The Terms of Employees Payment - Assignment Example

Case Study - Whats The Incentive? Task Evaluate the problems indicated within the engineers pay and reward package. What might you suggest as an alternative? As noted in the case study, the existing pay and reward package of engineers in the specific organization has been developed through negotiations between the employer and the engineers’ union five years ago. Since then, important changes have been introduced in the organization in regard to the working conditions of engineers. The above fact leads to the assumption that the particular package is no longer valid, and that it should be reviewed and appropriately updated. In its current form, the above package leads to inequality and inefficiencies, as analyzed below. The terms of employees’ payment within each organization have to be based on specific criteria: emphasis needs to be given on equality among employees so that conflicts in the internal organizational environment are avoided (Laffont and Tirole 1993). In the case of pay and reward pay package of engineers a significant dilemma appears: is this package fair, taking into consideration the changes developed in the organization since its introduction? The answer should be negative. The specific view can be justified through the following argument: the visits of engineers to the depot have been a key part of their position, meaning that their payment would be significantly lower if they were not obliged to visit the depot. In other words, the terms of engineers’ pay and reward have been arranged in this way mostly because engineers had to visit the depot many times each time, a fact that would reduce their free time for making calls to sites. It is for this reason also, that the term for a visit of at least 4 sites and the provision of reward for visiting extra sites was set in the agreement between the employer and the engineers’ union. The above agreement would not be valid today since the working conditions of engineers have been significantly altered so that a key feature of their daily tasks, the need for visiting the depot, has been eliminated. Being considered as valid, the above agreement can lead, in the short or the long term, to severe turbulences within the organization, at the level that other employees have not been favoured from similar advances in their daily tasks. From another point of view, the current pay and reward package of employees leads to another concern: the employer had suggested such package on the terms that the daily calls of engineers to sites could not be over a particular number. This means that having to visit the depot on a daily basis, engineers could not visit many sites each day; for this reason, 4 sites have been set as the basis for their payment and any extra site was set as a term for bonus. Through the changes in the their working conditions, i.e. the introduction of an intranet for communication with the depot, engineers can easily go above the specific number; the visit of 4 sites is now a target easily achieved. In other words, the amount due to engineers as a reward is significantly increased, a fact that needs to be reviewed by the organization’s financial manager; it has to be examined whether the organization can respond now to the increase of rewards of engineers, as resulted by the improvement of their working conditions. A new minimum of sites, higher, should be set in the context of the above alteration of engineers’ daily work. A significant aspect of the pay and reward package of engineers, as applied currently, is the differentiation of their relationship with employer (Banerjee 2006). Due to the increase of their independency, engineers have become less willing to communicate with employer but also with employees in other organizational departments. According to the issues discussed above, the pay and reward package of engineers has become invalid, based on conditions that do not exist any more. At the same time, the above package sets under severe risk the communication and cooperation within the organization; the negative effects of this package on the firm’s financial stability, through the increased needs for rewards to engineers, should not be ignored. Under these terms, the following suggestions should be made: a) the existing limit for the payment of rewards to engineers should be increased, from 4 calls to at least 6 calls daily. According to the equity theory, the views of people on ‘the fairness of rewards can differ’ (Martin and Fellenz 2010, p.171). This means that engineers may consider that their rewarding is fair even if, compared to other employees of the same organization, this assumption is false; the introduction of variable pay schemes, differed among employees of this category (Colling and Terry 2010) would be another solution for promoting fairness in regard to the payment of this teams of employees; b) the obligation of engineers to report to depot at the end of each day should be also added; this obligation would not mean to set obstacles in engineers’ daily work; however, it would be necessary for securing communication within the organization, an issue that is quite important. The elimination, or the deterioration of communication between the company and the engineers, could significantly harm the organization, even if its profits are kept at high levels due to the increased calls to sites on a daily basis (Wright 2004); c) a weekly meeting at the headquarters should be also introduced; engineers would have the chance to inform their supervisors on the progress of work and make any suggestion for improvements/ changes that they are considered as necessary; d) finally, the level of reward of engineers should be reviewed, at the level that it responds to their overall performance; in other words, rewards should not be related only on the number of sites visited but also on the performance of employee in terms of following the organization’s rules and standards in regard to the particular position; the establishment of a team for supervising, exclusively, engineers, would help the organization to assess the actual value of each engineers not just according to the volume of work completed but also to his willingness to follow the rules of the organization. The introduction of a code of practice specifically for the firm’s engineers could further help the above plans to succeed. Task 2 What are the advantages and disadvantages of the consultant’s/ sales teams pay and reward package and what alternatives might be appropriate here? In the case of the consultant’s/ sales teams pay and reward package, different issues need to be highlighted. The above package has a series of advantages, such as: a) it keeps employee motivation high by developing a link between performance and payment; b) At the same time, since the reward is not based on a minimum volume of work, such as in the case of engineers, the financial stability of the organization is not threatened; c) moreover, the specific package does not lead to inequalities among employees; employees are rewarded according to specific criteria; the training support provided to the specific team of employees aims to improve