Overall word limit: 2500
You hold the HR directorship of a local company in Durham, which employs 100 workers (all in a managerial position). The company usually offered an incremental pay rise of 3 per cent every year. It also offered some benefits such as health insurance, life insurance, and private pension plan. The cost of living and the high inflation are influencing the organisational revenue. You were asked to rethink the Employee Rewards including the pay rise and the benefit system and to consider withdrawing the private pension plan. Based on that information please answer the following:
1) What external influences do you need to check before responding to the HQ’s demands? Explain what influences you have to consider on the Employee Rewards. (50 per cent)
2) Presuming the changes are implemented what are the potential consequences for the managers? (You can draw from motivational theories to answer the question). (50 per cent)
EmployeeRewardStrategy.docx
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Lecture3_2024.pdf
LectureERS42024.pdf
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Employee Reward Strategy
Postgraduate Programmes
– Employee Reward Strategy
You hold the HR directorship of a local company in Durham, which employs 100 workers (all in a managerial position). The company usually offered an incremental pay rise of 3 per cent every year. It also offered some benefits such as health insurance, life insurance, and private pension plan. The cost of living and the high inflation are influencing the organisational revenue. You were asked to rethink the Employee Rewards including the pay rise and the benefit system and to consider withdrawing the private pension plan. Based on that information please answer the following:
1) What external influences do you need to check before responding to the HQ’s demands? Explain what influences you have to consider on the Employee Rewards. (50 per cent)
2) Presuming the changes are implemented what are the potential consequences for the managers? (You can draw from motivational theories to answer the question). (50 per cent)
Overall word limit: 2500
SUBMISSION INSTRUCTIONS
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Examiners will stop reading once the word limit has been reached, and work beyond this point will not be assessed. Checks of word counts will be carried out on submitted work, including any assignments or dissertations/business projects that appear to be clearly over-length. Checks may take place manually and/or with the aid of the word count provided via an electronic submission. Where a student has intentionally misrepresented their word count, the School may treat this as an offence under Section IV of the General Regulations of the University. Extreme cases may be viewed as dishonest practice under Section IV, 5 (a) (x) of the General Regulations.
Very occasionally it may be appropriate to present, in an appendix, material which does not properly belong in the main body of the assessment but which some students wish to provide for the sake of completeness. Any appendices will not have a role in the assessment – examiners are under no obligation to read appendices and they do not form part of the word count. Material that students wish to be assessed should always be included in the main body of the text.
MARKING GUIDELINES
Performance in the summative assessment for this module is judged against the following criteria:
· Relevance to question(s)
· Organisation, structure and presentation
· Depth of understanding
· Analysis and discussion
· Use of sources and referencing
· Overall conclusions
The word count should include all the text (plus endnotes and footnotes), but exclude diagrams, tables, bibliography, references and appendices. Guidance on referencing can be found on Sharepoint;
PLAGIARISM AND COLLUSION
Students suspected of plagiarism, either of published work or the work of other students, or of collusion will be dealt with according to School and University guidelines.
Your assignment will be put through the plagiarism detection service.
END OF ASSESSMENT
1
,
Employee Reward Strategy Elective Module
BUSI49Z15
Professor Roberta Aguzzoli [email protected]
Agenda 1st Class
• Course’s Presentation
• Introduction to Employee Rewards Strategy
LG1) An advanced understanding of design and
implementation of employee rewards policies in pursuit
of organisational objectives;
LG2) An advanced understanding of the key recent
debates and developments in the management of
employee reward;
LG3) Further developed understanding of the
contribution of HRM policy and practice to the strategic
management of organizations, and to addressing the
internationalisation of business.
