characteristics and environment
The Distributive Justice Model
- Employees exchanges his/her skills, knowledge etc. to company for a payment
The Labor Market Model
- Pay is based on the demand of the labor market
Balancing Equity
- A firm should try to establish both internal and external pay equity
Question of fixed vs variable pay
Perfromance vs membership
Job vs individual pay
- In a knowledge-based pay or skilled-based pay system, employeess are paid for their skills and talents as they are the only ones cabale of perofrming the given jobs
- A job based pay tends to work better in cases:
- And invidual pay when:
- The firm is relatively educated workforce with the ability and willinges to learn different jobs
- Elitism vs egalitarinasm
- Do you want to provide all employees under the same compesation plan or do the ones higher up get an advantage
- Below / above market compesation
Rewrding employees with Nomoneatry rewards
The Fair Labor Standards Act
Ch. 11 Rewarding Performance
Pay-for-performance system, also called incentive system rewards for performance on basis of three assumptions:
The "Do only what you get paid for" Syndrome
Unethical Behaviour
- If the only thing an employer cares about is performance, it may lead to employees cutting corners, hiding negative facts, misinform, deceive.
Difficulties in Measuring performance
Pay for performance may lead to lower satisfaction among employees and side effects such as higher levels of stress = lower performance
Meeting the challenges of pay-for-performance systems
- Link performance and reward appropriatley
-Develop a complementary relationship between extrinsic and intrinsic rewards
- Build employee trust
Different types of PYP- systems:
- Individual pay
- Team-based pay
- Corporate wide plans
Designing PYP- plans for executives and salespeople
- Short/long term incentives
- Golden parachutes
- Rewards for social responsibility
PYP- systems for small firms
Case 6a
New generations of people are stepping into the working life. They carry different culture, views and perhaps skills.
The Distributive Justice Model
Kerkko Jahnukainen
Learning materials
Ch. 10 Managing Compesation
It's important to design a compensation system witch rewards employees accordingly.
- enables firm to achieve its strategic objectives
- is molded to fit firm's unique characteristics and environment
The Distributive Justice Model
- Employees exchanges his/her skills, knowledge etc. to company for a payment
The Labor Market Model
- Pay is based on the demand of the labor market
Balancing Equity
- A firm should try to establish both internal and external pay equity
Question of fixed vs variable pay
Perfromance vs membership
Job vs individual pay
- In a knowledge-based pay or skilled-based pay system, employeess are paid for their skills and talents as they are the only ones cabale of perofrming the given jobs
- A job based pay tends to work better in cases:
- And invidual pay when:
- The firm is relatively educated workforce with the ability and willinges to learn different jobs
- Elitism vs egalitarinasm
- Do you want to provide all employees under the same compesation plan or do the ones higher up get an advantage
- Below / above market compesation
Rewrding employees with Nomoneatry rewards
The Fair Labor Standards Act
Ch. 11 Rewarding Performance
Pay-for-performance system, also called incentive system rewards for performance on basis of three assumptions:
The "Do only what you get paid for" Syndrome
Unethical Behaviour
- If the only thing an employer cares about is performance, it may lead to employees cutting corners, hiding negative facts, misinform, deceive.
Difficulties in Measuring performance
Pay for performance may lead to lower satisfaction among employees and side effects such as higher levels of stress = lower performance
Meeting the challenges of pay-for-performance systems
- Link performance and reward appropriatley
-Develop a complementary relationship between extrinsic and intrinsic rewards
- Build employee trust
Different types of PYP- systems:
- Individual pay
- Team-based pay
- Corporate wide plans
Designing PYP- plans for executives and salespeople
- Short/long term incentives
- Golden parachutes
- Rewards for social responsibility
PYP- systems for small firms
Sources: Luis R. Gomez-Mejia, David B. Balkin, Rober R. Cardy: Managing Human Resources
Case 6a
What Is Employee Engagement?
