Challenges in Compensation and Benefits Strategy of a Fictitious Business - Research Paper Example

 Challenges in Compensation and Benefits Strategy of a Fictitious Business Introduction An organization or business entity is a structure that is made up of many elements including men, machines and materials. All these different elements have to work together in an organized and planned way for the business to achieve any measure of success. Management may be described as the science and art of planning, organizing, staffing, directing and controlling the activities in an organization so as to achieve departmental and organizational goals. A good leader comes up with the vision, working principles and values and along with the senior management team, strategizes in the light of opportunities and threats that face the industry and the relative strengths and weaknesses of the firm. The human resource element or the men and women that make up the workers and managers are often the most challenging resource to manage- they need to be guided, motivated and warned to do the right things and avoid the wrong ones so that success is assured. Support in the form of training and development and listening to the problems of people in the organization is one of the best things that an HR manager can do. Sometimes the problems are directly related to the actions taken by managers and must be handled carefully in the larger interests of the organization. At other times even managers need to be corrected for carelessness and highhandedness in their attitude while dealing with workers. This paper will deal with the problems of turnover and employee retention failure that was created by bad HR management practices previously, as a result of which HR policies and compensation and benefits programs had to be corrected. A Brief History The organization in question is facing a multitude of problems, leading to an impasse between organization and management. However a closer inspection has indicated that most of these have been caused due to incorrect HR policies that restrict the freedom and productivity of employees, cause interdepartmental friction and lead to problems in cohesion and understanding. There is increasing frustration and a lot of good employees have left. At the same time, the organization is understaffed so the work burdens are increasing. There is no work-life balance, with some employees having to work weekends or beyond office hours with no extra compensation. Employee morale is at an all time low and the HR manager has regained, so I have been given an offer to take his place. Challenges to the Human Resources Department The issues of recruiting and maintaining staff or proper, efficient and effective personnel throughout the organization has been one of the key concerns of human resource managers and HR Department Heads wherever they are, and in whatever organization they are part of. Ever since it was realized that man is a key resource to getting things done in organizations and helping accomplish their goals, so that success and profitability follow, it has been the keen desire of every business owner and HR manager to recruit and maintain the best possible staff for the longest possible time so that the objectives of the enterprise could be attained using their labor and expertise. Achieving the satisfaction of the business owners would mean that the best performers are rewarded for their efforts, and management efforts are appreciated as well. This is unfortunately, easier said than done. An organization has to compete with others in the marketplace and in the same or different industry, in order to attract, retain and keep the best employees on their payroll. At the same time, achieving the best fit for positions in different departments and at different levels of the organization is important. A good employee must not only have the proper skills and attributes for the job, he must be able and willing to perform his duties with responsibility and confidence, whether individually or as a member of a team. He must be a self starter but also willing to follow the instructions, dictates and policies of the organization. Where problems arise, he must be able to approach his supervisors and take their advice. In fact an open culture and collaborative friendly approach to problem solving have been the hallmarks of the best organizations (Peters & Waterman, 2004). Management by objectives and providing valuable feedback and guidance during interim and annual performance reviews can help the willing and able employee succeed and earn the respect of his peers as well as his superiors (Crosby, 1992). In the present recessionary environment, organizations are cautious about hiring too many employees. Business has dwindled and consumer confidence is scarce. College and university graduates are having an increasingly difficult time finding and keeping jobs. It seems that the workplace is full of doom and gloom too, with a lot of directives to follow if one is to hold onto his or her job and make it up the career ladder. More and more of the work population are disenchanted with this state of affairs and the result is that the national unemployment rate of 10 percent in the USA is almost constant. The combination of consumer inertia and loss of confidence in the system means that it will be some time before we overcome this crisis. Preventing Worker Turnover from Escalating Maintaining a low rate of employee turnover has always been an important goal for the HR department. HR should look into the reasons for leaving of every employee and note similarities or differences. It should be made certain that records of employee exit interviews are kept confidential at all times. Sometimes an employee does not fit in or finds his career stalled; at other times it is the non-recognition of his efforts on the job and office politics that are