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MANAGEMENT OF HUMAN RESOURCES

MS - 02/TMA/SEM-II/2014-2015
1. Borderless world, Diversity, and Knowledge Power are the three broad phenomena of 21st
century, posing challenges to the corporate world and culminating into fierce competitive
environment.
Elaborate this statement and discuss the underlying concepts, specifically in respect of the
challenges faced by the corporates in managing Human Resources.
Draw examples from the cases you are aware of. Briefly describe the situation and organizational
limitations you are referring to.
Ans. Borderless world, Diversity Management, and Knowledge power, are some of the overarching
factors being encountered by the Human Resource Mangers of 21st century business world. Today, in the
midst of a complex and turbulent environment, the world economy and market are developing quickly. In
the analysis of their competitive factors, the prevailing understanding is that the bases from which
everything begins and on which everything depends are the people and their position rather than structure
and function. Competitive position of any business system within the global business environment
depends on its flexibility, inventiveness and focusing on their employees' quality. The subject of this
article is the development of the employees as the generic function of human resource management from
the viewpoint of its influence on individual performances, and based on this, on direct effect on the
company's development and the increase of its competitiveness. The main starting point of this article is
the idea that knowledge, as the result of the employees' development, is becoming a strategic resource and
centre of competitive advantage and differentiation in modern economy. Attempting to change from
within to adjust to external changes, modern organizations encourage development of employees and seek
after methods and instruments enabling them to change the employees' knowledge and skill structure as
the basis of organizational development.
Convergys has rapidly grown in India and the critical need to investigate the dynamics of human resource
management (HRM) practices and systems in this sector. Using a mixed-method approach involving both
in-depth interviews and self-completing questionnaires, we analyze the nature of HRM systems in
Convergys organizations. The focus on the nature and structure of work and organization of Convergys,
as well as the strategic role played by HRM in such organizations.. A number of insights related to HRM
policies and practices are shared by the HR managers interviewed shedding more light on the inner
workings of the Convergys and their challenges. The analysis provides original and useful information to
both academics and practitioners and opens avenues for future research on the nature of HRM systems
and practices in the Indian BPO industry.
According to the study conducted by NASSCOM and Everest India, the Indian BPO sector has been
growing at more than 35 percent over the past three years and currently estimated at US$ 26-29 billion
and could grow nearly five-fold to reach US$50billion in size by 2012.
The IT enabled services (BPO) industry is being looked upon as the next big employment generator. It is,
no doubt, one of the toughest task for an HR manager in this sector, to bridge the ever increasing demand
and supply gap of professionals. He has to find the right kind of people who can keep pace with the
unique work patterns in this industry. Adding to this is the challenge of maintaining consistency in
performance and keeping the motivation levels high, despite the monotonous work. The toughest concern
for an HR manager in India is, however, the high attrition rate which is approximately 30-35 percent at
present. In this regard an earnest attempt has been made by taking 120 respondents from the BPO sector

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in NCR to study the various challenges. The statistical tools like factor analysis, means are being used. It
concluded that attrition is the most challenging factor for all HR managers.
Case study
The study has included 50 variables; to identify the challenges which an HR manager faces rated on 5
point scale. The statements are put for factor analysis by using composite analysis method. Factor
analysis resulted into 10 factors solution as HR Challenges.

Sr. No.

Factor Name

Eigen value

1.

Attrition

7.965

2.

Interpersonal Relation

5.195

3.

Talent Management

4.157

4.

Leadership

3.31

5.

Performance Management

3.007

6.

Worklife Balance

2.695

7.

Changing Employee Expectation

2.243

8.

New Industrial approach

2.087

9.

Compensation

1.961

10.