As the title suggests the article talks about employee engaganemtn, what it really means and the benefits of it.
It starts out by saying employee engagement =/= employee happieness. A person can be lousy at work and do nothing but still be extremely happy with their job. But also employee engagement =/= employee satisfaction. A hard worker may be very unhappy with their job or some aspects of it. I wouldn't consider this a very healthy relationship in the long run, as it most likely will start to hinder performance.
The points made in the article really depend on the job we talk about. Is it anentrylevel job or an advanced job which requires special training. And on the reward system. A job where the pay is static, many employees will not be very engaged and easily go into "only do what is get payed for" mode.
So, it makes me think, does pay-for-performance lead to much higher engament among employees and from there leading to:
- higher service quality and productivity -> higher customer satisfaction -> increased sales -> higher levels of profit -> higher shareholder returns
(Kevin Kruse, "What Is Employee Engagement?", 22.6.2012, www.forbes.com, https://www.forbes.com/sites/kevinkruse/2012/06/22/employee-engagement-what-and-why/#4d0038707f37)
Case 6b
The New Rules of Employee Engagemnt
Talks about the future of employee relationships and engagement to firms in the ever changing world.
It brings up 6 main points:
1. Globalisation
2. Environemt
3. Demigraphic change
4. Individualism
5.digitalzation
6. Technological converenge
1. Company engagement is more important than ever, as today a person can basically go work anywhere in the world way outside the boundaries of the their home town.
As the economy shifts and middle class grows - pay levels need to increase to compensate the change
The Labor Market Model
As the economy shifts and middle class grows - pay levels need to increase to compensate the change
The Labor Market Model
2."Businesses must respond to the demand for
sustainability to maintain their workforces’ engagement
and commitment. Failure to do so will put them at a
disadvantage in the war for talent, particularly in the
eyes of younger workers."
3. Generations vary in size, and we are about to pass the "baby boomer" generations which leads to a huge shortage in expertise, so huge it needs to be taken into account when planning ahead.
New generations of people are stepping into the working life. They carry different culture, views and perhaps skills.
The Distributive Justice Model
"For businesses, an ageing population means a growing skills shortage. With the babyboom
generation hitting retirement age, experienced talent will be at a premium. This
will put pressure on younger workers to quickly become mature and skilled leaders.
Organizations need to invest time and effort now to develop the next generation, and
make sure they’re ready to lead the company into the future."
4. Money isn't everything in modern world. Employees want to be treated as human beings. Employees need to be more personal and try to provide the best possible enviromnt to work at.
Meeting the challenges of pay-for-performance systems
- Link performance and reward appropriatley
-Develop a complementary relationship between extrinsic and intrinsic rewards
- Build employee trust
Meeting the challenges of pay-for-performance systems
- Link performance and reward appropriatley
-Develop a complementary relationship between extrinsic and intrinsic rewards
- Build employee trust
5.
"Digital technology is reversing the balance of power
between employers and employees in a number of ways:
- It creates a climate of transparency, putting
reputations at risk. Employees and customers
can instantly share information about companies
and colleagues – good or bad – with the world at
large.
- Social media offers a platform for talented
individuals to promote their abilities and
achievements, making them more accessible to
competitors.
- Online resources make it easier for employees to
compare their compensation, career opportunities
and work environments with the competition."
6.
"Life is about to get considerably more advanced. A combination of NBIC (nano,
bio, information and cognitive) sciences will lead to a wave of technological
breakthroughs. This will transform many areas of our everyday lives, giving rise to new
product markets and leaving others behind.
The pace of change will accelerate beyond imagination. In the race for innovation,
highly technical NBIC research will demand new forms of collaboration – between
business functions, companies, competitors and even whole scientific fields."
People are afraid of change, especially when their careers are on the line. It's a balance of ensuring employees of their future and expecting flexibility in an ever changing world.
This article really shows that money is only one type/part of employee compensations (maybe the most important still). The engagement doesn't nearly stem from a big pay check but other factors as well.
