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Bonus Schemes Utilized by Bibby Financial Services - Book Report/Review Example

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This report "Bonus Schemes Utilized by Bibby Financial Services" reflects the bonus scheme of a company offering professional financial advice to owners of small businesses and factoring. The company considers numerous factors within the organization in determining the amount of bonus offered.
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Bonus Schemes Utilized by Bibby Financial Services
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This report reflects the review of bonus scheme or analysis of the current bonus schemes utilised by Bibby Financial Services (BFS), a company offering professional financial advice to owners of small businesses and factoring. The company utilises different methods for calculating financial bonuses offered to various employees as incentives to motivate and enhance employee commitment to organisational goals. The company considers numerous factors within the organisation in determining the amount of bonus offered. These factors include team working, individual performance, among many others. Calculations of various financial bonuses offered follows predetermined formula which provides employees with their earned bonus. Through a proper method for motivating employees, some essential changes can be implemented to enhance the commitment resulting from these incentives. Introduction of non-financial rewards can be identified as one possible way of applying changes into the bonus scheme utilised by BFS. Table of contents Abstract 1 Table of contents 1 1. Introduction 2 2. Findings 3 2.1. Key elements of BFS bonus scheme 3 2.2. Current situation of BFS bonus scheme 4 2.2.1. Bonus scheme factors 6 2.3. Rationale for current bonus scheme 7 2.3.1. Increase motivation 7 2.3.2. Increase productivity 7 2.3.3. Improved morale 8 2.3.4. Retention 8 2.3.5. Job satisfaction 8 2.3.6. Positive behaviour and Career development 9 3. Conclusions and recommendations 9 References 11 1. Introduction Bibby Financial Services (BFS) is a financial services organisation which offers numerous services to individuals. The services include lending money and offering financial advice to various business organisations seeking these services. The company targets mainly micro-businesses and individuals with private enterprises, seeking financial advice and assistance. The financial advice offered normally includes management of business finance, and achieving increased business profitability within various markets. Many private businesses normally experience financial difficulties because of the limited financial management knowledge of the owners. This contributes to poor business performance. While offering these services to other organisations and businesses, BFS also has its own internal financial affairs to manage. The aim of this report is to provide a detailed analysis of the company’s reward and bonus scheme offered by the company to employees. The report further analyses the role played by the scheme in providing motivation and commitment of employees to the organisation. Different bonuses available to company employees are also identified and consequently explained within the context of the report. Within the setting of this organisation, different issues, concerning the bonuses are evident and the effects of the arising challenges, to these issues, are also contained within the report. The report provides a detailed analysis of the reasons behind the utilisation of bonuses in boosting employee output within the organisation. The report provides a description of the current organisational bonus structure, while identifying the various bonuses, applicable within the organisation. The rationale of the bonus schemes is also identified and critically analysed within the report. Recommendations have been made regarding the essential changes which can be introduced into the bonus scheme, and increase the effectiveness of the bonuses in providing satisfaction and motivation to employees. 2. Findings 2.1. Key elements of BFS bonus scheme Employee bonus schemes and reward strategies continue to be utilised by many organisations to achieve various purposes, including business improvement. According to Burt 1997, the benefits are normally paid according to a predetermined method utilised in calculating accrued individuals bonuses within various organisation. However, employee bonuses are not as beneficial in this current economic crisis (recession) as they undergo extreme scrutiny most especially in financial sectors (Drazen 2012). BFS offers bonus based on individuals performance normally expressed as a percentage of the results (Bibby financial report 2012). This makes the bonus paid to different individuals to become relatively variable under different conditions. The bonus scheme within this organisation remains based on the job description, and the amount of work done by individuals. The bonus calculation includes identification of profit sharing value for the entire business and UK regional office, for UK based employees and employees at the end of head-office, also located in United Kingdom. Head office employees receive a 10% profit share of the global market sales, and 5% profit share from United Kingdom. The performance-related pay constitutes the large percentage of the individual salary and is calculated from individual sales achieved within monthly durations. All employees earn a performance-related pay of 5%, normally consisting their basic salary. This payment structure enables the company to sustain