2018 SHRM-CP Total Rewards Sec 1

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Design

2nd Stage *Identify/analyze reward strategies to implement.*

Direct Communication

person-to-person communication is still preferable in many instances

Less Entitlement-oriented Trend:

trend is moving away from the entitlement approach toward the performance approach

The Challenges of Pay Transparency

*Advocates for Transparency*: achievement of strategic business objectives will not be met unless *employees understand the pay system* and *how their pay is determined*. Reduces conflicts among employees and between employees and management regarding pay. *Advocates for Less Transparency*: Employees *may question the system's fairness*. *Preserve employee privacy and protect proprietary information*

Goal of Total Reward Plan

*Attract the right people* to the *right jobs* at the *right time* and *place.* *At the right cost* and should *provide appropriate performance incentives to produce engaged employees* who are loyal to the organization and *drive organizational success*.

Compensation Philosophy - Elements

*Communication* *Transparency* *Consistency*

Contribution-Oriented Org

*Comp programs* are more *performance-driven.* For example, the firm *may require copayments for medical insurance.*

Regiocentric Implication for Comp Strategy

*Consistency of remuneration approaches within a region.* The proximity of countries may lead to the perception that remuneration practices are more similar than they really are. Regional headquarters may suffer blind spots with respect to country differences, *leading to ethnocentrism at the regional level.*

Lag market competition

*Controls labor costs* by setting pay rates below those of other organizations Because of *economic necessity* To *offset other higher costs* such as purchasing, distribution, or sales expenses *Offers other benefits* such as *learning and development*

Four Reasons for Communication of a TRS

*Educate* on practices. Achieve *employee buy-in*, aware of overall Support org's *strategic objectives.* Support org's *goals for performance mgmt.*

Entitlement-Oriented Org

*Entitled to benefits, health-care, disability* *Less emphasis* on *individual employee contributions and responsibility * *More emphasis on the success* of the organization *as a whole*

Ethnocentric Implication for Comp Strategy

*HQ controls compensation policies*, with *inadequate consideration* of *local legal and cultural differences.* Directives to local country management may result in *outward consistency* but *actual rejection of headquarters practices.*

Organizations compete for employees with other organizations that share their:

*Industry*—The organizations have similar products or services. *Occupation*—The organizations employ workers with the same experience or skills. *Location*—The organizations employ workers in the same geographical area.

Geocentric Implication for Comp Strategy

*Local compensation strategies* are *consistent with global policies.* A desire for too much global consistency can lead to the imposition of inappropriate policies at the local country level. The development of consistent and equitable remuneration policies among global managers will facilitate *efficient and effective transfers.*

Polycentric Implication for Comp Strategy

*Local cultural and legal compensation norms* *understood and implemented.* Remuneration policies are likely to be consistent and integrated within each subsidiary. Incentives tend to *maximize achievement of local* rather *than global objectives*

Cultural Alignment

*Performance-driven* (and pay for performance) vs. *Entitlement-oriented* (with longevity of service rewarded). and *Higher acceptance of risk* in compensation vs. *Risk-averse* and *Level of uncertainty avoidance* in a culture determines: *Amount of fixed* vs. *Variable pay* that ppl accept.

Required vs. Voluntary Communication

*Required comm* is *mandated by law. * *Voluntary comm* used to *outline policies and expectations.*

Internal Equity

*Rewarded fairly according to the relative value of their jobs within an organization.* Ensure legal compliance with fair pay regulations and prevent employee lawsuits for alleged pay discrimination

Complexities of Legal Compliance

Even with concepts that are commonly applied in many areas of the globe, there are *no universal minimums, guidelines, penalties, or enforcement.* *Two effective practices for compliance* are to always: *Research local laws versus organizational practices.* *Involve experts*, internal or external, to validate particularly complex local compensation and benefits practices and requirements in order to implement compliant and culturally accurate programs.