the reason for his departure (Ulrich et al, 2001). While an organization must be competitive in terms of compensation and benefits, it is the relationship with the supervisor that is often a crucial factor in determining whether a person stays or goes (Werther & Davis, 2005). Employees want more interaction with management, more self-satisfaction on the job, more responsibility and more control over decisions affecting them. They want their work to make a difference and want to be part of something that matters (Phillips & O’Connell, 2003). Organizations should encourage innovation by soliciting the advice and input of their staff members, followed by responses to ideas, complaints or questions (Phillips and O’Connell, 2003). It is difficult to keep people on the job if they have no say in how to do it (Crosby, 1992). People need to be recognized and appreciated for their accomplishments in the workplace. In most organizations the feeling of under-recognition is the most pervasive feeling in the workplace (Werther & Davis, 2005). HR can act positively in this respect by provide a great deal of personal and team recognition (Ahlrichs, 2000). Another way is to recognize achievements with memos, mentions in staff meetings or articles in the newspapers (Crosby, 1992). In an atmosphere of uncertainty, it is important to communicate more with employees, not less. Employees are ready to believe the worst and may believe rumors more readily than fact when the going is tough and they are sure that the axe is going to fall. It is the time when the office grapevine goes into overdrive. In such a situation, HR has a duty to communicate its strategy and timeframe to all the employees in the organization. If there are indeed going to be job cuts there should be proper justification for it. One should make sure that a mix of experience and youth is retained in terms of bench strength even after the dismissals. This can help the organization get back on track fast whenever things improve. HR should maintain a friendly demeanor in an already tense atmosphere. Recommending trusted and loyal employees to others or for training to get them other jobs will score high marks for HR and for the firm as well. But by far one of the best ways to retain employees is for organizations to offer career advancement opportunities. Workplaces failing to offer employees career opportunities, room for advancement and enhancement of skills and knowledge may find it difficult to retain qualified employees (Phillips & O’Connell, 2003). Ulrich & Brockback (1995) confirm this by pointing out that promoting from within is one of the proven methods of employee retention. Promoting from within also shows that there is room for advancement and growth within the organization. The literature reiterates that employee involvement, recognition, importance of work, and career advancement opportunities are all important when dealing with employee retention and reducing worker turnover. Retaining Young Graduates One of the most important talking points in today’s HR departments is how to attract and retain young aspiring graduates for the long term. It is often said that every twenty years there is a new generation and this is no less true than of today’s youth. Fresh from college or university, many of them have unrealistic dreams of the workplace. Those with MBAs typically think that they are set to climb up to the top without much difficulty. Yet it is the patient and hardworking employees that get the results and the rewards. He will not be overlooked for a promotion or bonus and likes to challenge the status quo. He is ready for challenges but if he is not rewarded up to his expectations he is likely to leave in a huff for the nearest competitor. Today’s employees like to work smart, not hard and are savvy and willing to take challenges and risks if they think it will pay off (Phillips & O’Connell, 2003). We have already touched upon the importance of training and development, good pay and benefits and a level playing field for all employees to perform and get recognized and rewarded for their efforts. Proper feedback and supervision with orientation, training and support on the job can make even an ordinary employee a good performer. While people may think that money and benefits or lack thereof are the main reasons people leave their jobs, this is not always the case. While compensation and benefits may be a key factor in the final decision-making process, a money shortage is usually not what causes people to look elsewhere in the first place (Ulrich et al, 2001). Money may be the reason they give when they resign, but it’s like white noise. They are conscious of it for a while but if they are bored on the job, money alone is not going to keep them there (Lawler, 2000). Preventing Early Turnover Studies have shown that it is exceedingly important to judge employees on merit only. What matters is their work attitude, ability to work hard, level of interest and motivation and potential to grow with the organization. The best measure is how they would react to a certain job related scenario. That’s why this is the most important part of job interviews. Also the entire selection and hiring process takes time and is a cost to the organization. So it is important that it is done well. Nevertheless, all organizations have a probationary period where either party can decide to let go if it is not working out. Potential employees should be able to stick at a task till it is clear that nothing more can be got out of the situation. Their doggedness and tact and willingness to try different approaches to get the job one shows their adaptability and maturity as well. These are the employees that should be selected for the jobs in the organization. Proper training and orientation is important as well and can play an important part in a new employee’s fit into the workplace. Each must