Issue Facing Organizations in the Field of Total Rewards Management - Term Paper Example

Issue Facing Organizations Today In the Field of Total Rewards Management Name: University: Course Title: Instructor: Date: Issue Facing Organizations Today In the Field of Total Rewards Management 1.0 Introduction The current business environment is highly competitive and stiff as compared to earlier years. This forced human resource managers who specialized in compensation and benefits to think of ways of balancing efficiency, effectiveness and marketplace viability so as to ensure “value exchange” between employer and employee. In the 1970s and 80s, most organizations acknowledged that “strategically designed compensations and benefits programs could give them edge in a rapidly changing environment”. Moreover, in 1990s companies experienced numerous challenges this pushed the need to have “alignment of pay and performance, tighter control on benefits costs and more relevant and valued employee reward programs” (Alliance for work-life progress, 2006). This paper examines issue facing organizations today in the field of total rewards management as a core business strategy. The issue that paper tackles is poaching and sustainability. 2.0 Concept of Total Reward Management According to Armstrong and Murlis (2007, p. 99) employees ought to be paid according to their skills and contribution to the organization. Various business organizations have realized the importance of having “integrated and enriched value exchange between an employer and its employees” (Alliance for work-life progress, 2006). Presently, owing to concerted efforts, scholars have developed models indicating various elements of the concept as an integrated business strategy so that an organization can attract, retain and motivate employees. These elements include compensation, benefits, work-life, performance & recognition and development and career opportunities (Alliance for work-life progress, 2006). Application of these elements is shaped by regulatory frameworks, cultural environment and competition. The benefit and compensation elements are best exemplified through exchange relationship where employer rewards valued employees and on the other hand employees provide time talent, effort and results. Compensation includes fixed pay, variable pay, long and short term incentive pay. These are meant to pay for time talent, effort and results. Benefits as the second element group & social insurance and pay for time not worked. They are meant to address financial risks and supplement cash compensation. The third aspect is work-life which helps employees achieve success. This group includes work flexibility, financial support, culture change interventions and paid and unpaid time off among others. The fourth is performance management where individuals are aligned to the organizational goals and those who succeed in this are recognized. The last is development and career opportunities so that employees can further their skills and also for organization to attract new talents (Jiang et al., 2009, p.179; Alliance for work-life progress, 2006). 3.0 Issue Facing Organizations Today In the Field of Total Rewards Management (Poaching and Sustainability Issue) With employers searching for talent, at a time they go to an extent of raiding talented employees of their competitors. One of the issues associated with total reward management especially at macro-economic levels is poaching of employees and reduced loyalty to the employer. This kind of scenario is likely to be evident in a situation where an organization with a well performing and talented employee is unable to sustain his or her demands due to various constraints. This then means that another company which is able to pay that kind of employee will poach him at the expense of the other organization which spotted the talent. This in long run is not healthy and has a negative cumulative effect. Moreover, this kind of approach will mean that certain organizations with huge capital will not engage in talent development, but just poach the already developed. This kind of perspectives reduces employee loyalty as he/she is less attached with the organization, but only there for monetary gains (The Institute for Employment Studies, 2003, p.9). Total reward in context of poaching also signals exploitation since the employer will play you maximum and once the productivity goes down you are dumped or your pay is reduced. Connected to the poaching is the concern of sustainability. Total reward management might not be sustainable as it forces firms to engage in risky rewards so as to keep the employee. This argument is reinforced by economic thinking where the employee will be in high demand and thus, hike the price of acquiring his/her services. The need for sustainability can be equally challenged during massive recession as the one witnessed in 2008 and its effect is still being felt. The issues of sustainability can also be evident when firms are facing lean times and thus unable to pay well. This was evident in IBM AND Apple in 1980s up to early 1990s. This kind of approach means at a time also they under look those with the potential of learning if well groomed and thus, missing the opportunities. Moreover, the above approach can at a time compromise on issues of equity and diversity since it is true that various regions face a lot of disparities in terms of capital training. Moreover, the concept can cause brain drain in developing nations since these economies cannot be able to pay their services and thus, they are likely to be attracted to global brands. Sustainability can also be analyzed in terms of standardization for all subsidiaries. 