the workforce as salaries come from accrued employee sales during the month. Individuals having higher output, therefore, earn more than those with low outputs (Smith 2013).The employee bonus payment calculations are indicated in the table below. Performance Related Pay (PRP) UK Profit Sharing (PS) Global PS Head Office 5% 5% 10% UK based employees 5% 10% 5% Table 1employee bonus calculation 2.2. Current situation of BFS bonus scheme The organisation normally provides a variety of benefits and feedback process to employees which is aimed at improving employee output, engagement and job satisfaction (Smith 2012). The bonus schemes applicable within the organisation are both individual and corporate schemes. The individual bonus schemes are based on individuals’ performance normally measured by the earning accrued from the activities undertaken by the individual. This is paid through performance-related pay and bonus based on individual amount of work performed. Corporate bonus schemes are based on the total business earnings of the organisation within the region and globally. This remains based on the fact that the overall corporate performance depends on the individual input; hence the necessity to include the corporate reward system within the total amounts of bonuses issued to employees. Other than the fixed bonus identified by the organisation, and included within the overall monthly individual earnings, the company also offers various individual incentives. The company normally rewards the best performing individuals based on the overall employee performance ranking. The individual ranking is normally based on the results indicating monthly performance in terms of earnings brought to the company. The best performing monthly individuals are given some extra amount accompanied by a certificate of recognition as best employee. This recognition and the bonus are normally awarded to few individuals ranking highest among all organisation employees. Management employees are normally not included among the individuals offered with performance-related pay, as their duties remain limited in organisation and planning of various company operations. The company offers attractive payments, salaries and benefits to management employees as an incentive to secure the future growth, retention and maintaining them within the organisation (Featherstone 2012). The salaries offered at this level, have ensured the company attracts efficient and competent directors into the board. Competent directors enable the company to achieve increased business, as customers become confident of the organisation’s capabilities and capacity to deliver desired services. Offering sufficient salaries to the management employees ensures the individuals become satisfied, motivated and remain focused on improving the organisation’s performance. BFS also offers Flexible bonus to its employees which was launched five years after the total reward strategy incorporated in the company in 2006 in order to respond to about 720 employees who requested for their bonuses to be tailored to their needs- with some extending to immediate family members of various employees (Paterson 2012). Flexible bonus normally comes in various schemes including medical covers, extended to employee family members. Other than employees, extending corporate bonus to employee families offers the individuals an opportunity for ensuring their families also benefit from the company. Other incentives like holiday packages are also offered to individuals winning various organisational awards, like best performance. Through these flexible bonus schemes, individuals become sufficiently motivated and have increased desire to remain focused on their work. The motivation received from flexible bonus is also increased by family members’ encouragement for individuals to increase their performance, and enable the family members to receive the bonus as well. The company has introduced updated bonus schemes aimed at reviewing the available bonus schemes, and improve their efficiency. Numerous amendments introduced to the employee bonus schemes remain focused on increasing employee satisfaction for the bonus. This update enables the organisation to introduce improvements into the existing bonus schemes, aimed at increasing the sufficiency of the schemes in increasing employee motivation and commitment to organisation. Research studies have shown that a poorly designed bonus schemes can have adverse effect which could lead to employee demotivation as well as dissatisfaction (Drazen 2012). Following these amendments, the available bonus schemes have become extended to cover regional employees. Local employees, within BFS, receive regional employees bonuses, which have contributed to the increase of the total bonus received from the company. Previously, employees only received the bonus from their local office, with regional bonus not being included within the package. The current amendment has enabled the individuals to receive increased bonus from the company (BFS bonus review 2012). 2.2.1. Bonus scheme factors Various factors are considered before issuing and developing the bonus schemes utilised by the organisation. These factors include the following. Team working – this factor considers the performance of different teams based on the targets expected to be met within the organisation. Bonuses are offered in relation to the team targets set from the company head-office. These bonuses include those offered at regional level, as they remain based on the region’s performance. However, team working bonuses may not work in all organisations as most staff may not have collective goal and targets (Hobson 2013). HR-related measures – these are measures set by the management to govern the performance of various individuals, consequently offering rewards through bonus for individuals showing best performance through an appraisal process which brings about motivation and engagement but might course confusion due to human factors such as partiality or bias .