Learning goals
The Module Introduction
• Lecturers Mondays from 11:00 am to 1:00 pm
• Seminars • Fortnightly
• Material is in Ultra
Topics
• Introduction to Rewards Management – chapter 1
• Theories of Rewards and incentives – chapter 2
• External and Internal influences on ER – chapter 3
• Base pay structures and pay-setting – chapters 4 & 5
• Employees Benefits and Pension – chapters 7 & 8
• Rewarding employee performance – chapter 6
• Non financial rewards – chapters 6 & 9
• International Rewards – chapter 11
• Executives rewards & Evaluating Employee Reward Strategy– chapter 10 & 12
Perkins, S., White, G., Jones, S. Reward Management: alternatives, consequences and contexts, CIPD
Book
Seminars
• Seminar 1 – Case Study – Richer Sounds
• Seminar 2 – Grand Challenges
• Seminar 3 – Formative
• Seminar 4 – Rewarding in the International environment.
Guest Speaker
• Two Guest Speakers working with Rewards are planned to join us in class in February, but those are tentative dates.
Encore
The Module Introduction
• Assignment
– Formative (Seminar 3) – group presentation that will help with the summative.
– Summative (2,500 words)
• Office Hours
– Mondays 2 to 3.30 pm
– Office 530 in the Business school.
Introduction to Employee Reward Strategy
Dr Roberta Aguzzoli
Agenda
Objectives
• At the end of the session you should:
– understand the meaning of employee
reward management.
– Understand differences on extrinsic
and intrinsic rewards.
– Understand the importance of rewards
for the business.
– Understand its link to Strategy.
What is reward?
“a bundle of returns offered in exchange for a cluster of employee contributions” (Bloom and Milkovitch 1992).
“all forms of financial returns and tangible services and benefits employees receive.” (Milkovitch and Newman, 2004 )
But before this, what motivates people?
Does money motivate?
Source: https://latamjournalismreview.org/news/cnn-brazil-lays-off- more-than-120-professionals/
Rewards
Extrinsic Reward
Financial Rewards Development Rewards Social Rewards
Intrinsic Reward
– Job challenge
– Responsibility
– Autonomy
– Task variety
Importance of intrinsic and extrinsic motivations
Extrinsic and intrinsic rewards
• Extrinsic rewards are rewards that are provided to
employees as a result of good performance, including
such items as salaries, bonuses, benefits, and job
security. They are largely “administered” by the firm, not
the employee, as a consequence of his or her
performance.
• Intrinsic rewards are rewards that arise from doing one’s
job in a satisfactory way. They are largely “self-
administered;” that is, employees may feel pride or
satisfaction from a job well done or they may enjoy the
holiday time they receive as a consequence of hard work.
https://www.youtube.com/watch?v=gKn_fV6P GGA
https://www.youtube.com/watch?v=dyr7wg9s 7gM
Expectations, rewards, and job attitudes
Employee expectation for
extrinsic rewards
Actual extrinsic rewards received
Employee equity
perceptions and
cognitive dissonance
Positive or negative
job attitudesEmployee
expectation for intrinsic rewards
Actual intrinsic rewards received
‘Total reward’.
Need to consider reward holistically – not just the wage! • Rewards of two types (see Shields et al. 2015)
– Intrinsic – interest, challenge, satisfaction arising from doing the tasks in the job
– Extrinsic – separate from the task itself but arising from it
• Financial
• Developmental (career progression, leaning and development)
• Social (non-cash benefits, wellness programmes, sabbaticals, work group affinity)
• Correspond to intrinsic and extrinsic motivation
Rewards
• From an employee side, rewards is part of the formula people look for when evaluating whether or not to work for an employer.
Total Compensation
Direct Indirect
Bonuses
Gainsharing Security Plans • Pensions
Employee Services • Educational assistance • Recreational programs
Commissions
Wages / Salaries
Insurance Plans • Medical • Dental • Life
Time Not Worked • Vacations • Breaks • Holidays
Source: Snell and Bohlander, 2012
Rewards
• Direct financial compensation: compensation received in the form of salary, wages, commissions, stock options, or bonuses
• Indirect financial compensation: all the tangible and financially valued rewards that are not included in direct compensation, including free meals, vacation time, and health insurance
• Nonfinancial compensation: employee rewards and incentives that are not financial in nature, including flexible work schedules, development opportunities, casual dress codes, and helping employees balance work with the other demands
Direct Financial remuneration
Remuneration can comprise several elements. ‘Reward package’
• Base or fixed pay. Salary or hourly wage as stipulated in contract.
