Strategic Human Resource Management in Achieving Strategic Production Objectives - Term Paper Example

 Strategic Human Resource Management in Achieving Strategic Production Objectives  Introduction Employees play a very important role to a corporation’s success. Depending on their performance, they can drive the company’s productivity in an upward or downward shift. But which manager would want productivity to go down? Nobody. This standpoint is where Human Resource Management arises.  The Human Resource Management department’s primary task is to improve the match between individuals and jobs. Human Resource managers should use job analysis to obtain job description information about what each job needs to accomplish in terms of quality and quantity. Up-to-date job descriptions are essential for proper employee selection, appraisal, training and development for wage and salary administration and for labor negotiations. In addition to that, it is vital for summarizing the companywide human resources in terms of employee skill categories.  Early human resource managers saw that people positively respond to monetary incentives, at least behaviourally. It is known as the greatest motivator until latter researches saw that money is not just about everything. Rather, the quality of work life is pointed to be another of the greatest motivator and in the long run, the quality of work life comes first to motivating employees. Human resource managers have also found out that a good quality of work life in an organization reduce employee dissatisfaction and unionization efforts, thereby, increasing productivity, effectivity and efficiency. However, this aspect of motivation is intangible or immeasurable. This research study is primarily concerned and focused on the tangible measures to employee motivation which can be readily managed and easily observed by the human resource managers. And by tangible measures, the researcher meant cash and other monetary incentives, insurances, allowances, and other physical benefits received by employees.   This research study shall make use of an actual company as a subject for assessment. Current compensation and benefits practices shall be reviewed and assessed in order to formulate necessary recommendations for changes or amendment to the existing compensation and benefits scheme. The goal of this research is to come up with a more effective compensation and benefits package that will enhance recruiting and retention in the organization with the strategic objective of increasing overall productivity by twenty five percent over the next five years.   The readers or subscribers of this research study can expect that the proposed development to the current compensation and benefits package shall support the business strategy for productivity. It shall also include brief discussion of the sources of competitive advantage, how the proposed system motivates behaviour, how employees will be evaluated, and how the pay levels are designed.  Statement of the Problem This research study is made in pursuit to understand the impact of the current compensation and benefits package to the recruitment and retention of employees of International Business Machines (IBM). This research study aims to identify the strategic impact of the current compensation scheme to the company’s overall production in the long-term. The researcher is challenged to propose a new compensation strategy that will increase the company’s overall production by 25% over the nest five years. In order to efficiently design a new plan, the following must be confronted by the researcher: source of competitive advantage, how the new system motivates behavior, how employees will be evaluated, how the pay levels are designed, and what steps this new system will employ to retain key employees.  Review of Related Literature Human Resource Management (HRM) Strategy HRM strategies addresses the issue of whether a company or business unit shall employ a large number of low-skilled employees who receive low pay, perform repetitive jobs, and most likely to quit after a short time OR hire skilled employees who receive relatively high pay and cross-trained to participate in self-managing work teams (Wheelen 2004). Multinational corporations are increasingly using self-managing teams in their foreign affiliates as well as in home country operations. Research indicates that the use of work teams leads to an increased quality and productivity as well as to higher employee satisfaction and commitment.  Employee Motivation Motivation has been defined as: the psychological process that gives behavior reason and course (Kreitner 1995); a penchant to behave in a purposive manner to achieve specific, unmet requirements (Buford, Bedeian, & Lindner, 1995); an internal take to satisfy an unsatisfied need (Higgins 1994); and the resolve to achieve (Bedeian 1993). The level of impetus of an employee reflects his quality of work; the more motivated a person is, the more he is likely to work efficiently, productively, and effectively. Managers need to understand the complexities of factors that motivate their employees. Prior research proved that money becomes less of a motivator as an employee’s income increases (Kovach 1987) and that work challenge becomes a deal of a motivation to employees who are getting older. To fairly characterize the factors that motivate employees, managers must look closely to Maslow’s Hierarchy of Needs (1970). Maslow argued that lower level needs had to be satisfied before the next higher level need would motivate employees.   