( Lotich 2010). Individual performance – this remains the most commonly employed factor in determining bonus payments but this is might be restricted to employees closing deals or tasks given (Higuera 2013). This factor follows individual performance as indicated in measurable output and appraisals written by immediate managers. Attendance – this factor is normally considered to offer incentives for avoiding absence and employees absconding duties. This normally becomes considered irrespective of the reason for absence. 2.3. Rationale for current bonus scheme The current bonus scheme serves various purposes within the organisation and the management continues to apply this scheme. The reward includes offering monitory incentives upon consideration of various factors as desired. Following consideration of all applicable factors, individuals become awarded with various incentives aimed at achieving increased production within the working environment. The main rationale as observed within the company includes the following rationale. 2.3.1. Increase motivation Incentives like bonuses offered by BFS serve a fundamental element of increasing motivation among employees. Receiving of bonus and other rewards makes individuals feel appreciated, consequently creating a sense of belonging within the company environment (Langley, Aidan 2008). While other methods for offering motivation do exist, rewards have been identified as a method which ensures immediate motivation upon individual. The element of offering rewards to motivate employees remains a sustainable option as the individuals become rewarded with what they have earned (Saari, Judge, 2004). The company does not incur extra costs to cater for bonus payments while setting of targets normally becomes a motivating factor for employees to increase their performance aiming at beating the targets. 2.3.2. Increase productivity According to Schuler and Rogovsky (1998), equitable distribution of the bonus to individuals does not have similar input levels. This contributes to increased employee input, consequently resulting in increased productivity. Individuals become enticed by the idea of receiving rewards following high individual performance. To achieve this high performance individuals put in extra hours and undertake their responsibilities with zeal, resulting in increased productivity (Kalleberg, 1977). While a company’s productivity can also be increased through increasing the available production resources, like labour, utilisation of rewards makes individuals have a personal commitment and increase productivity. This enables organisations to increase productivity without necessarily investing in more resources than are already available (Kalleberg, 1977). 2.3.3. Improved morale Through such non-financial rewards, intrinsic motivation could develop among employees consequently raising their self-esteem and morale (Schacter, et al, 2011).Factoring of teamwork during bonus provision and calculation creates an environment where individuals become forced to cooperate with other individuals. Through the corporation, individuals become capable of performing various operations specified within their region or team. Individual’ morale becomes boosted by the knowledge that sufficient cooperation would result in attractive bonus earnings. The individuals become a force to operate efficiently within teams as they have various targets set by the management or general organisational requirements (Schultz & Schultz, 2010). The knowledge that hard work becomes rewarded through bonuses could immensely boost the morale of certain individuals who feel neglected within the working environment. 2.3.4. Retention The structuring of employee bonus payment scheme remains fundamental in enhancing the availability of employees. Through proper bonus calculation and scheme development, numerous individuals become committed to the organisational objectives. Personal commitment to organisational purposes remains essential in ensuring employee retention; consequently reducing the employee turnover rate (Saari, L. M., & Judge, 2004). High employee turnover rate could contribute to the depletion of human resource skills, when highly skilled individuals leave an organisation. Within the services industry, the human skills remain the selling tool, which enhances business. Insufficient skills and human capital could result in poor service delivery, making organisations, lose business. 2.3.5. Job satisfaction Offering bonuses could be identified as a method of creating a balance in the work done and salary earned for undertaking the involved responsibilities (French 2003). Within the salaried organisations, without bonus, individuals might be offered equal salaries based on their job description. The performance of individuals, however, cannot be equal despite having similar job descriptions. Some individuals might feel they work more than others while earning similar salaries; hence creation of dissatisfaction among employees. Offering bonus serves to address this inequality issue arising from salaries for work done (Langley, Aidan 2008.). Bonuses are normally based on the individual output measured against a specified standard. Individuals who have higher output become awarded with higher earning as a result of performance based bonus schemes (Breaugh, and Starke, 2000). Herzberg theory claims that dissatisfaction and satisfaction are brought by different factors. For instance, it is important to reward employees based on their job, location, and description because it enhances satisfaction at the work place (Breaugh, and Starke, 2000) 2.3.6. Positive behaviour and Career development Bonuses have been identified as reinforcement methods within an organisation and positive reinforcement produces positive behaviour (Bono & Judge, 2003). Positive attitude and behaviour toward work might become rewarded with recognition as best employee for certain duration. These recognitions normally entice other individuals to adopt positive behaviour aiming at achieving similar rewards. Though not all individuals within an organisation could achieve the best result, individuals become enticed upon observing others being rewarded for positive behaviour. This creates a desire for improvement upon these individuals; consequently resulting in improved overall positive behaviour among different employees (Robertson et al., 2012). 3. Conclusions and recommendations This report provided an analysis of the major employee reward schemes utilised by BFS to motivate its employees. The numerous methods applied by the organisation all include offering monitory rewards and incentives as a bonus and rewards for various reasons. While the approach might be working for the organisation, the following recommendations could be adopted in order to improve the bonus scheme, available within the organisation. The organisation should consider introducing as performance-related pay offered to employees exceeding their targets. While each individual contributes toward the regional income, the contribution varies, and so should the bonus offered. This would make the bonus become reflective of individual performance as opposed to general company’ performance. The organisation should introduce non-monetary rewards, like frequent recognition and praise for employee accomplishments. Another reward method would be allowing employees to become actively involved in decision making process. The individual would become more satisfied with their jobs, consequently increasing their commitment to the organisation. The value of these non-financial rewards cannot be quantified and achieved motivation becomes increased. When individuals become satisfied with monetary rewards, they begin getting demoralised and dissatisfied with the work done. This problem could be solved through non-financial rewards. The organisation has not been in a better position to reward employees based on their location and job performance. The individuals would record increased input, which could translate into increased productivity for the organisation. Bonuses have been identified as having greatest motivation when based on the effort applied by employees in delivering the desired operation. Performance levels and goal achievement, therefore, should become factored in determining the bonuses offered to employees. References Bono, J. E., & Judge, T. A., “Core self-evaluations: A review of the trait and its role in job satisfaction and job performance”. European Journal of Personality, 17(1): 5-18. 2003 Bowling, N.A.. “Is the Job Satisfaction-Job Performance Relationship Spurious: A Meta-Analytic Examination”. Journal of Vocational Behavior, 71, 167-185. 2007 Breaugh, J. A., and Starke, M., "Research on Employee Recruitment: So Many Studies, So Many Remaining Questions." Journal of Management pp. 305-434. 2000 Burt, R. ‘The Contingent Value of Social Capital’. Administrative Science Quarterly 42(2), 339-365. (1997) Drazen, P. The Good, the bad and the ugly of bonus schemes [Online] Available from http://businessexposuregroup.wordpress.com/2012/09/27/the-good-the-bad-and-the-ugly-of-bonus-schemes [11/07/13] (2012) Goldberg, C. B., & Waldman, D. A. “Modeling employee absenteeism: Testing alternative measures and mediated effects based on job satisfaction”. Journal of Organizational Behavior, 21(6), 665-676. 2000 Hobson,F. Pay Systems–Bonuses [Online] Available from http://www.hobsonconsult.co.uk/index.html [11/07/2013] (2013) Kalleberg, A.L. "Work values and job rewards—Theory of job satisfaction". American Sociological Review 42: 124–143. 1977 Langley, Aidan. Employee reward structures. 3rd ed. London: Spiramus, 2008. Lotich, P. "Advantages and Disadvantages of Working in an Organizational Group." StudyMode.com. Retrieved from http://www.studymode.com/essays/Advantages-And-Disadvantages-Of-Working-In-984033.html (2010) Paterson, J. (2012) Exclusive: Bibby Financial Services launches flexible benefits scheme[Online]Available from [11-07-2013] Robertson, I. T., Birch, A. J., & Cooper, C. L. 2012. “Job and work attitudes, engagement and employee performance: Where does psychological well-being fit in?” Leadership & Organization Development Journal, 33(3), 224-232 Saari, L. M., & Judge, T. A. “Employee attitudes and job satisfaction”. Human Resource Management, 43, 395-407. 2004 Schacter, D. L., Gilbert, D. T. and Wegner, D. M., “Self Esteem." Psychology, 2nd Ed. New York: Worth, Incorporated. 2011. Schuler, R. S. and Rogovsky N. Understanding compensation practice variation across firms: the impact of national culture, Journal of International Business Studies, 29(1):159-77. 1998 Schultz, Duane P. and Sydney Ellen Schultz. Psychology and work today: an introduction to industrial and organizational psychology. 7th ed. Upper Saddle River, N.J.: Prentice Hall, 1998 Smith, V (2012) Exclusive: Bibby Financial Services launches flexible benefits scheme[Online] Available from Read More
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