Succession Planning

1.763

Factor 1:
Attrition: This challenge has six issues related to Attrition. All deal with the various dimensions of
Attrition and highlight the importance that attrition is the most important issue and a challenge for HR
managers as the total Eigen value is 7.965.
Factor 2:
Interpersonal Relations: This challenge has four issues related to Interpersonal Relations. All deal with
the various dimensions of Interpersonal Relations
Factor 3:
Talent Management: This challenge has five issues related to Talent Management. All deal with the
various dimensions of Talent Management and highlight the importance Talent Management is an
important issue and a challenge for HR managers as the total Eigen value is 4.157.
Factor 4:
Leadership: This challenge has four issues related to Leadership. All deal with the various dimensions of
Leadership and highlight the importance that Leadership is an important issue and a challenge for HR
managers as the total Eigen value is 3.310.

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Factor 5:
Performance Management: This challenge has five issues related to performance management. All deal
with the various dimensions of Performance Management and highlight that Performance Management is
the one of the important issues and a challenge for HR managers as the total Eigen value is 3.007.
Factor 6:
Work Life Balance: This challenge has five issues related to Work Life Balance dealing with its various
dimensions and highlighting the importance that Work Life Balance is an important issue and a challenge
for HR managers as the total Eigen value is 2.695.
Factor 7:
Changing Employee Expectations: This challenge has six issues related to the various dimensions of
Changing Employee Expectations and highlight the importance that Changing Employee Expectations is
an important issue and a challenge for HR managers with the total Eigen value 2.243.
Factor 8:
New Industrial Approach: This challenge has eight issues related to the various dimensions of New
Industrial Approach and highlight that the New Industrial Approach is an important issue and a challenge
for HR managers with the total Eigen value 2.087.
Factor 9:
Compensation: This challenge has four issues related to the various dimensions of Compensation and
highlight the importance that Compensation is an important issue and a challenge for HR managers with
the total Eigen value 1.961.
Factor 10:
Succession Planning: This challenge has three issues related to the various dimensions of Succession
Planning and highlight the importance that Succession
2. Define and describe the inter-relationship between Self-Concept, Concept of Role and
Organizational Socialization. Explain with examples, you have come across or aware of. Relate
your response with the socialization factors in organizational socialization process. Briefly describe
the organization you are referring to.
Ans. Self-concepts is the way you perceive and judge yourself. It is your way of thinking about the kind
of person you really are. Do you see yourself as a leader or follower? Do you have high need for power,
achievement, or social affiliations? Are you aggressive or passive? People have the unique capacity for
thinking about their own behavior and their impact on others.
Self-concept is of vital importance in the process of organizational socialization. When the self-concept is
compatible with ones organizational role and requirements, the person is likely to be motivated, oriented
to task performance, and satisfied. However, when self-concept and organizational role are not
compatible, then integration is difficult and motivation, performance, and satisfaction are likely to be low.
This does not imply that self-concept is totally fixed. Indeed, one of the important aspects of
organizational socialization is the potential modification in self-concept. The MBA graduate who thought
of herself in passive terms may be thrust into a leadership position where she is effective and gratified.
The idea of role comes form sociology and it is the pattern of actions expected of a person in his activities
involving others. It arises as a result of the position one occupied in the social structure as he/she interacts
with other people. In order to be able to coordinate his work with others in an organization, one needs

