Question 2 Behavior & Performance in compensation & benefits.

What motivates behaviour of individual employees and how a good and Compensation & Benefits plays a stimulant for behavior modelling? Compensation is one of the primary reasons for employees to seek employment. They are rewarded for their services and efforts that they exert for their organizations. They can be compensated in many ways for example salaries, holidays, bonuses etc. There are two basic compensation models; performance based pay and components based pay. In the former paradigm, employees compensation is either tied to the way he performs; if he performs better he would be rewarded accordingly (performance based pay) and on the other hand, nonperformance based pay; where, employees performance is not tied to getting rewards, rather the employee is paid or rewarded even if its performance is not up to the mark e.g fixed pay and salaries etc.(Taylor, F.1911)see diagram-1. Diagram- 1

Performance Based Pay Source: Taylor, F. (1911) Components Based Pay Source: Beard, P (1986).

The first model works best in factories and production units where labour is cheap and performance is tied to the rewards directly. The second model is used for decades in corporate sector, in this model compensation is divided into three components namely; Fixed Pay, Flexible Pay and Benefits (Beard, 1986). Psychology gives us different rationales regarding the nature of motivation. For this reason, there are many theories relating to motivation, as to what motivates human beings and how to manipulate that process for organizational needs. Major theories are Process, Content and Reinforcement motivation theories. The theory is about motivating employees based on three important factors, motivation due to self-belief, motivation due to outcome and motivation due to valence (Vroom, 1964). Simply, it can be said Motivation = Expectancy X Instrumentality X Valence. Expectancy means that employees will be motivated if they believe their effort will result in performance, in other words, if they believe in their skills they will be motivated. On the other hand, Instrumentality means that employees will be motivated if they believe their performance will yield rewards. This factor determines that trust of employees on management is very important for their motivation. Lastly, Valence means that employees will be motivated if they are rewarded with rewards they value and not just any reward. Motivation is the drive of a person to carry out a task which he desires to do so. Some link motivation to human basic needs like food; clothing and shelter (Maslow 1943, Herzberg 1959) other focuses on higher end concepts like; motivation due to self-belief etc: (Vroom, 1964). However, one can say Motivation is the activation of goal-oriented behavior whether motivation is intrinsic or extrinsic. Intrinsic motivation is something that comes from within the person e.g challenging task motivates some people while thirst for recognition motivates others and extrinsic motivation is motivation caused by external factors e.g pay, bonus esetc. In the recent times, a lot of research is being done on what makes people motivated and how to motivate them by choosing the best option among many? At first employees were considered as a mere mechanical input to the organizational outputs (Taylor, 1911). But after the Hawthorne Studies, conducted by Elton Mayo from1924 to 1932, this attitude changed and considered human values, dreams, aspirations and needs into account,(Dickinson, 1973). At first employees were considered as a mere mechanical input to the organizational outputs (Taylor, 1911). But after the Hawthorne Studies, conducted by Elton Mayo from1924 to 1932, this attitude changed and considered human values, dreams, aspirations and needs into account,(Dickinson, 1973). Vrooms Expectancy theory says that people are motivated when they have a self belief on their skills, belief in the promises of the management about getting the

reward and the personal value they place on a specific reward (Vroom, 1964). The self-belief on skills is called Expectancy, belief in getting the reward is Instrumentality and value on the reward is the Valence. It is important to define each term further in order to be able to understand the hypothesis and theoretical framework coming later on. Expectancy: when Employees have a better perception of their skills they are more likely to try out difficult objectives. If they dont believe in their skills they wont be motivated. For example some one believes in himself; going in front of huge audience and delivering a lecture so his motivation to actually do it, would be more. Instrumentality: if employees belief that they will be rewarded for their efforts they will be motivated to perform. Managers need to be honest and objective about what they can provide as a reward and to whom they can provide. Otherwise employees will be in state of confusion and wont be motivated. Valence: Every one place a different value on a certain reward. To some pay is of more value than other rewards and to others more intrinsic rewards like recognition, achievement etc. are of more value. Employer should take a personal interest in his employees to know them better so that he can identify which reward he values most. Expectancy theory remains the most widely used theoretical framework for empirical studies that concern motivation and compensation related research ( Kanfer, 1990). That is why this model is chosen to measure the effect of compensation on Work Motivation as it is the most valid representation of the work-related attitudes (Pinder, 1984). Igalens &Roussel (1999) summed the work of previous researchers and came up with framework shown in diagram 2. The diagram shows relationship between total components of compensation (Fixed Pay, Flexible Pay, Benefits) with Vrooms Expectancy Theory.

