HRM in Volvo Car Corporation - Essay Example

?Running Head: HRM in Volvo Car Corporation HRM in Volvo Car Corporation [Institute’s HRM in Volvo Car Corporation IntroductionInformation and technology is one of the noteworthy fields that have witnessed significant amount of developments in its different sectors. In the case of information and technology, developments have not remained limited, and it has caused enormous changes in almost every area of human society. In particular, the field of IT has resulted in changes in the field of business specially, and organisations have now inclined towards alteration in their different processes and procedures that has resulted in huge number of researches and analyses regarding such changes. In this regard, experts (Arnold & Silvester, pp. 12-19, 2005) have identified major change in the perspective and attitude of employers towards their employees, and this indicates creation of different innovative policies and strategies to ensure motivational workplace environment for the workers. Specifically, performance and reward management is one significant component of HRM that plays a crucial role in every organisation, and analysis has indicated that organisations are nowadays relying heavily on the factors of benefits and rewards as modes and tools of ensuring organisational success by guaranteeing efficient and productive performance of the employees. Particularly, this paper is an attempt in the same series of efforts that will focus on identification of various types of benefits and pay systems existing globally, as well as, reward strategies of Volvo Car Corporation that will allow understanding of the topic in realistic manner. Different Forms of Rewards Rewards play a crucial role in every human life, and particularly, it is an understanding that reward is one of the components that drive the society to develop and grow in different aspects. This works in the organisational setting as well; however, before identifying different forms of rewards and pay, experts (Robbins et al., pp. 39-47, 2009) have suggested that it is very important that employers should put efforts to ensure integration of rewards’ methodology with organisational objectives and mission, as non-integration often have resulted in failure of the strategies. For instance, if organisational mission is to become a market leader, Corporation will have to keep a higher-paying reward system to retain best talent from the market, and if mission is to survive and go with flow of the market, and then a lower-reward system will work as well. Following are some of the common forms of pay and rewards: Fixed Pay This is the most common and conventional form of compensation that includes payment to employees on a fix-pay methodology, usually on monthly basis (Rothwell et al., pp. 23-25, 2009). In this kind of method, employees get fix monthly payment despite of any change in performance or productivity. It is an observation that organisations are now moving away from the fixed pay methodology due to dominance of other modern reward and performance management systems. Variable Pay Method “Why should I make an extra effort for this job? Why should I try to contribute and think more about the organisational goals and success” (Langton, pp. 46-76, 2000)? Abovementioned is one of the common statements that one can hear from employees in a fix-pay system that resulted in the creation of variable pay method system that “bases a portion or all of the employees’ earnings on some individual or organisational formula or measure of productivity” (Torrington, Hall, & Taylor, pp. 365-348, 2005). Analysis has indicated that 60% of the organisations in the United Kingdom are depending on the variable pay system to compensate and motivate their workers. One of the major benefits of using this system is reduction of fixed labor costs, and this system enables the organisations to focus more on the level of productivity and performance that is often not possible or not workable in fixed pay method. Besides these pay systems, organisations have come to an understanding that rewards and benefits other than the pay are very important to ensure higher motivation level in employees, and thus, experts have identified extrinsic and intrinsic types of rewards. It is an observation that several organisations offer benefits to their employees in the form of ‘profit sharing plans’ that usually come in the form of cash and often in the form of Corporation shares. Experts (Robbins et al., pp. 59-78, 2009) have pointed out that offering shares to the well-performed employees provide them a sense of ownership and result in increment in the level of motivation. Another noteworthy type of reward is gain sharing that is a “formula based incentive plan like profit sharing, but is different profit sharing that it is not based on the profitability of the Corporation but on the group productivity” (Mathis, & Jackson, pp. 56-74, 2008). Until now, the paper included identification and description of rewards and pay methods and their significance in the organisations. In order to acquire a critical understanding of benefits and rewards, the paper will now include discussion and analysis of reward system of one of the most successful international organisations, Volvo. Volvo’s Reward Strategy Volvo Car Corporation (2011) has been able to prove itself as one of the most successful car manufacturing companies around the globe with capacity of creating approximately 350,000 cars annually. In order to analyse Volvo’s (2011) reward strategy, it is imperative to identify its existence and objective that will be significant in evaluating the significance and appropriateness of Volvo’s reward system. In this regard, Volvo has production plants in three countries along with several