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Managerial CompensationManagerial Compensation

Sessions 5-6Sessions 5-6

Prof. Narendra Nath AkhouriProf. Narendra Nath Akhouri

8 7 2011

What is the art of giving feedback?

Feedback

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Feedback is an important communicationtool that can improve the way we work witheach other

Feedback is a 2-way process

We may avoid words, that express judgment(controlling parent) like “good”,” bad”, ‘should”Or “must” become prescriptive and not constructive

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Address the personalityAddress the issue

What would you prefer a feedback to be?

Create bad bloodCreate good feeling

Use of You statementUse of I statement

Settling a personal scoreDirected at modifiable behaviour

Destroy performanceImprove performance

PrescriptiveDescriptive

DemolishingEmpowering

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Class Exercise: HUL

Discuss in your Group and prepare for Unilever India (HUL) Exempt Staff a detail Report of your Recommendation:Reward StrategyReward PolicyPay progression approachSalary Grade range and how many?Vertical grade structure or Broadband?What would be your motivating approach?Critically examine what Compa Ratio % would your recommend?What is the Cultural imperative for operating in India?

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JapanBMW

GermanyMercedes

FrancePEPSI

USCOKE

ChinaP & G

IndiaHUL

Class Exercise

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Engagement Strategy – Hero Honda Way Engagement Strategy – Hero Honda Way

Hero Honda believes that the employee life cycle in the organization consists of…….

Starts the New job with enthusiasm

Evaluates the job roles,

peers, bosses in real time

Tries to see the

Bright side of things

Passively seeks for new

jobs

Tries to change things

or seeks change

Actively seeks new job

Moves to a NewJob

Is under-assigned, can’t integrate, finds unconducive

work env.

DISENGAGEDENGAGED

ACTIVE DAMAGE IN THE JOB

PASSIVE DAMAGE IN THE JOB

ZONE FOREENGAGEMENT STRATEGIES

Modified version of, ‘7 Hidden Reasons why employees leave,” Leigh Branham

MONITORED THROUGH FORMAL (Q12) AND INFORMAL MEANS

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How to calculate Compa Ratio?

The compa-ratio is the average of the employee's actual pay divided by the pay range midpoint within the job grade

Salary ranges provide a minimum and a maximum range for salaries within a specific pay grade

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Find the Compa Ratio

Salary Range

Grade 1 : $20,000 to $30,000

Grade 2: $30,000 to $40,000

Grade 3: $40,000 to $50,000

You are being asked to find an appropriate salary for someone who is

moving from Grade 1 to Grade 2 pay grade. Her current salary is $24,500 What would be her compa ratio %

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Implication of the Compa ratio

Most organizations provide a recommended course of action to take if the compa ratio falls within a certain percentile range. For example, if the ratio percentage falls between 0 to 33 percent, the result is a grade demotion. If the ratio falls between 34 and 66 percent, the result is a lateral movement andif it falls between 67 and 100 percent, the action is a promotion. Following this guidance, our example would result in a promotion recommendation.

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Factors affecting International HRMFactors affecting International HRM

Human Resource Management

CultureEducation- HumanCaptital

Political-Legal System

EconomicSystem

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Influence of Nation’s CultureInfluence of Nation’s Culture

Prof. Geert Hofstede conducted perhaps the most Prof. Geert Hofstede conducted perhaps the most comprehensive study of how values in the workplace are comprehensive study of how values in the workplace are influenced by cultureinfluenced by culture..

He was the HR Director at IBMHe was the HR Director at IBMGeert Hofstede analyzed a large data base of employee Geert Hofstede analyzed a large data base of employee values scores collected by IBM between 1967 and 1973 values scores collected by IBM between 1967 and 1973 covering more than 70 countriescovering more than 70 countries

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Cultural Dimension Scores for 10 CountriesCultural Dimension Scores for 10 Countries

1.1. PD=Power DistancePD=Power Distance2.2. ID= IndividualismID= Individualism3.3. MA= MasculinityMA= Masculinity4.4. UA= Uncertainty AvoidanceUA= Uncertainty Avoidance5.5. LT= Long Term OrientationLT= Long Term Orientation

H= Top thirdH= Top thirdM= Median thirdM= Median thirdL= Bottom thirdL= Bottom thirdSample size = 53 countries / regions for first four DimensionsSample size = 53 countries / regions for first four DimensionsSample size = 23 countries / regions for the 5th DimensionSample size = 23 countries / regions for the 5th Dimension

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Cultural DimensionCultural Dimension Scores for 10 Countries Scores for 10 CountriesPDPD IDID MAMA UAUA LTLT

