How Can Line Management Be Helpful to HR in Establishing Strategic Pay Plans - Assignment Example

Executive summary This paper summarizes several points about Focus Pointe and whether there is a need to increase Angelo’s salary. In doing so, this paper gives several HR and manager’s perspective as to the basis why one employee will or should be given a raise. In doing so, the different approaches to giving employee compensation is being analyzed. Commission based pay is said to be advantageous because it will increase workers’ eagerness to work,, however it would minimize teamwork and collaboration. Giving incentives, on the other hand, is a good motivator for employees to work harder. All in all, it is still the managers’ prerogative to choose whatever kind of salary scheme should fit the company and the workers. What is important to note that salaries – in whatever form – is aimed at benefitting the employees as it is a reflection of their work. Introduction In an organization, human capital and workforce relationships are the backbone of success. The flow of information between colleagues, work teams, customers and suppliers, for example, depends on the quality of relationships and talent in the workplace. Various changes over company policies, mission and vision statements, roster or work schedules and even on varied salary schemes have been made so as to enhance workplace diversity, particularly that which reflects people management (Barney, 1991). This paper is aimed at answering the five questions from the case study (appendix 1). Background information As what has been stated, workforce relationship and management is very important to maintaining company competitiveness and high productivity. In lieu of this, flexible employment has now been introduced to the many human resource facilitators. Flexible employment, as the name implies, is the type of employment wherein the workers themselves have the chance to choose what better style of employment would fit him, thereby increasing his/her efficacy in the line of his work. Flexible employment can be applied in many different aspects, like the roster or schedule of work, the type of employment and even the place of work and lastly, the kind of compensation that would better serve the worker and the company as well (Wright and McMahan, 1992).. Would you have given Angelo a pay raise up front? What are you reasons? There is enough good basis for Angelo to be given a pay raise. Among the many strategies to keep the human resources at a greater advantage is by properly motivating its people – that is through good wages - and training the people. This is a proven way of keeping the staffs. In fact, American businesses have been spending billions of dollars annually on employee staffing, giving good salaries and training (Hunter and Hunter, 1984). Because of this, there have been series of studies conducted to really discover the linkage between the success of business strategy and the training practices of the company. From a mere business strategy typology that provides strategic challenges translatable into specific job and skill requirements, newer and advanced theoretical perspectives are now being revealed in the pursuit of understanding how firms acquire and shape the human resources to establish a sustainable competitive advantage (Wright and McMahan, 1992). It would be also worth considering giving him a commission on each success he will be able to give to the company. Commission based pay is believed to be one of the most popular form of payment scheme in various industries like real estates. Commission rates are usually set by skill level, length of service, or size of client base (Wright and Snell, 1991). Some of the noted advantages of a commission based pay are (Wright and Snell, 1991): 1. Obvious eagerness to work of the providers – Why not? They can set their own pace and time for their work. They can use their own strategies. They can do whatever ethical thing to do as long as they will be able to provide the company with the sales figure that are expected from them. 2. Management will find it easy to manage the workforce. – Some would not even require the workers to meet the management on a daily or weekly basis. Some companies need not see the worker at all. As long as the sale or business is made and the worker is paid (by the agreed commission rate), then the business is running smoothly. 3. There will be minimal risk for both the company and the worker – the old adage ‘no strings attached’ holds true for this matter. It’s just like paying what has been worked for and that’s it. Meanwhile, some of the disadvantages are (Wright and Snell, 1991): 1. Company cannot expect teamwork – As it is on a commission base, each employee will strive to get the higher commission for their own good. Some will keep good strategies only to themselves. Some will work behind somebody else’s back. Money rings a loud bell for the worker’s mind and they will do everything to get a good commission. 