• Performance-based or incentive pay (Input or output based pay).
• Benefits eg. pension, health insurance
Why is it important?
• “At the present, organisations tend to see payroll as an administrative cost, when they should view it as a function that effectively delivers benefits to the business”.
• “Payroll sits between HR and finance and does not usually get a seat at the top table, except in the very largest companies”
• (Payroll errors: mistakes cost money, People Management, CIPD: 38)
I may replace my $2000 week engineers with ones that earn $500, but my costs may skyrocket because the new lower-paid employees are inexperienced, slow, and less capable. In that case I would have increased my costs by cutting my rates (Pfeffer, 1998).
Objectives from the Rewards
Reward objectives
• Attract the right people for the right job
• Retain the best people
• Motivate employees to contribute
• Management of performance
• Align employee interests and behaviour with those of the organisation
• Sustain favourable public image
Rewards should seek to be
• Need-fulfilling: the rewards should be of value to employees satisfying relevant human needs;
• Felt-fair, particularly in terms of offering rewards commensurate with contribution
• Legal: it should comply with relevant legal requirements (mandatory benefits and minimum standards)
Rewards should seek to be
• Affordable: the rewards allocated, an associated on costs, should be within the organisation’s financial means
• Strategically aligned: reward management should support the organisation’s corporate and business objectives.
Carrie Gracie
My name is Carrie Gracie and I
have been a BBC journalist for
three decades. With great regret, I
have left my post as China editor
to speak out publicly on a crisis
of trust at the BBC.
I am not asking for more money.
I believe I am very well paid
already – especially as someone
working for a publicly funded
organisation. I simply want the
BBC to abide by the law and
value men and women equally.
Salary disclosures the BBC was forced
to make six months ago revealed not
only unacceptably high pay for top
presenters and managers but also an
indefensible pay gap between men and
women doing equal work. These
revelations damaged the trust of BBC
staff. For the first time, women saw
hard evidence of what they’d long
suspected, that they are not being
valued equally.
I told my bosses the only acceptable
resolution would be for all the
international editors to be paid the same
amount. The right amount would be for
them to decide, and I made clear I wasn’t
seeking a pay rise, just equal pay. Instead
the BBC offered me a big pay rise which
remained far short of equality. It said
there were differences between roles
which justified the pay gap, but it has
refused to explain these differences.
Source: https://www.theguardian.com/media /2018/jan/08/carrie-gracie-letter-in- full
http://carriegracie.com/news.html
• https://www.youtube.com/watch?v=wy0IEEw uclc
• https://www.youtube.com/watch?v=1rMoLSL WJ_M
Discuss:
• What are the problems you can identify in this case?
• What are the consequences of a bad pay structure?
• What is she saying when she states “I am not asking for more money”?
• How can Rewards be linked to other HR subsystem as recruitment and retention, training and performance management?
Other HR Practices: Compensation Effects
• Recruitment and Retention
– Number and quality of job applications received during recruitment.
– Employees’ decisions to stay with their employers.
• Training and Development
– Value of tuition reimbursements, management development programs offered by employers
• Performance Management
– Alignment between the pay system and performance measurement affects employees’ motivation
Employee Rewards Strategy
© 2012 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
The Strategic Importance of Managing Human Resources
“It’s all about people.
Everybody can buy coffee
beans and open stores. So
when it comes to being
successful, it’s all about how
you manage your people.”
Howard Schultz
Chair and Chief Global Strategist
Starbucks
L E A R N I N G G O A L
1
1-40
What Is Strategy?