be given a mentor or buddy who is responsible to give them proper feedback and guidance when needed. It helps immensely if HR introduces them to the boss and the people they will work with on the first day. HR and their supervisors must also be available to help them as they get set within the workplace and its culture. If all this is done correctly and the employee is satisfied, it is highly likely that he will stay. Management by objectives is one good way to both get performance and measure results. Wherever possible the goals of the organization are converted into achievable workloads so that progress can be measured on a daily, weekly or even annual basis. Using the HR value proposition and the HR scorecard are good ways to correlate strategy with the desired results (Ulrich et al, 2001; Ulrich & Brockbank, 2005). Although traditional benefits such as vacation and health are still important, today’s workers are also looking for more non-traditional benefits. Benefits such as flexible work hours, availability of child care and tuition assistance programs or discounts on services now top the list of desired benefits (Phillips & O’Connell, 2003). The literature clearly indicates that money and benefits are not as important as job satisfaction in terms of employee retention. Challenges to Compensation and Benefits Programs It is clear that a lot of thinking and planning would go behind any compensation and benefits program that is prepared for the organization. Employers and HR managers have to get together and debate on many ideas before the final program elements are finalized. Employees must not only be paid a reasonable salary for their efforts, but we have also to look at what others are paying in the same industry so that we can match their offers and our best workers are not taken away by the competition. The salary and benefits forming the total compensation package would have to be made out considering starting salaries for different jobs or positions in the industry. Increments or bonuses along the scale of performance would have to be made looking at the budget available for compensation, sales and profits achieved and the future outlook for the enterprise. It is best to make the total package having less of fixed compensation and more of variable compensation. In this way compensation can be tied to performance and economic conditions. Even if the company is not performing well because of environmental factors, at least the employees have a good salary base and will continue working for the firm. Performance based rewards are good for both the company and the employees because they encourage healthy competition and productivity while the employees are motivated too when they see how good performers are being rewarded. In the present scenario as it has been seen that the leave procedure was needlessly detailed and prevented the employees from their due entitlements, it was affecting the morale and had led to increased absenteeism and high turnover. Even in the case of maternity leave, it was seen that mothers returning to work were not given increases in their first year. It was assumed that they would be taking additional leave or leaving early to look after the baby and this would lead to lower productivity and lack of responsibility on their part. Of course it did not always happen but some employees had noticed and complained about this hidden discrimination. Regarding the leave plans in general, as the previous HR manager believed in Short staffing the firm just to reduce costs, the consequence was that most people were overburdened with work and had to share responsibilities. They had to make inventive excuses to miss work even when there was an emergency. The new leave plan however will use scientific grounds looking at the functional responsibilities of employees, deciding which ones can be shared and how, training employees in concurrent functions and responsibilities so that they could take on extra tasks if needed for the short term only. In fact every employee was encouraged to plan his or her earned leave in advance and notify the Departmental Head. It was the responsibility of the departmental head or the managers to see that the leave of two needed employees did not clash or match so that the work of the department would not be affected. After this the leave plan was also communicated to HR and the employee was required to fill out a leave application a few days in advance, get his or her leave approved by the supervisor and hand over any pending work to the person that was taking his place or assuming his responsibilities for the short term. The employees going on leave were also required to send out an office email throughout the firm informing the period of leave, when returning, and who to contact in the employee’s absence regarding different aspects of work. The entire pending work handover procedure would have to be done in an official meeting attended by the departmental head or supervisor/ manager, the leaving employee and the replacement staff. Notes are generally also taken regarding stage of completion of various jobs so it can be a starting point for the replacement staff. Similarly to address the problem of employee turnover, once we have revamped the HR policy manual, we will then look at the reasons that employees are leaving the firm. Hopefully with the new policies in place, employees will get the message that the changes being made will benefit them in the long run. The morale of the workforce will improve and employees and managers alike will be more civil and respectful towards each other. When the problem of understaffing has been addressed by putting forward the case for a competent and adequate workforce that is both knowledgeable and committed towards the organizational goals, we can have a motivated and competent workforce. They should be conscious of their rights and