A research design was developed to define the relationship of compensation with motivation. The Compensation Based Pay was incorporated in Expectancy theory. From this three hypotheses of the research were developed. First hypothesis was based on finding the relationship between Effort-Performance and Motivation due to

Self-Belief. Second hypothesis was based on finding the relationship between Performance-Outcome and Motivation due to Outcome. Both the variables were further divided into three components namely, Fixed Pay, Flexible Pay and Benefits. Finally, the third hypothesis was based on finding the relationship between Valence of Outcome with Motivation due to Outcome. Again, both the variables here were divided into three components of Fixed Pay, Flexible Pay and Benefits. See Diagram 3 for illustration of the constructed Research Frame Work. Diagram 3.Research Frame Work

Vrooms Theory: Motivation = Expectancy X Instrumentality X Valence Components of Compensation = Fixed Pay, Flexible Pay, Benefits Hypothesis-1; relates to the Expectancy part of Vrooms theory. Hypothesis-2; relates to the Instrumentality part of Vrooms theory. Hypothesis-3; relates to the Valence part of Vrooms theory. In Hypothesis 2 and 3 Components of Compensation are incorporated to be able to measure the effect of individual components on motivation of employees. Hypothesis 1: More the belief of an employee on his skills more will be his motivation level. There can be two variables in this hypothesis according to Vrooms Expectancy theory. One is the independent variable of Effort Performance Expectancy and other is the dependent variable of Motivation due to Self-Belief. Effort Performance Expectancy Motivation due to Self-Belief

Hypothesis 2: More the employees trust on managements promises to reward him more will be his motivation level. According to compensation components, reward can be of three types, fixed pay, flexible pay and benefits. Therefore, there is a need to have more variables to test this hypothesis. If the reward is fixed pay, it will motivate employees If the reward is flexible pay, it will motivate employees If the reward is benefits, it will motivate employees Performance Outcome Instrumentality is the independent variable which is tested with the dependent variable Motivation due to Outcome. Further, Performance Outcome is divided into three components namely, Performance Fixed Pay, Performance Flexible Pay and Performance Benefits. Motivation due to Outcome is similarly divided into three components namely, Motivation Fixed Pay, Motivation Flexible Pay and Motivation Benefits. The division is done to check the effect of individual components of compensation on motivation. Performance-Outcome Instrumentality Performance-Fixed Pay Performance-Flexible Pay Performance-Benefits Motivation due to Outcome

Motivation due to Fixed Pay Motivation due to Flexible Pay Motivation due to Benefits

There are five items related to Performance Outcome including the components and four related to Motivation including the components. The relationship of Performance-Outcome with Motivation due to Outcome was tested by linear regression. The relationships of Components of Compensation with Motivation are tested with Chi square. Hypothesis 3: If the employee is rewarded with something he values, more will be his motivation. For this hypothesis, there is a need of three components as well to test their individual effect on motivation. Therefore; If the reward is fixed pay, it will motivate the employee. If the reward is flexible pay, it will motivate the employee. If the reward is benefits, it will motivate the employee. There are two major variables. One is Valence of Outcome which is independent variable and the other is Motivation due to Valence which is the dependent variable. There are three variables for the components of compensation, namely Valence of Fixed Pay, Valence of Flexible Pay and Valence of Benefits. Similarly, Motivation due to Valence is divided into three components namely, Motivation due to fixed pay, Motivation due flexible pay and Motivation due to benefits.

Valence of Outcome Valence of Fixed Pay Valence of Flexible Pay Valence of Benefits

Motivation due to Valence Motivation due to Fixed Pay Motivation due to Flexible Pay Motivation due to Benefits

Question 3 What is job analysis. Why job analysis is important for an organization. Many industries draft an thorough job analysis of each ranking before embarking on Compensation & Benefits structure. Discuss on the above. Job analysis is the systematic study of jobs to identify the observable work activities, tasks, and responsibilities associated with a particular job or group of jobs. What job analysis is: It is a systematic method for gathering information It focuses on work behaviors, tasks, and outcomes It identifies the personal qualifications necessary to perform the job and the conditions under which work is performed It reports the job as it exists at the time of analysis; not as it was in the past nor as it exists in another organization

Job Analysis is: Job data obtained by job analysis serves a variety of organizational purposes and provides a basis for decision making. Organizations utilize job data obtained by job analysis to meet a variety of organizational objectives. Common applications of job analysis include: - Recruitment, selection, and placement of employees - New employee orientation and training - Performance management - Promotions and transfers - Job design - Job evaluation - Job enlargement - Job classification - Compensation (e.g., market-based pay) - Training and development/career development of staff - Manpower (staffing) planning - Utilization of staff - Plant safety - Writing or amending manuals and publications - Organizational design - Establishment of lines of responsibility - Establishment of organizational relationships - Union relationships (e.g., contract negotiations, grievances, etc.)

- Compliance (e.g., meeting equal opportunity guideline Job analysis serves as a legal compliance tool for EEOC and ADA Job analysis can be used to help organizations cope with change. In today's rapidly changing world, organizations need a flow of accurate and reliable information about the content and requirements of their jobs.

