Managerial Level

01 - Key HR Drivers

HR Key Drivers in Action

Chartered Institute of Personnel Management Sri Lanka (Inc.)

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Web.www.cipmlk.org
Content

Page No.

Session 01. Managerial Implications of HR Planning and 04

Resourcing

Session 02. Managerial Implications of Performance Management 08

Session 03. Managerial Implications of Reward Management 14

Session 04. Managerial Implications of Employee Relations and 42

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ER Models

STUDENTS ARE ALSO ADVISED TO PLEASE REFER RELEVANT AREAS IN THE

PRESCRIBED STUDY TEXT (Michael Armstrong- Handbook of Human Resource Management
Practice) AND THE STUDY PACKS OF RELEVENT SUBJECT AREAS IN THE OPERATIONAL
LEVEL.

Learning Objectives:
1. Participants learn to deal with the Practical aspects of HR Planning and Resourcing
2. Participants learn to deal with the Practical aspects of Performance Management
3. Participants learn to deal with the Practical aspects of Reward Management
4. Participants learn to deal with the Practical aspects of Employee Relations
5. Participants learn the concepts of Employee Relations Models

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Session 01.
Managerial Implications of HR Planning &
Resourcing
Session Contents
• Buy Strategy and make strategy in resourcing
• Aligning HR Planning to the overall Organizational plan and the Departmental Plans
• HR Planning and Resourcing in a Dynamic External and Internal Environment

Buy Strategy and Make Strategy in Resourcing

Buy Strategy
• The focus of this strategy is that if an employee leaves the company, the company will
advertise the job externally, and recruit the best person available in the market.
• The Companies that adopt this strategy are of the view that spending money and resources on
training and developing staff is a waste of resources and that well trained competent staff leave
the company and join the competitors.
• This strategy is used by many companies in Western countries like U.S.A. because the average
time that an employee remains in one job is 2-3 years.

Make Strategy
• The focus of this strategy is to develop people for the long term and retain them in the
organization
• In these companies the Vacancies will be mainly filled through Internal Recruitment.
• Succession Planning is adopted for the Senior Positions in the Company.
• Organizations adopting the Make Strategy Invest large sums of money in training and
developing their staff

Aligning HR Planning to the overall Organizational plan and the

Departmental Plans
HR Planning should aim to capture "the people element" of what an organization is hoping to achieve
in the medium to long term, ensuring that:- it has the right number of people
• it has the right kinds of people
• at the right place
• at the right time
• It creates positive attitude

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 • It has High Performing employees
• High involvement management – Decision making

In order to Support the Overall Organizational Planning and the Respective Departmental Plans, the
Formulation of HR strategies are required as follows
• Setting the strategic direction
• Designing the Human Resource Management System
• HR Planning
• Filling HR gaps
• High Performance
• Human resource development and management development
• Growing your managers
• Effective recruitment & selection procedure
• Relevant training,
• Effective compensation Management

Integration of HR Plans to the Overall Company Plans and the Departmental Plans
Integration of HR Plans to the Overall Company Plans and the Departmental Plans is important, in
this context the concept of External Fit and Internal fit is relevant

• External fit means that HR strategies and Plans are congruent with business strategies,
match the firm’s stage of developments, take account of organizational dynamic, and
are in line with the characteristic of the organization. Congruence with business
strategies may means aligning HR strategies to the strategic orientation of the firm.
Different orientation establishes the need for different type of people and required
changes in approaches to investing in the firm’s human capital.

External Fit –

• Fitting HR strategy to organizational strategy is external fit. HR programs must align

or fit with the overall strategy of the organization. If the business strategy is to
differentiate the organization from its competitors based on superior service, then
selection and training programs should be developed to higher and train people in the
skills and attitudes necessary to deliver superior service. Fit with other functional
strategies is also important. HR senior management must be included in strategy
discussions to be sure this happens.

• Internal fit or horizontal integrations is accomplished by developing coherent range

of interconnected and mutually reinforcing HR policies and practices. This may be
achieved by the use of shared process such as competence analysis, performance
management, employee development and reward. This will take place between line
managers and HR mangers on how HR policies should be implemented

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Internal Fit –
• Linking the various HR programs to other functional areas and to each other is internal
fit.

We look at two types of Internal Fit: a fit with other functional areas such marketing and a fit among
all HR programs.

• For example if the marketing department is developing and advertising plans that
promises 24 hour access to customer service representatives but the HR plan does not
include compensation differentials for shift work, the overall marketing strategy might
fail.

As HR programs must fit with other functional areas so too do they have to be consistent with each
other. That is, training, selection and appraisal must work together to support a strategy.

• For example if the training dept., decides to teach employees to use the internet to
handle customer services, the staffing dept., must hire people who either are computer
literate or who have the kinds of intelligence that enable them to learn computer skills
rapidly.

Consistent cross functional practices are critical to the achievement of an organization’s goals.
For example if the business strategy depended on exemplary customer service as it’s main
competitive advantage, but untrained employees were incapable of providing this level of
service, the organization’s goal cannot be achieved.

HR Planning Model
This approach builds on tools. Modern HR planning compliments the traditional approach to HR
planning (forecasting, supply and demand) but adds more choices. The steps in the Modern HR
Planning model are the following.

1. Monitor, identify and analyse external environmental factors influencing issues for the
organization in order to develop strategies and Plans. Included in this are those factors that
influenced an organization’s human resource capabilities.

2. Develop tentative Organizational Plans and Departmental Plans.

3. Assess the relative strength and weaknesses of the organization’s human resources, using
forecasting and analysis techniques. Identify the competitive advantages of the HR dept.

4. Develop HR strategies and plans that are consistent with the overall strategies and Plans of
the Organization and the Various Departments.

5. Identify HR policies and practices that will increase the likelihood of achieving the
Organizational and Departmental Plans.

6. Measure results and modify plans as necessary.

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HR Planning and Resourcing in a Dynamic External and Internal
Environment

Competitive Challenges and HR Planning

The HR implications in a company aiming to achieve and maintain low costs involve the following.

1. Reduce and manage employee related costs

2. Downsizing
3. Eliminating unnecessary work
4. Adopting performance related pay programmes
5. Improving productivity and efficiency
6. Avoiding costs resulting from litigation
7. Quality and value creation

Company policy must shift towards setting tougher performance requirements for continual quality
improvement in products and services and strengthening the value change involving vendors and
distributors.

The Human Resources Planning would involve the Following:

1. Streamlining work 2.
Delegation
3. Improve team effectiveness and building employee involvement and commitment to changes
4. Supporting the company vision and values
5. Using people as a value adding process (add value for the customer, the organization and the
employee)
6. Change relationship styles to increase delegation, communication consultation and
participation to provide opportunities for individual initiative.
7. Set up cross-functional teams, task forces, working groups, and circles to initiative.

Culture fit
HR strategies and Plans need to be congruent with the existing culture of the organization or design
to produce cultural change in specified directions. Culture refers to the way we do things.

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Session 02.
Managerial Implications of Performance
Management
Session Contents:
• Bell curve-Positive and Negative aspects
• Objective Setting – Setting SMART objectives where objectives are difficult to measure
quantitatively.
• Dealing with underperformers
• Performance Rating-obtaining consistency in rating among Line Managers

Use of Bell Curve in Performance Appraisals – Good or Bad?

Before you’re stuck in the science behind the Bell Curve performance appraisal, do you really think
it is fair to categorize your employees in different boxes designated as ‘top performers’, ‘average
performers’ and ‘low-performers’! May or may not.

Well, we can help you make a perfect decision on this!