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some way to anticipate their behaviour as one interacts with them. Role performs this functions in the
social system.
From a managers point of view, a fuller understanding of roles should help him know what others expect
of him and how he should act. Knowing this he should be more adaptable to each unique role relationship.
His decision making should improve because he will understand why other people are acting the way they
are. He will also recognize the variety of roles each employee plays and will try to provide motivations
and satisfactions for those several job roles.
SOCIALISATION FACTORS IN ORGANIZATIONAL SOCIALISATION
People coming into organization are not like raw material inputs possessing rigid specifications. No
amount of quality .control and inspections will ensure that they are 99.99% perfect and uniform. They are
individuals influenced by hereditary factors, previous socialization processes, and their other life
experiences. In the socialization process, organizations are working with highly variable, heterogeneous,
and somewhat imperfect human resources. To the extent that individuals have faced significantly different
acculturation processes in their earlier lives, they represent different inputs to the socialization process.
Many studies have indicated that workers coming from different communities (rural versus urban), from
different social classes, or who are in other ways differentiated by past socialization have different
expectations, motivations, behaviors, and satisfactions. These groups represent subcultures that prepare
people differently for functioning in work organizations. Looking at these subcultures may help us
understand some of the problem that result from variations in social learning among societies or among
subgroups within a society (Nord, 1976).
Influence of Subcultures Relevance for Gender and Minority Issues
The phenomenon of socio-cultural divergence can be illustrated by looking at two groups in the work
force: women and minorities. We are born into two broad subcultures based on gendermale or female.
These are obvious physiological differences, but how much these contribute to later differences in the
behavior men and women is the subject of much controversy. A good deal of evidence suggests that much
dissimilarity occurs because of different socialization process for girls and boys There appear to be rather
clearly defined sex role stereotypes of men and women (Broverman et al., 1972). The young girl or boy is
socialized to match these stereotypes. Some of the major components of personality characteristics,
interests, and behaviors as appropriate for one sex or the other; (2) sex roles are systematically inculcated
in individuals, beginning at birth, by parents, the educational system, peers, the media, religious
institutions, and other informational sources; (3) individuals learn appropriate sex roles through role
models and differential reinforcement; (4) sex roles form the core of an individuals identity or self
image; and (5) in many societies the male role enjoys the higher status.
Stereotypical masculine traits (more logical, objective, aggressive, and ambitious as well as less sensitive,
warm, and expressive) are often perceived to be more desirable for mature adults than stereotypical
feminine characteristics (more emotional, sensitive, and expressive as well as less aggressive, objective,
and standards exist for women than for adults. If women adopt the behaviors specified as desirable for
adults, they risk censure for their failure to be appropriately feminine; but if they adopt the behaviors that
are designated as feminine, they are necessarily deficient with respect to the general standards for adult
behaviour (Broverman et aI., 1972, p. 75).
It also leads to additional problems for women seeking to rise in the organizational hierarchy to
managerial positions. The effective manager is seen to have those traits most closely associated with the
masculine (and adult) sex role. The aspiring women generally must assume some of these traits if she is to
be successful in a managerial position. However, the more aggressive women is often described as pushy,
ruthless, and domineering. An aggressive man, behaving in essentially the same way, is called a gogetter or a take-charge guy. If a women behaves in the stereotypical feminine manner, she is likely to
be considered overcautious, incapability of decisive action, and too emotional.
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There are further indications that other factors in organizations contribute to the problem, such as
differential recruitment of women to lower-level jobs that require dependence and passivity and excessive
control that give women less power (Acker & Van Houten, 1974). Taken together, past socialization into
differentiated sex roles and conditions within organization that reinforce these differences create unique
problems of socializationboth for the woman and the organization. It takes much more than just saying,
We are opening the doors to reach a successful accommodation.
It is very important for the organization and the manager not to fall into habits of stereotyping different
subcultures. Many people associate certain personality traits with different groups in our society.
Sometimes this is useful, but more likely we find that it blinds us to really understanding the individual as
the unique human being. Often, with better information we find that there are not as many differences as
we expected.
There is an additional key factors when considering the socialization process for women and minorities
entering into new, higher-level positions in organizations. This is not only process of change for the
newcomer, but something requiring significant resocialisation of existing members. Not only are we
modifying the values, attitudes, and behavior of the new employee, we are also asking for substantial