U SU S 40 L40 L 91 H91 H 62 H62 H 46 L46 L 29 L29 L

GermanyGermany 35 L35 L 67 H67 H 66 H66 H 65 M65 M 31 M31 M

JapanJapan 54 M54 M 45 M45 M 95 H95 H 92 H92 H 80 H80 H

FranceFrance 68 H68 H 71 H71 H 43 M43 M 86 H86 H 30 L30 L

NetherlandsNetherlands 35 L35 L 80 H80 H 14 L14 L 53 M53 M 44 M44 M

Hon KongHon Kong 68 H68 H 25 L25 L 57 H57 H 29 L29 L 96 H96 H

IndiaIndia 77 H77 H 48 M48 M 56 H56 H 40 L40 L 60 H60 H

West AfricaWest Africa 77 H77 H 20 L20 L 46 M46 M 54 M54 M 16 L16 L

RussiaRussia 95 H95 H 50 M50 M 40 L40 L 90 H90 H 10 L10 L

ChinaChina 80 H80 H 20 L20 L 50 M50 M 60 M60 M 118 H118 H1414

Top, Median and Bottom third in Top, Median and Bottom third in Cultural DimensionCultural Dimension Scores for 10 Scores for 10 CountriesCountries

PDPD IDID MAMA UAUA LTLT

Top thirdTop third RussiaRussia

ChinaChina

IndiaIndia

USUS

NetherlandsNetherlands

FranceFrance

GermanyGermany

JapanJapan

GermanyGermany

USUS

IndiaIndia

JapanJapan

RussiaRussia

FranceFrance

ChinaChina

Hong KongHong Kong

JapanJapan

IndiaIndia

Median thirdMedian third JapanJapan JapanJapan

RussiaRussia

IndiaIndia

ChinaChina

FranceFranceNetherlandsNetherlands

ChinaChinaNetherlandsNetherlands

GermanyGermany

Bottom thirdBottom third GermanyGermany

NetherlandsNetherlands

USUS

IndonesiaIndonesia

ChinaChina

Hong KongHong Kong

NetherlandsNetherlands

RussiaRussiaHong KongHong Kong

IndiaIndia

USUS

RussiaRussia

USUS

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Interview Worksheet for International CandidatesInterview Worksheet for International Candidates

MotivationMotivationHealthHealthLanguage abilityLanguage abilityFamily considerationFamily considerationResourcefulness and InitiativeResourcefulness and InitiativeAdaptabilityAdaptabilityCareer planningCareer planningFinancial considerationFinancial consideration

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Effective Cross-Cultural TrainingEffective Cross-Cultural Training

Verbal behaviorVerbal behaviorNon-verbal behaviorNon-verbal behaviorAttributionAttributionComprehensionComprehensionDesignDesignMotivationMotivation

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Basic Process for HR StrategyBasic Process for HR Strategy

Scan the Externalenvironment

Identify peopleissues

Develop HRstrategy

Communicatethe HRstrategy

Identify strategicBusiness issues

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Base SalaryCash AllowancesFixed Bonus

Total Cash

ConveyanceHousingRetiralsLoans

Fixed Pay

Variable Pay

Performance BonusIncentivesCommissions

Total Cost to Company

Total Fixed Pay

Hewitt’s Total Cost to Company ApproachHewitt’s Total Cost to Company Approach

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Hero Honda Salary Structure: AGM/DGM

2020

Its given in the excel sheet

Asia Pacific - Salary Increases 2007 - 2008Asia Pacific - Salary Increases 2007 - 2008

4.1

8.3

3.7

2.5

7.5

4.8

7.5

4.2 4.2

5.9

4.6

8.6

4.2

15.1

2.8

6.2 6.5

8.2

4.7 4.6

6.3

4.6

8.7

4.5

2.8

6.76.2

8.4

5 4.7

6.4

14.415.2

0.0

2.0

4.0

6.0

8.0

10.0

12.0

14.0

16.0

Australia China Hong Kong India Japan Korea Malaysia Philippines Singapore Taiwan Thailand

(%)

2006 2007 2008 (Proj.)

Source : Hewitt's 12th Salary Increase Survey 2007-08

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Overview of Survey Results Total Cost to Company (TCC)Figures in INR 000's per annum

Min P25 Median Mean P66 P75 P90 Max

Level 1 4 5748 7071 7627 7313 7738 7870 8098 8250

Level 2 10 2742 3996 4664 4523 4753 5058 5702 5825

Level 3 8 2477 2677 3067 3280 3565 3859 4181 4520

Level 4 9 1716 1912 2180 2328 2312 2391 3254 3501

Level 5 10 1367 1610 1743 1892 2050 2103 2420 2650

Level 6 11 927 1157 1375 1458 1632 1745 2052 2063

Level 7 10 769 990 1185 1202 1369 1445 1483 1597

Level 8 11 515 803 866 895 1027 1068 1109 1169

Level 9 11 409 638 719 677 747 754 798 854

Level 10 11 280 476 537 531 615 635 647 682

Level 11 11 237 347 383 406 431 471 525 595

Levels MatchesMarket

Hewitt’s recommendation is that pay should be positioned at least at the Median (P50) of the market