Organizations believing in pay for performance exhilarate the concept of performance appraisal on
the basis of outcomes observed over a specific time period. It helps to:

a. reward top performing employees to boost their confidence and motivate them to achieve
business goals
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 b. encourage mediocre performers to work harder and get into the square of highest performance
c. identify low performers to guide them right and get them back on the track of better
performance

If this is all that you wish to do, Bell Curve is the right thing on your mind.

Now think for a moment! How cool does it sound when HR people embrace a trigonometric plot (Bell
Curve) calling it to be their strategic distribution of evaluating employee performance?

Believe it or not! People in past have used Bell Curve for carrying out performance appraisal process
brilliantly. To an extent, it is all about enforcing the accountability on the employees and expecting
them to do better and better. The normal distribution of this systematic bell-shaped graph places the
majority of people in the average performance area while keeping the exceptions on both sides of the
dropping slope.

A lot of debating has happened over the forced ranking system of appraisal. It is now very clear in
the minds of HR managers that ‘though bell curve for performance appraisal is the right tool to
understand and implement evaluations, yet it is not an ideal outlook for people to think, expect and
perform’.

Forced rating assumes that all the employees in a company can be ranked as follows:

• Top performers – 20%

• Average performers – 70% Non-performers – 10%.

Some HR professionals believe that a bell curve is the best way to identify the top performers and
under-performers, whereas others believe it compels the appraiser to use a forced rating instead of a
fair one. However, the truth lies somewhere in between. Let us explore some advantages and
disadvantages of using a bell curve for performance appraisal from the organizational perspective.

Advantages of the Bell Curve System

Identify Top Performers through the Bell Curve Grading
The forced ranking compels managers to make decisions and differentiate between the performances
of different employees. Those who are identified as high performers are rewarded; they feel motivated
and work harder to grow in the company. Their growth and career plans can be developed suitably
and initiatives taken to retain them within the company. This not only helps retain the top talent but
also builds succession pipelines.
Manage Lenient and Strict Ratings of Managers
The bell curve is perhaps the only method that can be used by the organization to manage leniency
and strictness of managers’ ratings. Lenient ratings mean a larger cluster of employees in a highrating
group (a right-skewed bell-curve), and strict ratings mean large numbers of employees in a low-rating
group (a left-skewed bell curve). These unbalanced ratings may demotivate high performers and retain
mediocre employees. The average manager has a tendency to rate on a lenient scale.

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Identify Suitability of Employees in a Job Position
An underperforming employee may be more suited for another position in the company. The forced
ranking with adequate analysis and HR intervention can identify other positions for employees. By
digging deeper into the competencies, strengths and career plans of employees and placing them in
positions which map better to their capabilities, HR can play a key role in employee development.

Manage Training Needs

The Training Management talks about the importance of the correct allocation of training to
employees. The bell curve can help identify the training that is most applicable to different categories
of employees.

Disadvantages of the Bell Curve

Too Rigid
Using the bell curve model may be considered a rigid approach for rating employees. Sometimes
managers need to put employees in specific gradients just for the sake of bell curve requirements.
This happens more often when the manager’s teams are small.

Loss of Morale
The bell curve performance appraisal creates doubts in the mind of both managers and employees,
who may worry about the possibility of an exit during tough job market conditions. This may lead to
a loss of morale and further deterioration of job performance.

Not Suitable for Small Companies

The bell curve is not suitable for small companies where the number of employees is less than 300.
With fewer employees, the categorization cannot be done properly, and the results are mostly
erroneous.

While there is an ongoing debate on the bell curve based on Normalization Methodology, an
additional 360 Degree may help ease some of these doubts. Employees’ desired and actual
performance can be viewed through a bell curve in Empxtrack’s Appraisal dashboards. The bell curve
for performance appraisal can be normalized or used to view the performance gaps of employees.

Objective Setting -Setting SMART objectives where objectives are difficult to measure
quantitatively Group Work

Resource Person to provide a template (format) for Objective setting SMART

Objectives to be set for:
Any two positions where the work undertaken is qualitative.

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Managing Under Performance
Poor performance may not be the employees fault. It could arise from a defective system of work,
inadequate leadership or guidance, the allocation of inappropriate tasks, placement in jobs that are
beyond their capabilities or insufficient training.
- William Densing

• Whose responsibility is it?

• What can managers do to reduce the risk of under-performance

Exercising Effective Leadership

• Motivating people
• Spelling out expectations
• Encouraging good teamwork

Securing Results through People – Team Leadership

1. Becoming an Effective Team Leader

• Achieves objectives
• Develops people Builds the team

2. Develop systems of work that do not

Place impossible demands on people 3. Allocate
work which is within their capacity Need
based training

“Stretch” objectives, but achievable not necessarily easy

4. Act as a Coach
Providing guidance on how to carry out unfamiliar tasks.
Reviewing the tasks performed

Dealing With Under Performers

1. Identify and agree the problem –

Obtain agreement from the individual
Develop a self-regulating feedback mechanism

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 2. Establish the reasons for the shortfall
• Not a case of attaching blame
• Jointly identify the problem
• Identify the causes that are outside the scope of the employee
• Could not do it – Ability
• Did not know how to do it – skill
• Would not do it – Attitude

3. Decide and agree on the action required

• Take steps to improve skills – Joint Action
• Change behavior – Individual’s responsibility, major challenge for the superior
• Change attitudes – extremely difficult. Behavioral change may lead to an attitudinal change.
• Clarify expectations jointly
• Develop abilities and skills
• Redesign the job

4. Resource the action

Provide the coaching, training, guidance, facilities required to enable the agreed actions to happen.

5. Monitor and provide feedback

• Both parties monitor performance
• Should be constructive
• Agree on further actions

Handling Problems at Performance Management Meetings

When tackling performance weaknesses, please remember that they may be aspects of a person’s
performance that are only weak in comparison with that individual’s overall performance and not
weak in comparison with other people.

Some of the practical ways of handling problems at performance management meetings

are as follows:
• Let reviewees know that their frankness in identifying any shortcomings is appreciated.
• Get reviewees to produce their own ideas on remedial action.
• If reviewees do not agree that there is a problem, be firm but specific, giving examples.
• Confine comments to weaknesses that can be put right; do not try to alter the reviewee’s
personality.

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 • Do not tackle more than two weaknesses in one meeting – there is a limit to how much
criticism individuals can take without becoming defensive.
• Confine comments to weaknesses that can be put right; do not try to alter the reviewee’s
personality.
• If the performance problems are related to the employee’s personal life, arrange counselling.
• If poor performance is due to a change in organization’s standards, explain how they could
obtain conformity.
• Obtain employee’s commitment to reaching that standard.
• Tell employee what will happen if that standard is not met.

Disciplinary Action
If poor performance constitutes misconduct, do not hesitate to invoke disciplinary action.

Performance Rating-obtaining consistency in rating among Line Managers

Group Discussion:

Practical Situation
Some Managers tend to be tough in their rating of Performance while some line Managers tend to be
more lenient. What can the HR Department do to reduce this gap?

Discuss with Participants the use of Performance Management as a tool for identifying High
Performers and Developing the High Performers to Take up Higher Level Positions in the future.
Discuss the methods used to Develop Staff.

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Session 03.
Managerial Implications of Reward Management
Session Contents
I. Job Evaluation
II. Selection of the appropriate Job Rating method
III. Pay Structures
a) Selection of appropriate pay structure
b) Fitting in current employees to the new pay structure
IV. Incentives
Practical Use of Incentives for motivating employees
V. Motivation
Managerial implications of motivational theories
VI. Competence Based Pay
• The Practice of Competency Based Pay. VII.
Performance Based Pay-
• Use of Performance Based Pay in Reward Management

Job evaluation
Job evaluation is a systematic way of determining the value/worth of a job in relation to other jobs
in an organization. It tries to make a systematic comparison between jobs to assess their relative worth
for the purpose of establishing a rational pay structure.