responsibilities as much as we are respectful of their demands. A good pay for an honest day’s work must be made. Employees who are respected and trained, who want and get job rotation and enrichment are more motivated to progress up the organization, so opportunities must also be created for their promotion or transfer to areas of interest or expertise. We must also have adequate talent to replace employees who might leave or retire so that no vacuum is created. We should look to promote employees from within the organization to available positions, failing which we have to look for talent from outside Having a clear and merit based policy will also reap dividends in boosting employee morale and respect for the organization. Suggestions to Handle the Problems Faced by the Organization It is clear from the above discussion that the organization is presently facing a problem of attracting new graduates, employee retention and motivation to stay on because of the bad policies adopted in the past by the HR department. The best idea would be to completely revamp the present system of selecting, promoting and rewarding employees for their efforts. Suggested benefits to be included in the new program would be as under: 1. Signing on Bonus: To initially attract the candidate. 2. Medical Coverage: As per entitlement for a particular level. 3. Paid Leave: As per entitlement for a particular level. 4. Life Insurance: As per entitlement for a particular level. 5. Disability Insurance: As per entitlement for this level. 6. Educational Assistance: As per entitlement for a particular level. 7. Provident Fund and Gratuity: As per entitlement for a particular level. 8. Relocation & Settling in Allowance: If brought in from another city. 9. Company maintained car: As per entitlement for a particular level. 10. Stock option grants: Depending on performance achieved. 11. Flexible Spending Account: As per entitlement for a particular level (Money Zine, 2011). These benefits have been rated as the most common ones provided by top level organizations (SHRM website, 2009). Some of these benefits are considered mandatory and admissible by Law, e.g. Disability Insurance and Retirement Benefits. Other benefits have been known to be given by organizations as a matter of common practice and would be expected at different levels, if employees are to be motivated to join and work at the firm. Putting the Recommendations into Action It is clear that both employees and management will be affected by the revamping of HR policies, so an open door policy in Human Resources department may be needed here. At the same time, confidentiality must be ensured at all times regarding employee and managerial complaints, so that each case is properly investigated and a solution found. The HR department has not only to set up a hiring and selection procedure based on scientific and measurable grounds, but the chosen candidates must go through screening with HR, the relevant functional department head and the supervisor or manager of the available position. If possible, cross functional interviews should also be arranged for important positions so that all biases are removed. The employee must have a good orientation and training period before being asked to perform independently. Management by objectives with agreement and approval on both sides is needed. HR or departmental review may be necessary if employee feels victimized. The open door policy of HR would be necessary to note and address the difficulties that the workers and management are facing on different issues. If a problem seems to be recurring or common, a policy or procedural change may be needed. Confidentiality must be assured at all times. When an employee leaves, the reasons for leaving must be carefully documented through a written Exit Interview with HR as well as a cross functional departmental head. It helps to compare notes and feelings about how the employee feels and whether the atmosphere can be improved to promote employee satisfaction. Conclusion In this paper we have looked at the various problems concerning the recruitment of employees, turnover and retention, how to improve morale and change the atmosphere through a revamping of HR policies as well as strategic thinking, improving compensation and benefits and making the organization a worthy place to work for, thereby increasing employee retention and respect for the firm and its management. A confidential employee survey undertaken once every six months conducted by an independent surveyor would be a good measure of employee satisfaction and morale. References Ahlrichs, N. (2000). Competing for Talent: Key Recruitment & Retention Strategies for Becoming an Employer of Choice. Nicholas Brealey Publishing. Author Unknown (2009). Compensation Communication: What should be included in a total compensation statement. Accessed on 15 Jan 2012 from the SHRM website at http://www.shrm.org/TemplatesTools/hrqa/Pages/totalcompensationstatement.aspx Author Unknown (2011) Top Employee Benefits. Accessed on 15 Jan 2012 from the Money-Zine.com website at http://www.money-zine.com/Career-Development/Finding-a-Job/Top-Employee-Benefits/ Crosby, P. (1992). The Eternally Successful Organization. Signet Books. Lawler, E. (2000). Rewarding Excellence: Pay Strategies for the New Economy. Jossey-Bass. Peters, T. & Waterman, R.(2004). In Search of Excellence: Lessons from America’s Best Run Companies. Harper Paperbacks. Phillips, J. & O’Connell, A. (2003). Managing Employee Retention: A Strategic Accountability Approach. Butterworth-Heinemann. Ulrich, D.; Huselid, M. & Becker, B.(2001). The HR Scorecard: Linking People, Strategy and Performance1st ed. Harvard Business Press. Ulrich, D, & Brockbank, W. (2005). The HR Value Proposition, 1st ed. Harvard Business Press. Werther W. & Davis, K. (2005). Human Resources & Personnel Management, 5th Ed. McGraw Hill. Read More