Retaining & Attaining Employees
In the modern world, the business environment is highly competitive. The technological advancements impose demands to workers; therefore, people tend to invest in their personal and professional development the available resources represented by time, money, experience, knowledge skills. The high competitiveness of the business environment makes the companies to adjust the existing systems of management with an intention to meet the demands imposed by the global market, attract the most professional and talented employees, and take the leading position at the market while being a socially responsible business that invests in the workforce and creates services/goods of high quality with minimal adverse effect on ecology. The achievement of long-term and short-term of any business should be based on the well-developed tools for management. One of the most influential tools in the business surrounding is represented by the compensation and benefit system. The city’s largest employer, Holland Enterprises, has 3,500 employees, but since 2010 has lost 25% of its staff. The exit interviews and employees` feedback provide information that the main reason of high turnover is represented by the inefficient, unfair, and uncompetitive compensation and benefit system that does not meet the requirements and demands of the modern market. The modifications of the compensation and benefit system are crucial for the organization since its insufficiency negatively influences employees` motivation and productivity, the organizational culture, and the organization`s productivity; nonetheless, the process of changes incorporation first and foremost should be based on the analysis of the organization, its current compensation and benefit system, and the features of the market that determine the specifics of the system to make it a useful tool of management that provides the organization with opportunities for growth and evolvement.
The Impact of Compensation and Benefit System on Organizational Effectiveness
The compensation and benefit system is a significant part of any organization since it influences the employees` motivation, organizational culture, and the organization`s effectiveness. The compensation and benefit system forms a solid basis for the development of employees’ motivation and intentions to contribute to the balanced evolvement of the enterprise. It is necessary to indicate that unfair and insufficient compensation and benefit system might lead to the decreased motivation of workers, poor performance, and conflicts at the workplace. It significantly influences organizational culture since it determines the attitudes of workers towards the enterprise and its management. It also determines the form of the relationship that exists among workers. The influence of the compensation and benefit system on the organization`s effectiveness is determined by its impact on the employees` productivity. Furthermore, the insufficient compensation and benefit system might lead to financial difficulties in the organization that will limit its capabilities to achieve the desired stage of evolvement within the boundaries of the certain market.
The components of the compensation and benefit system of any organization should be contemplated from the perspective of its impact on employees, their motivation and productivity. Daniel H. Pink (2018) (2018), the author of the book called Drive: The Surprising Truth About What Motivates Us, examines the existing gap between science achievements and the concepts used by modern business nowadays. The author discusses a brand-new perception of driving forces that motivate the professionals to achieve the settled goals and benefit the overall performance of the company. It is necessary to mention that the issue contemplated by the author is of paramount importance for the modern global community, inasmuch as the development of different spheres of human endeavor creates various challenges and there is a need to implement the measures with an intention to boost the development of the global community and make it as beneficial as possible.
The compensation and benefit system of the organization should be based on the motivation model proposed by Daniel Pink (2018). The author states that the achievements of sociology nowadays cannot be neglected and should be taken into consideration not simply by the establishments related to this branch art, but also by HRM, inasmuch as sociology forms a solid basis for the development of this sphere of human endeavor. Daniel Pink (2018) mentions that the economic crisis is caused by the wrong perception common for a majority of businesses that operate at the domestic market and international market nowadays. According to the author, HRM should be perceived as a product of the development of humankind, and as every concept and theory created by human beings it should be changed in accordance with the demands imposed by the economy and human beings; moreover, it should be changed in accordance with the modern achievements of science. According to Elliot and Dweck (2014), there is a deficiency of scientific literature focused in the issue of motivation; nonetheless, even this small amount of findings is not fully implemented in the area of HRM (p. 9). The author resorts to the use of argumentative evidence based on scientific facts and various cases with an intention to demonstrate a gap between the strategies used by HRM and scientific achievements that have already proved that the professionals` performance cannot be benefited by the influence of external factors and can be changed only in accordance with the boost of personally mandated comprehension of the need to develop mastery while achieving autonomy and realizing the purpose of the conducted duties in a broad sense.
Principles and Purposes of the Compensation and Benefit System
The contemporary compensation and benefit system should be modified to meet the demands imposed by the modern business setting and the core principles of human resource management practice. The compensation and benefit system should be fair; therefore, there is a need to formulate its principles and features and make these data public with an intention to eliminate the occurrence of any misunderstanding. The compensation and benefit system should reflect the principles of equality and equity while eliminating the influence of any discriminatory factors that might be represented by age, gender, ethnicity, race, and religious affiliation. The modified compensation and benefit system should be used as a tool by the organization`s management for various purposes. It is necessary to indicate that the modified compensation and benefit system should be adjusted in accordance with the business needs, short-term and long-term goals, and resources obtained by the organization stage at certain time.