As the world changes, the way be perceive compensations needs to as well.
(Hay Group, The New Rules of Employee Engagemnt, 2014, http://f.datasrvr.com/fr1/414/25154/Hay_Group_New_Rules_of_Engagement_Report.pdf)
Case 6c)
Enablers of Engagement – What has to happen to make engagement work
The report talks about the different rewards systems and how they affect engagement in the workplace.
LEADERSHIP provides a strong strategic narrative which has widespread ownership and commitment from managers and employees at all levels. The narrative is a clearly expressed story about what the purpose of an organisation is, why it has the broad vision it has, and how an individual contributes to that purpose. Employees have a clear line of sight between their job and the narrative, and understand where their work fits in. These aims and values are reflected in a strong, transparent and explicit organisational culture and way of working.
-A strong narrative that provides a clear, shared vision for the organisation is at the heart of employee engagement. Employees need to understand not only the purpose of the organisation they work for but also how their individual role
- Elitism vs egalitarianism
ENGAGING MANAGERS are at the heart of this organisational culture– they facilitate and empower rather than control or restrict their staff; they treat their staff with appreciation and respect and show commitment to developing, increasing and rewarding the capabilities of those they manage.
- An engaging manager is at the heart of success in engaging the workforce.
- Makes the management seems more humane, not just some obscure voice giving out orders. By getting to know the employees better, it might help with the working environment and make information flow better.
-Employees need managers who are themselves engaged and who are seen to be committed to the organisation.
- Soft skills
Three things which make a good manager:
1. Engaging managers offer clarity for what is expected from individual members of staff, which involves some stretch, and much appreciation and feedback/coaching and training.
2. treating their people as individuals, with fairness and respect and with a concern for the employee’s well-being
3. Managers have a very important role in ensuring that work is designed efficiently and effectively.
VOICE An effective and empowered employee voice – employees’ views are sought out; they are listened to and see that their opinions count and make a difference. They speak out and challenge when appropriate. A strong sense of listening and of responsiveness permeates the organisation, enabled by effective communication.
-During the course of our review, we received evidence from employers and trade unions of the value of engaging with a collective voice in the workplace, as an integral part of engagement approaches.
INTEGRITY Behaviour throughout the organisation is consistent with stated values, leading to trust and a sense of integrity.
Most organisations have espoused values and all have behavioural norms. Where there is a gap between the two, the size of the gap is reflected in the degree of distrust within the organisation; if the gap is closed, high levels of trust usually result. If an employee sees the stated values of an organisation being lived by the leadership and colleagues, a sense of trust in the organisation is more likely to be developed, and this constitutes a powerful enabler of engagement.
- Good management => better working environment => more productive and less stress. Also, helps battle the "do only what is get paid for"- syndrome as employees getting more engaged and genuinely want the best for the company.
Meeting the challenges of pay-for-performance systems
- Link performance and reward appropriatley
-Develop a complementary relationship between extrinsic and intrinsic rewards
- Build employee trust
Money ain't everything for employees, as things like workplace treatment are important as well.
Source: Engaging for Success: enhancing performance through employee engagement, David MacLeod Nita Clarke (http://engageforsuccess.org/wp-content/uploads/2015/08/file52215.pdf)
As the world changes, the way be perceive compensations needs to as well.
(Hay Group, The New Rules of Employee Engagemnt, 2014, http://f.datasrvr.com/fr1/414/25154/Hay_Group_New_Rules_of_Engagement_Report.pdf)
Case 6c)
Enablers of Engagement – What has to happen to make engagement work
The report talks about the different rewards systems and how they affect engagement in the workplace.
LEADERSHIP provides a strong strategic narrative which has widespread ownership and commitment from managers and employees at all levels. The narrative is a clearly expressed story about what the purpose of an organisation is, why it has the broad vision it has, and how an individual contributes to that purpose. Employees have a clear line of sight between their job and the narrative, and understand where their work fits in. These aims and values are reflected in a strong, transparent and explicit organisational culture and way of working.
