Definitions…
• Job evaluation is the process of
determining the worth of one job in
relation to that of the other jobs in a
company.
• Is a process of determining the
relative worth of a job.
• An effort to determine the relative
value of every job in an organization.

.ILO definition “an attempt to determine and compare demands which the normal performance of a particular job makes on normal workers without taking into account the individual abilities or performance of the workers concerned”.

importance. and necessity of a particular job… Key factors considered for Job evaluation are: • Volume of Responsibilities • Output • Decision makers • Emerging needs of the company .It simply means…. Studying / analyzing the value.

• Consensus with the supervisors and employees on rating. • Encourage employee cooperation to participate in the rating program.Principles of Job evaluation • Rate the job but not the employee. • Should be a collective effort. defined clearly and properly selected. . • Employee concerned and supervisors should be educated and convinced about the program. • Supervisors should be encouraged to participate in rating the jobs. chance for equal representation from all departments. • Elements / tasks selected should be easily understood.

The employee shall also feel his worth thanks to his pay. PAY • A pay is a statement of an employee’s worth by an employer. • An employee is given compensation based upon the contribution of that particular employee to the organization. • It is also a way to motivate employees through compensation. • Pay is a perception of worth by an employee. .

• To reduce unnecessary turnover. • To maintain salary equity among employees. • To mesh employees’ future performance with organizational goals. • To attract new work force. Employees are compensated because of the following reasons. • To reward the past performance of the employee. . • To remain competitive in the labor market.

• The ability of the compensation must be such that the employees must be motivated to perform to the best of their abilities. • Equal to that of industry standard or below to that of the industry standard. .• Compensation that an organization provides can be either above the industry standard.

. • The pay scale raise and revision is of significant importance in an organization and will be subjected to the merit and seniority of the employees.• The level of compensation also determines the differential between recruiting new employees or working with senior employees. • The pay levels needed to facilitate the achievement of a sound financial position in relation to the products and services offered.

• Salary workers: Employees whose compensation is computed on the basis of weekly. • Piece work: Work paid on the number of units produced. .The basis for compensation • Hourly work: Work paid on an hourly basis. biweekly or monthly pay periods.

Pay for performance
• Refers to a wide range of
compensation options.
• Including merit-based pay, bonuses,
salary commissions, job and pay
banding, team/group incentives and
various gain sharing programs.
• Where managers tie compensation to
employee effort and performance.

Motivating Employees
through compensation
• Pay Equity: An employee’s
perception about the compensation
received is equal to the value of work
performed.
• Motivation theory explains that an
employee under situations will
respond to the compensation they
have received by thinking over paid,
or under paid.

• Expectancy Theory: A theory of
motivation, this theory thinks that an
employee in order to receive a good
compensation must work hard to
achieve it.
• They must also believe that good
performance is valued by the
employer will reward by providing
expected compensation.

.• Pay Secrecy: It is an organizational policy prohibiting employees from revealing their compensation information to anyone. • This creates misconceptions and creates distrust in the employees about fairness pay and pay for performance standards.

Individual Incentives: Commissions • A commission is compensation based on a percentage of sales in units or dollars – Straight commission is the equivalent of straight piecework and is typically a percentage of the price of the item – A variation pays the salesperson a small salary plus a commission or bonus when the sales goal is exceeded .

these systems share the benefits of: – Improved productivity – Reduced costs – Improved quality . and – Unite diverse organizational elements in the common pursuit of improved organizational effectiveness • Through cash bonuses.Gain-sharing Incentive Plans • Gain-sharing plans are companywide group incentive plans that use a financial formula to: – Distribute organization-wide gains.

Profit-Sharing Plans • Profit-sharing plans distribute a fixed percentage of total profit to employees in cash or deferred bonuses – Profit sharing is not dominant in other industrialized countries • Profit-sharing plans are typically found in three combinations: – Cash or current distribution plans – Deferred plans – A combination of both .

People-Based Pay • The bureaucratic job-based method of determining pay will not be used in the future – The new designs will be people-based • Variants of people-based pay: – Skill-based – Knowledge-based – Credential-based – Feedback – Competency-based .

or – How many jobs they can do • Expected positive outcomes include: – Increased quality – Higher productivity – A more flexible workforce – Improved morale – Decreased absenteeism and turnover . Skill-Based Pay • Skill-based pay sets pay levels on the basis of: – skills employees have.