Overview of Survey Results Total Fixed PayFigures in INR 000's per annum

Min P25 Median Mean P66 P75 P90 Max

Level 1 4 5403 5538 5886 5871 6175 6218 6274 6311

Level 2 10 2570 3314 3902 3747 4119 4261 4565 4755

Level 3 8 2124 2333 2460 2757 3069 3420 3508 3526

Level 4 9 1389 1812 1995 2060 2092 2279 2723 2801

Level 5 10 1268 1497 1572 1684 1756 1915 2118 2120

Level 6 11 820 1055 1286 1295 1365 1531 1692 1820

Level 7 10 769 913 1079 1087 1184 1213 1369 1468

Level 8 11 515 719 825 809 906 942 993 1011

Level 9 11 409 596 647 623 682 709 741 751

Level 10 11 280 439 489 489 564 578 602 627

Level 11 11 237 327 348 373 396 437 491 505

Positions MatchesMarket

Given that Fortius Motors is a startup and therefore competitiveness on Total Fixed Pay will be key

Remuneration Framework - As Percentage of Total Cost to Company (TCC)

Base SalaryCash

EmolumentsHousing Conveyance Retirals Loans Variable Pay

Level 1 27% 33% 8% 4% 8% 0% 20%

Level 2 28% 31% 9% 6% 8% 0% 17%

Level 3 26% 35% 7% 8% 8% 0% 16%

Level 4 29% 30% 12% 9% 9% 0% 12%

Level 5 30% 32% 11% 7% 9% 0% 11%

Level 6 30% 34% 11% 5% 9% 0% 11%

Level 7 31% 33% 12% 4% 9% 0% 10%

Level 8 33% 32% 12% 3% 10% 0% 10%

Level 9 34% 33% 13% 1% 10% 0% 8%

Level 10 34% 33% 13% 2% 10% 0% 8%

Level 11 35% 33% 12% 2% 10% 0% 8%

Positions

Basic Salary as a % of TCC is typically in the range of 30-35% across industriesVariable Pay ranges basis line of sight to business goals

GroupsGroups

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HUL

P&G

COKE

PEPSI

MECEDES

BMW

1

2

3

4

5

6

Assignment for Sessions 5-6 on 8th July, 2011

The Chapters on Reward Policies, Factors affecting Pay Levels, Motivation and Reward.Readings: Part 1 & 2, Chapters 6-8, Pages 96-134 of the book.

Group COKECase Study 4: The Importance of Pay in Compulsory Competitive Tendering And Case Study 5: Changing the Reward System at Blane and Rivershire Building Society.

Group PEPSICase Study:“Exploring Lawler’s new pay theory through the case of Finbank’s reward strategy for managers”

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Class Exercise: P & G

Discuss in your Group and prepare for P & G China Exempt Staff a detail Report of your Recommendation :Reward StrategyReward PolicyPay progression approachSalary Grade range and how many?Vertical grade structure or Broadband?What would be your motivating approach?Critically examine what Compa Ratio % would your recommend?What is the Cultural imperative for operating in China?

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Class Exercise COKE

Discuss in your Group and prepare for COKE US Exempt Staff a detail Report of your Recommendation :Reward StrategyReward PolicyPay progression approachSalary Grade range and how many?Vertical grade structure or Broadband?What would be your motivating approach?Critically examine what Compa Ratio % would your recommend?What is the Cultural imperative for operating in US?

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Class Exercise: PEPSI

Discuss in your Group and prepare for PEPSI France Exempt Staff a detail Report of your Recommendation :Reward StrategyReward PolicyPay progression approachSalary Grade range and how many?Vertical grade structure or Broadband?What would be your motivating approach?Critically examine what Compa Ratio % would your recommend?What is the Cultural imperative for operating in France?

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Class Exercise: Mercedes

Discuss in your Group and prepare for Mercedes Germany Exempt Staff a detail Report of your Recommendation :Reward StrategyReward PolicyPay progression approachSalary Grade range and how many?Vertical grade structure or Broadband?What would be your motivating approach?Critically examine what Compa Ratio % would your recommend?What is the Cultural imperative for operating in Germany?

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Class Exercise: BMW

Discuss in your Group and prepare for BMW Japan Exempt Staff a detail Report of your Recommendation :Reward StrategyReward PolicyPay progression approachSalary Grade range and how many?Vertical grade structure or Broadband?What would be your motivating approach?Critically examine what Compa Ratio % would your recommend?What is the Cultural imperative for operating in Japan?

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Geert Hofstede• Geert Hofstede analyzed a large data base of employee values

scores collected by IBM between 1967 and 1973 covering more than 70 countries

• From this he first used the 40 largest only and afterwards extended the analysis to 50 countries and 3 regions.

• In the editions of GH's work since 2001, scores are listed for 74 countries and regions, partly based on replications and extensions of the IBM study on different international populations.

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Subsequent studies validating the earlier results have included commercial airline pilots and students in 23 countries, civil service managers in 14 counties, 'up-market' consumers in 15 countries and 'elites' in 19 countriesFrom the initial results, and later additions, Hofstede developed a model that identifies four primary Dimensions to assist in differentiating cultures: Power Distance - PDI, Individualism - IDV, Masculinity - MAS, and Uncertainty Avoidance - UAI

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Geert Hofstede added a fifth Dimension after conducting an additional international study with a survey instrument developed with Chinese employees and managers.That Dimension, based on Confucian dynamism, is Long-Term Orientation - LTO and was applied to 23 countries.These five Hofstede Dimensions can also be found to correlate with other country, cultural, and religious paradigms.

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