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1、Compensation ManagementA Strategic Overview,Lee Kok Wai Lectures 2 and 3,Strategic Evolution of Human Resource Role,Old thinkingHR performance primarily administrative role.,New thinking.HR performs primarily strategic role,Maintainingpersonnel files,Compensation/Benefits,Benefitsadministration,Relo
2、cation,Approval cycles,exceptions,andpolicy interpretation,Recruit,Employee lifecycle management,Retire,HR Role,Corporatestrategy/objectives,Leadership,MatchingSkills,Culture,Rewards&Conse-quences,Motivation,Cross-functionalteams,Organizationdesign,Human Resource as Business Partner,Linkage between
3、Corporate and HR Strategies in Compaq,StrategicPartner,Administrative Expert,Employee Relations Expert,Change Agent,HRs 4 Roles&Key Accountabilities,Strategic Components of Human Resources,COMPENSATION MANAGEMENTWe believe in paying competitive wages that commensurate with job size and individual pe
4、rformanceWELFARE MANAGEMENTWe believe in being a firm,fair and caring employer.We strive to make employees value their jobs and want to remain in the organization based on their abilities to contribute and grow.PERFORMANCE MANAGEMENTWe believe in equipping employees with the necessary skills to do a
5、 good job,providing them with the tools,the environment,the support and the information needed to excel in their jobs.CAREER MANAGEMENTWe believe in matching employees strengths and aptitudes to available jobs,developing them to their highest potential and offering them opportunities to advance in t
6、heir careers.CULTURE/VALUE MANAGEMENTWe believe in instilling our corporate core values and promoting a corporate culture that emphasizes results,teamwork,learning,sharing,service quality and work excellence.,Retaining Talent:Its About Dollars&SENSE,Need a balanced approach to maximize ability to at
7、tract,retain and compete effectively in this market,Dollars:Economic Equity,SENSE:Emotional Equity,Lets look at what we are doing to develop and support stronger manager/employee relationships,HIGHLIGHTS,HR Management-An OverviewCurrent HR ChallengesTotal CompensationPhilosophyT-Comp DriversStrategi
8、es in CompensationPolicies&PracticesManaging Local Employees:Basic ComponentsTemplate for T-Comp DesignMeasuring Performance in MNCsExpatriate Compensation:Managing Expatriate CompensationThe Balance-Sheet ApproachForeign Service PremiumHardship AllowanceCost of Living AllowanceAdditional PerksTax T
9、reatmentConclusion.and Some Points to Ponder,Managing Human Resources in COMPAQ,Compensation Mgt.T-Comp philosophy&design T-Comp planning&admin.Incentive plans(MIPs/LTB)Profit-sharing scheme Reward&recognition prog.Expatriate mgt.,Manpower Mgt.Headcount management Recruitment strategies Sources of l
10、abor supply Selection process&tools Retention strategies&plans Staff deployment Staff orientation,Employee Relations Mgt.Benefits administration Code of conductðics Employee discipline Employee communications Staff social,sports&recreation Community services&relations,EHS&S Mgt.Environment mgt.Em
11、ployee wellness Employee health services Loss prevention Asset management Safety mgt.,Culture/Values Mgt.Corporate vision Corporate mission Culture building Teambuilding Habits building,Performance Mgt.(HRD)Staff training&development Succession planning Career planning Coaching&counseling Appraisal
12、review/ranking Organization development Leadership development,Human Resource Admin.Records&information mgt.Personnel research HR policy review HR process improvements HR performance stds&audit Legal compliance Document control,If you:Are loyalWork hardDo as youre toldWell provide:A secure jobSteady
13、 pay increasesFinancial securityAnd,youll be part of:A safe,secure organization,StayDo your job plus someone elsesVolunteer for task forcesA job if we canGestures that show we careThe same payA business struggling to compete,Develop skills we needApply them to help us winLive our valuesA challenging
14、 work environmentSupport for developmentReward for your contributionA progressive industry leader,The New Deal in Employment Relationships,1980s and 1990s,2000 and beyond,CURRENT HR CHALLENGES,Constant organizational change and the need to adapt to new requirements;Global workforce mobility vs.the a
15、bility to develop people and retain talents;The need to maintain/enhance its competitiveness vs.containing cost;andThe social responsibility to provide for lifestyle improvements in an increasingly affluent society.,Internalequity,Externalequity,Employeeequity,Administration,Concepts,Compensation Te
16、chniques,Planning,Budgeting,Monitoring,Evaluating,JobAnalysis,JobDescription,JobEvaluation,JobGrades,MarketDefinitions,SalarySurveys,PolicyLines,PayStructures,SeniorityIncreases,PerformanceEvaluation,IncreaseGuidelines,Compensation Objectives,Role clarity and accountability.Facilitates administratio
17、n and performance management.Competitive wage policies and practices.Influence employees workattitudes and behaviour.Attract talents.Retain talents.Motivate employees.Comply with regulations.Consistency in policyadministration.,The Strategic Compensation Model,TOTAL COMPENSATION,Compensation managem