Job evaluation needs to be differentiated from job analysis. Job analysis is a systematic way of
gathering information about a job. Every job evaluation method requires at least some basic job
analysis in order to provide factual information about the jobs concerned. Thus, job evaluation begins
with job analysis and ends at that point where the worth of a job is ascertained for achieving pay
equity between jobs and different roles.

Process
The process of job evaluation involves the following steps:

• Gaining acceptance: Before undertaking job evaluation, top management must explain the
aims and uses of the programme to the employees and unions. To elaborate the program
further, oral presentations could be made. Letters, booklets could be used to classify all
relevant aspects of the job evaluation programme.
• Creating job evaluation committee: It is not possible for a single person to evaluate all the
key jobs in an organization. Usually a job evaluation committee consisting of experienced
employees, union representatives and HR experts is created to set the ball rolling.

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 • Finding the jobs to be evaluated: Every job need not be evaluated. This may be too taxing
and costly. Certain key jobs in each department may be identified. While picking up the jobs,
care must be taken to ensure that they represent the type of work performed in that department.
• Analyzing and preparing job descriptions- This requires the preparation of a job description
and also an analysis of job needs for successful performance.
• Selecting the method of evaluation: The most important method of evaluating the jobs must
be identified now, keeping the job factors as well as organizational demands in mind.
• Classifying jobs: The relative worth of various jobs in an organization may be found out after
arranging jobs in order of importance using criteria such as skill requirements, experience
needed, under which conditions job is performed, type of responsibilities to be shouldered,
degree of supervision needed, the amount of stress caused by the job, etc. Weights can be
assigned to each such factor. When we finally add all the weights, the worth of a job is
determined. The points may then be converted into monetary values.

Installing the programme

Once the evaluation process is over and a plan of action is ready, management must explain it to
employees and put it into operation.

Reviewing periodically
In the light of changes in environmental conditions (technology, products, services, etc.) jobs need to
be examined closely. For example, the traditional clerical functions have undergone a rapid change
in sectors like banking, insurance and Railways after computerization. New job descriptions need to
be written and the skill needs of new jobs need to be duly incorporated in the evaluation process.
Otherwise, employees may feel that all the relevant job factors - based on which their pay has been
determined - have not been evaluated properly.

For job evaluation to be practicable it is necessary:

• that jobs can be easily identified
• that there are sufficient differences between different jobs; and
• that agreements know the relative importance or worth of different jobs can be negotiated
between the enterprise and its employees and/or their representatives

There are primarily three methods of job evaluation: (1) ranking, (2) classification, (3) Factor
comparison method or Point method. While many variations of these methods exist in practice, the
three basic approaches are described here.

Methods of Job Evaluation

Ranking method
Perhaps the simplest method of job evaluation is the ranking method. According to this method, jobs
are arranged from highest to lowest, in order of their value or merit to the organization. Jobs can also
be arranged according to the relative difficulty in performing them. The jobs are examined as a whole
rather than on the basis of important factors in the job; the job at the top of the list has the highest
value and obviously the job at the bottom of the list will have the lowest value. Jobs are usually ranked
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in each department and then the department rankings are combined to develop an organizational
ranking. The variation in payment of salaries depends on the variation of the nature of the job
performed by the employees. The ranking method is simple to understand and practice and it is best
suited for a small organization. Its simplicity however works to its disadvantage in big organizations
because rankings are difficult to develop in a large, complex organization. Moreover, this kind of
ranking is highly subjective in nature and may offend many employees. Therefore, a more scientific
and fruitful way of job evaluation is called for.

Classification method (Grading method)

According to this method, a predetermined number of job groups or job classes are established and
jobs are assigned to these classifications. This method places groups of jobs into job classes or job
grades. Separate classes may include office, clerical, managerial, personnel, etc. Following is a brief
description of such a classification in an office.

• Class I - Executives: Further classification under this category may be Office Manager,
Deputy Office manager, Office superintendent, Departmental supervisor, etc.
• Class II - Skilled workers: Under this category may come the Purchasing assistant, Cashier,
Receipts clerk, etc.
• Class III - Semiskilled workers: Under this category may come Stenotypists,
Machineoperators, Switchboard operator etc.
• Class IV - Unskilled workers: This category may comprise peons, messengers, housekeeping
staff, File clerks, Office boys, etc.

The job grading method is less subjective when compared to the earlier ranking method. The system
is very easy to understand and acceptable to almost all employees without hesitation. One strong point
in favor of the method is that it takes into account all the factors that a job comprises. This system
can be effectively used for a variety of jobs. The weaknesses of the Grading method are:

• Even when the requirements of different jobs differ, they may be combined into a single
category, depending on the status a job carries.
• It is difficult to write all-inclusive descriptions of a grade.
• The method oversimplifies sharp differences between different jobs and different grades.
• When individual job descriptions and grade descriptions do not match well, the evaluators
have the tendency to classify the job using their subjective judgements.

Factor comparison method or Point method

This method is widely used and is considered to be one of the reliable and systematic approach for
job evaluation in mid and large size organizations. Most consulting firms adopt this method, which
was pioneered by Edward Hay in 1943. Here, jobs are expressed in terms of key factors. Points are
assigned to each factor after prioritizing each factor in order of importance. The points are summed
up to determine the wage rate for the job. Jobs with similar point totals are placed in similar pay
grades. The procedure involved may be explained thus:

1. Select key jobs. Identify the factors common to all the identified jobs such as skill, effort,
responsibility, etc.

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2. Divide each major factor into a number of sub factors. Each sub factor is defined and expressed
clearly in the order of importance, preferably along a scale.

The most frequent factors employed in point systems are (i) Skill (key factor); Education and training
required, Breadth/depth of experience required, Social skills required, Problem-solving skills, Degree
of discretion/use of judgment, Creative thinking (ii) Responsibility/Accountability: Breadth of
responsibility, Specialized responsibility, Complexity of the work, Degree of freedom to act, Number
and nature of subordinate staff, Extent of accountability for equipment/plant, Extent of accountability
for product/materials; (iii) Effort: Mental demands of a job, Physical demands of a job, Degree of
potential stress

The educational requirements (sub factor) under the skill (key factor) may be expressed thus in the
order of importance.

3. Find the maximum number of points assigned to each job (after adding up the point values of
all sub-factors of such a job).

This would help in finding the relative worth of a job. For instance, the maximum points assigned to
an officer's job in a bank come to 540. The manager's job, after adding up key factors + sub factors
points, may be getting a point value of say 650 from the job evaluation committee. This job is now
priced at a higher level.

4. Once the worth of a job in terms of total points is expressed, the points are converted into
money values keeping in view the hourly/daily wage rates. A wage survey is usually undertaken to
collect wage rates of certain key jobs in the organization.

Market Pricing
Market pricing is the process for determining the external value of jobs, allowing you to establish
wage and salary structures and pay rates that are market sensitive. Job matching session is conducted.

