Changing Reward Structures: Airbus UK - Essay Example

Changing Reward Structures: The case of Airbus UK Changing Reward Structures: The case of Airbus UK Writers Name Institution Name Company overview: Airbus UK According to Redman and Wilkinson “Airbus UK is a part of a giant European aerospace group EADS and is jointly owned by EADS and British BAE system. It is the only European manufacturer of aircraft. Airbus UK competes with their American manufacturer Boeing, the world’s only other aircraft manufacturer. Airbus has European manufacturing facilities in Germany, France and Spain as well as the UK. In the UK the company operates on two sites: Filton (Bristol) and Broughton (Cheshire). (Redman and Wilkinson, 2006) According to an article published on BBC website “In April 2006 BAE Systems announced its intention to sell its share of Airbus SAS to EADS. BAE originally sought to agree a price with EADS through an informal process. However due to the slow pace of negotiations and disagreements over price, BAE exercised its put option which saw investment bank Rothschild appointed to give an independent valuation.” (BBC News, 2006) Advantages and disadvantages of the new reward structure Before 2001, Airbus was using job based system. In job-based systems, the assumption is made that work gets done by people who are paid to perform well-defined jobs. Each job is designed to accomplish specific tasks and is normally performed by several people. Because all jobs are not equally important to the firm and the labor market puts a greater value on some jobs than on others, the compensation system primary objective is to allocate pay so that the most important jobs pay the most. This is the traditional form of pay system which was used in Airbus before 2001 designing of new reward structure where employees increased their base pay as they were promoted to higher grades in organizational chart. There are three key components of developing job-based compensation plans: Achieving internal equity (job evaluation) based on six steps; Achieving external equity based on market survey and Achieving individual equity Job based-compensation assesses the relative value or contribution of different jobs to an organization. The first part of this process is known as job evaluation composed of six steps to provide rational, orderly and systematic judgement of how important each job is to firm. In job evaluation the company conducts: job analysis; write job description; determines job specifications; rate worth of all jobs using a predetermined system; create job hierarchy and classify jobs by grade levels. Now in order to achieve external equity company conducts market survey. The purpose of this survey is to determine the pay ranges for each grade level. This is done in order to achieve external equity. Airbus was planning to conduct this survey and benchmark itself against the top notch companies so that the employees are fairly paid as compared to the same ranks being paid in the other companies. After this survey is conducted it has to make strategic choice about whether it will pay the same rate, a lower rate, or a higher rate. Even though the entire process is performed thoroughly but I believe that the system has many problems. Firstly even though there is capacity in this system to assess the performance of each individual and their ranks and grades are determined according to that but what if the employee has performed well during or before the entire evaluation period. Then how will he will be rewarded or graded for that? I think that in this system the job is considered more, its importance and contribution to the company is given utmost importance and the potential, skills and expertise of the person is not paid, leaving no room behind for better performance and increase productivity level for the employee. The new reward structure used by Airbus post 2001 was based on dividing the jobs in broad bands and further dividing these into sub broad bands paying the employee based on their skills, knowledge and expertise. All employees usually starts at the same pay level and advance in their career and pay level based on their knowledge, new skills and expertise acquired. Three types of skills of an employee may be rewarded. Employees acquire depth skills when they learn more about a specialized area or become expert in a given field for example technicians. They acquire horizontal or breadth skills when they learn more and more jobs or tasks within the firm like through job rotations and thirdly when they acquire vertical skills when they acquire self-management abilities such as scheduling, training, teamwork, coordinating and leadership. Skill-based pay offers several potential advantages to company like Airbus. First it creates a more flexible workforce that is not straitjacketed by job description specifying work assignments for a given job title. Even though the job descriptions are specified and clearly defined but the employees have enough authority to adjust the work conditions according to the situation. Secondly it promotes cross-training, thus preventing absenteeism and turnover from disrupting the work unit’s ability to meet deadlines. Third it also calls for fewer supervisors so management layers can be cut to produce a leaner organization. Fourthly it also increases employees control over their compensation because they know in advance what it will take to receive a pay raise. It also facilitates systematic organizational learning and continuous improvement, as well as encouraging a participative work culture. Broadbanding used by Airbus is also a newer method of skill based pay system. It simply involves reducing the large number of narrow jobs smaller number of pay bands, each with an extremely wide pay range. Unlike the job based compensation plan, in broadbanding the emphasis is given more on the individual skills and expertise rather than the job itself. Another important step taken in the new reward structure proposed is the introduction of the variable pay system. Variable pay is viewed as a means of aligning the interests of employees with those of employers. I strongly believe that variable pay can be a good factor used to motivate employees and enhance their performance and productivity level because it increases the pay level and it also has the potential to motivate employees to achieve high self-esteem and fulfill their needs other than just simply achieving a pay raise in their job. The employees are paid for their better performance and high productivity level which gives them a sense of achievement and a thought to