2. HRM’s idea of performance evaluations will be left futile – how can one assess performance if the workers are obviously working for the money alone? They will not care whether or not their boss’s have evaluated them good or bad, after all, it will not affect the amount of commission they are to get. 3. For the workers’ side, there will be just a minimal room or opportunity for growth – Again, this can be attributed to the fact that workers will only view performance evaluation as meaningless, hence there will be no room for their development. Angelo’s track record in attracting high calibre focus group participants combined with the plush surroundings at Focus Pointe, giving him the pay increase shows continued good faith and also protects the organisation against any legal action if Angelo is to be let go in the near future. Aside from being able to maintain Angelo and motivating him to work harder, a pay raise could also be a strategy to help resolve any differences between both parties and it may even lead Angelo to be more open to retraining that he may or may not need. How can incentive plans best used? Why they are well suited to a company like Focus Pointe? Why do you think the sales incentive plan at Focus Pointe is a combination plan? There are six key reasons why flexible employment programs is now said to be critical to the organizational strategic goals and objectives of the company and these include (Becker, 1964): 1) Greater adaptability and flexibility in a rapidly changing marketplace 2) Attracting and retaining the best talent 3) Reducing costs associated with turnover, absenteeism and low productivity 4) Return on investment (ROI) from various initiatives, policies and practices 5) Gaining and keeping greater/new market share (locally and globally) with an expanded diverse customer base; and 6) Increased sales and profits The above stated reasons are also the basis why giving incentives is part of some companies strategies to maintaining good employees while increasing sales and profits (Wright and McMahan, 1992). Incentive plans are best used as part of the add-on to salary schemes of companies related to sales such as the pharmaceutical companies, real estates, advertising agencies and the likes. In the Philippines, for example, United Laboratories, Inc. (ULI) is one big, multinational pharmaceutical company who is known for giving incentives (money and/or travel benefits) to each medical representatives (the sales force) if they will be able to reach, or, better, exceed their quota. In some instances, they also provide incentive packages (in the form of travel perks) to the doctors who are able to prescribe ULI”s products in astounding volumes. The most recognized benefit of giving incentive as part of the salary scheme is its ability to motivate the workforce better. With this incentive, the workers will strive to work harder, not only to reach their quota, but to exceed it so as to achieve a higher incentive as well. More so, once an employee is awarded with the incentive, he/she will feel that his/her efforts did not go unnoticed. He/she will realize that the top management are well aware of how hard he/she has worked and will be expecting more from him/her in the succeeding months or years (Wright and McMahan, 1992). The only downside of this incentive benefit is the idea that employees will only work for the money or the incentive and not because they love the work. Can you think of a strategic sales incentive to keep recruiters motivated at Focus Pointe? A very good strategic sales incentive that could keep recruiters motivated at Focus Pointe can be internal award system, such as a merit program, profit sharing or Management by Objectives (MBO) program. So now one question remains, when does the incentive plan/program proved to be at its best? Based on the information gathered above, incentive plans is best to be provided to certain area or group of people within the company – and this is to the marketing and/or sales group. These area or group of people are the ones directly responsible to gaining income for the company. They are the ones who face the customers and close the deals for sales that will generate income. By giving them incentives, they will be highly motivated to use the best strategy possible to generate the sale thus benefiting the whole company in the end (Griffin and Pustay, 1996). Indeed, incentive plans work best when they serve to keep people focused on turning a profit, in shifting economy or during a downturn when competition is especially fierce. A combination plan allows the sales person some security while at the same time, assuring the organisation (Focus Pointe) of having a highly motivated employee. Bearing in mind that this combination plan only operates smoothly if both the corporate and individual goals align. It would seem in this case that Angelo seems to be working independently rather than as a team player. Recruiters in Market Research at Focus Pointe must consistently be able to draw qualified respondents otherwise there is a tendency that corporate clients will simply seek services elsewhere (Griffin and Pustay, 1996). How can line management be helpful to HR in establishing strategic pay plans? Human resource is one of the most important aspects of the business. This is the area of the business where the full force of operation is coming from. The people are the human resource. They are what make the business flourish or fail. With this reason alone, it is extremely important that the human resources are managed properly and effectively (Wright and McMahan, 1992). Thus, line management can be helpful to HR in