The OHR Compensation Study is using job analysis to meet these goals: Develop broader, more flexible job classifications Describe the work of the job family Identify and differentiate functions within the job family Develop a common language to describe work Aid in bargaining unit classification Conduct market studies of salaries Apply FLSA for exempt/nonexempt work

Common methods of job analysis include the following: Observation: A trained observer observes a worker, recording what the worker does, how the work is done, and how long it takes. There are two types of observation: (1) Continuous observation involves observing a job over a given period of time. (2) Sampling involves observing several incumbents over random, relatively short periods of time. Observation is a simple and frequently used method of job analysis. Interview: A trained job analyst interviews a job incumbent, usually utilizing a standardized format. Sometimes more than one worker is interviewed, and the results are aggregated. Another variation is the group interview, where several incumbents are interviewed at the same time. Critical Incident: Behaviorally based critical incidents are used to describe work, and a job analyst determines the degree of each behavior that is present or absent in the job. Diary: The job incumbent records activities and tasks in a log as they are performed. Checklist: A worker or supervisor check items on a standardized task inventory that apply to the job. Checklists may be custom-made or purchased from an outside vendor. Questionnaire: There are two types of questionnaires: The structured questionnaire uses a standardized list of work activities, called a task inventory, that job incumbents or supervisors may identify as related to the job. In addition, the respondent may also identify additional information such as how much time is spent on the task, the amount of supervision required, and/or the expertise required. The

open-ended questionnaire asks the job incumbent to describe the work in his or her own words. Technical Conference: Several experts (often called "subject matter experts") on the job collaborate to provide information about the work performed. A job analyst facilitates the process and prepares the job description based on the consensus of the technical experts. In certain applications, two or more methods may be combined. An example is the observation-interview. Job analysis is important for an organization because it helps in analyzing the resources and establishing the strategies to accomplish the business goals and strategic objectives. Effectively developed, employee job descriptions are communication tools that are significant in an organization's success. The main purpose of conducting job analysis is to prepare job description and job specification which helps to hire right quality of workforce. Job Analysis can be used in training to identify or develop, training content, and assessment tests to measure effectiveness of training, equipment to be used in delivering the training and methods of training. Job Analysis can be used in compensation to identify or determine: skill levels, compensable job factors, work environment, responsibilities and required level of education. Job Analysis can be used in selection procedures to identify or develop job duties that should be included in advertisements of vacant positions, appropriate salary level for the position to help determine what salary should be offered to a candidate, minimum requirements for screening applicants, interview questions, selection tests/instruments (e.g., written tests; oral tests; job simulations), applicant appraisal forms and orientation materials for new hires. Job Analysis can be used in performance review to identify or develop goals and objectives, performance standards, evaluation criteria, length of probationary periods, and duties to be evaluated. An ideal job analysis should include Duties and Tasks: The basic unit of a job is the performance of specific tasks and duties. This segment identifies the working environment of a particular job. This may have a significant impact on the physical requirements to be able to perform a job. Tools and Equipment: Some duties and tasks are performed using specific equipment and tools. These items need to be specified in a Job Analysis. Relationships: The hierarchy of the organization must be clearly laid out. The employees should know who is under them and who they have to report to.

Requirements: The knowledge, skills, and abilities required to perform the job should be clearly listed. There are several ways to conduct a job analysis, including: interviews with incumbents and supervisors, questionnaires (structured, open-ended, or both), observation, critical incident investigations, and gathering background information such as duty statements or classification specifications. It is important for organizations to hire the right candidates who suit their work environment and requirements otherwise they will end up stagnating. It also important for the job seekers to pick up a job that suits their personality and interest as the first step will play a deciding role in shaping their career and position in life. This can be possible only when job seekers and organizations are able to communicate their requirements to each other. Finally, a job analysis and description is important because it helps to answer important questions such as; What are the specific job duties?, What methods or processes will be used to perform the job?, What type of working conditions will be working in?, and What tools, equipments, and materials will be needed to perform the job?. The job analysis helps answer these important questions and set the foundation for Human Resource managers. They also ensure that any one will not be breaking any labour laws. In order to know each job's functions, they must first do a job analysis. Furthermore, that a thorough job analysis is needed for supporting a selection procedure. Job analysis have many uses, which are all important to ensuring human resource activities run properly.

