Employee Reward Strategy for Heidelberg Insurance Services - Case Study Example

Sales Division Existing Payment System The performance of an organization depends directly with the performance of the sales department. At Heidelberg Insurance Services, the sales staff is paid equally on time based payment system that kills the instinct of competition of selling number of policies among the employees. The positive competition among the sales staff of an organization has been proved to be the backbone in the success of the organization. This present practice of paying equal pay to the sales employees without keeping in mind the number of policies one sells leads Heidelberg's sales staff towards complacency regarding their job targets. Though the existing system is inexpensive, easy to manage and understandable, it is not supplementing the target of higher sales. Recommended Reward Strategy In order to reduce the problems of lack of commitment, Poor quality performance and Lack of effective control, it is hereby recommended that the amount of times based salary in their monthly take home should be considerably reduced and a new system of commission based salary should be introduced. Commission should be directly proportionate to the volume of sales achieved by individual sales consultant. Also, the formula of higher the sales, the higher the percentage of commission should apply. Complete abandonment of fixed based salary is not recommended because it will reduce job security that may lead to high turnover. Also, if due to any reason i.e. illness, a sales consultant is not able to work for full number of days in a month; his/her commission income will sharply reduce. Thus, this fixed based salary will supplement that consultant's income in that particular month. Ultimately it will lead to enhanced commitment towards HIS. In an addition, to ensure effective checks and balances on the activities of sales consultants, amount of commission income should be made inversely proportionate to the number of complaints received against each of them. Quarterly and / or yearly sales bonus should also be introduced to ensure long-term commitment and motivation. A Points System of Rewards i.e. 10 reward points on sale of 1 policy/10 calls which after accumulation up to a certain limit for example 5000 points entitles the sales consultant for owner ship of the company car and / or other exciting prizes. Customer's feedback should also have strong impact on a sales consultant's pay package and quarterly/yearly bonus. To achieve this, customer satisfaction survey should be conducted after careful selection of sample. It will help in two ways. First of all it will make the customer feel that his/her feedback regarding the sales consultant's service to him is important to the company and thus it will develop a sense of attachment between him/her and the company. Secondly, it will help exercise effective control over the sales consultant. He/she will take great care at the time of making commitments - a problem that the company is facing and paying for by bad publicity by some unsatisfied customers. It is also highly recommended that the team of sales consultants should not be hired by one sales director only; they should be divided into 4 teams and each team headed by one team leader directly reporting to the sales director. It will be easy for team leaders and the sales director also to handle small groups of people that will help develop committed teams competing with each other in terms of sales and quality of output. Clerical Division Existing Payment System An organization's success depends not only on the performance of its sales team and / or of the senior management, the minor tasks performed by clerical staff are also important though relatively lesser than that of others. At Heidelberg, existing reward strategy does not reflects any thing that may motivate clerical staff to stay committed to the organization and to help achieve management's aim of reducing cost. Recommended Reward Strategy Since the job does not require a very high level of commitment, neither does it reflect on the over all performance of the organization, the basis of reward strategy for clerical staff should remain fixed time-based. However, a number of reward strategies should be adopted to reduce the problem of turn over resulting in less recruitment cost, absenteeism and lack of motivation to suggest for cost reduction strategies to the management etc Clerical staff should be offered a system of rewards that is directly related to suggestions for cost cut in the daily operations. Clerical staff is well aware of the line losses that incurs in the day-to-day operations. Therefore, a percentage of total cost saved should be offered to them if their suggestion is accepted as valid by the management and implemented. Monthly, quarterly, yearly full attendance allowance should also be offered to over come the problem of absenteeism. Introducing a profit bonus for them (relatively smaller percentage than that of others i.e. sales) and company share options would also help reinforce commitment of clerical staff to the company. Job Rotation and Job Enrichment with some allowance will be very effective in overcoming the monotonous and repetitive character of their work. New and interesting roles and responsibilities within the clerical division will help reduce the motivation problem. This will also have impact on low attendance rate. A performance-based employee of the month reward with some cash prize will commit them to perform well. Making them realize that they are also important and an integral part of the company through rewards would definitely result in less absenteeism, less turn over and less recruitment cost with motivation to work at a high performance level. Product Development Division Existing Payment System Being the creative side of the company, product development division is very much dependable by Heidelberg for maintaining its competitive edge in the market. The existing payment system is resulting in a poor morale, absenteeism, lack of flexibility, lack of long term commitment to the company and even not able to attract high calibre professionals when it comes to recruitment. Recommended Reward Strategy The reward strategy should be reinvented for product development division staff in a way that it provides for improvement in their morale, reduce absenteeism, encourage flexibility, team working and attract human resource of high calibre. To improve team working, collective results/performance rather than individual results/performance should be rewarded. For example, a percentage of profit of new product should be offered to the whole team and not to any individual. This will improve acceptability and flexibility towards ideas of each other and make the team members work with synergy and help and support each other towards the achievement of the team's objectives for greater benefits. Also, for achieving the objective of long term commitment of these people with the company, royalty for the products developed through team efforts for say first 5 years should be offered to the whole team till the individual team member remains with the company. Royalty will end if the individual or the company decides to discontinue employment. This sense of mutual benefit by working together will lead to improved results in team settings. The sense of sharing of company profit will also multiply their motivation towards efficient working and towards the achievement of company's objectives. Once the motivation to work is there, absenteeism will automatically reduce. Such rewards will transform the company as an employer of choice and thus the problems of recruitment would be overcome. Executive Directors Existing Payment System At Heidelberg, the top most brass - the executive directors - is also paid on fixed time basis. The company is facing the problems of low commitment and insufficient amount of dynamism among executive directors as well. This is a very serious concern and highly risky for the company's future. Existing reward strategy for executive directors seems to be responsible for this dangerous situation. Recommended Reward Strategy High commitment and a high level of dynamism are extremely important at this level in any organization. Existing reward strategy of fixed time basis doesn't seems to be supplementing this. Keeping in view the above circumstances, it is recommended that the share of fixed salary in their income should be reduced to a considerable amount and they should be offered a reward system which is related to company profits. Linking their pays to company profits will get them to work with a commitment to work hard. Because the more they will work the more the company will make profit and more will be their income. Only a few allowances/fringe benefits should be offered to them as fixed salary. Read More