• Methods for defining individual skills: • Direct observation • Testing • Measurable results Instead of job descriptions. "person" and "skill block" descriptions are developed .

mapping pay progressions. and assigning dollar values to skills • It works best when built on a broad base of skills in a stable but expanding work environment .• Skill-based pay: – Is difficult to design – Does not fit all situations – Involves a time-consuming process of constructing skill blocks.

and some technical personnel . managers. Knowledge-based Pay • Knowledge-based pay rewards employees for acquiring additional knowledge – Applies to both the current and new job – Stretches the skill-based model to professionals.

or – Pass one or more examinations from a third-party professional or regulatory agency • Credential-based pay is more cut- and-dried than skill-based or knowledge-based pay. . Credential-based Pay • Credential-based pay rests on the fact that an individual must have: – A diploma or license.

Feedback Pay • Feedback pay is based on: – Aligning pay with strategic business objectives – Establishing a direct connection between the jobholder and his/her part in accomplishing goals .

Competency-Based Pay System Design Issues Identification of the required competencies Progression and compensation of employees Competency- Limitations on who can acquire Based Pay more competencies Systems Training in the appropriate competencies Certification and maintenance of competencies .

Base pay structures Grading structures • Core building-blocks of an organisation’s HRM system • Not just about pay but also about conditions and career development • Grading closely linked to the desired shape of the organisation • Grading normally reflects the value of jobs in terms of skill. difficulty or responsibility .

Criteria for grading structures
• Equity, fairness and consistency
• Internal structure versus external market
• Degree of operational flexibility and
continuous development
• Capacity for individual growth within the
structure
• The clarity of reward and career paths
• Ease of communication
• Degree of control over pay growth given to
management
(Armstrong, 2002)

Types of pay structure
• Individual ‘spot rate’ or ‘rate for the
job’
• Individual pay ranges
• Narrow-graded structures
• Pay spines
• Broad-banded structures
• ‘Job’ or ‘career’ families

Job families
The objectives of job families:
• to map out career paths
• to achieve more flexibility in
grading
• to identify market groups
• to provide for rewards to be
based on personal contribution
and progress
IPD (2000)

and expected behaviours. and a commentary matching the various job evaluation factors. knowledge and skills required. and is more focused on inputs and outputs. . Job or role analysis • A job description typically provides an overview of the job and its place in the organisational structure. a detailed description of the duties and responsibilities. • A role profile is more flexible. describes the type of personality required for the task.

Aligning pay with the market • The immediate local labour market surrounding the workplace (the town or suburb) • The regional labour market (the geographical or travel-to-work zone) • The national (or international) market .

Differentiating between groups • Interim ad hoc payments for specific groups • Market supplements • Separate pay structures for different groups of staff • Job or career family structures • Skills-based approaches (internal development) • Using grading structures and/or actively encouraging grade drift IDS (2006) .

the more money the employees get • Usually based on a target – i. If we exceed that target.e. Profit Sharing • Giving out a share of the company’s profits to all the employees • The more money the company makes. our target for this quarter is $1 million in profit. 20% of any amounts beyond that will be divided among the employees .

we will distribute half of the savings ($250.000) among the employees • Usually the savings are shared with the employees who are responsible for producing those results – i. they get the gain sharing benefit (not employees in other departments) .e. Gain Sharing • Provide an incentive for savings • Example: If we cut costs by 10% (saving us $500.000). if the assembly line workers develop a cost saving measure.

PERFORMANCE MEASURES - PERFORMANCE MEASURES Chapter 11 - Chapter 11 .

” – Jack Welch Performance measures should aim at the long-term and should be forward-thinking initiative designed to fundamentally change the way corporations do business. but by taking quality to a whole new level."We want to change the competitive landscape by being not just better than our competitors. It is not a post-mortem of what happened but a step towards how we do better in the .

Why measure performance? Objectives for for-profit organizations: – Measure changes to stakeholders wealth. put in simple terms. the value of a firm. – Reward an employee for contributing to increase in firm value Issue: How would a firm measure an individual’s contribution to value creation and what purpose does it serve? .

– By accelerating the receipt of those cash flows. . how would you – By making increase the cashthem flows? more certain or less risky. The value concept (Results control) • The performance measurement concept indicates that employees can increase the value of the firm by – Increasing the size of a firm’s future cash flows. or If you are a CEO or CFO.

. Measure the right things • An ideal performance management system is one that energizes the people in an organization to focus effort on • Improving things that really matter – • One that gives people the information and freedom that they need to realize • Their potential within their own roles and that aligns their contribution with the success of the enterprise.

Then. • Follow: What has to be done" (WHTBD). details. .details. details • Staff who collect data get frustrated. why do performance measures fail? • Root cause: complexity .

