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Compensation Management -Case Analysis

Question 1:
Comment on the approach followed by the management in creating additional positions to meet the demands of additional workload



Unsystematic approach
Multiple managerial levels were created with an idea not to evenly distribute work, but merely for the sake of introducing hierarchy
Job Descriptions of Manager and Asst. Manager clearly indicate: Redundancy, overlap of duties, mismatched and unsystematic allocation of duties (with regard to crucial versus daily tasks) Scope of work more or less the same Lacks comparison of Seniority and Merit Lack of devising a new compensation strategy aligned to new organizational structure (leading to issues of frustration and biasness)

Question 2:
Suggest suitable steps to remove the dissatisfaction among the managerial staff.

2. Steps to remove dissatisfaction:

Reorganizing roles and responsibility in Job Description Differentiating the Work areas at every Managerial level, such as:
Strategic areas and review comes under the purview of manager (with direct accountability to the management) Regular accounting tasks under Asst. Manger Red denotes interchanged Responsibility on next slide

Creating Job Worth

Creating and enforcing a new compensation strategy aligned with the new organization structure

Asst. Manager

Cash Management Cash Forecast- Monthly/ quarterly (Strategic) Monitor payments Monthly/ quarterly reports to bank Liaison with banks (relationship building) Excise Supervising filling returnsmonthly Day to day routine problems (Supervisory role) Sales Tax (same) Insurance (Only work the amount of cover to be taken) Materials Department (all- quality adherence) Accounts Sales (same- as important for revenue generation) Purchase (approve payments) General (removed) MIS (Budgets and reviews)

General Accounts & MIS (Same) Ledgers Recording of vouchers (Regular wok) Fund Flow (in continuation with cash flow) Banking Bank Dealings Submission of required info. Excise Follow up pending cases with authorities, submission of required info. (Same) Insurance (Same) Follow up insurance claims Purchase Accounts (same)

Question 3:
What different methods would you follow to streamline the compensation disparities among the managerial staff?


Methods to streamline the compensation disparities among Managerial Staff

Higher degree of Job differentiation

New Compensation strategy

Introducing ESOP after Manager level in hierarchy A special level of qualification based requirement beyond a certain position in the management hierarchy

Point Factor Compensation

Set of compensable factors identified to determine worth of jobs
Skill Experience Education Ability Responsibilities Fiscal Supervisory Effort Mental Physical Working Conditions Location Hazards Extremes in Environment

Question 1
Do you agree with the approach decided by the Consultant to be followed in this case? Discuss.



Approach of external Consultant

Theory based approach Lacks Organizational know-how Supplementary Jobs undertaken were not considered

Some suggested aspects are relative in nature (Example: No. of subordinates level) & cannot be considered as such

Question 2
If you were a member of the committee formed by the management, what would you be your views with regard to the factors decided by the consultant?


Views with regard to factors decided by the Consultant

The consultant has taken a holistic view and has even taken into consideration such aspects which do not hold good relevance with the prime concern of the Organization

Question 3
Would you allocate Weightage to different factors? Give reasons in support of your answer.


Weightage to different factors

A study/research needs to be conducted to analyze which factor plays a vital role at what point in the hierarchy Not all the factors can hold an equal weightage and such weightage would also vary at different positions

Allocating Weightage

Majority of weightage in case of fresh candidates needs to be given to the Education background 40% Whereas in case of experienced candidates, Education Background can not be given a weightage of more than 10% Assuming a leadership role and strategic contribution in the organization matters, hence evaluation on varied aspects

For Fresher's

Education Qualification : 40% General Managerial Ability (time management, output per time ratio etc) : 20%

Skill set (example presentation skills for a marketing executive, specific technical skill for laborer): 20%
Level of Value addition : 10% Ability to meet challenges/ Complexity in Job: 10%

For Experienced
Education : 10% Experience : 15% Stability: 15% Roles and Tasks Managed: 10% Workforce handled (Span of control): 10% Managerial Level (Position): 10% Value Addition to Organization : 15% Agility and ability to influence others: 5% Multi tasking/ Acquisition of varied skill sets: 10%

Question 1:

The Chairman suggested replacement of Job Grades. Can you suggest some of the modern approaches to wage determination?


1. Some of the common approaches to wage determination are: Time Wage Piece Wage

Skill based
Knowledge based

Credential based
Feedback based Competency based

New engaging wage determination methods:

Hay Plan
Know how Problem Solving Accountability

MBOs (Management by Objectives: Mutual goal & accountability setting and wage determination) Directly aligned with new business objective achievement (Google+ )

Question 2: Is it possible for employees to have control over their pay?


Yes, it is possible for employees to have control over their pay, to the extent of:

Organizational Policies that incentivize individual contribution: Compensation structure as proportion of fixed and variable (Variable is directly related to individual performance/ potential) Organizational enablers: High performance culture and systems that facilitate individual performance via regular feedback, mentoring/ coaching, training etc. Negotiation/ Bargaining power of Employee: Depends on the unique skills he brings on the table, contribution to the business he/she makes and the ability to negotiate an aligned pay (directly depends on substitute labour availability and associated costs)

Question 3: Design a competency based framework for Praveen Metals

Competency Framework
2. 3. 4.


Dynamic Customer Focus Active Learning and Agility Co-operative Teamwork Enduring Commitment and Initiative Drive for Excellence

Followed by quarterly Performance Review meeting and individual IDP plan to facilitate performance and enable employees to have more control on their compensation The entire process must necessarily be communicated and discussed with employees (to gain positive perception and acceptance of the new Compensation structure)

5 Key Organizational Competencies

Dynamic Customer Focus (Solutions and Service)

Enduring Commitment
(Consistent performance)

Drive for Excellence (Business Results)

Active Learning and Agility

(Willingness to learn, accept and influence change)

Co-operative Teamwork

IDP (Individual Development Plan)

Action Steps to be taken by employee Others Involved Nature of Support needed by others Progress Indicator/ Results Target Completion Date


Dynamic Customer Focus

Active Learning and Agility

Co-operative Teamwork Enduring Commitment and Initiative Drive for Excellence

Drive for excellence Taking the case in point, assumingly the total gross is Rs 12,000 for manufacturing laborers. Wage will be determined on Fixed Piece Rate by which the average fixed wage would amount to Rs 7200 (that is 60%) Standard performance: One piece/ unit of output can be produced in an hour Piece Wage: is Rs 100 per unit produced Time: Hours worked is the factor to be multiplied with the number of pieces produced

Standard production by a worker should be 9 units in 8 hours and total wage will be 9*100*8= 7200
A below average employee produces 6 units in 8 hours. He will get 6*100*8= 4800

Dynamic Customer Focus (quality and process improvements, service) upto 15% (of Rs 12,000 for laborers) Enduring (Consistent) Performance Monthly bonus: upto 10%

Co-operative teamwork and Active Learning & Agility (Based on qualitative observation of supervisor and/or feedback of co workers) Upto 7.5% each

The competencies will remain the same at all levels only parameters/ KRAs to evaluate these changes (For instance customer focus for a laborer would be adherence to quality processes (defect ratio etc), whereas for a marketing executive would be client loyalty and servicing)