establishing strategic pay plans if the entire work force – are addressed and maintained with the policies and procedures of the company. They must feel that they are properly compensated and that their philosophies and vision in life is parallel with the philosophies of the company as well as with its mission and vision. If this does not happen, for sure, majority of the human resource will not feel motivated to work (Wright and McMahan, 1992). This of course would mean that the desired output and/or projected earnings of the company will be hard to achieve as the human resources do not deem it necessary to aim for a better performance. Analyzing the organization structure is categorized into four different ways. This includes (http://www.liebowitzassoc.com/articles/organizationanalysis.shtml): • Explicitness or non-explicitness of the company’s vision and strategy • Premeditated information and work flow in and out of the company • Appreciation of the culture of the organization • Knowing the people in terms of how they are selected, what are their qualifications, what are their most recent salary and benefits, when was their last promotion and what is their career path With these four categories, it is very clear that organization is not only focus in how to earn money but also on how to maintain harmony inside the company by maintaining ideal communication flow and having and retaining qualified employees. Human resources play a major role in maximizing the company resources to maintain competitive advantage. Evaluate the Core and Distinctive Competencies of the Employees After having a clear understanding of the organization, analyzing the competencies of each and every employee is the next step that the Human resource Manager must do. The employees are one of the biggest weapons of the company. They are the workers who ensure that the company is working right on target and the customers are satisfied with what the company is offering. This is the very reason why the organization sees to it that all the staffs are equipped with the right armament to keep them competitive and effective in their respective responsibilities (Peteraf, 1993).. Based on the resource-based perspective, firms possess unique bundles of resources that are largely incomparable (Peteraf, 1993). Some of these resources are collected in a path-dependent manner, which in turn make it difficult and expensive to replace or acquire quickly when needed (Dierickx and Cool, 1989). Meanwhile some resources are simply not tradable, for example, tacit know-how. Firms possessing such difficult-to-create resources are then forced to work with their existing stocks and not rely on creating them again as and when needed. Indeed, resource-based view plays a very significant role for this can be utilized to understand how firms develop and accumulate human resources as a basis for creating sustainable competitive (Winter, 1987). On some other studies, it has been proven that the resource-based view of competitive advantage implies that the human resources provide enduring distinctive advantages to the company because they are able to remain inadequate and/or hard to replicate, have no direct substitutes, and enable companies to pursue distinguishing business opportunities (Barney, 1991). Thus, the concept of human resources as a source of competitive advantage shows that the people have competencies, experiences, and knowledge which provide significant economic value to the company. Barney and Wright (1998) even disclosed that in order for human resources to bring in sustained competitive advantage, they must remain hard to imitate, create value, and co-align, uniquely, to the organization's business strategy. In order to eliminate a possible human resources related problem, some of the policies that can be established by the Human Resource Manager are: 1. Creating venues for development This can be done by having a regular seminars and training sessions for the employees. It should be noted that trainings and/or seminars will not only benefit the employees, but also the overall performance of the company. With regular trainings and development session for the employees, they will learn new techniques regarding their key responsibilities. They will feel invigorated as they face each day-to-day task (Peteraf, 1993).. 2. Create an avenue where subordinates can evaluate their supervisors It is not necessary that only supervisors or mangers will be allowed to evaluatethe enablers or the subordinates. Thus, there must also be a regular evaluation of the supervisors and managers where the subordinates will play a significant role. the subordinates are among the first people who knows exactly how the mangers/supervisors work. They are the ones who know what is lacking and/or what is good about their bosses. Hence, by giving them the chance to evaluate and make the top management (or the Human Resource manager) understands the work ethics and overall performance of the managers and supervisors, then everybody must be motivated to work as a team. Managers and subordinates will then work hand in hand for the success of the company, thereby benefiting them too (Peteraf, 1993).. 