Job Analysis Process

Question 5 Application of job and knowledge in Compensation & Benefits formulation. Knowledge skill and ability (KSA) are only used for determine pay scale. Do you agree to the above on are more elements in determine pay scale? Discuss on the above. These first two competencies are agreed upon by almost everyone: Knowledge. This is the accumulated information that the individual has attained through education and experience. Skill. This is the application of knowledge to particular situations. These are the things (tasks) the individual can do. Together these might be called the individual's ability: these two factors are the essential characteristics of individuals that are required to do the job (as in the motivation model that states that performance is a function of ability x effort). Knowledge and skill requirements are the basis of the selection process and can be found in the job specification section of job descriptions. A second level of competencies is that of behaviors. In this regard competencies look very much like Behaviorally-Anchored Rating Scales [BARS] used in performance appraisal. These competencies represent the application of skills and knowledge in work related situations, much like behavior-based questions interviewers would ask of applicants. A third level of competencies are more controversial, those of personal characteristics. This opens up competencies to a wide variety of factors such as motives, general disposition, attitudes, values and self-image. The premise behind using these kinds of factors is that through observation and research, the organization can elicit the critical factors that distinguish superior performance. Then the characteristics that distinguish superior performance from average performance can be used as rewards. The ultimate goal being that the total productivity of the organization be increased. What the organization is seeking to discover with these factors is what causes the individuals to apply their effort: this answers the part of 'effort' in the motivation model. However, these factors may vary by areas within the organization and over time as the organization grows and changes. In today's work world a majority of work requires at least basic knowledge in operating a computer. But there are many stages from this basic skill level all the way up to being capable of designing computer systems. Basic skills are the building blocks for the development of higher skills. Often organizations will hire people who have some level of skill sets and then train them or reward them for obtaining further skills needed by the organization. One of the toughest parts of doing a job analysis is developing the job specifications. This section of a job description describes the knowledge, skills and abilities [KSA] required to perform the job. The reason that it is so challenging is that there is no direct information that tells the analyst which KSAs are required for the successful performance of any particular job. This is the problem faced by all selection procedures and in this instance, the problem of selecting competencies for use in a compensation plan. The first part of this is selecting the

appropriate criterion; that is defining successful performance. In selecting competencies the group to be covered by the plan to a large degree determines the nature of the criterion. Selecting appropriate competencies then is a matter of judgment on the part of the person doing the selecting. However, the competency must be a clear concept, preferably an observable one. There are some themes running through these dimensions. Developing Competencies. Where does the individual obtain the competencies desired by the organization? If the answer is outside the organization then the question is when; before or after being hired? This is a selection vs. training question. The answer will help determine the type of competency pay system that is appropriate. For instance, if the training is done outside by an educational institution, then the pay system focuses on being competitive in the labor market for graduates and paying for courses taken that improve the individual's skills. On the other side, if the answer is in house training, then a definition of skills to be taught is required with certification that increases the individual's pay. Competitive Edge The goal of a competency-based human resource approach is to create a workforce that is unique and provides the organization with a strategic advantage in the marketplace. This suggests that the organizations needs and desires should create an atmosphere that rewards behaviors and attitudes as well as skills that are clearly related to the organizations mission. This seems most likely to happen where the organization has carefully defined the needed competencies, established methods whereby individuals can obtain or sharpen the competency and the individual is rewarded for obtaining and using the competency. Selecting Competencies One of the toughest parts of doing a job analysis is developing the job specifications. This section of a job description describes the knowledge, skills and abilities [KSA] required to perform the job. The reason that it is so challenging is that there is no direct information that tells the analyst which KSAs are required for the successful performance of any particular job. This is the problem faced by all selection procedures and in this instance, the problem of selecting competencies for use in a compensation plan. The first part of this is selecting the appropriate criterion; that is defining successful performance. In selecting competencies the group to be covered by the plan to a large degree determines the nature of the criterion. Selecting appropriate competencies then is a matter of judgment on the part of the person doing the selecting. However, the competency must be a clear concept, preferably an observable one. Some competencies such as a degree in Aeronautical Engineering for a job designing aircraft, or keyboard skills for most clerical positions, are obvious. A term like Entrepreneurial Drive for managers is not as quantifiable; what is its exact definition, and is it needed for all mangers or only some?

A second requirement is that the competency needs to be variables that have degrees. A competency that is simply present or not may be sufficient, or even desirable, for selection but does not provide a range for purposes of payment. People may be honest or not, but rarely would we consider degrees of honesty worth rewarding. Again these degrees need to be measurable and preferably observable. Variations or levels of competency may be in terms of either depth or breadth. Depth is becoming more expert in a particular field. Increased breadth in a competency is related to acquiring knowledge that allows the person to do more of some function. For instance, a sales person learning more about an organizations product line enables them to sell more to both new and current customers. Sources for competencies can be developed from outside expert sources or developed internally by the organization. There are many sources of pre-defined competencies available to use. The advantage to using these off-the-shelf sources is that they are ready-made and tested, though not for a specific situation. These sources are good, but not likely to identify competencies that will be unique to your organization and provide a specific competitive advantage. Figure15-1 is a list of the competencies that can be found in the eDOT. Basic Characteristics -Data -People -Things Advanced Characteristics -Specific Vocational Demands -Physical Demands -Aptitudes -Temperaments Enhanced Characteristics -Adaptation and Stress -Understanding and Memory -Sustained Concentration -Social Interaction Figure 15-1. Person Characteristics described in the eDOT