• A firm’s strategy refers to the actions that managers take to attain the goals of the firm; … which in most cases means not only profit, but also profit growth.
1-41
Strategies to Increase Value
• Porter’s Strategic Positioning …
1. Differentiation strategy – adding value to a product so that customers are willing to pay more for it … – the higher the value customers place on a firm’s
products, the higher the price the firm can charge for those products
2. Low cost strategy – lowering costs – Assumes that customers are more price sensitive than brand loyal
Market Rate Analisis
Pay progression though
contingency pay
HR Strategy
context
Reward Strategy
Grade and pay structure
Base and pay management
Allowances
Perfomance Management
Job Evaluation
Employee Benefit
Reward Philosophy
Total Remuneration
Total Rewards
Non-financial rewards
Achieve aims: – Performance – Attract and
retain – Motivate
and engage – Add value
Source, Armstrong, 2015
Employee reward strategy
Two possible approaches:
• Strategic fit approach – align pay and benefits policies with needs of the business strategy
• Best practice approach – there is one best way for all to manage pay and benefits
Strategic fit approach
Pay and benefits used to reinforce employee attitudes and behaviours in line with the particular requirements of specific business needs and strategies
Strategic fit: cost leader
Business strategy – to be a low-cost competitor (cost leader):
• HR priority – productivity (short-term performance) and cost reduction
• Reward strategy – just competitive; tied to efficiency.
• Reward policy – pay at the median or lower if possible; limited benefits provision (legal requirements as benchmark); incentive pay tied to output/sales (individual if possible).
Strategic fit: differentiation
Business strategy – to compete on service quality (differentiation):
• HR priority – attract, retain and motivate high quality, customer-oriented employees.
• Reward strategy – more than competitive; reward loyalty and quality
• Reward policy – pay at 75th quartile; extensive benefits provision; link pay to quality service and/or development of customer service skills
Comparison of Compensation at Costco and Wal-Mart
Source: https://money.cnn.com/2013/08/06/news/economy/costco- fast-food-strikes/
Can a company pay its workers well and also make money?
Source: https://www.thedailybeast.com/why-cant-walmart-be- more-like-costco
Discuss:
1) What are the consequences for the companies on having such pay difference?
2) What are the consequences for the employee on those differences?
Best practice approach
A notion of ‘best’ or ‘excellent’ practice:
• Package of “state of the art” reward practices
• Apply universally – in (almost?) all situations
• Allows the organisation to attract, retain, develop & motivate best talent
• Which practices are we referring to?
– Sophisticated HRM practices (Pfeffer, 1998), including high pay linked to performance
– High commitment management (Walton, 1985), including group/team incentives
Summary
We have covered a lot of ground today • Key elements of reward
• An initial consideration of key issues in reward design
• Reward objectives
• Contextual influences on employer reward strategy
• Employer strategic choices
Next week: Theories of rewards and incentives from Economics, Sociology, and Management
Slide 1
Slide 2: Agenda 1st Class
Slide 3: Learning goals
Slide 4: The Module Introduction
Slide 5: Topics
Slide 6: Book
Slide 7: Seminars
Slide 8: Guest Speaker
Slide 9: Encore
Slide 10: The Module Introduction
Slide 11
Slide 12: Introduction to Employee Reward Strategy
Slide 13: Agenda
Slide 14: What is reward?
Slide 15
Slide 16
Slide 17
Slide 18: Importance of intrinsic and extrinsic motivations
Slide 19: Extrinsic and intrinsic rewards
Slide 20
Slide 21: Expectations, rewards, and job attitudes
Slide 22: ‘Total reward’.
Slide 23: Rewards
Slide 24
Slide 25: Rewards
Slide 26: Direct Financial remuneration
Slide 27: Why is it important?
Slide 28
Slide 29: Objectives from the Rewards
Slide 30: Reward objectives
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