4.0 Case Examples 4.1 Poaching and Sustainability Issue in Google Inc Cost leadership is a business strategy that enables companies such to gain competitive advantage and maximize their market place share. Competitors in the market place usually achieve cost leadership by making their business processes and procedures to be the lowest in terms of production and operation costs (Daft, Murphy and Willmott, 2010, p. 59). As noted above, poaching and sustainability in employment is a real concern with total reward management. This case is true since employees nowadays tend to move to employers who offer higher rewards than their current employers. Google has had numerous conflicts with other IT firms like Facebook and apple over employee poaching. To ward off any potential poaching and address the issues of sustainability, Google Company has formulated numerous holistic measures in terms of employee development, growth opportunities and performance management. Currently, Google human resource goal is based on hiring those who are smart & determined and with skills & ability and not experience. Moreover, their system is based on the idea of hand-on contribution. This shows that the approach that the firm has adopted is value based. In this case, the firm will employ an employee and pay him/her according to his/ her value and the contribution in creating value to the end consumer (Google, 2012). 4.1.1 Measures put in Place to Address Poaching and Sustainability Issue The first solution to addressing poaching and sustainability is reward management. According to Armstrong and Murlis (2007, p. 99) employees ought to be paid according to their skills and contribution to the organization. This is exactly what Google company has done. Moreover, they offer incentives at work place to increase the internal drive of employees by combining fun and work. Their approach of providing free meals, spa, having standby doctor, laundry and billiards is based on motivation theory whereby one feel encouraged when they are rewarded. Moreover, they believe in hands-on approach by employees whereby employees are encouraged to participate in company process and even they can have a direct chat with the CEO (Google, 2012). Also to reduce recruitment cost and avoid relying on employees that have worked in other organizations, in most of their offices, they have programs that allow one to transform from campus life to corporate world, they have entertainments services, free meals, swimming spa, giving engineers 20 % of the total time for special projects, health benefits and good perks (Strickland, 2012; CCN money, 2012). From the above, it is clearly evident that the firm is fully maximizing on its human and social capital so as to further production, creation of value and market leadership. Moreover, in terms of employee recruitment and training, the firm’s recruitment policy is based on skills, one’s ability and not on experience (Google, 2012). Apart from the above, to ward off poaching of their employees, Google has invested heavily in employee development. The importance of human resource cannot be over-emphasized. Apart from the training that one received while pursuing academic qualification, it is important for organization to train its employee and expand their human capital on the job and through refresher courses. This allows them to grasp new concepts in their field of profession and be engaged in domestication of these new ideas for the organization. In a nutshell, this allows employees to improve their performance and enhance their personal development (Joy-Matthews, Megginson and Surtees, 2004, p.58). In their organization culture and what they believe in, they say that employees are allowed to formulate what they want to achieve in relation to the firm’s mission. To reduce the barriers to performance, the firm ensures that the working environment is fit in all perspectives The next measure put in place by the management at Google is performance management. This is applied to address sustainability concern so that the amount one is paid is equally same to his/her contribution. One approach to managing people and increasing performance has been management by objective. This approach in a participatory manner sets out what is to be achieved by employees or