Compensation in Making Hr a Strategic

8/8/2019 Compensation in Making Hr a Strategic

1/12

ROLE OF COMPENSATIONROLE OF COMPENSATIONIN MAKING HR AIN MAKING HR ASTRATEGIC BUSINESSSTRATEGIC BUSINESS

PARTNERPARTNER


2/12


3/12

ValuesValues

& Culture& Culture

WorkWorkProcessesProcesses& Business& Business

SystemsSystems

IndividualIndividual

& Team& TeamCompetenceCompetence

BusinessBusinessResultsResults

StrategicStrategicIntentIntent

Organisation,Organisation,Team & JobTeam & Job

DesignDesign

Reward &Reward &RecognitionRecognition

ManagementManagementProcesses &Processes &

SystemsSystems

LeadershipLeadership

The capability of people individuallyand as teams tocarry out the strategy

The ability of leadersto mobilise theorganisation aroundthe strategy

The way in whichaccountabilities areorganised

The manner in whichbehaviour, capabilityand/or results arereinforced

The key processesthrough whichmanagementinfluences people

The way in which theorganisational normssupport thestrategy

The sequence of activities throughwhich resources aretransformed to meetcustomer needs

Approach


4/12

OBJECTIVES OF AOBJECTIVES OF ACOMPENSATION PROGRAMMECOMPENSATION PROGRAMME

PRIMARILY TO ATTRACT, RETAIN ANDMOTIVATE EMPLOYEES OF THE CALIBRENECESSARY TO ACHIEVE THE ORGANISATIONSPRESENT AND FUTURE OBJECTIVES


5/12

ROLE OF COMPENSATIONROLE OF COMPENSATION

Pay is not t he central issue for attracting andretaining employees .People rarely leave a job for money alone.

Instead, they leave for career advancement,technical or career challenge,communication reasons (lack of appreciation bycompany, inability to have an impact at thecompany, etc.), job security.


6/12

W ARNING SIGNSW ARNING SIGNS

The Compensation Plan does notdifferentiate between high and lowperformers

Company Goals are not being achievedHigh performing employees are leavingEmployees do not understand and payattention to the Compensation PlanThe Compensation Plan has not beenreviewed for strategic alignment in more than3 years


7/12

STEPS TO CREATE STRATEGICSTEPS TO CREATE STRATEGICCOMPENSATION SYSTEMSCOMPENSATION SYSTEMS

Categorize employees by job

Compare your pay to the labor market .Manage internal equity .Link pay with job performanceCommunicate how pay works .


8/12

VARIABLE PAY SYSTEMSVARIABLE PAY SYSTEMS

Variable pay is employee compensation thatvaries with the organization's businessperformance.

Variable compensation plans continue toincrease in popularity.According to a recent survey by HewittAssociates, variable pay awards as a

percentage of exempt payroll has increasedsteadily from 4% in 1990 to almost 12% in2003 .


9/12

F ACTORS DRIVING VARIABLEF ACTORS DRIVING VARIABLECOMPENSATION PLANSCOMPENSATION PLANS

Variable pay is counter-cyclicalVariable pay links employee goals with

the organization goalsThe employee is motivated to help theorganization do well .


10/12

TYPES O FTYPES O F VARIABLEVARIABLECOMPENSATION PLANSCOMPENSATION PLANS

F ormal bonus or incentive plansProfit sharing plansLump sum merit awardsSpot bonusesGain sharing plansStock Plans


11/12

STOCK PLANSSTOCK PLANSStock Option PlansStock Purchase PlansStock options provide companieswith a long term incentive andretention tool. The recipients of stock options are motivated to helpthe company perform well, so thestock will appreciate in valueAs they must wait several years to

receive the entire stock option grant,employees are motivated to remainwith the company, as long as thestock value is increasing.


12/12

Documents

Compensation in Making Hr a Strategic