change on the part of others in the organization. This makes the process even more difficult.
Cross-cultural Comparisons
Early socialization processes deeply affect the expectations and behaviour of a particular people. For
example, in Japan the Nenko system of lifetime commitment to and organization is often associated with
centuries old behavior pattern and value orientations. This system is based on traditional Japanese values
of respect for elders, the importance of family and group social systems, and mutual responsibility,
loyalty and collaboration. However, the Nenko system is not universal in Japan. It is used only in the
larger enterprise and does not cover temporary employees and outside contract workers.
This system does appear to work well within the culture, but there are major questions about its
appropriateness in other societies, such as the United States. The reverse of this is also true: many modern
U.S. Corporate practices are not easily transferred to other countries. This becomes particularly evident in
multinational corporations operating in a foreign country. In the organizational socialization process
abroad, we may find that we are requiring people to develop attitudes, values, and behavior patterns that
are in conflict for the individual.
As we develop more varied and complex organizations and recruit people from different subcultures, we
can anticipate that the socialization process will become even more complex. Not only must individuals
adjust, but the organization will have to adapt to the attitudes, beliefs, and behavior patterns that different
people bring into the organization. We see an increasing possibility of having more diverse values, views,
and even life styles among different participants and groups within organizations.
Organizational PerspectiveInitial Socialization
Certainly, more balanced recruitment and selection techniques can ease the socialization process. Some
organizations have attempted to provide the prospective employee with more realistic job previews in the
form of booklets, films, visits, to the work site, and informal discussion that convey not only the positive
side of organizational life, but some of the potential problems and frustrations as well (Hall & Hall, 1976;
Wanous, 1980; Feldman, 1976). The recruiters fear that this might put of the better candidates have
proven unjustified, and research indicates that turnover and dissatisfaction are significantly lower for
people who have received realistic information and expectations.
Organizational socialization can be underdone, appropriately done, or overdone (Schein, 1968). If it is
underdone, appropriately done, rebellion and alienation on the part of the individual who rejects all the
norms and values of the organization. The rebellious individual is dissatisfied with both himself and the
organization: where the individual totally conforms to the organization, unquestioningly perpetuating and
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demanding acceptance of existing goals, values, and practices. The goal of appropriate socialization
should develop creative individualism where the person generally accepts the key goals, values, and
norms of the organization but also retains the desire to seek changes and improvement. Fortunately, there
is growing attention to organizational socialization process, both by researches and practicing managers
(Van Maanen, 1978). The importance of these processes is becoming more evident in term of both
organizational performance and human satisfaction.
3. What is the role and purpose of Human Resource Accounting? Explain with suitable examples,
citing the limitation this process has in organizational situations. Draw from your own experience
or the ones you are aware of. Briefly describe the organization, situation and organizational
dynamics you are referring to.
Ans. ROLE AND PURPOSE OF HUMAN RESOURCE ACCOUNTING
Human Resource Accounting is the process of assigning, budgeting, and reporting the cost of human
resources incurred in an organization, including wages and salaries and training expenses.
Human Resource Accounting is the activity of knowing the cost invested for employees towards their
recruitment, training them, payment of salaries & other benefits paid and in return knowing their
contribution to organization towards its profitability.
Role or Objectives of HR Accounting
The objective of HRA is not merely the recognition of the value of all resources used by the organization,
but it also includes the management of human resource which will ultimately enhance the quantity and
quality of goods and services. The main objectives of HR Accounting system are as follows:
1. To furnish cost value information for making proper and effective management decisions about
acquiring, allocating, developing and maintaining human resources in order to achieve cost
effective organizational objectives.
2. To monitor effectively the use of human resources by the management.
3. To have an analysis of the human assets i.e. whether such assets are conserved, depleted or
appreciated.
4. To aid in the development of management principles. and proper decision making for the future
by classifying financial consequences of various practices.
5. In all, it facilitates valuation of human resources recording the valuation in the books of account
and disclosure of the information in the financial statement.
6. It helps the organization in decision making in the following areas:
Direct Recruitment vs. promotion, transfer vs. retention, retrenchment vs. retention, impact on budgetary
controls of human relations and organizational behaviour, decision on reallocation of plants closing down
existing units and developing overseas subsidiaries etc.
Purpose or Advantages of HR Accounting
Human Resource Planning anticipates not only the required kind and number of employees but also
determines the action plan. The major benefits of HR accounting are:

It checks the corporate plan of the organization. The corporate plan aiming for expansion,
diversification, changes in technological growth etc. has to be worked out with the availability of
human resources for such placements or key positions. If such manpower is not likely to be
available, HR accounting suggests modification of the entire corporate plan.
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It offsets uncertainty and change, as it enables the organization to have the right person for the
right job at the right time and place.

It provides scope for advancement and development of employees by effective training and
development.

It helps individual employee to aspire for promotion and better benefits.

It aims to see that the human involvement in the organization is not wasted and brings high
returns to the organization.

It helps to take steps to improve employee contribution in the form of increased productivity.

It provides different methods of testing to be used, interview techniques to be adopted in the

selection process based on the level of skill, qualifications and experience of future human
resources.

It can foresee the change in value, aptitude and attitude of human resources and accordingly
change the techniques of interpersonal management

Case Study:- Hindustan copper limited

Despite the poor performance of the economy in year 2009 the company was able to report a revenue of
Rs 5,680 crore and profit before interest and tax of Rs 3,665 crore. This was due to low cost operation,
robust balance sheet and strong organic growth line. Production of lead and zinc rose by 17% in financial
year 2009 compared to 2008 in the same period production of saleable silver increased by 31% while
wind power generation increased by 122%.
Hindustan copper limited is a public sector undertaking which market copper wire bar copper cathodes
and various by product such as copper sulphate, anode lime, sulphuric acid etc. the company value it
human resource based on Lev and Schwartz economic model.
Findings
Though much progress has been made in accounting for human resource in India, comparison can only be
made within the same (inter-period) firm but not between firms because of different modification made in
computation techniques and lot of objectivity while making estimates. All the company's that have
introduced human resource accounting have used the Lev and Schwartz economic model. The human
resource accounting presentation in India can be summarized in the table below
All the companies that furnished information about human resource value included such report as a
separate report from the main financial statement i.e. the income statement and the balance sheet. This
means that human resource accounting is not still considered as part of financial statement but additional
materials for use by users of annual report. Thus human resource accounting is in need of further
development in order for human resource data to receive equal weight like other items in the balance
sheet and income statement. In order for human resource accounting to have significance and to be part of
financial statement the value of human resource as computed by various company should be incorporated
in the balance sheet. This will make the balance sheet complete and lead to better analysis than traditional
balance sheet. For instance considering the case of Infosys, return on asset before considering value of
human resource is computed as follows
This illustrate that omitting the value of human resource from the balance sheet can give misleading
information about the company's performance. Before incorporating the value of human resource the
ROA in 2009 was 27% but after incorporating the value of human asset ROA drop to 4.8% which is the
actual return on asset. In addition the earlier calculation indicated a growth in return on asset by 1% while
calculation incorporating human resource value indicates a growth in ROA by 0.8% between 2009 and
2009. This example indicates that human resource accounting can lead to better analysis of financial
performance of a company.
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Investors can use human resource ratios to analyze the performance of the company over the period and
thus understanding whether the performance of the company is improving or deteriorating. For instance in
the case of Infosys total income/human resource ratio was 0.21 in 2009 compared with 0.17 in 2008. This
indicates an improvement in performance of the company. Other human resource ratios which illustrated
improvement in performance include value added to human resource which increased from 0.15 to 0.19
and return on human resource value which increased from 4.7 to 5.9. Based on human resource ratios the
company performed better in 2009 compared to 2008 and investor can use this information to make an
investment decision. However other ratios of profitability, liquidity, efficiency and leverage need to be
included while analyzing the financial health of a company otherwise the use of a single category of ratio
can mislead users of accounting information.
Management can also use the information provided by human resource accounting. Breakdown of the
workforce in term of professionalism can help managers to decide whether they have right mix of
workforce to drive organization growth. Change in the mix can be necessitated by change of business or
acquisition and merger. For a technology firm like Infosys, a large portion of the workforce is expected to
be professionals with less unskilled workers but for a manufacturing firm the number of semi skilled
worker is expected to be higher. Comparison of the level of professionalism between firms in the same
industry can pinpoint weaknesses or competitive advantage that one firm have over the other (Harrell and
Klick, 1980). In technology industry if the managers find that the number of semi-skilled and unskilled
worker is high than technical staff and other professionals, it is an indication that the organization has