18、ent essentially involves:Managing employee perceptions and expectations;Understanding the history and values of the organization;andAligning programs to the companys business goals and strategies.A major compensation theme today is Total Compensation,as variable pay is increasingly replacing traditi
19、onal base pay increases.,COMPENSATION MANAGEMENT,Total Compensation philosophy and designTotal Compensation planning and administration Incentive schemes Profit/gain-sharing schemes Reward and recognition programs Expatriate management,14,Compensation Philosophy,The companys overall compensation phi
20、losophy is to pay performance relative to the market,focusing on total compensation.This helps to:-Attract outstanding external candidates-Retain high performing employees-Not retain low performing employees-Motivate employees to perform at their highest level-Focus each employee on specific contrib
21、utions they make to the overall success-Put compensation decision-making in the hands of managers,15,Base Compensation System Design Process,Review Pay Philosophy,Participate in ExternalSalary Surveys,Verify BenchmarkJob Matches in Surveys,Collect&EvaluateSurvey Data,Develop SalaryStructures,Evaluat
22、e Cost&Develop Merit Grids,Distribute CommunicationPacket,Management prepares and submitsperformance reviews as appropriate*,PHILOSOPHY,Do we wish to pay salaries to employees based on their job sizes?Concept of internal equityHow do we link individual contribution and performance to pay?Concept of
23、meritocracyWho do we need to benchmark against to ensure pay levels and practices are competitive?Concept of external equity,Job sizePerformanceMarket rates,SalariesBonuses&incentivesBenefits,POLICIES&PRACTICES,Set guidelines that underline the philosophy of the Companys T-Comp pertaining to:The dir
24、ection of the organization-evolving from where we are today to where we want to be.The positioning of individual components relative to market norms.The design of value-added cost-effective program with maximum motivational effect at minimum cost increase.,T-COMP DRIVERS,ExternalGovernment legislati
25、on3rd party interventionCompetitor practicesNew entrantsLabor supply shortage/brain drainEconomy,including employment conditions,T-COMP DRIVERS,InternalCostCompetenceCommitmentBusiness needsOrganization structure and values,STRATEGIES in COMPENSATION,Align strategically to business goals.Position co
26、mpetitivelyTo remain comparable with external community practices;andTo enhance ability to attract and retain people.Streamline salary practicesFor internal equity;andTo create promotion opportunities/career commitment.,STRATEGIES in COMPENSATION,Merit-based compensation systemsTo reward and recogni
27、ze good and sustained performance for both individuals and work teams.Deferred compensationTo share in company successes/achievement of long-range goals.Program cohesivenessTo integrate and streamline Compensation programs with other HR systems and policies;andTo manage expectations and measure prog
28、ram effectiveness,MANAGINGLOCAL EMPLOYEES,BASIC COMPONENTS,Annual base salary12 months base salary,regular cash allowances+year-end 13th monthTotal CashAnnual base salary+bonuses&cash incentives.Total EarningsTotal cash+other non-cash components and incentives.Total CompensationTotal earnings+value
29、of benefits,both in cash and in kind,including pension funds.,TEMPLATE FOR T-COMP DESIGN,MEASURING PERFORMANCE in MNCs,By production output/service resultsProduct quality,yield and cycle timeBTO/CTO and time-to-market technologyOn-time deliveries(95/5)and Service QualityScrap,waste,cost of reject/no
30、n-conformanceBy financial performanceProfitability(GM)/Return Measures(ROIC/EVA)Earnings Per ShareRevenue Growth/Territory PenetrationMarket Share/Product MixExpense control/cost savings,Example of EPS-LCC Payout Matrix for Executive Bonus,MEASURING PERFORMANCE in MNCs,By customer satisfactionCustom
31、er satisfaction ratingsCustomer complaints/returnsVendor/supplier awards,EXPATRIATE COMPENSATION,MANAGING EXPATRIATE COMPENSATION,The basic components of an expatriates compensation viz.base salary,variable pay,staff benefits and other perks(if any)are typically linked to home country practices.Howe
32、ver,companies needing to incent employees to relocate and compensate for:Expatriation to host country;Hardship;Cost of living differentials;Tax differentials;andRepatriation and re-adjustment to home country practices.,THE BALANCE-SHEET APPROACH,Basic principleTo allow the expatriate employee to mai
33、ntain a compensation position equivalent to an average counterpart employee in the home country.i.e.Differences in housing costs,goods and services costs,education and taxes must be accounted for in deriving the net,after-tax compensation of the employee.Effect of Balance Sheet ApproachHome CountryH