1st consideration in TRS

Review the organization's mission and strategy

Individualized Total Compensation Statements

Shows the *total value* of the base pay, incentives, and benefits package so employees can clearly see the value they receive in the total compensation package. *Without such total compensation statements*, organizations in the past found that they were *spending significant money on benefits that employees did not value, understand, or even know existed*

Total Rewards Strategy

A plan implemented that provides monetary, benefits, and developmental rewards to employees. Maintains a balance between providing market-competitive wages to attract and retain top talent and adhering to the overhead budget

Addressing Pay inequity

*Internal equity study* for *internal pay equity* *Remuneration surveys* for *external pay equity*

Con of multiple pay strategies

May cause *morale issue*s and lead *valuable employees to seek other jobs*

Assessment

1st Stage *Most important outcome* of the assessment phase is the *assessment report*, which includes recommendations for the new total rewards system *Survey employees* on their opinions and beliefs regarding their pay, benefits, and opportunities for growth and development *Examine the current policies and behaviors* that are implicit in the organizational culture *Consideration to negative behaviors* that might be overlooked yet compensated

Implementation

3rd Stage *Implement new rewards systems.* *Circulate communication* and *training*

Evaluation

4th Stage *Measure the results* and *communicate results to decision makers*. *Modifications proposed* for future implementation.

Incentives/premiums

Payments in return for the achievement of specific, time-limited, targeted objectives. Percentage of base salary. or Lump sum or Ongoing payments

A Compensation Philosophy

A statement documenting the organization's *guiding principles and core values about employee compensation.* *The "Why"* behind employee pay. Conveys what the organization values Supports strategic plan, initiatives, goals. How the org plans to pay and reward competitively.

Four-Step Process of developing a Total Rewards Strategy

Assessment, Design, Implementation, Evaluation

Objective of a Total Rewards Strategy

Be Compliant Be Cost-effective Be Strategically aligned Be Internally/externally equitable

How to analyze workforce and its characteristics to understand needs.

Conduct surveys to check their attitudes and current and long-term needs

Factors that influence the type of comp strategy for an Org

Degree of market competition, Level of product demand, Industry characteristics Organization's life-cycle stage

Four Global Orientations

Ethnocentric - Polycentric - Regiocentric - Geocentric They have a *direct and tangible impact* on an organization's* total rewards*

External Equity

External pay equity occurs when there is perception of *fair rewards in relation to similar jobs in similar organizations.*

Perquisites

Goods and services as Compensation. e.x cars and mobile devices

Pay Strategies Types

Lag, Match, Lead Market Competition

Assessment report

Most important outcome of the assessment phase. Recommendations for the new total rewards system. Who should be eligible for the rewards? What kinds of behaviors or values are to be rewarded (within the organization's reward and recognition system)? What type of total rewards will work best? How will the organization fund the new system?

Lead market competition

Offers *higher wages* and/or better benefits in an attempt *to attract and keep the best talent* Rationalizes that *higher-quality employees are more productive*, which makes up for the higher salaries

Match market competition

Often referred to as *being externally competitive* Offers wage rates and benefits packages *similar to that of the competition* *Most common approach*

Pay Equity

Relates to the *fairness of compensation and benefits paid to employees.* *Cannot effectively recruit new employees* or *retain existing ones* without internal and external equity.

Why "compensation and benefits" now be termed "total rewards."

Term has broadened and advanced considerably to for the *pursuit of cheaper alternative rewards* but still attract, engage, and retain employees and motivate them to excel.

Measures, Metrics, and Analytics

The *best measures* of a TRS are the ones that are *connected to existing organizational frameworks* and *systems* and *enhance decisions.* *Measuring the right variables* has a lot to do with measurement success *Measures* (e.g., the *cost of employee benefits*). *Metrics* that *analyze performance* (e.g., time and costs to fill). *Analytics* that *convert a metric* into *decision-supporting insight.*

TRS Communication Plans

The *more complex the system* and the more choices available, the *greater the need for a communication plan.* They *include a description of the organization's compensation strategy, policies, practices, and procedures plus other information*

Consistent Key Messages

When an *organization has multiple locations, *special attention should be paid to developing and communicating *consistent key messages about compensation and benefits*

Global compensation and benefits must recognize and accommodate:

legal, cultural, and financial differences Driven by such operational and country specifics, strategies for compensation and benefits delivery are often capped by market practices.

Self-Service Technologies

provide employees with *quick and easy access* to compensation and benefits *information online.* *Increased accuracy* of *employee data.* *Improved timelines in information* and *employee transactions. * *Reduced dollars spent on other traditional HR delivery channels* (e.g., paper-based transactions). *Enhanced reputation* as *a "green," environmentally conscious employer*


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