Each of the competencies in the eDOT contains a range. Figure 15 -2 shows the range for reasoning. Reasoning Level 0: Apply little understanding to carry out the simplest of jobs. Never deals with variable situations encountered on the job. Level 1: Apply commonsense understanding to carry out simple one- or two-step instructions. Deal with standardized situations with occasional or no variables in or from these situations encountered on the job. Level 2: Apply commonsense understanding to carry out detailed but uninvolved written or oral instructions. Deal with problems involving a few concrete variables in or from standardized situations Level 3: Apply commonsense understanding to carry out instructions furnished in written, oral, or diagrammatic form. Deal with problems involving several concrete variables in or from standardized situations. Level 4: Apply principles of rational systems to solve practical problems and deal with a variety of concrete variables in situations where only limited standardization exists. Interpret a variety of instructions furnished in written, oral, diagrammatic, or schedule form. Level 5: Apply principles of logical or scientific thinking to define problems, collect data, establish facts, and draw valid conclusions. Interpret an extensive variety of technical instructions in mathematical or diagrammatic form. Deal with several abstract and concrete variables. Level 6: Apply principles of logical or scientific thinking to a wide range of intellectual and practical problems. Deal with non-verbal symbolism (formulas, scientific equations, graphs, musical notes, etc.) in its most difficult phases. Deal with a variety of abstract and concrete variables. Apprehend the most abstruse classes of concepts. Figure 15-2. Degrees of Reasoning Developing Measures If a company is going to pay for a particular competency then they must have a measure of that competency. They need to know if the employees have a specific competency and the degree to which they have it, so that accurate decisions about how much to pay the individual for that competency can be made. Further, the proposed measure must in fact measure that competency, not an easy task in all

cases. In general, measures are not the competency; they are indicators that the person has the competency. Thus, the value of using a particular competency is partially a function of how well the competency can be measured. Measures can fall into a number of categories: Education and Training. A major indicator of a person's competency is the education and training they have. This may be before being employed, in which case the pay upon hire should reflect the level of education and appropriate training. Degrees and certifications are major indicators of the level of competency. Organizations need to direct education and training taken after hire. The type and level of education and training the organization desires the employee to have, as well as the reward for attaining that level of competence, needs to be made explicit. Experience. Often one's experience is called the best education and training needed. Organizations usually reward experience, either consciously or unconsciously. Pay systems in which the employee receives a standard increase each year, independent of cost-of-living increases, is rewarding experience even if it isn't realized as such, and just like competencies, experience can be of two types: breadth and depth. Breadth of experience is attaining competence in a variety of tasks. These may be closely related tasks permitting the person to perform a larger part of the total task or they may be new tasks that provide the person with a new skill set. Organizations can plan employee attainment of new skills by establishing planned programs and then connecting these to rewards in the form of increased pay. The value to the organization of this approach is that employees with a variety of skills can be moved more readily into new tasks as the organization changes. Depth of experience is attained by being able to perform more complex tasks within the person's current occupational area. This is typical of the experience attained by engineers as they are assigned more complex design work as they attain more experience. However, as those experienced in selection know, there is the problem of distinguishing 10 years of experience from one year of experience 10 times over. Tests. Education, training and experience are rough measures of competence. To improve on the accuracy of measuring these competencies or for measuring other more personal characteristics of employees, the organization may resort to testing. There are tests for almost any psychological concept imaginable, so if the organization wishes to use a psychological concept as its basis for paying a group of employees, then there is undoubtedly a ready-made test available. On the other hand, if what the organization needs is specific information on the KSA of a particular job, it may be necessary to build a test specific to the situation. Behaviors. Another way to measure competency is to record behaviors. After all, if one is competent in something it should show up in how a person behaves. This is measuring competency by observing the person in action. This necessitates determining what behaviors represent the competency concept for which the organization wishes to pay. Measuring behaviors has been done mainly for purposes of performance appraisal. Two common methods are the Behavioral Observation

Scale [BOS] and the Behaviorally Anchored Rating Scale [BARS]. These two techniques have the advantage, in the realm of performance appraisal, of getting away from personal characteristics and focusing on behaviors that lead to superior performance. Developing these types of systems requires a great deal of work as they are specific to a job or a solitary part of the organization. They also take up the time of the supervisor who must observe the employees on the job sufficiently to make accurate decisions about their behaviors. A question that comes up in all performance appraisals is who should collect this data that is so necessary in making performance decisions. The trend is toward 360 degree appraisals. These appraisals ask all persons who have significant interactions with the employee to complete an evaluation. Accomplishments. A final category of measures would be the person's accomplishments. These would be measures of how well their past behavior has led to positive results. Essentially this is an output measure. As such, pay for accomplishments is usually a part of a variable pay plan. The requirement here is that the reward and the accomplishment are spelled out in advance and the connection between the two is made clear. For all of these measures there needs to be an accompanying rating scale. This is so that distinctions can be made between employees to the degree that they exhibit the desired competency; from these distinctions differences in pay can be developed. Most of the above have either obvious scales, such as experience, or the measure has, as an integral part of its development, a set of scales such as BARS. Accomplishments are an exception, suggesting that appropriate rewards for this measure may be in the form of an incentive such as a bonus. Linking Competencies to pay There are pay structures that use competencies as the base. Typically a wage structure consists of a series of levels, although in some competency based plans it is more like a continuum. When levels are established in competency pay, they tend to be quite broad, lending themselves to a broadbanding approach. In this system the organization needs to select a limited number of bands. Within these bands the competency zones would be established that define levels of competency. Individuals would be placed first into the appropriate band and then within the competency zone. Movement within the zone would occur as the person's competency increases. The basic problem that occurs in these kinds of systems is pricing the structure. Wage information comes in the form of jobs, not competencies. However, it is important to figure out ways to estimate the market value so as to establish controls that keep the organization from paying too much. An approach would be to use certain benchmarks. The easiest would be developed from wage surveys establishing the highest and lowest within a band. An example of the lowest being a new college graduate in engineering and the highest an expert design engineer. Or at a higher level an engineering supervisor and the Head of engineering for the entire organization. All others would fall between the two based upon their level of competency.