insufficient skills to sustain growth in a highly competitive market. For instance in 2009 Infosys had
97,349 software professionals compared to 7,501 support staff. This indicate that the firm has the right
mix of workforce and it is expected that in future the growth in both categories of workforce will be
proportional but in a situation where the number of supporting staff grow at a higher rate than software
professionals it may be a sign that the organization is not maintaining the correct proportion of workforce.
The increased use of the balanced score card will make human resource accounting to be more useful for
making strategic decision in India. The balanced score card is a performance measure system that
consider both financial measures and non-financial measures of performance such as business process
perspective, customer perspective, and learning and growth perspective (Kaplan and Norton, 1996). The
balance score card just like human resource accounting is more useful than traditional financial reporting
system which indicate how a company has performed in the past but offer little information on future
performance of the company. For instance a firm may reduce training cost to boost current earnings but
the future earnings might be adversely affected due to reduced productivity.
The balance score card balance between external and internal measures, subjective and objective
measures, and performance results and the drivers of future results. During the current information age
the firm value is embedded in customer relations, innovative processes and human resource unlike in
industrial age when the firm value depended on property, plant and equipment. Though financial
accounting system was good at valuing asset in industrial age, in information age it is ineffective which
calls for adoption of the balanced score card and human resource costing and accounting. As stated earlier
balanced score card goes beyond financial measure to include internal process perspective, customer
perspective and learning and growth perspective.
1. Financial perspective - this indicate financial measures e.g. return on asset, return on equity,
value added, net profit margin etc
2. Customer - this indicate measures such as customer retention, customer satisfaction and market
share.
3. Business process perspective - this indicate the following measures; quality, cost and
throughput associated with business processes e.g. production, procurement and order
fulfillment.
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4. Learning and growth perspective - this indicate measure such as skill sets, employee retention,
employee satisfaction etc.
The future of human resource accounting in India and the rest of the nations may be linked to the
balanced score card. In today business application human resource accounting suffer due to the fact that it
is not grounded in business strategy. When balance score card is linked to human resource accounting this
problem would be solved (Kaplan & Roll, 1972). In addition the measures developed within human
resource accounting will be utilized by the balanced score card particularly in the area of learning and
growth perspective which deal with measures such as skill sets, employees satisfaction, employees
retention etc.
One of the shortcomings from use of balance score card is the missing link between non-financial
indicators and financial measures such as cash flow and earnings. The use of human resource accounting
will help to transform non-financial measures to financial ones thus linking them to financial reporting
system.
To make human resource accounting more meaningful and to facilitate it inclusion in financial statement,
personnel cost should be classified into two categories namely capital expenditure and revenue
expenditure. Capital expenditure will include costs such as acquisition, retention, development, upgradation or update and hiring cost (recruitment and training). Revenue expenditure will include salaries,
wages, commission, bonus, allowance, efficiency maintenance cost and short term motivation (Cascio,
1998).
Capital expenditures should be capitalized and recorded in the balance sheet as intangible assets and
amortized over the useful life of human asset. This armotisation should be recorded as expenses in the
income statement. Revenue expenditure should be charged against revenue in the income statement. This
will be the only way that human resource cost is represented in the financial statements i.e. the income
statement and the balance sheet rather than a separate report in the annual statement.
Conclusion
Human resource accounting provides quantitative information about the value of human resource, which
helps the top management to take decisions regarding the adequacy of human resources. Based on these
insights, further steps for recruitment and selection of personnel are taken. Outside the organization,
quantitative data on the most valuable asset has an impact on the decision of investors, clients, and
potential staff of the company. When proper valuation and accounting of human resources is not done
then management may not be able to recognize the negative effects of certain programs, which are aimed
at improving profit in the short run. If not recognized on time this programs could lead to fall in
productivity levels, high turn over rate and low morale of existing employees.
Just as Likert and Bowes (1968) conclusion that whilst it is true that accounting has a myopic focus on
monetary data it is also this focus which is impending the flow of accounting information, particularly to
external users about economic resources and activities which cannot effectively be expressed in monetary
terms. There are several areas in which non-monetary measurements may be evolved in accounting and
human resource accounting is probably one of these. To make valuation of human resource objective and
comparable there must be a universally acceptable method of valuation.