Merits and demerits

The point method is a superior and widely used method of evaluating jobs. It forces raters to look into
all key factors and sub-factors of a job. Point values are assigned to all factors in a systematic way,
eliminating bias at every stage. It is reliable because raters using similar criteria would get more or
less similar answers. The methodology underlying the approach contributes to a minimum of rating
error. It accounts for differences in wage rates for various jobs on the strength of job factors. Jobs
may change over time, but the rating scales established under the point method remain unaffected.
On the negative side, the point method is complex. Preparing a manual for various jobs, fixing values
for key and sub-factors, establishing wage rates for different grades, etc., is a time consuming process,
According to Decenzo and Robbins, "the key criteria must be carefully and clearly identified, degrees
of factors have to be agreed upon in terms that mean the same to all rates, the weight of each criterion
has to be established and point values must be assigned to degrees". This may be too taxing, especially
while evaluating managerial jobs where the nature of work (varied, complex, novel) is such that it
cannot be expressed in quantifiable numbers.
Group Discussion;
The Factors to be considered when selecting the relevant method of Job Evaluation to be used in an
Organization.
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Introduction to Compensation and Designing a Pay Structure
Compensation is a critical area of human resource (HR) management, and one that can greatly affect
employee behavior. To be effective, compensation must be perceived by employees as fair,
competitive in the market, accurately based, motivating and easy to understand.
HR professionals might create the pay structure for their organization, or they might work with an
external compensation consultant. There are several steps to designing a pay structure: job analysis;
job evaluation; pay survey analysis; pay policy development; and pay structure formation. Each step
is briefly explained below. For a more extensive discussion, please review Milkovich & Newman
(2008).

Step 1: Job Analysis

Job analysis is the process of studying jobs in an organization. The outcome of this process is a job
description that includes the job title, a summary of the job tasks, a list of the essential tasks and
responsibilities, and a description of the work context. Also included are the knowledge, skills and
abilities needed to perform the job.

Step 2: Job Evaluation

Job evaluation is the process of judging the relative worth of jobs in an organization. The outcome of
job evaluation is the development of an internal structure or hierarchical ranking of jobs. Job-based
evaluation is used more often than person-based evaluation, and so the former will be the focus in
this case. There are three methods of job-based evaluation: the point method (which is the most
commonly used); ranking; and classification. Job evaluation helps to ensure that pay is internally
aligned and perceived to be fair by employees.

Step 3: Pay Policy Identification

Pay policy identification is the process of determining whether the organization wants to lead, lag or
meet the market in compensation. The pay policy or strategy will likely influence employee attraction
and retention. Pay policies can vary across job families (i.e., groups of similar jobs) and job levels if
the top management feels that different strategies can be effective in different areas of the
organization.

Step 4: Pay Survey Analysis

Pay survey analysis is the process of analyzing compensation data gathered from other employers in
a survey of the relevant labor market. Gathering external pay data (e.g., base pay, bonuses, stock
options and benefits) is essential to keep the organization’s compensation externally competitive
within its industry. Employee attraction and retention can be improved by maintaining externally
aligned pay structures.

Step 5: Pay Structure Creation

Pay structure creation is the final step, in which the internal structure (Step 2) is merged with the
external market pay rates (Step 4) in a simple regression to develop a market pay line. Depending on
whether the organization wants to lead, lag or meet the market, the market pay line can be adjusted
up or down. To complete the pay structure, pay grades and pay ranges are developed

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Types of Pay Structures
These pay structures include:

• Narrow-graded structures
• Career family structures
• Job family structures
• Broad-banded pay structures
• Pay spines
• Spot Rates

Which Structure Should Be Used?

Source: (Kogan Page Publication)

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Narrow-Graded Pay Structure
This is also called a multi grade pay structure.

Narrow-graded structure –
A Narrow-graded structure consists of a sequence of job grades in to which jobs of broadly
equivalent value are placed. There may be ten or more grades and long established structures.

Broad-graded structure –
Broad-graded structures have 6 to 9 grades rather than 10 or more grades contained in the
narrow-graded structures.

Source: (Kogan Page Publication)

Career Family Pay Structure

A career family pay structure is a single graded structure where each grade has been divided into job
families, for example operations, finance, administration, marketing and IT. A career family pay
structure normally has 6 to 8 levels defined by the activities carried out and/or by the knowledge and
skills or competencies needed to perform these activities. Some job families may have more levels
than others.

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Jobs in the corresponding levels across each of the career families are within the same size range and
when a point’s factor job evaluation system is used, the same range of scores would be given. The
pay ranges in corresponding levels across the career families are the same.

Source: (Kogan Page Publication)

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Source: Reward Management: A Handbook of Remuneration Strategy and Practice By Michael
Armstrong, Helen Murlis, Hay Group

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Source: Benefits and Compensation Resources
Job Family Pay Structure
A job family pay structure may resemble a career family pay structure. The key difference is that
instead of the all job families having a common grade structure, in a job family structure, each job
family would have its own pay structures. This would take into account the different market rates
between different job families.

In a job family pay structure, the level or grade structures may differ in order to reflect the special
characteristics of the roles. This may result in unequal pay for work of equal value between different
job families.

Armstrong and Murlis pointed out that career family structures can solve this problem by using market
supplements which are easier to justify on an individual basis. A market supplement is an additional
temporary payment to the basic salary of an individual job or specific group of jobs where market
pressures would otherwise prevent the organization from being able to recruit or retain staff with a
particular skill or group of skills.

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Source: (Kogan Page Publication)

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Source: Reward Management: A Handbook of Remuneration Strategy and Practice By Michael
Armstrong, Helen Murlis, Hay Group

Source: Job Families (Peter Reilly)

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Broad Band Pay Structures

Broad-banded structures –
Broad-banded structures compress multi-graded structures into 4 or 5 bands. The process of
developing broad banded structures is called broad-banding. In it’s original version a
broadbanded structure contained not more than five bands each with typically a span of 70 –
100%.

Structure often crept in. It’s started with reference points aligned to market rates around which
similar roles could be clustered. These were then extended into zones for individual jobs or
groups of jobs, which placed limits on pay progression.

Source: World at Work

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Source: Presentation Slides By Pabak Dev

Source: Job Families (Peter Reilly)

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Broad Band versus Broad Graded Structures

Source: (Kogan Page Publication)

Note: Each salary band will be developed for each job family level based on market data relevant for
that level and will not necessarily match the same band level of another job family. If a level is left
blank, there are no current positions slotted in that level.

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Combined Career/Job Family and Broad-Banded Structures

Source: A Handbook of Employee Reward Management and Practice by Michael Armstrong What
is a Pay Spine?

Pay spines consist of a series of incremental points stretching from the highest to the lowest paid job.

It can be used to determine pay ranges, according to job evaluation decisions and market pay rates.
Each job pay range may span 4 or 5 incremental points.

Pay spines -
Pay spines are found in the public sector or in agencies and charities that have adopted a public
sector approach to reward management. They consists of a series of incremental pay points
extending from the lowest to the highest paid jobs covered by the structure. Increments may
be standardized from top to bottom of the spine or the increments may vary at different levels,
widening at the top.

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Source: (Kogan Page Publication)

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Source: Reward Management in Context written by Angela Wright published by the Chartered
Institute of Personnel and Development

Spot Rates

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Source: (Kogan Page Publication)
Spot rates
Some organizations do not have a graded structure at all for any jobs or certain jobs such as
Directors. Instead they use “spot rates”. They may also be called the rates for the job. Spot
rates are not located within grades and there is no defined scope for progression.

Group Discussion
Selection of Appropriate Pay Structure

Practical Use of Incentives for Motivating Employees.

