Management at Standard Chartered Plc UAE - Case Study Example

Table of Contents Compensation and Performance Management at Standard Chartered Plc UAE 3 Introduction 3 Purpose and Objectives 4 Compensation Strategy 4 Relationship between Compensation and Employee Satisfaction 10 Methodology 11 Discussion and Findings 12 Recommendations 19 References 20 Appendix 22 Questionnaire for Managers 23 Questionnaire for Contractual Staff 25 Compensation and Performance Management at Standard Chartered Plc UAE Introduction The company that has been selected for the purpose of this research project is Standard Chartered Plc UAE. The Standard Chartered Plc in UAE is a subsidiary of the global operations of the financial institutions which initiated its operations in the region through a branch in Sharjah. Over the years the company has been able to build a close knit comprehensive network in the Asia and Middle East region with branches in other regions of UAE including Abu Dhabi, and Dubai as well resulting in extensive network based presence in the region. Internationally the company has operations in 70 countries which lend network support to the operations in the region as well. The Standard Chartered Plc is an international bank which is highly focused when it comes to managing the financial needs of new and emerging economies in the region (‘About Us’, 2013). The company has a line of products through which it caters to the individual customers as well as corporate entities as well. The three main areas of operation for the company include global businesses as well as personal banking and corporate banking. Purpose and Objectives The purpose of this paper is to determine the compensation strategy at place in Standard Chartered UAE. The company is going to be assessed for its compensation strategy through an overview of the company policy and through the publications provided by the company. In addition the paper seeks to identify specifically the employee attitudes and satisfaction regarding their compensation and remuneration by Standard Chartered Plc. For the purpose of the latter query, a specific research is being employed which includes the employees of the company to act as respondents and provide insight regarding their opinion regarding the compensation and remuneration strategy of Standard Chartered Plc Compensation Strategy The compensation strategy that is employed by Standard Chartered is one based on performance and behavior of the employees (Markland, 2011). The performance and reward philosophy that is at place in Standard Chartered Plc in UAE is reflective of the strategy of the company towards its employees. Analysis of the compensation and pay model for the employees at Standard Chartered Plc UAE shows that the company bases it compensation model primarily on the expectancy theory as put forward by Victor Vroom (1964). The theory provides that when it comes to the efforts made by the employees, and their respective performance, these two are positively correlated with favorable performance in rewarded resulting in satisfaction of employees derived through the attainment of the reward. The desire to attain the reward is the motivation for the employees. This is applied by the company to the pay for performance model of the compensation system where performance is measured against the strategic objectives of the company. The motivation is managed by the company through the VIE model (Motivation = Valence *Expectancy (Instrumentality)) where reward drives effort made by employees resulting in the required performance levels. The company depicts that its strategy is to adjust the compensation for the existing risk in the market before provision to its employees (‘Risk Management’, 2011), which is based on the performance of the employees. The company has a performance oriented culture where the performance of the business as well as the individual employee is taken into account along with the interest of the shareholders. Specifically the company provides competitive remuneration and compensation packages to its employees that seek to retain talent as well as provide them with incentives to operate more efficiently resulting in continued high levels of performance (‘Remuneration Committee’, 2011). The forces that impact the compensation model of the company can be depicted as: The compensation or pay model at Standard Chartered Plc is such that it takes the form of three main types of compensations made to the employees. These include the Fixed Compensation, Benefits, and Variable Compensation. The Fixed Compensation for the employees takes the form of the base pay that is made out to them in the form of cash payments, which has the characteristic to be pensioned by the bank. The base pay is reviewed on an annual basis for the employees, where they are assessed as per the market dynamics and data. In addition every year on April 1st the company makes changes or increases in the base pay where applicable (‘Reward Arrangements for All’, 2011). The objective behind this form of compensation is to attract talent to the company and retain it through a competitive offering. The Benefits compensation made by Standard Chartered Plc to its employees takes the form of core benefits as well as share-save plans. The core benefits specifically include the benefits associated with retirements, medical insurance as well as life insurance. In addition to this annual leave is also incorporated under the core benefits compensation (‘Reward