Measure What Matters • Easy to say but difficult to do. process: treasury management. • Find out what is valued both by customers and stakeholders • Examples: process: new product • development. value created. • process: customer service. measure: cost of service vs. measure: customer retention. measure: time to market. .

. they have less time for making calls. Keep it simple • Performance Measures must be • • simple to operate • simple to understand • • simple to action • Ex: If a sales person spends too much time on call reporting.

find out whether these measures conform to the concepts we just discussed. later. .Let us now examine how real world firms measure performance and we will.

gross margin. ROA. ROE.Most organization measure performance using accounting measures – Net profits. . etc.

Why do organizations choose accounting data as measures of performance? • Accounting profits and returns can be measured on a timely basis relatively precisely and objectively. and objective. employees would react positively. . • Because they are timely. • The short term measures keep employees on check. precise.

• Dependent on the choice of measurement method. . Why accounting measures of performance are not adequate? • Accounting measures are lagged indicators.

Accounting can create management myopia • Accounting is short term earnings or returns. • Why focusing on the short term is inappropriate? • Why would this short-term focus affect long-term relationships? .

The Changing Business Environment Are historical accounting measures adequate for today’s business environment that transcend global boundaries? .

while important. . • Even if less than precise. Performance Measurements for the new era • In the global. • These measures should be capable of measuring multiple attributes of an organization. technology-driven. other measures of performance are required. is not adequate. measuring • Financial performance. decentralized environment.

We need a balanced set of Performance Measures – We need both lead and lag indicators .

employee morale. backlog (book-to-bill ratio). new product introductions. customer satisfaction. bad debt ratio. new product development lead times. product quality. • Common examples are: – Market share. Lead indicators as value drivers • Many non-financial indicators can serve as lead indicators in certain settings. or safety . inventory turnover. personnel development.

Lag Indicators • In contrast to lead indicators. lag indicators are measures that point to earlier plans and their execution. • Financial performances are lag indicators. . financial performances are too late to affect future products and services. we need multiple measures that include both financial and non-financial measures. • Therefore. • Many times.

Financial performance 2.Comprehensive Performance Measures must address 1. Allow an organization to learn and grow. Internal business process developments and 4. . Customer satisfaction 3.

.Financial Performance can be measured by •ROA ROE. These measure are essential to summarize the economic consequences of strategy. EPS etc.

.Customer-related measures • Managers must identify the customer and market segments in which the business desires to compete. • Develop measures to track the business unit’s ability to create satisfied and loyal customers.

Customer-based measures Customer Customer Satisfaction Retention Customer Product and Loyalty Service Attributes Image and Reputation .

. Internal Business Process Measures Identify the critical internal processes for which the organization must excel in implementing its strategy. and – satisfy shareholder expectations regarding financial returns. • IBP dimension enable the business unit to – deliver the value propositions that will attract and retain customers in targeted market segments.

Internal Business Process Measures Innovation Operation processes Processes Quality Cycle Time Measures Measures Cost Measures .

Learning and Growth measures • Learning and growth identifies the infrastructure an organization must build to create long-term growth and improvement. • Growth comes from: people. . systems and organizational procedures.

A performance concept that combines everything that we discusses so far is Six Sigma .

The Six Sigma • Is “a business process that enables companies to increase profits dramatically by streamlining operations. and eliminating defects or mistakes in everything a company does. “ • The objective is change the process so that defects are never produced in the first place. improving quality. .

• To enable better performance by better design • To improve the ‘quality’ of supplies and other operational proces ses.The objectives of Six Sigma • To ‘satisfy the customer’ by changing internal performance and processes. • Manage the costs .

Six Sigma points out • You don't know what you don't know You can't do what you don't know • You don't know until you measure • You don't measure what you don't value • You don't value what you don't measure .

takes many years before all operations within a given process are improved. . Difference between TQM and Six Sigma • TQM focuses on improvement in individual operations with unrelated processes. producing results more rapidly and effectively. • Six Sigma focuses on making improvements in all operations within a process.

Topic 17 : HR management: Financial Rewards Lecturer: Zhu Wenzhong .

LEARNING GOALS • Define the term “financial rewards” • Explain the five payment schemes for rewarding employees • Explain the five types of incentive schemes used by businesses to motivate workers • Explain the incentive schemes for employees and those for managers and directors • State some problems with these incentive schemes .

such as weekly or monthly. Compensation Financial rewards: • Wage—compensation based on an hourly pay rate or the amount of output produced. • Salary—compensation calculated on a periodic basis. • Benefits .

Compensation • Most firms base their compensation policies on five factors: – Salaries and wages paid by others – Government legislation – Cost of living – Firm’s ability to pay – Worker productivity .