Incentive is an act or promise for greater action. It is also called as a stimulus to greater action.
Incentives are something which are given in addition to wagers. It means additional remuneration or
benefit to an employee in recognition of achievement or better work. Incentives provide a spur or zeal
in the employees for better performance. It is a natural thing that nobody acts without a purpose
behind. Therefore, a hope for a reward is a powerful incentive to motivate employees. Besides
monetary incentive, there are some other stimuli which can drive a person to better. This will include
job satisfaction, job security, job promotion, and pride for accomplishment. Therefore, incentives
really can sometimes work to accomplish the goals of a concern. The need of incentives can be many:-

1. To increase productivity,
2. To drive or arouse a stimulus work,
3. To enhance commitment in work performance,
4. To psychologically satisfy a person which leads to job satisfaction,
5. To shape the behavior or outlook of subordinate towards work,
6. To inculcate zeal and enthusiasm towards work,
7. To get the maximum of their capabilities so that they are exploited and utilized maximally.

Therefore, management has to offer the following two categories of incentives to motivate employees:

1. Monetary incentives- Those incentives which satisfy the subordinates by providing them
rewards in terms of rupees. Money has been recognized as a chief source of satisfying the needs
of people. Money is also helpful to satisfy the social needs by possessing various material items.
Therefore, money not only satisfies psychological needs but also the security and social needs.
Therefore, in many factories, various wage plans and bonus schemes are introduced to motivate
and stimulate the people to work.
2. Non-monetary incentives- Besides the monetary incentives, there are certain non-financial
incentives which can satisfy the ego and self- actualization needs of employees. The incentives
which cannot be measured in terms of money are under the category of “Non- monetary
incentives”. Whenever a manager has to satisfy the psychological needs of the subordinates, he
makes use of non-financial incentives. Non- financial incentives can be of the following types:-
a. Security of service- Job security is an incentive which provides great motivation to
employees. If his job is secured, he will put maximum efforts to achieve the objectives
of the enterprise. This also helps since he is very far off from mental tension and he can
give his best to the enterprise.

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 b. Praise or recognition- The praise or recognition is another non- financial incentive
which satisfies the ego needs of the employees. Sometimes praise becomes more
effective than any other incentive. The employees will respond more to praise and try to
give the best of their abilities to a concern.
c. Suggestion scheme- The organization should look forward to taking suggestions and
inviting suggestion schemes from the subordinates. This inculcates a spirit of
participation in the employees. This can be done by publishing various articles written
by employees to improve the work environment which can be published in various
magazines of the company. This also is helpful to motivate the employees to feel
important and they can also be in search for innovative methods which can be applied
for better work methods. This ultimately helps in growing a concern and adapting new
methods of operations.
d. Job enrichment- Job enrichment is another non- monetary incentive in which the job of
a worker can be enriched. This can be done by increasing his responsibilities, giving him
an important designation, increasing the content and nature of the work. This way
efficient worker can get challenging jobs in which they can prove their worth. This also
helps in the greatest motivation of the efficient employees.
e. Promotion opportunities- Promotion is an effective tool to increase the spirit to work
in a concern. If the employees are provided opportunities for the advancement and
growth, they feel satisfied and contented and they become more committed to the
organization.

The above non-financial tools can be framed effectively by giving due concentration to the role
of employees. A combination of financial and non- financial incentives help together in bringing
motivation and zeal to work in a concern.

Positive Incentives
Positive incentives are those incentives which provide a positive assurance for fulfilling the needs and
wants. Positive incentives generally have an optimistic attitude behind and they are generally given
to satisfy the psychological requirements of employees. For example-promotion, praise, recognition,
perks and allowances, etc. It is positive by nature.

Negative Incentives
Negative incentives are those whose purpose is to correct the mistakes or defaults of employees. The
purpose is to rectify mistakes in order to get effective results. Negative incentive is generally resorted
to when positive incentive does not works and a psychological set back has to be given to employees.
It is negative by nature. For example- demotion, transfer, fines, penalties.

Managerial Implications of Motivational Theories

Application of Motivational Theories in the work Place

Motivational theories attempt to explain what motivates people to behave the way they do.
Motivational theories can be applied to workplace settings to shed light into why some employees
work harder or are more committed than others, which can lead managers to understand how to
motivate each employee to perform at peak levels. Understanding how to apply motivational theories
in the workplace can take your leadership skills to the next level.

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Use traditional and innovative compensation strategies to leverage the expectancy theory. The
expectancy theory puts forth the premise that for each specific task, employees will put forth an
amount of effort commensurate with their perceived value of the compensation they will receive.
Employees who resist taking on new job duties, claiming “I'm not being paid for this,” serve as an
ideal example of the expectancy theory at work.
Tie compensation incentives directly into specific performance objectives to push your employees to
excel. Give out generous bonuses to top performers, and use intangible rewards in additional to
monetary compensation to reach employees on a deeper level, soliciting a deeper level of commitment
to company goals.

Institute employee development programs, employee recognition programs and a positive, open
company culture to tap into the acquired needs theory. The acquired needs theory states that all people
are fundamentally motivated by three needs, with one need always being stronger than the others.
According to this theory, all employees subconsciously seek either personal achievement, social
acceptance or power. Employee recognition programs can boost employees' self-esteem and feelings
of achievement. A welcoming company culture encourages employees to develop lasting friendships.
Employee development programs allow hard workers to move into positions of leadership, fulfilling
their ambitions.

Gauge the intrinsic motivation of your employees to determine whether McGregor's Theory X or
Theory Y is more appropriate in your company. Theory X sets forth the premise that employees are
inherently averse to working, and must be continually motivated by external sources. Theory Y sets
forth the opposite premise, stating that employees are internally driven to succeed at projects that
truly interest them. Put strict operational guidelines in place to guide front-line employees through
their day-to-day routines if you feel Theory X is more appropriate in your company. Make sure
employees understand that they are free to try new things and learn from their mistakes, while
matching employees up with job tasks that truly interest them if you feel Theory Y is the way to go.

How Motivation Theories Impact the Workplace

Take a look at three popular motivation theories that are summarized here, devised by:
Maslow, Herzberg and Emmet.
If you need to improve motivation at work, these may hold the key.
Maslow
Maslow believed that the needs of an individual could be expressed in the form of a hierarchy of
needs or a pyramid. This theory of motivation can be applied to the workplace as well as other
scenarios. Maslow felt that the most basic needs were physiological. Unless an individual has food
and shelter, Maslow believed it was pointless trying to motivate them at a higher level. The same
applies in the workplace; if employees are not comfortable in their work environment, then motivation
at a higher level will be difficult. Once this need is met, the employee is then motivated to gain a
sense of security. In a difficult economic climate, do you as a manager keep your employees
sufficiently informed of their job prospects, or is there a heavy reliance on the grapevine? When a job
is felt to be reasonably secure, the employee is next motivated by social aspects. Do you foster a good
working atmosphere in your workplace? Is there a strong sense of teamwork? Do employees
communicate in lots of different ways? When a good social network is in place, the employee then
looks for a feeling of self-esteem. When your employees do a good job, is it noticed? Do you have
reward systems in place? Do you give lots of positive feedback? And finally, when all the other factors
are in place, the employee is looking for self-fulfillment. Do your employees have opportunities to
learn and grow at work? Do you provide training opportunities, work on project teams, job transfers?
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See the pyramid as a constantly changing guide; employees can be at different stages so be aware of
where they are on the pyramid so you can foster motivation at the right level.

Herzberg
Herzberg came up with one of the more popular motivation theories. He felt that certain conditions,
or 'hygiene factors', had to be in place for employees to be satisfied, but these did not necessarily
motivate the employees. For example, if an employee is working below the minimum wage, it is not
likely that he/she will be motivated until a perceived fair rate of pay is given. At the same time, if an
employee is well paid, Herzberg believed that a pay rise would not have a lasting motivational effect.
Herzberg suggested that once the hygiene factors were met, employers should focus on recognizing
the achievements of the employee and providing opportunities to learn and grow. So the motivation
theories of Maslow and Herzberg were similar in this regard.