their skills in regard to their role, so no issue of inequality or unfairness is established within the organization. In any case, the terms of the particular package are clearly described, meaning that the specific part of employment contract is well structured, so that no misunderstanding or unfairness can be developed (White and Druker 2007, p.107). However, the specific package has also an important disadvantage: the rewards provided to the specific team of employees can be characterized as high, compared to the market conditions. In the case study it is noted that a competitor has appeared that offer consultancy/ technical support services at significantly lower prices. It is assumed that the competitor can make such offer because for him the costs of the specific services are lower, compared to the organization under examination. At this point, an important weakness of the organization’s reward management system is revealed. As in the case of engineers, in the case of consultants/ sales staff, the organization seems to be unable to measure the potential effects of the high level of employee rewards on the organization’s financial stability. Of course, the payment criteria of consultants/ sales staff can be characterized as fairer, compared to engineers, based on commission. Still, the rewards of this team of the organization, as described in the case study, can be characterized as high, not allowing to the organization’s managers to reduce the prices of services provided to customers, a fact that it is made clear to competitors who use this chance for increasing their market share. In regard to the above, the organization should review the pay and reward package of consultants/ sales staff. The cost of the rewards given should be estimated and evaluated taking into consideration the current market conditions, and the similar practices of competitors (Marchington and Wilkinson 2005). The potential limitation of non-monetary rewards would help to reduce the cost of the package for the organization. It should be noted that the update of the pay and reward package of this team of employees should be appropriately planned, ensuring that the motivation of employees will not be reduced, since it is vital for the organizational performance, as the motivation theory suggests (Fisher 2008). On the other hand, a balance should exist between the organizational benefits and the reward, so that fairness in regard to employee rewarding is secured (Armstrong 2010). Erasmus and Schenk (2008) note that incentive schemes in modern organizations should meet specific criteria: a) they should be flexible, allowing for update when such need emerges, b) they should be appropriately managed; when sets schemes are introduced, managers should primarily consider whether the appropriate administrative support is available, c) they should be fair and d) they should not threaten the organization’s ‘salary system’ (Erasmus and Schenk 2008, p.508). Moreover, Armstrong (2007) notes that ‘the criteria of effectiveness of incentive schemes’ (Armstrong 2007, p.447) should be carefully reviewed, at the level that they are aligned with the organizational goals and culture. Also, Bhattacharyya (2011) notes that incentive schemes cannot be standardized across organizations; rather, they should be based on each organization’s needs and values. Task 3 After analysing the above, making use of relevant theoretical perspectives, identify the performance expectations, key values and culture in the insurance company in question. The particular company seems to focus highly on the continuous increase of its profits. This fact is revealed especially through the firm’s practices in regard to the payment of its engineers. The introduction of advanced technology for supporting the increase of engineers’ performance indicates the aim of the company for developing its performance. It is assumed that the organization aims to secure its position towards its competitors who also monitor closely the industry’s performance and try continuously to increase their competitiveness. Under the pressure of its competitors, the firm had to change its strategic priorities; instead of focusing on profits, it chose to set quality and short time of response to customers’ requests as priorities. The ability of the organization to achieve its expectations, as described above, has not negatively affected its values. As of its employees, the firm seems to focus on trust, support for personal development and fairness in rewarding. In regard to its customers, the organization’s values could be described as follows: a) customer is highly valued and his needs are respected; the introduction of the ‘multi-skilling training scheme’ (case study) indicates the emphasis given on the appropriate response of the organization to customers’ requests, b) customer communication and customer care are also important elements of the company’s values; the company tries to keep its relationship with its customers at excellent levels, urging its technical/ sales staff to minimize the time required for responding to customer requests and to focus on the quality of services provided to customers. The above facts reveal the most critical aspects of the organization’s culture. The company focus on team work, customer care, communication (with employees and with customers) and trust. The organization seems to be willing to highly reward its employees for their work, revealing that it recognizes the role of employees in organizational growth. The potential update of the pay and reward schemes of certain teams of employees, as suggested above, would help to the improvement of relationship between the organization and the employees, a benefit that would be made clearer in the long term. References Armstrong, T. (2010) Armstrongs Handbook of Reward Management Practice: Improving Performance Through Reward, 3rd Edition. London: Kogan Page Publishers. Armstrong, M. (2007) A Handbook of Employee Reward Management and Practice, 2nd Edition. Kogan Page Publishers. Banerjee, B. (2006) Cost Accounting Theory And Practice, 12th Edition. New Delhi: PHI Learning Pvt. Bhattacharyya, D. (2011) Performance Management Systems and Strategies. Ned Delhi: Pearson Education India. Colling, T., and Terry, M. (2010) Industrial Relations: Theory and Practice, 3rd Edition. Hoboken: John Wiley & Sons. Erasmus, B., and Schenk, H. (2008) South African Human Resource Management: Theory & Practice. Cape Town: Juta and Company Ltd Fisher, J. (2008) How to Run Successful Employee Incentive Schemes: Creating Effective Programs for Improved Performance, 3rd Edition. London: Kogan Page Publishers. Laffont, J., and Tirole, J. (1993) A Theory of Incentives in Procurement and Regulation. Massachusetts: MIT Press. Marchington, M., and Wilkinson, A. (2005) Human Resource Management at Work: People Management and Development, 3rd Edition. London: CIPD Publishing. Martin, J., and Fellenz, M. (2010) Organizational Behaviour and Management, 4th Edition. Belmont: Cengage Learning. White, G., Druker, J. (2000) Reward Management: A Critical Text. London: Routledge. Wright, A. (2004) Reward Management in Context. London: CIPD Publishing. Read More