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4. What are the key factors governing motivational aspects of Reward Management, which have
substantial impact on development, implementation, maintenance, communication, and evaluation
of reward process? Explain with examples from your own experience or the ones you are familiar
with.
Briefly describe the organization and the situation you are referring to.
Ans. Reward management is about the design, implementation, maintenance, communication and
evolution of reward processes which help organizations to improve performance and achieve their
objectives.
Reward processes are based on reward philosophies and strategies and contain arrangements in the shape
of policies and strategies and contain arrangements in the shape of policies, guiding principles, practices,
structures and procedures which are devised and managed to provide and maintain appropriate types and
levels of pay, benefits and other forms of reward. This constitutes the financial reward aspect of the
process which incorporates processes and procedures for tracking market rates, measuring job values,
designing and maintaining pay structures, paying for performance, competence and skill, and providing
employee benefits. However, reward management is not just about money. It is also concerned with those
non-financial rewards which provide intrinsic or extrinsic motivation.
The key issues facing reward management are:

How to ensure that reward management strategies support the achievement of the organizations
business strategies and satisfy the needs and aspirations of employees for security, stability and
career development?

How to achieve internal equity and external competitiveness?

How to respond to a fragmenting pay market and maintain a reasonably coherent pay
structure?

How to concentrate on rewarding for output and maintain, indeed enhance quality standards?

How can we reward individual performance and contribution and promote teamwork?

How to introduce sophisticated performance management process and ensure that managers are
committed and have the skills required to get the best out of them?

How can we give high rewards to high achievers and motivate the core of the employees upon
whom we ultimately have to rely?

How to achieve consistency in managing reward processes and provide for the flexibility needed in
ever-changing circumstances?

How can we devolve power to the line managers to manage their own reward processes and retain
sufficient control to ensure that corporate policies are implemented?

How to continue to provide motivation for those who have reached the top of their pay range and
maintain the integrity of the grading system and contain costs?

How to introduce more powerful pay-for-performance schemes and ensure to get value of
money from them?

How to deliver the message that improved performance brings increased reward and cap
bonus earnings to cater for windfall situations or a particularly loose incentive scheme?

How to operate enterprise-wide bonus scheme and ensure that they increase motivation and
commitment?

How to reward people for their outputs and their inputs?

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How to operate job evaluation schemes as a means of allocating and controlling gradings in a
formal hierarchy and cater for the role flexibility which is increasingly required in the
organization?

Key Reward Management Trends

Following are the key reward management trend in todays scenario.

Greater sensitivity to sector and functional market practice to enable more effective market
positioning to help with attracting and retaining high caliber employees.

The implementation of increasingly focused performance awards starting at the top and
working down through organizations as performance orientation increases.

Pay increases linked to market worth and individual or team performance-not service and/or
cost of living.

More attention given to achievement or success-oriented individual bonuses rather than

payment increases in base pay.

A move towards team pay as the importance of teamwork increases.

More flexible pay structures based on job families and using broader pay bands or pay curves.

More integrated pay structures covering all categories of employees.

A growing linkage between pay practice and training and development initiatives through the
design and implementation of skills and competency based pay processes which reward the
acquisition and use of new skills and behaviors.

The development of integrated performance management systems with the emphasis on

coaching development, motivation and recognition through the identification of opportunities
to succeed.

A search for simpler and more flexible approaches to job evaluation which enable a move
away from the control of uniformity to the management of diversity. This will make use of
techniques such as job family modeling and computer assisted job evaluation.

Increased awareness of the need to treat job measurement as a process for managing
relativities which, as necessary, has to adapt to new organizational environments and much
greater role flexibility and can no longer be applied rigidly as a system for preserving existing
hierarchies.

More emphasis on the choice of benefits and clean cash rather than a multiplicity of
perquisites.

Greater creativity and sensitivity in benefit practice.

