HRM: Strategic Compensation Framework in Canada
Part A: Chapter 1: A Road Map to Effective Compensation
The type of business plays a role in the nature of the human resource management system, particularly when considering compensation. The hotel and restaurant industry is one of the industries where employees play a central role since it is a service-oriented industry. Direct contact with the customers through face-to-face interaction and constant communication are the primary services applied while attending to the customers. Our organization operates in the hotel and restaurant industry, and my role is as a dining team supervisor.
Compensation components include base pay, performance pay, and indirect pay offered by the organization to its employees. The components differ from one organization to another and from one position to the other. The base pay in our organization comprises the basic salary plus the allowances. For example, there is a base pay of $1 000 for all the supervisors, a house allowance of $800, a responsibility allowance of $ 400, and a transport allowance of $ 300. The performance payment is received at the end of the year as a bonus and differs from one year to the other. Indirect pay, including Medicare insurance, pension contribution and paid leave, is also offered. The compensation system applied by the organization is motivational and enhances commitment to the organization. The base pay are way above the average acceptable rates. Hence the beneficiaries can meet all their bills and allow for some savings. Indirect pay indicates that the organization is committed to employees’ needs, including time to attend to personal issues and health care; this enhances personal commitment to the organization (Long, 45).
Part B: Chapter 2: A Strategic Framework for Compensation
High involvement managerial strategy plays a primary role in the organization. The management strategy allows the employees to work as a team to achieve a common goal without being controlled by the management. In other words, the employees are given autonomy while conducting their duties and responsibilities. Two reasons have led to the application of managerial strategy. First, the company hires its employees from the most qualified sectors in terms of skills and knowledge as well as a passion for serving in their respective position. Such employees tend to understand their roles, duties, and responsibilities; therefore, they work without necessarily being monitored and controlled (Long, 105). Secondly, the employees work as a team within their area of operation, and the supervisor is given the authority to ensure that operations take place effectively.
Employees should understand the type of managerial strategies applied in an organization in order to avoid acting out of the set limits. In an organization where classical strategy is applied, employees should always do things as directed to avoid conflict with the management as opposed to a high involvement strategy where personal efforts and autonomy are allowed. The high involvement strategy applied in the organization is appropriate for business operations. The service-oriented organization depends on the effectiveness of the employees as they meet the needs of each of their customers. Customers have different needs and demands, and hence it would be appropriate to give the employees the autonomy to apply their skills and knowledge in serving different customers.
Part C: Chapter 3: A Behavioral Framework For Compensation
The compensation system should be designed to facilitate the realization of the designed behaviors and attitudes among the employees. There are certain employee behaviors that employers desire to enhance and retain. The first behavior is membership behavior, which is realized when an employee decides to join and remain in the company. The second target is task behavior, where the employees tend to perform the tasks assigned as expected. The last behavior is organizational citizenship behavior, where employees voluntarily behave in ways that benefit the organization (Long, 120). The total compensation system applied in our organization promotes the realization of the desired behavior. The higher rate of pay than the industrial average enhances the membership behaviors, the autonomous approach, and the performance-based compensation enhances task behaviors. Indirect compensation, such as paid leave, Medicare, and pension contribution, boosts corporate citizenship.
The desired employees’ attitude that a reward system foster include the act of feeling valued, confidence in senior leaders, and growth opportunities. The employees feel valued in a number of ways, including fair compensation and respect within the organization. Confidence in senior leadership in the organization is realized through leadership style and fair compensation. The high involvement strategy fosters growth opportunity, which allows the employees to apply their knowledge and skills. This approach assists them in building relevant experience and competence.
Three common causes of reward dissatisfaction can be experienced in an organization: lack of equity, lack of progress, and lack of consistency and assurance. Equity is concerned with the fairness of the compensation based on the role-played and in comparison with players in other organizations. Lack of equity leads to dissatisfaction because the employees feel that they are underpaid, and hence their efforts are not rewarded (Long, 127).