Compensation Compensation refers to money or assistance received by an entitled employee from an employer in respect of a work done pertinent to a given accounting period. Compensation is also referred to as salary but is not limited to which. The remuneration is normally based on either the time spent at work, or some other objective indicator of the amount of work done.  Employee compensation is a broad subject of human resource management that could also bracket to health care, monetary or non-monetary bonuses, allowances, etc.  Basic Compensation Practices Employed in the United States as Mandated in the Labor Code The wage-and-work-hour or time-based compensation is the most common pay system practice in the United States. Hours of work and minimum levels of employee compensation in the United States and some U.S. possessions are largely governed by federal statutes and regulations referred to as the wage and hour laws.   The Fair Labor Standards Act (FLSA) establishes minimum wage, overtime pay, recordkeeping, and child labor standards affecting full-time and part-time workers in the private sector and in Federal, State, and local governments. Covered nonexempt workers are entitled to no less than $6.55 per hour effective July 24, 2008. Overtime pay at a rate of not less than one and one-half times their standard rates of pay is requisite after forty hours of labor in a workweek (DOL 2009). The Fair Labor Standards Act does not limit the number of hours per day or per week that workers aged 16 years and older can be required to work.   Other compensation and benefits provided by the employer to its employees were usually discussed between employer and employee and is formally written along with the job offer and / contract. In spite of this agreement, employers must be aware that the contents of the contract must be in accordance with the constitution and must not have any misleading or malicious information that may risk its employees. Other compensation and benefits that the employees may be entitled to aside from their basic salary are health care benefits, retirement benefits, sick and vacation leave entitlements, insurances, loan applications (car, housing, etc.), monetary or in-kind allowances (grocery, food, transportation, clothing, etc), and others.   Employers are also accountable for their employees’ welfare. In fact, according to the Federal Employees’ Compensation Act, workers can claim for compensation if he or she can provide factual evidence that he or she was in performance of duty when the event/s or accident happened, and that the employee actually developed a medical condition while at service. The same law also applies to other employees of public and private corporations, however, claims and compensations claims are subject for investigation and review before assistance is made ascertain.   The Department of Labor also protects employees against discrimination in the workplace. The States protect people from racial, age, and gender bias. Also, there is a law that protects people with physical disabilities from employment prejudices. The aforementioned differences should not, in any way, deny or affect the employers’ determination of their employees’ salary, compensation and benefits; let alone their chance for employment.  Current Compensation and Benefits scheme and practices of IBM Aside from the basic salary that IBM provide for its employees to attract and retain qualified leaders and workers and to motivate high business performance, IBM also give out other compensation and benefits package to their employees to support their strategic plans and objectives. Compensation and benefits package may vary depending on the job description, skill level, and job performance.   IBM provides various elements of compensation to their employees depending on their status in the career ladder. Other compensation elements provided by the company are classified into three categories: current year performance; long term incentive plan; and Retention, Pension & Savings. Aside from the basic salary, current year performance may include compensation elements such as annual incentive and team incentive. Long term incentive plan may include Performance Share Units (PSUs), Chairman’s Performance Uplift, and Annual Stock-Based Grant. Lastly, Retention, Pension & Savings include compensation elements such as Retention Stock-Based Grant and Cash Awards, which are reviewed periodically; Pension and Savings Plans; Other Executive Retention Programs; and Executive Deferred Compensation Plan. NOTE: The above-mentioned compensation elements are widely directed for top-level managers of IBM.  Apart from the compensation packages cited in the above paragraph, IBM employees may be entitled to other compensation and benefits elements such as Tax Reimbursements, which are incurred from family travel to and attendance at company-related proceedings; Company Contributions to Defined Contribution Plans; Life Insurance Premiums wherein employees and executives hired before January 1, 2004 is two times salary plus annual incentive plan payout, with a maximum coverage amount of $2,000,000; and Dividend Equivalents that are payable in cash(IBM).  