Arrangements for All’, 2011) The objective behind the provision of core benefits by the company is to allow for additional performance based support to the employees which reflect the values of the company as well (‘Reward Arrangements for All’, 2011). These core benefits are assessed on a periodic basis to allow for compliance with regulations as well as ensure the competitiveness as per the market dynamics. The share-save plan as a form of compensation by the company seeks to include the employees in the ownership of the company at the different levels of management. In this regard the performance of the employees as reflected by the company performance as a whole is reflected in their compensation. Through share-save, employees are allowed to enter savings contract for three to five years where the option price is discounted by 20% (‘Reward Arrangements for All’, 2011). However where government regulation prevents compensation through shares to the employees, the equivalent cash payments are made to the employees by the bank (‘Governance and Regulatory Requirements’, 2011). In addition extensive bonuses are provided to the employees based on performance as well (Butcher, 2012). The third type of compensation that is highlighted in the compensation strategy and pay model for Standard Chartered Plc in UAE is the Variable Compensation. This includes performance based annual awards that are made in the form of cash, and shares either upfront or in a deferred manner. The objective of this compensation strategy is to allow for the alignment of the business performance, the employee performance and the shareholder interest. These awards are made out to the employees in a combination of share options as well as cash, where deferral is practices when the award amount exceeds $50,000 USD (‘Reward Arrangements for All’, 2011). Aside from this the performance shares are also awarded to the employees based on meeting performance targets. The following diagrammatically depicts the pay model at Standard Chartered Plc UAE. The pay model of the company can be depicted as: This compensation model is applicable to the employees of the Standard Chartered Plc UAE with respect to their position in the company. Three main types of management or employees are present in the company. These include directors and senior management (‘Reward Arrangements for Executive Directors’, 2011), general management, and contractual staff. The directors and senior management are compensated and remunerated as per the depicted compensation model. The contractual staff is compensated through the fixed pay and benefits elements of the compensation model, which includes an additional element of monthly performance based commission paid as compensation to the contractual staff as well based on their respective monthly and yearly performance of attaining and exceeding the set goals and performance requirements. Relationship between Compensation and Employee Satisfaction Compensation and remuneration by a business to its employees is to provide the justifiable due return for the efforts and involvement of the employee for the company. In this regard under the human resource management, compensation and remuneration policies at businesses seek to retain the existing talent attract new talent to enter the company, while motivating employees to continually perform exceedingly well through incentives. The literature on the subject provides that the compensation made to the employees does affect their satisfaction level as well as their motivation for continued employment at the company. Companies seek to motivate their employees and attain a high level of job satisfaction from them, not just to retain their intellectual skills and knowledge, but also to attain high financial performance. A study by Gary Loveman (1998) regarding retail banks highlighted how the increased employee satisfaction through a service profit chain can increase the financial performance of the company. When it comes to benefits as a form of employee compensation employee satisfaction is dependent on the coverage of the benefits and the respective costs to the employees. The high level of benefit coverage results in higher satisfaction for the employees, where it is supported by decreasing costs to the employees (Dreher et al., 1988). Similarly, when it comes to perception of satisfaction by the employees specific to the benefits provided to them, the satisfaction level of the employees’ increases with the respective increase in the pay and promotion awarded to them (Heneman et al., 1988). The basic pay awarded to the employees sets an expectancy level in the employees regarding remuneration and related satisfaction, however the additional benefits, increase in base pay, and the bonus or promotions awarded to them increase their job satisfaction as well as motivate them to perform better for higher compensation returns (Igalens and Roussel, 1999). However it needs to be included, that only the pay structure, and compensation made out to the employees does not affect their job satisfaction and motivation levels. In addition other factors also influence the satisfaction and motivation levels of the employees, amongst which the organizational structure and the management style in the organization are of significant importance (Harter et al., 2002). Methodology In order to assess the employee satisfaction levels in regard to the compensation strategy of Standard Charted Plc in UAE, a questionnaire based survey