departments over time (Koontz and Weihrich, 2008, p.92).This objectives cannot be achieved if the performances of employees are not well managed. One way to improve performance of an individual or a department is through performance management. Performance management is the creation of collaborative effort between the supervisors and employees by aligning them with the firm’s strategic management plan. This is done by explaining shared expectations and reducing barriers to poor performance (Bacal, 2012, p.3, 4 & 5). Moreover, Google offer incentives at work place to increase the internal drive of employees by combining fun and work. Their approach of providing free meals, spa, having standby doctor, laundry and billiards has paid off. These measures have worked well and is summed up by CCN money 2012.To show how they are valued, CCN money (2012) reports that they get 1, 300 resumes a day and is ranked the first among top 100 best companies to work for globally. 4.2 Poaching and Sustainability Issue in IBM IBM has adopted non discriminatory policy since 1953 so as to attract top talents (IBM, 2012). However, in 1980s to earlier 1990s, IBM faced stiff completion and almost went down. Their re-emergence was coupled with recruitment of a new CEO (Tung, 2001, p.41). During this time they lost most of their employees since they were undergoing under lean periods and would not sustain huge wage bills. But on the other hand, IBM has also engaged in talent raid. Currently, one of the IBM values is on individual performance. According to this organization, they expect individual commitment and performance above the standard of their industry. It is only through this that they believe they will be able to make profit (Tung, 2001, p.42). Moreover, it is in this approach that they have belief that individuals determine the character and strength of their. 4.2.1 Measures put in Place to Address Poaching and Sustainability Issue Since earlier years IBM recognized the importance of protecting their best brains from poaching by having various incentives for managing their employees. Moreover, the company is accredited as one of the first movers to provide life insurance, survivor benefits and paid vacations to their employees. As seen earlier, there are chances of employee quitting of being poached due to being disfranchised or as result of greener pasture elsewhere. This was done in the belief of increasing employees’ spirit and attachment to the organization. Having had experience of employee poaching and concerns of sustainability, presently the firm has numerous measures for employee management so that even if they apply their reward management scheme they are cushioned from mass exist. To support their human resource objective of hiring the best irrespective of their diversity issues so as to avoid poaching and having disfranchised employees the organization has employee well-being policy. The policy stipulates that “advancing the health and well-being of our global workforce is an absolute priority; it’s a commitment that encompasses the environments in which employees work and the communities in which they live” (IBM, 2012). To achieve this, employee well-being is integrated in all angles of the firm’s engagement. The firm doesn’t only adhere to traditional well being, but also in aspects like promotion of physical and emotional health. This kind of programs help their employees identify with them, serve faithfully and thus, avoid being poached by other competitors (IBM, 2012). 4.3 Poaching and Sustainability Issue in Microsoft The issue of poaching of employees has affected Microsoft Company in two ways. In the first direction they have been beneficiaries of the process and on the other hand they have also lost. To satisfy their urge for talented engineers and other employees, Microsoft has been accused of poaching apple and Google employees. The basis of this is tied to total reward management where they feel that with that talent they are able to afford and pay that employee at all cost. This is backed with the fact that they know they will get the returns out of this employee. On the other hand this is unethical practice and source of unfair competition making others who spotted the talent loose. On the other hand they have equally suffered from the same where they have also lost employees to competitors like facebook (Nextweb, 2012). 4.3.1 Measures put in Place to Address Poaching and Sustainability Issue Worldwide, the trend is to pay people according to their skills and contribution. Moreover, people work expecting to be rewarded and the reward should be based on performance, market value, skill, competence and not on standard rates. Reward should be based on performance appraisal where employee’s contribution to the firm is graded. Performance appraisal forms one of the subcomponent of performance management (Armstrong and Murlis, 2007, p. 99). This approach enables management to attract and retain employees so that they can contribute towards achievement of organizational goals (Armstrong and Murlis, 2007, p. 111).. In earlier years Microsoft did not have standard approach to remuneration of his employees. However, from 2011, the trend has changed and now the payments are based on individual’s value to the firm in terms of contribution (Miller, 2012). 