Strategic Plan for change or creation of the anticipated change: The objective of this paper is to come up with a new compensation and benefits plan that will be able to attract and enhance qualified workers and persuade current employees to retain their employment to IBM for a long-term duration. This is done particularly in order to raise production by twenty five percent over the period of five years from the implementation of the new compensation and benefits scheme.   Designing a new compensation and benefit scheme that will result to greater productivity raise of one fourth of the current productivity is a serious challenge to the Human Resource Department. Many possibilities can be assumed in five years time and it is necessary to make concrete strategic plans in order to successfully carry out the company’s objectives and vision for the nest five years.  IBM Corporation is a multinational company that generates multibillion dollar earnings from the vast products, services, and solutions that they offer. They are employing hundreds of thousands people in their business hubs and offices making adjustments to the current compensation and benefits plans rather difficult to review and implement. However, in order to carry out this research study, we shall be addressing a few departments of IBM Corporation. Specifically and most importantly concerned this study is the production and operations department/s of IBM products namely: software, storage, systems and servers.   The strategic plans that were formulated in dedication to this research study were proposed with utter consideration of the current compensation and benefits plan of the International Business Machines Corporation.   Strategic Plan A Strategic Plan A focused its proposal for changes on the company’s strategic objective, which is to increase production levels by twenty five percent over the next five years of operations. Resort to Output-based or Performance-based pay system Output-based pay system means that workers’ salary depends on the number of output he or she produced.  By implementing this system, employees submit themselves to increase the number of output they make, so in return, they will have more income. With output-based or performance based system, managers are given an immediate and meaningful feedback. Also this form of compensation has measurable objectives. Improve on other benefits Since this strategic plan proposes the use of performance-based pay system, the company must strengthen its benefits plans to be able to retain well performing employees. The Human Resource Department shall focus on benefits that could be of immediate assistance to the employees such as health care benefits which can be extended to his or her domestic partner or anyone of his or her chosen beneficiary. Offer sign in bonuses to encourage qualified workers Through sign in bonuses, many applicants can be lured to apply in IBM. In return, IBM can increase recruitment of new skilled employees.  Strategic Plan B Strategic Plan B is centered to the compensation and benefits plan that can be enjoyed sooner by the employees. Giving them tomorrow’s “bread” with the hope that it will work as a motivating factor is the goal of this strategy Convert deferred rewards into current rewards Tangible rewards are observed to be more appreciated than deferred rewards. Receiving rewards right on motivates employees more and this may result to increased productivity. The happier the employees are, the more energetic they are when it comes to performing their jobs. Offer less benefit value and more cash value Oftentimes, people respond more pleasantly to cash incentives than benefits packages. Employees realize benefits better if they are in cash value rather than intangible benefits. Also, employees should be able to choose what type of incentive they would like to have, either cash or stock option. Employees, depending on their needs and preference for investment, should have the benefit and liberty to choose which better help in his living.   Strategic Plan C Strategic Plan C has made more emphasis of future reaps in labor rather than benefiting from it today. The future of the employees is viably emphasized in this plan. Bring back the Retention Plan  and improve retirement plans/benefits Retention Plan was one of the benefit plans made use by IBM Corp. during the huge crises the company faced in the mid-1990s. This plan helped keep for full careers the senior leaders of IBM needed to turn the same company around (IBM 2007). However, the Retention Plan had been closed to new participants. The researcher thought that this plan is an effective tool to retain the most brilliant members of the workforce. A new Retention Plan could be opened, however, employees are not automatically entitled for it, and instead, they must apply and meet the criteria that HR will set in order to qualify for it. Through this, employees will be more motivated to work better and retain employment with IBM Corp. Emphasize individual performance based incentive/s If we were to retain employees, we must make sure we keep them motivated and they better be well-performing too. Giving performance-based incentives are likely to motivate employees to function more productively and more efficiently; the quality of the performance also determines their quality of work. Provide deferred rewards Investment-wise employees are most likely to prefer deferred benefits or reward other than current rewards. Some deferred rewards increase its value due to interests are more profitable in the long-run.  