34、ost Country BaseBase salaryHousingGoods&Svcs.HardshipForeign SalaryDifferentialsDifferentialsAllowancePremium,FOREIGN SERVICE PREMIUM,Rationale for paymentIncent employee for taking the international service assignment.Reimburse for separation from home country and its ties,cultural adjustment,neces
35、sity to learn new language etc.It is NOT related to cost differentials,and therefore is not part of the package designed to maintain with the average counterpart in the home country.,HARDSHIP ALLOWANCE,Rationale for paymentTo recognize certain disadvantages or hardships during the assignment.Factors
36、 of considerationMedical/sanitary standards;Political stability;Recreational opportunities andClimatic differences usually involving extremes.Like Foreign Service Premium,it is NOT related to cost differentials.,COST OF LIVING ALLOWANCE,Basic principleTo pay for the differences in relative costs of
37、goods and services between the home and host countries.There are established standards of measure of the basket of goods and services,after currency fluctuations have been taken into account.,Spore,Overseaslocation,ADDITIONAL PERKS,Family AllowanceMonthly allowances for family maintenance.Children E
38、ducationSchool and lodging,where applicable,for childrens education at International School standards to facilitate future adaptation to local school curriculum.Home tripsForm of rest and recreation for employee and family,where applicable,to visit family member,relatives and friends at stated inter
39、vals,TAX TREATMENT,Two most common practicesTax equalizationThe tax burden of the expatriate employee is maintained at parity with what it would have been,had the employee remained in the home country at the same base pay.A hypothetical tax on the base pay will be deducted from the employee and any
40、additional taxes will be borne by the companyTax protectionCompany reimburses expatriate employee for the excess of the employees actual foreign and local taxes.,Overseas tax,Singapore tax,SOME POINTS TO PONDER,What are the goals and long term direction of the organization with regard to Total Compe
41、nsation?What is the position of the individual components relative to market?Base salaryVariable payOther cash equivalentsBenefits&perquisitesWhat is the proportion of the individual components to base salary?Should variable pay be linked to productivity or other performance indices?What is the comp
42、anys philosophy on the provision and packaging of its benefits?,CONCLUSIONS ON COMPENSATION MANAGEMENT,Managing people is essentially managingPAY,PERFORMANCE,andPERCEPTION,PAY,PERCEPTION,PERFORMANCE,Recommended Readings,“Human Resource Champions”by Dave Ulrich,Harvard Business School Press,1997“A Ha
43、ndbook of Human Resource Management Practice 7th Edition”by Michael Armstrong,Kogan Page 1999“A Handbook on Compensation”by Milton L.Rock,Internalequity,Externalequity,Employeeequity,Administration,Concepts,Compensation Techniques,Planning,Budgeting,Monitoring,Evaluating,JobAnalysis,JobDescription,J
44、obEvaluation,JobGrades,MarketDefinitions,SalarySurveys,PolicyLines,PayStructures,SeniorityIncreases,PerformanceEvaluation,IncreaseGuidelines,Compensation Objectives,Role clarity and accountability.Facilitates administration and performance management.Competitive wage policies and practices.Influence
45、 employees workattitudes and behaviour.Attract talents.Retain talents.Motivate employees.Comply with regulations.Consistency in policyadministration.,The Strategic Compensation Model,What is Job Evaluation?,Job evaluation is a decision process of comparing one job with another job with the aim of es
46、tablishing the relative importance of jobs within the organization.Job evaluation will provide an internally logical ranking of all jobs which will form the basis of the companys salary structure,Decision Process:Two Dimensions,Process,Subjective,Objective,Judgement,Poor,Good,Entrepreneurial(Trying)
47、,Bureaucratic(Thinking),Novice(Learning),Expertise(Achieving),Principles For Job Evaluation,Evaluating the job,not the job-holderEvaluating the present job,not the future jobJob is being carried out in a fully acceptable and competent mannerProcess of evaluation is based on given facts in the job de
48、scriptions,Logic For Job Evaluation,Simple And Readily UnderstoodInvolve Members By ParticipationSense Of Justice And FairnessExclude Market Factor From ConsiderationAgreed Set Of Evaluation CriteriaClear Guidelines For Change To New Salary StructureFirm Has The Ability To PayCan Be Implemented With
49、in Reasonable Time FramePermits Quick Reaction To ChangesReduces Leap-Frogging,Job Evaluation,“A Task exists whenever human effort must be exerted for a specific purpose.When sufficient tasks accumulate to justify the employment of a person,a job position exists.Thus a position is an aggregation of
50、duties,tasks and responsibilities requiring the services of an individual”A job may be defined as a group of positions which are similar in nature.A job description is a document which describes the duties,tasks,responsibilities and the results expected when the tasks are fulfilled.A job grade refer