was employed. It was identified that two types of management or employees at the company could be targeted through this approach include the management and the contractual staff. The reason for the different segmentation of employee types is due to the difference in the compensation model as depicted earlier. The management is provided a base pay with benefits and variable compensation, while the contractual staff is provided with a base pay with monthly commissions, in addition to the benefits. The questionnaire based survey was implemented through an email dispersion and data collection system, whereby the survey was emailed to the employees, and completed survey instruments were received via return emails. This was the best strategy to gather the data as the employees of the company in both segments are dispersed significantly over the geographic sphere of UAE and its main cities. A formal letter explaining the purpose of the study, respective to the questionnaire was rolled out accompanying the survey instrument in order to attain the informed consent of the respondents. The anonymity of the respondent and the responses was ensured through the document as well. A total of 50 questionnaires were deployed to each employee segment, resulting in 100 questionnaires being rolled out. Discussion and Findings The following represent the findings of the research. Through the questionnaire, the respondents were inquired about the elements which they deem important whey they gauge their job satisfaction levels. The following depict the graphical representation of the findings for both the managers as well as the contractual staff. The findings indicate that the management perceives high base pay to be the most significant for determining job satisfaction, while yearly base pay increase and follow close behind. Medical insurance is deemed by them as least important as per the findings. Comparatively, the contractual staff does not think high base pay is significantly important for high job satisfaction. Instead they consider the monthly commissions on their achievement of targets to be most important followed by the fuel and transport refund. The following depicts the graphical representation of the findings for both the managers as well as the contractual staff regarding the job satisfaction at Standard Chartered UAE with their current compensation plans. The findings show that the management at the company is relatively satisfied, with only 28% responding stating the need for change, and 8% depicting dissatisfaction with their current plans. The contractual staff however shows a different result with regard to their responses. 42% of the respondents were satisfied, while 28% stated their need for improvement with 20% clearly indicating their dissatisfaction with the current plan. The management is significantly more satisfied compared to the contractual staff. The following depict the graphical representation of the findings for both the managers as well as the contractual staff their preferred changes to the compensation structure. The findings depict that the management at the company would prefer if their base pay and recreational allowances were increased in their current compensation structure, as they deemed them more important that the rest. Comparatively, the contractual staff focused more on higher commissions, followed by increase in allowances when it came to making choices for preferred changes in their compensation structure. The following depict the graphical representation of the findings for both the managers as well as the contractual staff regarding important non compensation attributes for their job satisfaction and motivation. Through the analysis it is determined that the managers consider the working environment to be most important for their job satisfaction and motivation to work at Standard Chartered UAE which is followed by the factors pertaining to people and colleagues and growth opportunities. Similarly the contractual staff also considers the working environment to the most influencing factor closely followed by growth opportunities. Remarkably, both do not consider the brand name of Standard Chartered to be very important. The following depict the graphical representation of the findings for both the managers as well as the contractual staff specific to the factors that can influence them to leave Standard Chartered UAE for other companies. The results depict that managers are more likely to leave Standard Chartered for other companies if they are offered higher base pay along with more frequent base pay increments. The contractual staff on the other hand focuses more on the commission rates, and shows the likelihood to switch companies if they are offered higher commission rates. The provision of the higher performance bonuses is the second most influencing factor for the contractual staff. Recommendations Conclusively it can be depicted that while managers and contractual staff are amongst the employees at Standard Chartered Plc UAE, their respective motivations and job satisfactions are based of varying and significantly different factors. Moreover the job satisfaction for the managers is relatively good, while the contractual staff has a mediocre level of job satisfaction. In this regard, in order to improve the satisfaction for its employees, the company should develop different strategies for the different types of employees. The managers should be motivated with their job satisfaction influenced through