The ERI Salary Assessor has started to deal with this problem by presenting data on some jobs by level. Figure 15 - 3 is a description of the three levels used to present the data. Level 1 Beginning Level. Applies fundamental principles and concepts of position. Performs the more routine aspects and progresses to more varied and complex activities with development of additional knowledge and experience. Level 2 Intermediate Level. Continuing development level. Performs more varied and difficult aspects of position compared to Level 1. Unusual aspects generally referred to supervision. At this level the employee would have less latitude than at Level 3 in terms of decision making and un-reviewed actions. However, this level requires considerable know-how of the subject matter, principles, and concepts of the position. Level 3 Senior Level. Competent in subject matter, principles, knowledge, and concepts; generally considered a specialist in area of assignment; able to perform full scope of activities associated with job which includes the most difficult aspects. May lead or coordinate individuals assigned to assist in the work.

Figure 15-3. Job Levels

Question 7 The balance approach for a Compensation & Benefits package. You are the HR specialist in a new organization. You are been asked by the Human Resource Director to implement a balance scorecard approach. He wants to know why balance score card is a better measuring tool for determine performance measurement. Introduction The success of any organization is reflected upon by its performance which is in turn highly dependent upon its strategies. In this era of cut-throat competition, what anorganization requires is not just framing the right strategies, but also managing the same. The impact of the right strategies will automatically be reflected in the results. Moreover, any organization has to understand that it needs to give impetus not only towards the financial results, but also towards satisfaction of the customers, development of state-of the- art technologies and creation of an environment of learning and growth. The balanced scorecard can be thought of as the strategic chart of accounts for an organization. The long-term success of any organization is determined by the capabilities and the competencies it has developed one of the tools for organizational appraisal. This innovative tool is unique in two ways compared to the traditional performance measurement tools. They are: It considers the financial indices as well as the non-financial ones in determining the corporate performance level; and It is not just a performance measurement tool, but also a performance management system. The aim of the balanced scorecard is to direct, help manage and change in support of the long-term strategy in order to manage performance. It acts as a catalyst for bringing in the change element within the organization. It allows, for the first time, an organization to look aheadusing leading indicatorsinstead of only looking back using agging indicators. The balanced scorecard puts strategythe key driver of results today at the center of the management process. The basic premise behind the balanced scorecard is quite simple: measurement motivates. Most of us have heard some version of the standard performance measurement cliches: what gets measured gets done, if you dont measure results, you cant tell success from failure and thus you cant claim or reward success or avoid unintentionally rewarding failure, if you cant recognize success, you cant learn from it; if you cant recognize failure, you cant correct it, if you cant measure it, you can neither manage nor improve it. However, what eludes many is the easy path to identifying truly strategic measurements without falling back on things that are easier to measure such as input, project or operational process measurements. Balanced Scorecard Basics The balanced scorecard was developed by Robert Kaplan (Harvard Business School) and David Norton as a performance measurement framework that added

strategic nonfinancial performance measures to traditional financial metrics to give managers and executives a more balanced view of organizational performance. While the phrase balanced scorecard was coined in the early 1990s, the roots of this type of approach are deep and include the pioneering work of General Electric on performance measurement reporting in the 1950s and the work of French process engineers, who created the Tableau de Borda dashboard of performance measuresin the early part of the 20th century. Balanced Scorecard Translates vision and strategy; Defines the strategic linkages to integrate performance across organizations; Communicates objectives and measures to a business unit, joint venture, or shared service; Aligns strategic initiatives; Aligns everyone within an organization so that all employees understand how and what they do supports the strategy; Provides a basis for compensation; and Provides feedback to the senior management if the strategy is working. Therefore, five principles of successful organizations emerged from Kaplan and Nortons research on successful balanced scorecard users. These five principles describe the key elements of building an organization able to focus on strategy and deliver breakthrough results. They are: Mobilize change through executive leadership; Translate the strategy into operational terms; Align the organization to the strategy; Make strategy everyones job; and Make strategy a continual process. The Review To really understand how the balanced scorecard has driven breakthrough results over the long-term, it is instructive to look at the early adoptersthe organizations that began using the scorecard back in 1992 and 1993. Cigna Property and Casualty was losing a million dollars per day in 1992. To fix this hemorrhaging of cash, they introduced a new strategy to reposition themselves as specialists, focusing on key underwriting niches. In 1993, they implemented the balanced scorecard to describe to their organization what it meant to be a specialist. Within two years, Cigna was profitable. Five years later, Cigna sold their property and casualty division for $3 bn. They went from negative shareholder value to positive $3 bn in five years. Mobils US Marketing and Refining Division was last in their industry profitability in 1993. To address this burning platform, they introduced a new strategy and d ivided their monolithic organization into 18 different business units. The balanced scorecard was used to convey the strategy to these new business units. Each business unit built its own balanced scorecard that was cascaded from the corporate balanced scorecard. Within two years, Mobil had moved from last in their industry to first. They maintained that position for five consecutive years. Brown and Root, the European