The compensation and benefit system should be used for recruitment and retention of employees, improvement of workers` satisfaction, encouragement of the work performance, achievement of internal and external equity, reduction of turnover, and modification of the working process. The core purposes of the compensation and benefit system determine its principles.
The modifications of the compensation and benefit system for the particular organization should be based on the need to improve the recruitment and retention process of employees. In the particular case, the compensation and benefit system should evaluate the availability and cost of applicants in accordance with the market factors. The job satisfaction is significantly affected by the compensation and benefit system. Therefore, there is a need to establish a balance between the amount of resources the employer is willing to invest in the workforce and the amount of benefits the employees should receive for the successful conduction of work duties. At current stage of its development, the organization cannot resort to salary freeze since there is a need to reduce employee turnover. The particular goals can be achieved by the increase in salary and salary levels. The compensation and benefit system should also provide rewards for exceptional work performance. The particular feature of the compensation and benefit system will beneficially influence the employees` motivation and productivity. Consequently, the organization`s effectiveness will be increased.
Components of the Compensation and Benefit System
The compensation and benefit system will be perceived as fair by employees if it is based on specific components. One of the most crucial components of the compensation system is represented by a detailed description of every position. The important components of the compensation and benefit system include job descriptions, job analysis, job evaluation, salary ranges, salary structures, and the description of policies and regulations.
The component of compensation and benefit system represented by job description is crucial for different systems of organizational management. The job description should include detailed information regarding the selection process, recruitment features, work responsibilities, functions, duties, and work conditions. The job description should also include data regarding the working environment. The job description can be created separately for each position or job families if the specifics indicated above are similar for several positions.
Job analysis should be perceived as a part of the compensation and benefit system. In fact, this component of the compensation system provides information regarding the selection process. It also provides opportunities to evaluate the work performance of employees and evaluate the effectiveness of compensation and benefit system. The job analysis is conducted by the implementation of job analysis tools and techniques, including interviews, questionnaires, and observations.
Job evaluation is used to determine the features of compensation and benefit system. The process of job evaluation provides opportunities to compare and contrast similar jobs on the market with an intention to identify the most efficient and adequate compensation levels. The process of job evaluation is conducted by the use of ranking, classification, factor comparison, and point method.
Salary ranges and salary structures are used to standardize the compensation and benefit system. The particular component of the compensation system includes data regarding a minimum salary for each grade. There is also a need to gather market data related to salaries within the boundaries of the chosen sphere of human endeavor. These data should include average salaries, inflation factors, cost of living indicators, and average salary budget. The organization can purchase these data by survey vendors or conduct its own investigation related to salary surveys.
The compensation and benefit system would be perceived as fair and efficient if it reflects internal and external equity; therefore, it is crucial to establish policies and regulations. The types of compensation the organization have to provide include base pay, commissions, overtime pay, bonuses, stock options, and travel/housing allowance if the organization aims to become a socially responsible business, increase effectiveness, and take the leading position on the market. It is also crucial to take into consideration the importance of benefits. The benefits can be represented by the coverage of medical insurance, vacation, maternity/sick leaves, retirement, and taxes.
The analysis of the organization showed that its current compensation and benefit system might be considered ineffective, unfair, and insufficient. The organization experiences the challenges represented by the decreased motivation and productivity of employees, high turnover, and negative aspects of organizational culture. These difficulties result in low efficiency of the organization. There is a need to modify the compensation and benefit system in accordance with the demands imposed by the market. There is a need to modify the core principles of the system to make it reflect the principles of equality and human resource management practice. The conduction of the analysis of the core principles of the compensation and benefit system showed that the organization`s job descriptions do not meet the requirements of the market. The job analysis and job evaluation showed that the types of the offered compensations should be enlarged and a set of benefits should be increased. The modifications of the compensation and benefit system should be reflected in the policies and regulations that should be available online to eliminate the occurrence of any misunderstandings.
Armstrong, M., & Taylor, S. (2014). Armstrong`s handbook of human resource management practice. Kogan Page Publishers.
Hamstra, M. R., Van Yperen, N. W., Wisse, B., & Sassenberg, K. (2014). Transformational and transactional leadership and followers’ achievement goals. Journal of Business and Psychology, 29(3), 413-425.
Home. (n.d.). Retrieved March 9, 2019, from https://www.hollandent.com/
Elliot, A. J., & Dweck, C. S. (2014). Handbook of competence and motivation. New York: The Guilford Press.
Lange, P. A., Rockenbach, B., & Yamagishi, T. (2014). Reward and punishment in social dilemmas. New York, NY: Oxford University Press.
Pink D. H. (2018). Drive: The surprising truth about what motivates us. Edinburgh: Canongate Books.