Payment schemes • Time rates: paid for the time spent at work . weekly or monthly • Annualized hours: paid on the basis of certain hours a year • Piece rates: paid for each item produced • Commission: paid by a percentage of the value of each good sold • Fringe benefits: extra pay for insurance. car or training © PhotoDisc .

Question for critical thinking • What are the objectives of employees for the payment they receive? © PhotoDisc .

Types of incentive scheme • Piece rate • Profit sharing • Profit-related pay • Share-related pay • Performance-related pay .

Types of incentive scheme • Each unit produced over the Piece Piecerate ratescheme scheme target is rewarded with a bonus or commission payment. .

Profit-sharing Profit-sharing .Types of incentive scheme • Profits are shared Piece equally or as Piecerate rate agreed by partners.

Types of incentive scheme Piece rate • Employees are paid a bonus as a percentage of Profit-sharing the profit amount made by a Profit-related pay company. © PhotoDisc .

Types of incentive scheme Piece rate • Employees are offered some shares or the Profit sharing possibility of purchasing some Profit-related pay shares as an incentive Share-ownership © PhotoDisc .

© PhotoDisc . Types of incentive scheme Piece rate • Employees’ annual Profit sharing salary is linked to their performance Profit-related pay in the job. The size of payment is Share-ownership determined by the achievement of the Performance-related pay set target.

Question for critical thinking • Why do companies encourage the use of share ownership as an incentive scheme? • Incentive schemes may differ for employees and managers and directors. What are the different incentive schemes between them? © PhotoDisc .

Problems with the incentive schemes in practice • Operating problems • Product quality problems • Quality of working life • Jealous problems © PhotoDisc .

• Four Forms of Incentive Compensation .

health insurance. – Some benefits. vacation.g. and tuition reimbursement provided for employees either entirely or in part at the company’s expense. Social Security contributions. are required by law . e. Compensation • Employee Benefits—rewards such as retirement plans.

Compensation • Flexible benefit plan (cafeteria plan)— benefit system that offers employees a range of options from which they can choose they types of benefits they receive • Flexible work plan—employment that allows personnel to adjust their working hours and places of work to accommodate their personal lives – Flextime – Compressed workweek – Job Sharing – Home-based work program .

Supervised by: Dr. Agami Amira M. Ali Hanan Seif . Maha Hafez Introduced by : Abeer F.

.It is any type of financial reward that is provided only when certain specified performance results occur. AKA : “Variable Pay” or “Contingent Pay”.

Motivation. . Reinforce cultures and values. Increase the commitment. Discriminate equitably between employees based on performance. Alignment with company performance.

Payment method Frequency of payout Ways of measuring performance Choice of which employees are covered .

. Communicate the payout formula. Use “SMART” performance standards.Pay based on individual performance differences. Ability to finance performance reward. Keep administrative costs reasonable.

Individual Group Organizational .

Merit pay Incentive pay Profit sharing Ownership Gain sharing .

.

.• Annual pay increases are usually linked to performance appraisal ratings. to determine the size and frequency of his/her pay increases. • Merit increase grid combines an employee’s performance rating with his/her position in a pay range.

. Distinguish merit raises from cost- of-living raises. Establish job-related performance criteria.Develop employee confidence and trust in performance appraisal. Separate merit pay from regular pay. Withhold merit payments when performance declines.

Depends on reliable and accepted performance measures. Not suitable for work depending on collaboration and cooperation. Setting the total available bonus pool is an arbitrary decision by top management and can cause dissatisfaction. and among subordinates. How to define behavior that will be rewarded? is a tough question. . Cause poor relationships between supervisors and their subordinates.

•  Forms: • Money piecework • Time piecework Sales Commissions •  Basic commission on sales volume •  One-third of salary •  Satisfy all the criteria listed for bonus schemes . Straight piece-work •  Payment of a uniform price / unit of production.

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• Gainsharing  A form of group compensation based on group or plant performance (rather than organisation-wide profits) that does not become part of the employee’s base salary. • Group incentives Tend to measure performance in terms of physical output. .

• .

• Profit Sharing • Any procedure by which an employer pays. . current or deferred sums based upon the profits of the enterprise. • Challenges: Agreement over division of profits between company and employees. in addition to their base pay. Possibility of no payout due to financial condition of company. or makes available to all regular employees.

Ownership Stock option An employee ownership plan that gives employees the opportunity to buy the company’s stock at a previously fixed price. Employee stock ownership plan (ESOP). . An employee ownership plan that provides employers certain tax and financial advantages when stock is granted to employees.

Thank U .