Purpose and Aim

The purpose of a pay structure is to provide a fair and consistent basis for motivating and rewarding
employees.
The aim is to further the objectives of the organization by having a logically designed framework within
which internally equitable and extremely competitive reward policies can be implemented, although the
difficulty of reconciling often conflicting requirements for equity and competitiveness has to be
recognized.
The structure should help in the management of relativities and enable the organization to recognize and
reward people appropriately according to their job role size, performance, contribution, skill and
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competence. It should be possible to communicate with the aid of the structure the pay opportunities
available to all employees.
The pay structure should also help the organization to control the implementation of pay policies and
budgets.
Criteria for Pay Structures
Pay structure should:

Be appropriate to the characteristic and needs of the organization: its culture, size and
complexity, the degree to which it is subjected to change and the type and level of the people
employed.

Be flexible in response to internal and external pressures, especially those related to market
rates and skills shortages.

Facilitate operational and role flexibility so that employees can be moved around the
organization between jobs of slightly different sizes without the need to reflect that size
variation by changing rates of pay.

Give scope for rewarding high level performance and significant contributions while still
providing appropriate rewards and recognition for the effective and reliable core employees
who form majority in most organizations.

Facilitate rewards for performance and achievement.

Help to ensure that consistent decisions are made on pay in relation to job size, contribution,
skill and competence.

Clarify pay opportunities, development pathways and career ladders.

Be constructed logically and clearly so that the basis upon which they operate can readily be
communicated to employees.

Enable the organization to exercise control over the implementation of pay policies and
budgets.

Reward management has an important part to play in the development of cultures in which individuals
and teams take responsibility for continuous improvement. It affects organizational performance because
of the impact it has on peoples expectations as to how they will be rewarded
Organization must reward employees because in return, they are looking for certain kind of behavior; they
need competent individuals who agree to work with a high level of performance and loyalty. Individual
employees, in return for their commitment, expect certain extrinsic rewards in the form of salary,
promotion, fringe benefits, perquisites, bonuses or stock options. Individuals also seek intrinsic rewards
such as feelings of competence, achievement, responsibility, significance, influence, personal growth, and
meaningful contribution. Employees judge the adequacy of their exchange with the organization by
assessing both set of rewards.
The Role of an Effective Reward Strategy in Achieving Strategic Goals
In todays economic climate where we need to maximize payroll investments, the lack of sophistication of
reward management practices is surprising. In this article, Keith Roxburgh and Dave Sorour show us how
effective reward strategies affect achievement of strategic goals. They include practical steps for
developing reward strategies.

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KEITH ROXBURGH AND DAVE SOROUR

It is well documented that the world of work has globally changed dramatically in the last ten to fifteen
years. In the face of ever-increasing global competition, organizations have had to seek new ways of
leveraging value out of their human resources, driving individuals and teams to constantly higher levels of
productivity, performance and the achievement of strategically critical goals and outcomes.
These demands have resulted in new leadership approaches, organizational structures and people
alignment processes within organizations. Increasing recognition is given to the need for an integrated
approach to human capital management and for the strategic alignment between HR interventions and
business goals. It is our contention, however, that while many organizations have made progress in
adopting a more strategic approach to their human resources, this has not filtered through to the area of
reward management.
The need for an effective reward strategy
The meaning of the word strategic has been left to individual interpretation. Closer scrutiny has revealed
that there are at least the same number of interpretations of the word as the number of people discussing
the subject. Unfortunately, we often find organizations claiming to have strategic HR and strategic reward
plans in place, which are no more than a collection of best practices and operational procedures.
There should be a logical link between the companys strategic plan, its rolled-down imperatives and the
HR or reward strategy that we create. The following diagram illustrates the relationship

Strategic reward ensures that reward practices support the delivery of the behaviours and performance
needed by the organization, in order to achieve its strategic goal. It is about leveraging the reward system
to support and drive the current and future human resource capabilities needed by the business, in terms
of its business strategy and support of ongoing organizational change deemed critical for business
success.

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