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    Compensation Management

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    Sajal Chourasia
    The company ABC introduced a new compensation plan where 20% of managers' pay would depend on their team improving productivity by 5%. Managers objected that their performance depends on others and external factors beyond their control. The HR director must decide whether to keep the new plan to continue being a leader in compensation.

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    © All Rights Reserved
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    Compensation Management

    Uploaded by

    Sajal Chourasia
    10 views9 pages
    The company ABC introduced a new compensation plan where 20% of managers' pay would depend on their team improving productivity by 5%. Managers objected that their performance depends on others and external factors beyond their control. The HR director must decide whether to keep the new plan to continue being a leader in compensation.

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    Case analysis

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    compensation management

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    The company ABC introduced a new compensation plan where 20% of managers' pay would depend on their team improving productivity by 5%. Managers objected that their performance depends on others and external factors beyond their control. The HR director must decide whether to keep the new plan to continue being a leader in compensation.

    Copyright:

    © All Rights Reserved
    Download as DOCX, PDF, TXT or read online from Scribd
    Download as docx, pdf, or txt
    10 views9 pages

    Compensation Management

    Uploaded by

    Sajal Chourasia
    The company ABC introduced a new compensation plan where 20% of managers' pay would depend on their team improving productivity by 5%. Managers objected that their performance depends on others and external factors beyond their control. The HR director must decide whether to keep the new plan to continue being a leader in compensation.

    Copyright:

    © All Rights Reserved
    Download as DOCX, PDF, TXT or read online from Scribd
    Download as docx, pdf, or txt
    of 9

    CASE STUDY- Compensation

    ABC Company is an engineering company with employee strength of 1,000. The


    company has a system of incentive linked monthly productivity bonus for the
    shop floor employees which serve the purpose of rewarding good work. The HR
    director, Mr. David has been facing a dilemma, how to evaluate the performance of
    middle management and how to link it with productivity. After deliberate
    discussions with the individual managers, he develops a plan. The plan is
    designed to enhance teamwork and provide incentives for improvement &
    excellence among middle level managers. Briefly the pay will be split into two
    components. The first consists of 80% of original salary, which will be a fixed
    component and will be determined as before. The second component of 20% will be
    flexible and will depend upon ability of each team as a whole to show minimum of 5%
    improvement in their respective areas.

    The scheme when discussed


    with managers received a
    number of negative remarks.
    One manager said
    that why should their
    performance depend upon
    the performance of other
    members of the team. The
    new pay
    scheme makes them team
    players first and specialist in
    their area next. Another
    objection was that why the
    good
    persons in the team should
    suffer, if the other members
    are not measuring up to the
    expectations. Moreover,
    there are number of external
    factors which affect the
    individual and collective
    performance. For example, if
    a
    product suddenly goes out
    of demand, affecting
    marketability, why should
    the concerned marketing
    team be
    penalized for something
    beyond its control.
    Now Mr. David is in a tight
    position. The company has
    been the trend setter in
    executive compensation
    in Indian industry as they
    have been paying the best.
    Will the new plan ensure
    that it remains that way? If
    the
    plan succeeds ABC set
    another trend in executive
    compensation.
    The scheme when discussed
    with managers received a
    number of negative remarks.
    One manager said
    that why should their
    performance depend upon
    the performance of other
    members of the team. The
    new pay
    scheme makes them team
    players first and specialist in
    their area next. Another
    objection was that why the
    good
    persons in the team should
    suffer, if the other members
    are not measuring up to the
    expectations. Moreover,
    there are number of external
    factors which affect the
    individual and collective
    performance. For example, if
    a
    product suddenly goes out
    of demand, affecting
    marketability, why should
    the concerned marketing
    team be
    penalized for something
    beyond its control.
    Now Mr. David is in a tight
    position. The company has
    been the trend setter in
    executive compensation
    in Indian industry as they
    have been paying the best.
    Will the new plan ensure
    that it remains that way? If
    the
    plan succeeds ABC set
    another trend in executive
    compensation.
    The scheme when discussed
    with managers received a
    number of negative remarks.
    One manager said
    that why should their
    performance depend upon
    the performance of other
    members of the team. The
    new pay
    scheme makes them team
    players first and specialist in
    their area next. Another
    objection was that why the
    good
    persons in the team should
    suffer, if the other members
    are not measuring up to the
    expectations. Moreover,
    there are number of external
    factors which affect the
    individual and collective
    performance. For example, if
    a
    product suddenly goes out
    of demand, affecting
    marketability, why should
    the concerned marketing
    team be
    penalized for something
    beyond its control.
    Now Mr. David is in a tight
    position. The company has
    been the trend setter in
    executive compensation
    in Indian industry as they
    have been paying the best.
    Will the new plan ensure
    that it remains that way? If
    the
    plan succeeds ABC set
    another trend in executive
    compensation.
    The scheme when discussed with managers received a number of negative remarks.
    One manager said that why should their performance depend upon the performance
    of other members of the team. The new pay scheme makes them team players first
    and specialist in their area next. Another objection was that why the good persons in
    the team should suffer, if the other members are not measuring up to the
    expectations. Moreover, there are number of external factors which affect the
    individual and collective performance. For example, if a product suddenly goes out
    of demand, affecting marketability, why should the concerned marketing team be
    penalized for something beyond its control. Now Mr. David is in a tight position. The
    company has been the trend setter in executive compensation in Indian industry as
    they have been paying the best. Will the new plan ensure that it remains that way? If
    the plan succeeds ABC set another trend in executive compensation.

    Questions:

    1. Do you think it is appropriate to evaluate managers on the basis of productivity?

    2. In your opinion, which is the most suitable criteria for incentive plans: individual
    performance or team performance?

    3. If you were the HR director, what would you do ?

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