Emmet
Emmet believed that in order to motivate employees, they need the following:
• To be proud of their company
• To do their best to learn
• To be recognized and respected
• To enjoy work if you think about what motivates you at work, It is very likely that your
staff are motivated in similar ways.

The Practice of Competence Based Pay.

Competency-based Pay Introduction

According to Brown (1998), competency frameworks have a role in main HR functions in as many
as 70 per cent of organizations. However, competencies are used mainly in performance
Management, recruitment and selection, and training and development, according to the Competency
and Emotional Intelligence Benchmarking Survey (2002). Only a minority of organisations have
decided to make a link between pay and competency. In this paper we describe the use of
competencies in reward
Systems and highlight both the attractions of such an approach and the potential problems and pitfalls
that may have contributed to its limited application.

Definitions of competence/competency

The term competency was brought into the public arena in the USA in the early 1980s by Boyatzis
(1982). Boyatzis defined competency as ‘an underlying characteristic of an individual which is
causally-related to effective or superior performance’. This definition is quite distinct from the way
the term competence came to be used in the new suite of vocational qualifications introduced by the
UK Government in the later 1980s. These awards National Vocational Qualifications (NVQs) are
based on nationally determined occupational standards or competences and focus on the desired
outcomes of work performance. So whilst one term (NVQ competence) was a label for the ability to
perform the other (Boyatzis’s competency) described the behaviour needed to perform a role with

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competence. However, this distinction is not always clear in the subsequent literature, or certainly in
practice. Armstrong (1999), for example, talks about ‘hard’ or work-based competences which are
expectations of work performance and the standards and outputs that people carrying out a role should
attain: in other words the NVQ description of ‘something which a person in a given occupational area
should be able to do’. He also refers to soft competences as ‘behavioural or personal 2 2003 © The
Institute for Employment Studies characteristics which people bring to their work roles’ — analogous
to the Boyatzis definition of competency/cies.
Some commentary makes a distinction between three possible uses of competency and/or
competence:

Input (the capacity within people to do job well — knowledge, skills and personal attributes)

; Process (the behaviour required to convert inputs into outputs), and outputs (the actual performance
in the job).

Armstrong (1999) points out that different organisations use different combinations of one, two or all
three of these definitions when employing the concept of competency in their human resource
strategies.

What is competency-based pay?

In addition to variations in language and the ways that terms are applied, gaining an understanding of
what is meant by competency-based pay is also complicated by the variety of different pay
arrangements that are given the label. Some of these systems are indistinguishable from skills-based
pay, in that they involve payment on the acquisition of knowledge or skills seen as necessary for the
effective delivery of a job role. Others are basically performance-related pay by another name, in that
they measure and reward competency in terms of the performance that competency produces.

Armstrong and Baron, gives the following as some of the distinguishing features of competencybased
pay:
• It is based on an agreed framework of competencies
• It is not based on the achievement of specific results, such as targets or projects completed. However,
• It is concerned with the attainment of agreed standards of performance.

The difficulty of getting an agreed description of competency based pay is reflected in Brown and
Armstrong‘s (1999) definition:

‘Competency-based pay can be defined as paying for the development and application of essential
skills, behaviours and actions which support high levels of individual, team and organizational
performance.’

Here we see the use of not just behaviours, but also ‘skills’ (akin to harder competencies?) and actions.

The latter is hardly distinguishable from individual performance-related pay. And if the performance
judgement is at team or organisational level then competency-based pay becomes indistinguishable
from team based pay or employee financial participation schemes. In practice, as discussed later in
this paper, competency-based pay systems are rarely used in a pure form as the only means of
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determining reward. Most, instead, combine the assessment of two or more of: inputs, processes and
outputs. Brown and
Armstrong’s (1999) distinction between competency-based pay and competency-related pay is
helpful. They make same point that many pay schemes involve competencies without these being the
primary focus of reward (hence ‘related’). They have also developed the concept of
‘contributionrelated pay’ to describe approaches that combine recognition for both inputs and outputs
— ie how results are achieved as well as the results themselves.
This approach is a formal combination of competency and performance-related pay. Brown and
Armstrong believe that contribution-based pay is a desirable approach precisely because it covers
both inputs and outputs in a way that is reflective of most jobs. Using the term contribution-based pay
is also a recognition that a number of organisations, though describing their pay system as either
competency-based or performance related, are actually a combination of both. Suff’s research (2001)
confirms that most competency-based pay arrangements could equally be described as
contributionrelated and that systems that are entirely competency-based are very much in the
minority.

How are reward and competency linked?

Competence related pay –

Agreed Competence Evidence of Rating or Methodology Competence

competence level competence assessment based pay
requirements definitions level achieved

Adams (1999a), in a survey of competency-related reward, found that there are four main ways in
which employers were making the link between competencies and pay:

• 76 per cent of organisations that used competency-based pay

• used competencies in design of the grading structure
• 0 per cent used them to determine promotions
• 88 per cent used competencies to determine pay rises or pay cuts
• 56 per cent used competencies to determine how an overall pay rise should be divided into pay shares.

Brown and Armstrong (1999) summaries two main ways of linking competency and reward — a
jobfocused process, which uses competencies wholly or partly as a way to evaluate jobs; and a
peoplefocused process that links individual pay to level of competence. The first method commonly
determines where an individual role is placed in the band. The second determines the link with pay:
this may be via a bonus, but through a pay increase is more common.

A Towers Perrin European survey, cited by Brown and Armstrong, found that most companies have
kept their job evaluation system, but, rather than replacing it with a system based on competencies,
have modified the system — with 60 per cent considering the introduction of competencies. The
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typical rationale for such a change is that it will introduce greater flexibility into job evaluation and
make it easier to measure job quality as well as size. Brown and Armstrong say that
competencyrelated evaluation suits organisations with a predominantly professional workforce and
nonhierarchical structure. Current practice in competency-related pay is diverse, with almost as many
different methods of linking competencies to individual reward being used as there are organisations
practicing them. However, approaches that make a systematic link between assessment of
competency and individual pay often fall into the following categories:
• A matrix approach where pay increases are determined by competence assessment and position in pay
range
• Competence assessment, which determines incremental progression within pay ranges.

How extensive is the use of competency-based pay?

A range of research evidence indicates that only a minority of organisations have chosen to link
competency and pay. It also indicates that, whilst many organisations report considering the use of
competency-based pay schemes, they usually decide not to implement this approach. Overall, there
is no evidence in recent years of a growth in the popularity of competency-based pay schemes.

The Towers Perrin 1997 European Survey, quoted in Brown and Armstrong (1999), found 20 per cent
of participants linking skills and competencies with pay, with 70 per cent planning to introduce or
extend such arrangements.

Introducing competency-based pay

In this section we will describe the various steps an organisation might wish to follow in order to
introduce a competency-based pay scheme.