-A strong narrative that provides a clear, shared vision for the organisation is at the heart of employee engagement. Employees need to understand not only the purpose of the organisation they work for but also how their individual role
- Elitism vs egalitarianism
ENGAGING MANAGERS are at the heart of this organisational culture– they facilitate and empower rather than control or restrict their staff; they treat their staff with appreciation and respect and show commitment to developing, increasing and rewarding the capabilities of those they manage.
- An engaging manager is at the heart of success in engaging the workforce.
- Makes the management seems more humane, not just some obscure voice giving out orders. By getting to know the employees better, it might help with the working environment and make information flow better.
-Employees need managers who are themselves engaged and who are seen to be committed to the organisation.
- Soft skills
Three things which make a good manager:
1. Engaging managers offer clarity for what is expected from individual members of staff, which involves some stretch, and much appreciation and feedback/coaching and training.
2. treating their people as individuals, with fairness and respect and with a concern for the employee’s well-being
3. Managers have a very important role in ensuring that work is designed efficiently and effectively.
VOICE An effective and empowered employee voice – employees’ views are sought out; they are listened to and see that their opinions count and make a difference. They speak out and challenge when appropriate. A strong sense of listening and of responsiveness permeates the organisation, enabled by effective communication.
-During the course of our review, we received evidence from employers and trade unions of the value of engaging with a collective voice in the workplace, as an integral part of engagement approaches.
INTEGRITY Behaviour throughout the organisation is consistent with stated values, leading to trust and a sense of integrity.
Most organisations have espoused values and all have behavioural norms. Where there is a gap between the two, the size of the gap is reflected in the degree of distrust within the organisation; if the gap is closed, high levels of trust usually result. If an employee sees the stated values of an organisation being lived by the leadership and colleagues, a sense of trust in the organisation is more likely to be developed, and this constitutes a powerful enabler of engagement.
- Good management => better working environment => more productive and less stress. Also, helps battle the "do only what is get paid for"- syndrome as employees getting more engaged and genuinely want the best for the company.
Meeting the challenges of pay-for-performance systems
- Link performance and reward appropriatley
-Develop a complementary relationship between extrinsic and intrinsic rewards
- Build employee trust
Money ain't everything for employees, as things like workplace treatment are important as well.
Source: Engaging for Success: enhancing performance through employee engagement, David MacLeod Nita Clarke (http://engageforsuccess.org/wp-content/uploads/2015/08/file52215.pdf)
Hospitals Review Pay-for-Performance Models
- An experiment thats have been in the talks in the USA, where they think changing the payment of doctors from a static pay to a "pay-for-performance" model. Their goal is to improve efficiency and create higher quality of treatment.
The "pay-for-performance" model doesn't work on everything, but it is still to be seen how this experiment goes. In my opinion, there is a lot of risks, but also if executed correctly, could revamp the medical fields in some ways.
(http://thessigroup.com/hospitals-review-pay-for-performance-models/. Accessed 9.4.2018)
HR Strategies to Follow for Employee Engagement and Productivity Improvement
The article talks about "simple" ways to increase employee engagement through some HR strategies.
"When your employees are unmotivated to complete their daily tasks, your entire business suffers. You may notice a drop in profitability, productivity, and customer ratings. You could also see an increase in safety incidents, absenteeism, and product defects."
- Ensure Proper Compensation and Benefits
- Improve Employee and Management Communication
- Improve Your Scheduling Practices
- Give Your Employees Opportunities for Advancement
- Eliminate Job Stress
Source: HR Strategies to Follow for Employee Engagement and Productivity Improvement, Advanced Systems, 28.4.2016, www.advancedsystemsinc.com (https://advancesystemsinc.com/hr-strategies-follow-employee-engagement-productivity-improvement/)
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