3. Having regular employee-performance reviews for promotions and salary appraisal Promotions and salary appraisals add hope for the employees. Because of this, they will have something to look forward to. Promotions and salary appraisal can also pave the way for competition and positive competition can always be enhanced (Reed and DeFilippe, 1990). Indeed, providing well defined pay rates for the employees will surely help ensure that human resource related problems will be minimized, if not, eliminated. It is also worth noting that there are three major reasons why employees would leave a certain company. These are: Low wages Because of the ever changing world, technological advancement and ever-increasing costs of living, more and more employees find their salaries and wages not enough to accommodate their everyday living expenses. That is why they would either ask for a high basic salary or would ask for salary increase to their company(Reed and DeFilippe, 1990). Indefinite employee benefits Aside from the salary, more and more employees are becoming more concerned on the employee benefits. These may include clothing, housing and transportation allowances, rice or food ration, vacation or leave benefits, medical benefits such as health card, maternity and paternity benefits and the likes. Employees would also want to ensure that about government taxes and benefits which would ensure that they will be gaining something even after they retire from working (Beuadreau, 1991).. Hence, if the company does not have any written contract regarding these benefits, a prospective employee will have second thoughts in pursuing to work in the company. Unsecured health insurance This benefit is practically important particularly on companies which are into manufacturing, chemical-related, mining etc., because these are the very companies who are prone to accidents and sickness. Hence, it is very important for every employees and workers to ensure that their health is insured (Peteraf, 1993).. Also, with proper health insurance allocation, employees will be extremely motivated to work for they know that the company will safeguard them if ever undesirable and work-related health problems will some their way. Lack of available incentive plans, bonuses or reward In this very competitive time, there are companies who would attract good workers by giving different bonuses, rewards or incentive plans for the entire work force. Some companies in Asia offers at least 3 months bonuses (as an add-on to the 12-month pay rates). Meanwhile, some call center companies in India provide rewards to employees who will be able to work long straight hours and receiving no negative feedbacks from the customers (Reed and DeFilippe, 1990). With clearly defined incentive, bonuses or rewards plans offered by the company, it will not only guarantee hard working employees, but will also pave the way to attracting workers who will be keen on staying for the company for a longer duration. Needless to say, without these, a different turn of events will occur. Conclusion With the continuing movement of the economy – may it be a decline or growth – every businesses and companies are using every possible means to keep the company at a stable end. Every organization must have the capability to adapt to the movement of the market and the ever-changing needs of the customers. However, an organization can only do this if the people – the very members of the workforce – are working smoothly as a team. Moreover, now that diversity in the workforce is seen as advantage rather than a problem, management have been seeking every possible means to maintain the competitiveness of each and every member of the workforce to mutually benefit the company and its workforce (Wernerfelt, 1984). Flexible employment has paved the way to different payment schemes. Commission based pays, normal daily or per-day based salary, giving add-on benefits like rewards and incentives are just some of the few remuneration systems being given to a specified group of workforce. Each remuneration system has its own advantages and disadvantages (Boudreau, 1991). Top management officials – the line managers, the human resource department as well as the overall organizational strategic goals play an essential part in the human resource management program. All members of the workforce must be aware of the human resource management programs being established by the management (Jenson, 1980). The top executives must adhere to employee equity (such as giving fair salaries and other benefits from the company). Lastly, the human resources personnel must adhere to meeting the needs of the different genders and/or sexual orientation as well as in maintaining the work/life balance for every members of the work force. These are just some of the strategic moves that the company and the whole organization must ensure in the pursuit of enhancing human resource programs and flexible employment. References: Barney, J. (1991). Firm resources and sustained competitive advantage. Journal of Management, 17, 99-120. Barney, J. & Wright, P. 1998. "On Becoming a Strategic Partner: The Role of Human Resources in Gaining Competitive Advantage." Human Resource Management, 37: 31-46. Becker, G. (1964). Human capital. New York: Columbia U. Press. Boudreau, J. W. (1991). Utility analysis for decisions in human resource management. in M. D. Dunnette and L. M. 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