higher returns which reflect long term return and growth for them that is reflected in their pension plans as well. Their choice of the base pay as the most important job satisfaction factor was based on the increase in pension through base pay increases. This can be targeted by the company to better cater to their managers. When it comes to the contractual staff, the commissions seem the best way to target their satisfaction levels, as they seem to want more short term returns. The commissions are based on performance, and better commission schemes which provide incrementally higher compensation for achievement of higher targets should be employed. In addition, they seek allowances more than bonuses, therefore the company should seek to increase their allowances while bonuses can be withheld or made less frequent for them. References Butcher, S., (2012), Did you know that Standard Chartered pays very large bonuses with limited deferrals, eFinancial Careers, available at Dreher, G.F., Ash, R.A., Bret, R.D., (1988), Benefit Coverage and Employee Cost: Critical Factors in Explaining Compensation Satisfaction, Personnel Psychology 41(2), pp237–254 Harter, J.K., Schmidt, F.L., Hayes, T.L., (2002), Business-unit-level relationship between employee satisfaction, employee engagement, and business outcomes: A meta-analysis, Journal of Applied Psychology 87(2), pp268-279 Heneman, R.L., Greenberger, D.B., Strasser, S., (1988), The Relationship between Pay-For-Performance Perceptions and Pay Satisfaction, Personnel Psychology 41(4), pp 745–759 Ignalens, J., Roussel, P., (1999), A study of the relationships between compensation package, work motivation and job satisfaction, Journal of Organizational Behavior 20, pp1003-1025 Markland, R., (2011), Directors' remuneration report, Standard Chartered Website, available at n.a, (2011), Governance and regulatory requirements, Standard Chartered Website, available at n.a, (2011), Reward arrangements for executive directors, Standard Chartered Website, available at n.a., (2011), Reward arrangements for all, Standard Chartered Website, available at n.a, (2011), Remuneration Committee, Standard Chartered Website, available at n.a., (2011), Risk Management, Standard Chartered Website, available at n.a., (2013), About Us, Standard Chartered Plc UAE Official Website, available at Quinn, J., Armitstead, L., (2012), Pay row risk at Standard Chartered, The Telegraph, available at Vroom, V., (1964), The Knowledge to Power Your Business, QuickMBA.com, available at Loveman, G.W., (1998), Employee Satisfaction, Customer Loyalty, and Financial Performance An Empirical Examination of the Service Profit Chain in Retail Banking, Journal of Service Research 1(1), pp18-31 Appendix Questionnaire for Managers Please answer the following questions as they best apply to your perceptions. 1. When it comes to job satisfaction what is of most importance to you as provided by Standard Chartered UAE Plc. Tick only one option only as your selected choice. A. Significantly High Base Pay B. Medical Insurance C. Pension Plan D. Yearly Base Pay Increments E. Transport Allowance F. Performance Based Quarterly Bonuses G. Sharesave Plan 2. Are you currently satisfied with the compensation and remuneration made out to you by the company? A. Yes B. No C. Could be Improved 3. What changes in your compensation structure would you prefer? Tick only one option only as your selected choice. A. Additional bonuses B. Higher base pay C. Recreational Allowance D. Increments made 6 monthly rather than yearly 4. What non compensation elements most effect your motivation and job satisfaction? Tick one only to select. A. Working Environment B. People and Colleagues C. Growth Opportunities D. The Brand name of Standard Chartered 5. Which of the following factors would encourage you to leave Standard Chartered Plc UAE join another company. Tick only one option only as your selected choice. A. Higher Base Pay B. Provision of More Benefits C. Higher yearly base pay increments D. Higher percentage of performance bonuses E. Better Share Options -------------Thank you for your cooperation-------------- Questionnaire for Contractual Staff Please answer the following questions as they best apply to your perceptions. 1. When it comes to job satisfaction what is of most importance to you as provided by Standard Chartered UAE Plc. Tick only one option only as your selected choice. A. Significantly High Base Pay B. Medical Allowance C. Monthly Commissions D. Periodic Base Pay Increments E. Fuel and Transport Refund F. Performance Based Quarterly Bonuses 2. Are you currently satisfied with the compensation and remuneration made out to you by the company? A. Yes B. No C. Could be Improved 3. What changes in your compensation structure would you prefer? Tick only one option only as your selected choice. A. Additional bonuses B. Higher commission percentage C. Increase in allowances D. Increment to base pay 4. What non compensation elements most effect your motivation and job satisfaction? Tick one only to select. A. Working Environment B. People and Colleagues C. Growth Opportunities D. The Brand name of Standard Chartered 5. Which of the following factors would encourage you to leave Standard Chartered Plc UAE join another company. Tick only one option only as your selected choice. A. Higher Base Pay B. Provision of More Benefits C. Higher Commission Rates D. Higher percentage of performance bonuses -------------Thank you for your cooperation-------------- Read More