retail outlets in different parts of the world that have roughly 24,000 employees (Volvo, 2011) indicating need of a huge and organised form of reward system. In addition, Volvo’s operations are present in regions, such as the United Kingdom, Spain, Sweden, Belgium, China, etc. that indicates diversified existence of the organisation. Analysis of Volvo’s (2011) reward strategy and policy has indicated that the organisation complies with the foremost requisite of effective reward management that is integration of reward strategies with basic mission and objectives of the Volvo Corporation (2011). In this regard, Corporation indicates compliance of ethical standards, as well as incorporation of Corporation’s vision in different reward strategies. Scrutiny of different sources have identified that Volvo Corporation emphasises on the performance factor when it comes to pay and rewards; however, Corporation (Volvo, 2011) has indicated that besides performance, employers focus on other factors as well to create its reward policies, such as commitment, capability, and level of development. The Corporation does not follow a fixed pay system due to its operations in different countries and cultures of the world; thus, the Corporation has done a remarkable work by identifying different factors that allow the employers to come up with particular reward strategies in every region. In particular, Volvo Car Corporation (2011) is running two different reward systems at a single time. Specifically, to ensure job satisfaction, the Corporation has introduced different management levels from one to five to come up with fixed pay method system. However, on the other hand, the Corporation has put efforts to ensure higher levels of motivation by running a performance-based reward system as well that allows the employees to benefit from both reward systems. In response, Volvo Car Corporation has been successful in retaining quality talent of the field, another major reason of its global success. Besides base salary system, Volvo (2011) has divided its performance-based system into further two categories: AICP (Annual Incentive Compensation Plan) (Volvo, 2011) that allows employees to benefit from by achieving their annual targets. On the other hand, the other segment is LTIP (Long-term Incentive Program) (Volvo, 2011) that is different from AICP due to its focus on long-term productivity and performance of Volvo’s employees at leadership levels. In this regard, Volvo has done an extraordinary work by ensuring steady motivation of employees with the application of fixed pay system, and by integrating it with incentive plans that motivate employees, result in increment in productivity and performance, and subsequently, enable organisation to acquire success as a market leader. Merits & Demerits Analysis of different resources (Arnold & Silvester, pp. 60-79, 2005) related to effective reward and performance management has indicated that Volvo has introduced and implemented an efficient reward management system by using both fixed pay, as well as incentive reward system that has resulted in higher levels of motivation in the organisation. Experts believe that the primary objective of a reward strategy is to ensure higher levels of motivation, in order to guarantee organisational success with higher performance and greater productivity. In this regard, Volvo (2011) seems successful in fulfilling such objective of its mission. However, while trying to acquire a critical perspective of Volvo’s reward strategy, it is an observation that contrary to theoretical justifications, Volvo’s fixed pay system has been motivating employees and managers in better manner, as compared with the incentive plans. Thus, managers of Volvo are trying to convince employers to introduce variable-pay method system that may focus more on performance and productivity of the employees. In this regard, Volvo will have to endeavor to look into the demands of managers and employees to retain talented workforce in the future by coming with integration of variable-pay method and incentive plans. In conclusion, organisations are now aware of the fact that employees are important stakeholders than the customers, and thus, it will be important to consider their needs and requirements to ensure their higher levels of motivation, in order to achieve organisational success. In brief, the paper included discussion of different rewards and benefits methods while considering Volvo as a case study to scrutinise its reward strategies that indicated various critical aspects of the performance and reward management system. It is expectation that the discussion and analysis will be fruitful for students in better understanding of the topic. References Arnold, John, & Silvester, Joanne. 2005. Work psychology: Understanding human behavior in the workplace. Prentice Hall/Financial Times. Langton, Nancy. 2000. Organizational Behavior: Concepts, Controversies, Applications. Pearson Education Canada. Mathis, Robert L., & Jackson, John H. 2008. Human Resource Management: Essential Perspectives. Southwestern Cengage Learning. Robbins, Stephen P., Judge, Timothy A., & Campbell, Timothy 2009. Organizational Behavior. Pearson Education, Limited. Rothwell, William J., Stavros, Jacqueline M., Sullivan, Roland L., & Sullivan, Arielle. 2009. Practicing Organization Development: A Guide for Leading Change. John Wiley and Sons. Torrington, Derek, Hall, Laura, & Taylor, Stephen 2005. Human Resource Management. FT Prentice Hall. Volvo. 2011. “Benefits Package.” Volvo Car Corporation. Retrieved on May 19, 2011: http://www.volvocars.com/uk/top/about/corporate/careers/pages/benefits.aspx Volvo. 2011. Official Website of Volvo Car Corporation. Retrieved on May 19, 2011: http://www.volvocars.com/intl/Pages/default.aspx Read More