Lack of progress is a situation where employees serve for a number of years, but their compensation remains constant. Lack of consistency and assurance leads to dissatisfaction because employees find it hard to predict when they are to receive the salaries and the expected amount. I have not experienced reward dissatisfaction for the period I have worked with the organization because the compensation offered is well-balanced based on the role played and within the industrial expectation. In addition, the salary increment of $ 100 on an annual basis is guaranteed while the salary is well structured, and the payment takes place between 24th and 28th of every month.
Part D: Chapter 4: Components of Compensation Strategy
There are three primary categories of compensation mix that an organization can apply in the compensation strategies. These components include base pay, performance pay, and indirect pay. An organization can use either of the three components or a combination in its system. Our organization uses the three components combined to motivate the employees. Base pay comprises the basic salary and the allowances. Each employee has a basic pay based on their roles and responsibility in addition to housing and transport allowances. Performances-based compensation is not a regular form of payment, but it takes place at the end of every year based on the profits earned. Indirect compensation comprises of the costs incurred by the organization on behalf of the employees, including Medicare insurance and paid leave.
Part E: Chapter 5: Performance Pay Choices
The current compensation system in the organization offers a uniformed payment to the employees based on the period of the year they have served. The system may not be effective in that some individuals can be rewarded out of the efforts of the other employees while their actual contribution does not warrant the bonuses. The company should apply a new performance pay plan where new components are applied. The performance pay will be determined based on the three perspectives, including the overall organization, the department and then at the individual levels. The performance of the different department would be evaluated to identify the portion contributed by each of the departments. At the department level, the performance of each of the employees should be evaluated to determine the level of contribution of each of the employees (Long, 145). Factors such as absenteeism, the period of service in the department, and the quality of service are the key determinants of the compensation received by each of the employees.
The reason behind the proposed performance payment plan is that it enhances equity as far as the share of the benefits of realizing the target compensation is considered. In addition, the performance-based payment plan will enhance competition between the departments and employees in the departments. The overall outcome of the plan will improve the performance of individuals, departments, and the organization.
Part F: Chapter 6: Formulating the Reward & Compensation Strategy
An organization’s reward & compensation strategy can be based on the labor market, the product market, and the organization’s financial ability. The labor market influences the demand and supply of labor, which determine the market rate of compensation expected by the organizations within the market. The product market is an important determinate of the reward and compensation because it determines the amount of revenue and profits from which the employees can be rewarded (Long, 185). In addition, the financial ability of an organization influences the compensation and reward strategy applied. For example, an organization can offer basic pay based on the market rate and the product market but may be unable to offer other components such as medical care and pension arrangements.
In comparison to the competitors, the organization leads as far as the level of compensation is concerned. Some of the competitors may have a higher rate of compensation, which does not necessarily imply that they have the highest pay since most of them have their employees working for up to 12 hours. Before an organization selects a strategy on whether to lead, lag or match as a compensation strategy, factors such as financial ability and sustainability should be considered. An organization can make huge profits in one year and pay high bonuses. Such a company may not be able to raise the basic salaries and allowances based on the profits because it may not be a sustainable move.
Part G: Chapter 7: Evaluating Jobs: The Job Evaluation Process
The purpose of developing a job evaluation system is to determine a certain job’s value to the organization. After the determination of the value of a job, an organization can be able to develop a pay structure for every job. Some events can trigger a re-evaluation of jobs in an organization. These events include the restructuring of the organization, streamlining the payment system in the event of duplication conflict of responsibility or when a number of employees have improved their quality through training and higher education, or when the method of evaluation is changed.
Point job evaluation system is applied in the workplace. The evaluation system is effective in that it considers various factors, including skills, responsibilities, and efforts required to fulfill the expectation of the job (Long, 205). In addition, each job is evaluated separately, and then the jobs with similar points are classified into one group.