Establishing a competency framework

It is recognised that it is better to have a successfully operating performance management system in
place before adding a link to pay. According to most major commentators therefore, the starting point
for any competency-based pay system will be a well-established competency-framework that has
been used effectively for other HR processes. A wealth of literature exists on developing an
appropriate competency framework for an organisation. A detailed consideration of this process is
outside the scope of this review. However, some summary points are worth making:

• The first task in introducing a competency framework will be to conduct an analysis of what
constitutes organizational success and how individuals contribute to that success. Hence Homan
(2000) describes competency-based pay as a means by which ‘pay and recognition are used to
communicate vision and values to employees and to reinforce desired behavior and
performance.’
• A competency framework is likely to combine both core competencies that are applicable
to jobs across the organisation and competencies that are specific to particular jobs. In
most organisations competency frameworks contain both ‘soft’ and behavioural
competencies and technical/ functional competencies, often known as ‘hard’ skills.
• Competency frameworks are typically developed via a process of internal research and
consultation, with or without expert external assistance. Typical stages, as reported by Miller,
Rankin and Neathey (2001) include:

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 • individual interviews with senior managers, often at board level, to obtain their views on the
current and future key issues and challenges facing the organization
• individual or group interviews with some other managers, to identify the characteristics
associated with under- and high-performance of individuals
• focus groups of managers and/or other staff, again to help identify key competencies,

And benchmarking the draft competencies against the competency frameworks of relevant external
comparators.

Assessment of competencies for reward purposes

The existence of a credible, tried and tested system of assessment is also a prerequisite for effective
competency-based pay. Competencies cannot be measured in quantitative terms, which makes
assessment difficult.
Armstrong (1999) recommends the development of profiles for roles against which individuals can
be assessed. These ‘do not eliminate subjectivity. However, they at least provide a framework within
which more objective judgements can be made, especially when these cover the contribution and
impact which can be measured by reference, not only to behaviour, but also to the results of that
behaviour’.
Other approaches rely more strongly on subjective judgement A typical approach is for managers to
rate employees on a scale for each competency, which is then to produce a total score. Brown and
Armstrong (1999) found that in broad-banded devolved structures, line managers were generally
required to give only a single competency score.

Introducing the competency-based reward system

If an organisation has in place these structural requirements, and has decided that it would benefit
from competency-based pay, Armstrong (1999) suggests a series of stages for its introduction.

The following list draws on the steps set out by Armstrong:

1. Communicate the purposes and potential benefits of competency-based pay.

2. Obtain the views of line managers, team leaders and employees.
3. Set up a project team to develop the process. Armstrong advocates a team that is ‘cross-functional
and fully representational’.
4. Define the broad approach that is to be used, and decide what work needs to be done to develop
it.
This might include the development of a new or revised job evaluation scheme,
The introduction of a broad-banded pay structure, decisions on how competency assessment will be
linked to reward, and means of maintaining and controlling the scheme.
5. Develop the scheme whilst communicating and consulting with all stakeholders.
6. Communicate the details of the scheme to the whole workforce and show what it will mean to
them as individuals and groups.
7. Introduce the scheme and develop and implement appropriate training for managers.

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8. Implement training aimed at allowing individuals to increase their levels of competency and so to
have access to opportunity for increased pay.
9. Monitor the introduction process.
10. Evaluate the results of the introduction.
11. Amend or improve the scheme as necessary.

All of these steps are applicable to the introduction of any reward scheme. However, some need
greater attention than usual.
For example, training and communication are especially important in what can be quite a complex
method to operate. The design phase, number 4 on the list, is also trickier than in a simple performance
related pay system. Since the organisation has to decide how to link its competency framework to
pay. Is it through a rating approach — this would be the most common decision. If so, do all the
competencies on the list have an equal value or is there some degree of weighting? Are all the
competencies in the framework to be used or only key items that are seen as particularly important
for pay purposes? Finally, is there a transparent scoring system or does the manager just make an
overall judgement?

Why do organisations introduce competency-based pay and what are its benefits?

Homan (2000), in a review of the literature, gives reasons why employers chose to introduce
competency-based pay. She suggests that amongst the most frequently quoted objectives are the
support of a change initiative, the pursuit of flexibility, and the need to build a broader skills base
within the organisation.
A 1998 CBI Employment Trends survey found that, particularly amongst service-based companies,
improving employee motivation was most likely to be cited as the foremost advantage of
competencyrelated pay by service-based firms (CBI, 1998).
Similarly, in the 1999 Competency & Emotional Intelligence Quarterly survey, employers reported
that the main factor influencing introduction of competency-related pay was the desire to encourage
better performance. This factor had been a consideration for 80 per cent of employers who had
introduced competency-based pay.

Other influential factors in decisions regarding whether or not to introduce competency-related pay
included:
The need to increase flexibility amongst the workforce (72 per cent)
to change behaviour (60 per cent)
giving employees access to job progression (52 per cent), and
to allow some form of progression within the job where no other form of promotion opportunities
otherwise existed (36 per cent).

These results are similar to the slightly earlier findings of the CBI, which reported that the main
benefits of using competency related pay were greater motivation, assisting with the introduction of
multi-skilling, and providing greater objectivity in pay determination (CBI, 1998).

As we have already established, competency-based pay is commonly just one means of determining
individual pay and pay progression. Competency-based approaches are often introduced as a means
of addressing limitations of existing reward practices.

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For example, Alan Fowler (cited in Suff) has suggested that competency-based pay is a more rounded
or ‘holistic’ approach and so avoids some of the problems associated with individual
performancerelated pay. These include:
• difficulties in setting measurable performance targets for qualitative factors (such as teambuilding)

• difficulties in converting variable performance against a range of targets into a single

assessment rating
• problems in taking into account factors outside of the
• individual’s control in the achievement of targets
• manipulation of the system by employees to ensure that they receive high levels of
performance pay
• Adverse impact on team work objectives.

So in summary, organisations contemplate competency-based pay where:

• Link to business strategy
Competitive advantage through the way people perform
• Importance of people development
Provides incentives for development, especially where role definitions are flexible
Replacement for performance-related pay
PRP has proved problematic and inappropriate in some settings
Organisational re-positioning
Structurally or culturally.

Many of the above points on the reasons to introduce competency based pay are again common to
many reward change projects and similarly the benefits tend to be the same. However, trying to
change behaviours through signaling that certain competencies are important to the organisation is
unique to competency-based pay. These can be linked to ‘core’ competencies or values, emphasizing
what is critical to organisational success or proper management. Links can be made between rewards,
recruitment, development and selection so that there is a holistic approach to people management,
with competencies the unifying theme.

Competency-based pay also recognizes that how the job is done is as important as the end result. It
considers the whole person’s performance. This is particularly evident in such areas as customer
services. Appraising people through competency rating frameworks has advantages compared with
some other approaches. It is an absolute measure of performance.
This means people can always improve — this is less true in ranking systems.
In addition, there are clear measurement criteria, sometimes missing from performance ranking.
Competency-based pay gives more options than other schemes in that it can be used to determine
progress up a pay band, to determine movement within or between bands. In allowing through
progression in broad-banded structures without the need for formal job evaluation procedures
competency-based pay systems may be seen as providing greater flexibility and responsiveness to
changing business needs.

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Other features relating to individual motivation, righting the wrongs of previous schemes could just
as easily apply to individual performance-related pay or contribution-based pay schemes. Improving
pay progression is also a frequently-found objective in renewing a remuneration structure.

The Use of Performance Based Pay in Reward Management.

Practical Aspects Discuss:
Difference in Reward between the Exceptional Performer, High Performer and Average Performer.
The Amount of Reward ((Rupee value) of Performance Bonus being given to the High Performer,
Average Performer in each Grade (Manager Grade, Executive Grade etc.)