4.4 Consequences of Their Action As seen earlier, poaching and sustainability is a two way issue. It is either the organization loosing the employee or acquiring. Most of the companies discussed above are large multi international company which means they are likely to attract employees rather than loose them. Moreover, they are likely to damp employee faster if her/his performance deeps. This raises the issue of social legitimacy based on Kantian ethics. The bone of contention here is exploit employee till he is less productive then relieves him/her. This is why the organizations will go after the employee at all cost and pay him. Social legitimacy is derived from social justice. The tenets of social justice are built on premise that “all have equal rights to the most extensive system of basic liberties compatible with a similar system of liberty for all.” The second posits that “social and economic inequalities within a society should be arranged so that they are both: 1) to the benefit of the least disadvantaged members of the society subject to the first principle; and 2) attached to offices and positions which are open to all members of society under conditions of fair equality of opportunity” (Zammuto, 1982, p. 45). In essence, this concept can be understood through minimum regret concept. In this concept, “firms should seek to minimize constituents regrets over the actual consequences of their participation in the organization” (Keeley, 1978 cited in Zammuto, 1982, p. 45). To me, poaching of employees in long run will not be sustainable since they employer will keep on giving counter offers leading to increased wage bills. 5.0 Conclusion In implementing reward management strategy, salaries should be capped according to companies overall revenue otherwise the firm might find itself directing most of the income towards recurrent expenditure rather than capital investment. Apart from investing in reward, to reduce high turnover of employee and reduce the level of being disfranchised, the management should invest in leadership and motivation to create an environment that make them to be attached to the organization. The leadership should be one that sees employees as those in need of motivation to succeed. This will enable not only to attract but, also to retain their best and those who they have developed. In addition, to curtail the challenges, employees should be oriented to feel that in the company payment will be done according to one contribution and not based on bonuses for nothing done. Moreover, the firm has to clearly outline promotional procedures and fair work practices that outline personal growth and rise of the employees. References Alliance for work-life progress (2006). Work and life: what is total rewards? Retrieved on 25th June 2012 from: http://www.awlp.org/awlp/about/html/aboutus-whatis.html Armstrong, H. and Murlis, M. (2007). Reward management: a handbook of remuneration strategy and practice. London: Kogan Page. Bacal, R. (2012). Performance management. New York: McGraw-Hill. CNN money (2012). 100 best companies to work for 2007. Retrieved on June 25, 2012 from: http://money.cnn.com/magazines/fortune/bestcompanies/2007/snapshots/1.html Daft, R. L., Murphy, J. and Willmott, H. (2010). Organisation theory and design. Hampshire: Cengage Learning. Google (2012). Company overview. Retrieved online on June 25, 2012 from: http://www.google.com/about/company/ IBM (2012). Employee well-being. Retrieved on 26th June 2012 from: http://www.ibm.com/ibm/responsibility/employee_well_being.shtml IBM (2012). IBM’s EO policy letter is IBM’s foundation for diversity. Retrieved on 26th June 2012 from: http://www-03.ibm.com/employment/us/diverse/50/tc.shtml Joy-Matthews, J., Megginson, D. and Surtees, M. 2004. Human resource development. London: Kogan Page. Koontz, H. and Weihrich, H. (2008). Essentials of management: an international perspective. New Delhi: Tata McGraw-Hill. Miller, S. (2012). Integrating performance management and rewards at Microsoft. Retrieved on 26th June 2012 from: http://www.shrm.org/hrdisciplines/compensation/Articles/Pages/RewardsatMicrosoft.asp x Nextweb (2012). Microsoft irate over facebook staff poaching. Retrieved on 26th June 2012 from: http://thenextweb.com/insider/2011/03/03/microsoft-irate-over-facebook-staff- poaching/ Strickland, J. (2012). How the Googleplex works. Retrieved on June 25, 2012 from: http://computer.howstuffworks.com/googleplex3.htm Tung, R. L. (2001). Learning from world class companies. London: Cengage Learning. Zammuto, R. F. (1982). Assessing organisational effectiveness: systems change, adaptation and strategy. Albany, NY: State University of New York Press. Read More