subsidiary of Rockwater, was responsible for developing and installing oil platforms in the North Sea. In 1992, they merged the two companies. The companies didnt understand the basis for the merger. The management introduced the balanced scorecard to get them on the same page so that they had a common vision. They introduced a very innovative strategy for segmenting the market into two levels. Within three years, Brown and Root was first in its industry in both growth and profitability. Perspectives The balanced scorecard suggests that we view the organization from four perspectives, and to develop metrics, collect data and analyze it relative to each of these perspectives: The Learning and Growth Perspective This perspective includes employee training and corporate cultural attitudes related to both individual and corporate self-improvement. In a knowledge-worker organization, peoplethe only repository of knowledgeare the main resource. In the current climate of rapid technological change, it is becoming necessary for knowledge workers to be in a continuous learning mode. Metrics can be put into place to guide managers in focusing training funds where they can help the most. In any case, learning and growth constitute the essential foundation for success of any knowledge-worker organization. Kaplan and Norton emphasize that learning is more than training; it also includes things like mentors and tutors within the organization, as well as that ease of communication among workers that allows them to readily get help on a problem when it is needed. It also includes technological tools, what the Baldrige criteria call high performance work systems. The Business Process Perspective This perspective refers to internal business processes. Metrics based on this perspective allow the managers to know how well their business is running and whether its products and services conform to customer requirements (the mission). These metrics have to be carefully designed by those who know these processes most intimately; with unique missions these are not something that can be developed by outside consultants. The Customer Perspective Recent management philosophy have shown an increasing realization of the importance of customer focus and customer satisfaction in any business. These are leading indicatorsif customers are not satisfied, they will eventually find other suppliers that will meet their needs. Poor performance from this perspective is thus a leading indicator of future decline, even if the current financial picture looks good. In developing metrics for satisfaction, customers should be analyzed in terms of kinds of customers and the kinds of processes for which a product or service to those customer groups is provided. The Financial Perspective Kaplan and Norton do not disregard the traditional need for financial data. Timely and accurate funding data will always be a priority with managers doing everything necessary to provide it. In fact, often there is more than enough handling and processing of financial data. With the implementation of a corporate database, it is

hoped that more of the processing can be centralized and automated. However, the point is that, the current emphasis on financial leads to the unbalanced situation with regard to other perspectives. There is perhaps a need to include additional financial-related data, such as risk assessment and cost-benefit data, in this category The Balanced Scorecard Model The following are to be done so as to utilize the balanced scorecard as a strategic management tool: The major objectives are to be set for each of the perspectives. Measures of performance are required to be identified under each of the objectives which would help the organization to realize the goals set under each of the perspectives. These would act as parameters to measure the progress towards the objectives.

 The next important step is the setting of specific targets around each of the identified key areas which would act as a benchmark for performance appraisal. The appropriate strategies and the action plans that are to be taken in the various activities should be decided so that it is clear as to how the organization has decided to pursue the pre-decided goals. Due to this reason, the balanced scorecard is often referred to as a blueprint of the company's strategies. Implementing a Balanced Scorecard: Nine Steps to Success The balanced scorecard helps everyone in an organization understand and work towards a shared vision. A completed scorecard system aligns the organizations picture of the future (shared vision), with business strategy, desired employee behavior and day-to-day operations. Strategic performance measures are used to better inform decision-making and show progress toward desired results. The organization can then focus on the most important things that are needed to achieve its vision and satisfy customers, stakeholders, and employees. Other benefits include measuring what matters, identifying more efficient processes focused on customer needs, improving prioritization of initiatives, improving internal and external communications, improving alignment of strategy and day-to-day operations and linking budgeting and cost control processes to strategy. Step one of the scorecard building process starts with an assessment of the organizations mission and vision, challenges and values. It also includes preparing a change management plan for the organization. In step two, elements of the organizations strategy, including strategic results, strategic themes and perspectives, are developed to focus attention on customer needs and the organizations value proposition. In step three, the strategic elements developed in steps one and two are decomposed into strategic objectives, which are the basic building blocks of strategy and define the organizations strategic intent. Objectives are first initiated and categorized on the strategic theme level, categorized by perspective, linked in cause-effect linkages (strategy maps) for each strategic theme and then later merged together to produce one set of strategic objectives for the entire organization. In step four, the cause and effect linkages between the enterprise-wide strategic objectives are formalized in an enterprise-wide strategy map. The previously constructed theme strategy maps have merged into an overall enterprise-wide strategy map that shows how the organization creates value for its customers and stakeholders. In step five, performance measures are developed for each of the enterprise-wide strategic objectives. Leading and lagging measures are identified, expected targets and thresholds are established and baseline and benchmarking data is developed. In step six, strategic initiatives are developed that support the strategic objectives. To build accountability throughout the organization, ownership of performance measures and strategic initiatives is assigned to the appropriate staff and documented in data definition tables. In step seven, the implementation process begins by applying performance measurement software to get the right performance information to the right people at the right time. Automation adds structure and discipline to implementing the balanced scorecard system, helps transform disparate corporate data into information and knowledge and helps communicate performance information. In short, automation helps people make better decisions because it offers quick access to actual performance data.