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Session 04.
Managerial Implications of Employee
Relations & ER Models
Session Contents
I. Managing Employee relations in manner that will prevent the need for formation of Trade
Unions
II. Analyzing the various steps of the Disciplinary procedure and practical implications of
decisions to be taken
III. Practical Implications in dealing with different types of Employee Misconduct
IV. Practical Aspects of Restructuring and Downsizing
V. Employee Relations Models
a) Dunlop’s Model for Employee Relations
b) Employee Relations Shared Services Escalation model.
c) The Aon Hewitt Employee Engagement Model

Managing Employee relations in manner that will prevent the need for
formation of Trade Unions:

A Create Job Satisfaction by Providing Financial and non-financial Motivators

(incentives)

1. Financial or Monetary Incentives.

• The underlying the idea of monetary incentives is that the money is the most important
motivating factor.

• Cash or anything in the form of wealth is known as monetary incentives.

They include:
• Target incentives
• Commission on sales
• Bonuses
• Over time payments
• Differentiated piece rates
• Monetary incentives are provided to increase production or to do work in lesser time.
• The importance of monetary incentives cannot be doubted. They are considered to be
more important than non-financial incentives. Cash provides a sense of security in
employees.

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Financial incentives can help improve performance and be self-financing. Monitory or financial
incentives are based on the assumption that money is the most important motivating factor, which
may not always be correct.

2. Non – monetary or Non – Financial Incentives.

Non-Financial incentives relate to social and psychological needs of the employee. They
satisfy the inner man of an employee and motive him to accomplish the best and more work.

• Non – monetary incentives include all social and psychological attractions by which
employees are incited to accomplish the best and more work.

• Though money is an important need but employees do not work for only money. They
take incentive to satisfy their social and psychological satisfaction.

They include:
3. Rewards & recognition
4. Promotions
5. Enhanced responsibility & challenge
6. Status & ranking
7. Training facilities
8. Appreciation & Praise
9. Freedom for decision making
10. Job security
11. Pleasant & interesting job

B. Employee Voice

Employee voice refers to the participation of employees in influencing organisational decision

making. Because research and analysis have grown around the voice concept in a variety of
disciplines, ‘employee voice’ has become an elastic term meaning somewhat different things to
different policy, academic and practitioner actors. In the many disciplines that cover voice, such as
human resource management, political science, economics, organisational behaviour, psychology or
law, perspectives toward the concept differ. Drawing on Dundon et al. voice can be seen with different
lenses. First, voice is an articulation of individual dissatisfaction or concern that aims to address a
specific problem or issue with management. Second, voice takes the form of collective organisation,
where voice provides a countervailing source of power to management. Third, there is the role of
voice as a contribution to management decision-making. Here the purpose is to gain employee input
to improve work organisation and efficiency more generally, perhaps through quality circles or
teamwork, or eliciting workforce engagement. Fourth voice can be seen as an instrument for mutual
gain, with productive collaboration between capital and labour increasing the long-term viability of
an organisation and economic well-being of employees The editors of the Elgar Handbook of
Employee Voice [1] define employee voice as the ways and means through which employees attempt
to have a say and potentially influence organisational affairs about issues that affect their work and
the interests of managers and owners. This definition combines a variety of voice mechanisms that
analysts often group in separate boxes (e.g. involvement or bargaining; union and non-union). It
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allows for employer implemented Non-union Employee Representative (NER) systems as a collective
form of voice, be it chosen to marginalize a union presence or to provide an alternative to union
influence In general, employee voice is about how employees are able to have a say over work
activities and decisions within the organizations in which they work, regardless of the institutional
channel through which it operates—whether through speak-up programmes, quality circles,
teamwork, or collective negotiation.
Arguments for employee voice can be both moral and political as well as economic. [There are a wide
range of mechanisms related to employee voice, and these may be direct or indirect, formal or
informal, and power-centred or task-centred. As well as trade union representation, voice may refer
to a wide array of techniques including Empowerment, Employee Engagement and Team working
initiatives. In reality, many employers adopt a blend of voice mechanisms. However, some employers
may also wish to limit employee voice, believing instead that the best approach is for management to
command and control the organisation. Equally, some employees may not want to have their voice
heard, or may not want to express their thoughts.

Informal and formal mechanism

Employee voice is attained through both informal and formal mechanisms. Informal employee voice
mechanisms include general conversation between employees and employers, email communication,
employee feedback, social functions and meetings at the workplace. Employees can also influence
corporate decision making through their actions, such as turnover and absenteeism

Formal mechanisms include communication tools implemented by an organisations human resource

department, such as employee surveys, suggestion boxes. Some organisations promote employee
voice through financial participation, such as share ownership and profit sharing opportunities.
Employee consultative committees and representation through trade Unions are also formal ways of
ensuring employees are informed and are given a voice in decisions that affect their employment

Analyzing the various steps of the Disciplinary procedure and practical

implications of decisions to be taken

Disciplinary Procedure

Discuss:
Suspension or Interdiction
- With Full Pay, half Pay and no pay

Preliminary Investigations -
Practically how it is done.

Issuance of a Charge Sheet (Show Cause Letter) -

Use a Practical Example of a Charge sheet.

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Domestic inquiry

Selection of Appropriate Punishment:

When selecting the appropriate punishment, the management should consider the following:
1. Gravity of the offence
2. Past record of the employee
3. Company policy so far practiced
4. Length of service

5. How courts will interfere

- Out of proportion
- Employee acted in other interest
6. Whether this punishment will lead to unrest in the work place

Discuss with Participants the Practical Implications in dealing with different

types of Employee Misconduct

Practical Aspects of Restructuring and Downsizing Reasons for Redundancy

- Closure of business

- Closure of site

- Reduction of Orders

- Introduction of new technology

- Specific work not required anymore

- Changes in the organization structure

- Outsourcing of Positions

- Business Process Outsourcing

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Focus of Redundancy

- Positions in the organizations not the people

- Cannot be used as a way of getting rid of specific persons who are trouble makers for the
organization

LEGAL POSITION

The main legislation covering redundancy is as follows:

- Termination of Employment of Workmen (special Provisions) Act No. 45 of 1971. (TWA)

- Amended by Act no 4 of 1976 and Act No. 12 of 2003

Non Disciplinary termination

TWA No 45 of 1971 says:

No employer shall terminate the scheduled employment of any workman without:

• The prior written consent of the workman or

• The Written approval of the Commissioner of Labour.

Application to Commissioner of Labour to reduce staff

- Application has to be submitted to the Commissioner of Labour and written approval must be
obtained

- The application should set out the reasons and justifications

- A copy of the application should be given to the employee

- The employee will be given a hearing by the Commissioner of Labour

- If the commissioner decides to grant approval, he is required to order the payment of

compensation in terms of the current formula applicable. Section 6D in Act No. 12 of 2003
provides that any money to be paid as compensation to the workman on decision or order
made by the Commissioner under the act shall be computed in accordance with such formula
as shall be determined by the Commissioner in consultation with the Minister.

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Use of Excess Staff to Meet Current and Future Requirements

- Recruiting / realigning existing staff based on Vision, Mission values Goals and Objectives
of the Organization

- Multi skilling of Staff

- Focus on HR Development

- Succession Planning

- Redeployment within the organization

- Encouraging existing staff leave the organization and obtain sub contract work from the
organization

- Recruitment freeze

- Reduce Unnecessary expenses

- Early Retirement

Procedures required for selection

Criteria to be used in selection

- Qualifications and experience

- Performance

- Length of service

- Attendance records

- Disciplinary records

- Interview Process

- Adaptability (including multi skilling)

- Extra skills

Objective selection

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Nondiscriminatory selection

Selection process perceived to be fair

Minimizing Redundancies

• Pro-actively monitor the external environment

• Constantly review staffing levels

• Review working practices

• Reduce sub contracted work

• Consider alternative work

• Early retirement

• Freeze Recruitment

• Reduce Overtime

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Employee Relations Models

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Aon Hewitt Employee Engagement Model

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