Strategic Approach for the Implementation of the Changes Should the selected strategy be permitted and authorized by top executives and the Board of Directors, all changes and development to the compensation and benefits scheme shall be made known to all employees in all levels through memorandums. Since such information is confidential and must only be between the Human Resource people and the employees, workers will only be notified through electronic mails of the new scheme. The Human Resource Department shall be responsible in making sure that all employees are well informed of these changes. Every employee must be able to access the complete and detailed information of the new compensation and benefits scheme whenever they want to read and review it.   Employees must understand that they only reap what they sow. They are rewarded based on their performance and contribution to the company. They will be assessed based on their attendance, output produced, quality of work, and their duration of service. For the company to be successful, transparency between top management and employees is greatly needed.   Final Recommendations and Possible Outcomes Strategic Plans A, B, and C have all been able to respond to need of enhancing recruitment and retention of employees that will be able to increase employee productivity by more or less twenty five percent. However, amongst the three, strategic plan C best suit the strategic objective of the company, which is the enhancement of recruitment and retention of skilled and qualified employees. In addition to the chosen strategy plan, the researcher recommends the following strategic actions be imposed for the betterment of the company: Make selection for employment diverse in terms of age, race, and national origin since this provides greater source of competitive advantage. Improve on internal marketing. Hold periodic team building activities to enhance professional relationships among employees. Identify and monitor all sources of compensation, including offers; and publicize patterns. Monitor the allocation of resources to ensure equity. Money should be reallocated to correct any identified inequalities. Monitor employees’ productivity and performance after the implementation of new compensation and benefits plan to determine its effectiveness. Projected Outcome Upon Implementation Best Worst By the end of the fifth year of implementing the new plan, it can be assumed that the strategic objective – production is increased by twenty-five percent- will be met. Employees of IBM have increased their productivity brought about by the new plan’s emphasis on giving workers’ performance-based incentives. In addition to that, a new pattern showed a higher retention rate due to the Retention Plan and improved compensation and benefits plan. Deferred benefits rewarded to employees in form of stocks and other investment figures may be put to risk due to uncontrollable phenomena like changes in the exchange rate and government policies in employment (. The value of stocks rewarded to workers may decrease in value due to varying movements in the financial market. IBM’s cash inflows and outflows could be affected by the changes in government policies. When the worst happens, the company may not be able to carry costs of investments like manpower, etc.   Summary/Conclusion: Taking a closer look at Human Resource Management concepts, we were able to learn that employees are integral to the success of any organization so companies must pay closer attention to the needs of their employees. A motivated team makes productive work, which benefits both the company and its employees. Employees are motivated in various ways like cash rewards, in-kind rewards, recreational experiences, stock options, health benefits, retirement benefits, etc. They are given to employees in current time or in the future. It is a known fact that future or deferred rewards have risks included and they should be regarded as well.   For IBM or any company for that matter, to be successful, it is important that their strategy plans must be aligned with their strategy objectives.   References Buford, J. A., Jr. (1990). Extension management in the information age. Journal of Extension, 28 (1). Buford, J. A., Jr., Bedeian, A. G., & Lindner, J. R. (1995). Management in Extension (3rd ed.). Columbus, Ohio: Ohio State University Extension. Department of Labor [DOL]. U.S. Department of Labor in the 21st Century. Retrieved January 16, 2008 from http://www.dol.gov/dol/topic/wages/minimumwage.htm  Gitman, L.J. (2006). Introduction to Managerial Finance (11th Edition). South Asia: Pearson Education Inc.  Higgins, J. M. (1994). The management challenge (2nd ed.). New York: Macmillan.  International Business Machines [IBM] (2007). 2007 Retention Plan Narrative. Retrieved January 15, 2008 from http://www.ibm.com/annualreport/2007/proxy_toc_1_excom7.shtml Kovach, K. A. (1987). What motivates employees? Workers and supervisors give different answers. Business Horizons, 30. 58-65. Kreitner, R. (1995). Management (6th ed.). Boston: Houghton Mifflin Company. Maslow, A (1970). Motivation & Personality (2nd ed.). New York: Harper & Row Publishers, Inc.  Wheelen, T & Hunger, JD 2004, Strategic Management and Business Policy (9th edition). New Jersey: Pearson Education Inc. Read More