In step eight, the enterprise-level scorecard is cascaded down into business and support unit scorecards, meaning the organizational level scorecard (the first tier) is translated into business unit or support unit scorecards (the second tier) and then later to team and individual scorecards (the third tier). Cascading translates highlevel strategy into lower level objectives, measures and operational details. Cascading is the key to organization alignment around strategy. Team and individual scorecards link day-to-day work with department goals and corporate vision. Performance measures are developed for all objectives at all organizational levels. As the scorecard management system is cascaded down through the organization, objectives become more operational and tactical, as do the performance measures. Accountability follows the objectives and measures, as ownership Implementing Balance Scorecard for Performance Measurement 13 is defined at each level. An emphasis on results and the strategies needed to produce results is communicated throughout the organization. In step nine, an evaluation of the completed scorecard is done. During this evaluation, the organization tries to answer questions such as, Are our strategies working?, Are we measuring the right things?, Has our environment changed? and Are we budgeting our money strategically. Balanced Scorecard Benefits Make strategy operational by translating strategy into performance measures and targets. Helps focus entire organization on what must be done to create a breakthrough performance. Integrates and acts as an umbrella for a variety of often disconnected corporate programs, such as quality, reengineering, process redesign and customer service. Breaks down corporate level measures so that local managers, operators and employees can see what they must do well in order to improve organizational effectiveness. The secret of the balanced scorecard and the reason it has gained such wide acceptance is quite simple. It lets organizations reach their full potential. The breakthrough results of the organizations in the Balanced Scorecard Hall of Fame were created not by new strategies, new people or new processes. Instead, the results were created by focusing the entire organization on the strategy and rewarding people for executing the strategy. The reason behind its popularity is that the organizations have understood the capability this tool has in bringing the desired results to the business by managing the strategies. Work that was done with a major telecommunications provider is a clear example of the mismatch that is often seen. At the start of the balanced scorecard initiative, the organization was determined that being appreciably superior in customer service was one element of its customerdriven strategy. This strategy was developed before the balanced scorecard was introduced to the organization and banners were hung in call centers throughout the country with slogans such as Customers First and Service Matters; however, customer service levels remained at the same abysmal levels. Why? This is because t`1qhe call center employees were measured based on the number of calls that they could process in an hour. This measure drove them to hang up on difficult problems to handle simpler ones, driving customers crazy. After lamenting the balanced scorecard, they changed their metric to percent of problems handled with one call. This completely changed the atmosphere of the call center and

allowed the employees to focus on solving problemsincreasing morale, customer satisfaction and eventually profits. However, one fact is that it is not easy to implement this tool because it involves a lot of subjectivity. Also, the tool is much more complex compared to the other tools. The measures that need to be taken is contingent upon the kind of environment, industry and the business the organization is in. The tool has tried to fill up the void that exists in most management systemsthat is the lack of a systematic process to implement and obtain feedback about the organizations strategy. However, a lot of refinement is still required, so that it becomes understandable to every stakeholder associated with the organization and removing subjectivity to a large extent. Conclusion The balanced scorecard is therefore a very important strategic management tool which helps an organization not only to measure performance, but also decide/manage the strategies needed to be adopted/modified so that the long-term goals are achieved. Thus, in other words, the application of this tool ensures the consistency of vision and action which is the first step towards the development of a successful organization. Also, proper implementation can ensure the development of competencies within an organization which will help it in developing a competitive advantage, without which it cannot be expected to outperform its rivals.

Reference 1) Lance A. Berger and Dorothy R. Berger, 1999, The Compensation Handbook, McGraw-Hill 2) http://www.cliffnotes.com/study_guide/Motivation 3) http://www.practical_management.com/OrganizationDevelopment/Employee_Motivation.html 4) http://www.textond.com/pdf/JBASR/J.% 5) http://www.eridlc.com/index.cfm?fuseaction=textbook.chpt1 6) http://www.balanced scorecard.org