Part H: Chapter 8: Evaluating Jobs: The Point Method
The purpose of developing a point system of job evaluation is to classify jobs within an organization to harmonize the pay system. The first step toward the development of the point system of job evaluation is the development of the applicable scale with a range of points. For instance, a range from 1 to 5 where 1 is the weakest and 5 is the highest. The second step is identifying factors to be considered in the valuation as well as their sub-factors. Factors such as skills, responsibilities, and efforts are primarily involved (Long, 245). The third step is identifying the jobs to be evaluated and matching the points to the jobs. Lastly, the jobs with similar points are classified into the same category, and the payment terms for each category are developed.
The fourth categories of pitfalls of designing the point system for job evaluation include the factors put into consideration becoming exhaustive. Jobs with different values can be matched into similar categories since the techniques applied might be difficult to understand. Finally, the point scale used can make a lot of difference. For example, an organization using a scale of 1 to 3 or 1 to 5, or 1 to 10 may have different results; hence, a sense of subjectivity can affect the results.
Part I: Chapter 9: Evaluating the Market
The labor market is an important factor for all organizations, irrespective of the Industry of operation. The labor market influences important aspects of human resources, such as the quality of employees, the costs of compensation and reward, and the retention of employees. For example, in a market where few trained individuals work in a certain industry, there are high chances of low-quality employees serving in the organization (Long, 300). Consequently, the costs of compensation would be high due to the low supply.
Individuals trained as receptionists, chefs, and in the customer care may find hotel and restaurant-based organizations to be relevant labor markets. In addition, those who are already working with other organizations would find the labor market important because they may intend to shift their services for better terms of service.
An organization may require data and information about labor market compensation in order to develop an effective compensation system for its employees. The sources of data and information on the labor market include the media analysis of the industry from the association of organizations and data from training institutions.
Part J: Chapter 10: Evaluating Individuals
Several reasons have encouraged employers to perform performance appraisals. The employers are enticed to perform an appraisal to identify areas of weaknesses among the employees. The objective is to support the training programs that would assist in the improvement of employee performance. Employers using performance-based compensation perform the evaluation to determine the amount that every employee is entitled to (Long, 320). Another importance of appraisal is to motivate excellent performers while poor performers are challenged to improve their performance.
Objective management is the best performance appraisal system for the organization. The system enhances objectivity as both the employees and the management agree on the objectives in various aspects at the start of the year. Individual performance on the various items is recorded through the year and compared to the objectives at the end of the year.
Part K: Chapter 12: Designing Indirect Pay
An indirect pay plan comprises of elements in non-mandatory benefits, which are appropriate for the employees in an organization. The first element that can be involved is the flexible work schedule, where employees with special needs, such as breastfeeding mothers, can work and attend to their children. The second element is the training and higher education support programs. The company can selectively assist the interested workers in acquiring additional skills that are highly required within the organization by offering flexible work schedule and subsidizing the cost of training and school fees required.
The Indirect Pay Plan should be developed after the consideration of a number of factors. The first factor to consider is the ability of the organization to support the program. For example, when an organization decides to support its employees in acquiring higher education, it is important to ensure that the program is sustainable. Secondly, the special needs of the majority of the employees should be considered. For example, when an organization has a large number of employees in their last years of service, then assisting them to acquire higher education may not be appropriate, but saving plans can be a viable idea. Organizations should also consider competitors in the same industry with the same size and scale of operation when facilitating market-based equity (Long, 490). Another factor to consider is the intended behaviors and attitude outcome in order to match the objective with the work done. Lastly, an organization should consider the clarity of the plan to the stakeholders; for instance, the employees should understand the plan and its implication for their compensation and benefits.
Strategic compensation can assist an organization in achieving its objectives. The effective compensation motivates employees to perform their duties and responsibilities effectively and effectively. As a result, the level of output increases while the cost of operations is likely to decline. Strategic compensation is also critical in promoting key desirable behaviors and attitudes among employees. Strategic compensation ensures that the employees are fairly paid, respected, and valued. In addition, the employer facilitates their growth in financial and career perspectives.
Long, Richard J. Strategic Compensation in Canada. Toronto: Nelson, 2013. Print.