strive and achieve more in their job for money and recognition both. New reward structure was designed to help generation of performance culture. What other HR initiatives would be consistent with this aim? The new reward structure that is designed is simply a tool used to achieve high performance but the HR should keep it in their mind that these tools are a means to an end, not an end in them. I think the HR department can take an initiative to pay at the top of the market for critical jobs that are central to its mission and at the low end of the market for jobs it considers less important. In short the Airbus and its HR strategy should drive the use of compensation tools rather than the other way around. Another initiative that the HR department at Airbus UK can take is to secure the employee input. Employee dissatisfaction according to me will be reduced when employees will have a voice in the design and management of the compensation plan. A simple straight forward way to solicit employee input is to use computers. Computer-assisted job evaluation systems allow employees to describe their jobs in a way that can be synthesized, displayed, rearranged and easily compared. This approach will offer two benefits. First, it gives employees a chance to describe what they do. This tends to improve the acceptability of job evaluation results (although it does not eliminate the need for evaluative judgments to develop a job hierarchy). Second, it offers an inexpensive way to update job descriptions and to incorporate these changes into the system regularly (for example, yearly). Third initiative that HR can take is to examine statistical evidence periodically to ensure that the job evaluation system is doing what it is supposed to do. For example, high turnover or difficulty in hiring employees in certain job classifications may be a good indicator that job evaluation is not working properly. Another initiative that the HR department can take is that to establish dual career ladder for different types of employees so that moving into management ranks or up the organizational hierarchy is not the only way to achieve substantial increase in pay. Which other HR initiatives complement the new reward structure? Which HR initiatives would you recommend to further enhance the performance management at Airbus? Performance management is now considered to be a task of utmost importance. In past the performance was measures on yearly basis but now it is considered to be an ongoing process. Some other initiatives that HR should use in order to improve performance in Airbus is to firstly have well written and effective job descriptions. A job description is basically a summary statement of the information collected in the job analysis process. It is a written document that identifies, defines and describes a job in terms of its duties, responsibilities, working conditions, and specifications. This is important because the job description is the basic instrument used to define and measure the level of work being performed by any given employee and is really the defining cornerstone of the employee's relationship with the institution as far as work related matters are concerned. Secondly hiring the right kind of employee is another important initiative the HR should take in order to complement the strategy it has implemented. Now the reason behind the importance of this initiative is that the employees hired in the future should be in a position to meet the needs, policies and procedures of the organization Airbus. The reason why I am saying this is because if they do not value the reward structure for example of the company it will not take long for them to be gone for ever from the company because they will not be motivated and this will affect their overall performance level and we all know that employee turnover eventually turns out to be extremely expensive for an organization, even if it’s a billion dollar company like Airbus. Thirdly I strongly believe that the HR should conduct proper training sessions and workshops for the current managers and professionals at supervisory position to teach them the need for effective supervision. The reason for this is because no matter how excellent the strategies are to motivate employees, no matter how hard you work for performance management and higher productivity but the initiative, the change always occurs from the top. It is crucial that along with the delegation of the task the managers should know the tactics for effective supervision, constant monitoring and feedback from the employees in order to get the work done, right for the first time. To what extent fairness and inconsistency may co-exist in the Airbus reward structure without harmful consequences? I believe that this is not possible because the reward structure should be transparent and should be dealt with in fair manner, if HR is looking for an environment which is free of biasness, hostile behavior, jealousy and lot of conflict because then most of the time is spent in solving the issues and the overall image and productivity might be effected. What should be the form and content of the communication and training programming? Training is considered to a process of providing employees with specific skills or helping those correct deficiencies in their performance. I think it is important the Airbus should communicate well with its employees in order to keep them inform of their new reward structure, change in strategies, their performances and achievements so that the employees feel responsible and consider themselves to be a part of an organization rather than just service providers. The training program according to me should clear and realistic goals. Airbus can conduct on the job training for its employees which can include: Job rotation: Job rotation allows employees to gain experience in different kinds of narrowly defined jobs in the organization. The reason why I recommend this is because in this way the employee would know his worth, his level of expertise, will gain more knowledge and experience and will perform well. As Airbus is a huge organization and is geographically dispersed then it can also use the presentation option of tele-training. In this way the employees that are unable to attend the training being physically present can participate being virtually present in the training sessions. The satellite broadcast of a training program is put on videotape, and the video is edited to eliminate the live questions and discussions. The video is then made available at sites where people still need to receive the training. Read More