Compensation & Reward Management (EDL 409)-Semester 4

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Block 1:

CASE STUDY
Salary inequities at Acme Manufacturing
Joe Black was trying to figure out what to do about a problem salary situation he had in his plant. Black recently took over as president of Acme Manufacturing. The founder and former president, Bill George, had been president for 35 years. The company was family owned and located in a small eastern Arkansas town. It had approximately 250 employees and was the largest employer in the community. Black was the member of the family that owned Acme, but he had never worked for the company prior to becoming the president. He had an MBA and a law degree, plus five years of management experience with a large manufacturing organization, where he was senior vice president for human resources before making his move to Acme.A short time after joining Acme, Black started to notice that there was considerable inequity in the pay structure for salaried employees. A discussion with the human resources director led him to believe that salaried employees pay was very much a matter of individual bargaining with the past president. Hourly paid factory employees were not part of this problem because they were unionized and their wages were set by collective bargaining. An examination of the salaried payroll showed that there were 25 employees, ranging in pay from that of the president to that of the receptionist. A closer examination showed that 14 of the salaried employees were female. Three of these were front-line factory supervisors and one was the human resources director. The other 10 were non management.This examination also showed that the human resources director appeared to be underpaid, and that the three female supervisors were paid somewhat less than any of the male supervisors. However, there were no similar supervisory jobs in which there were both male and female job incumbents. When asked, the Hr director said she thought the female supervisors may have been paid at a lower rate mainly because they were women, and perhaps George, the former president, did not think that women needed as much money because they had working husbands. However, she added she personally thought that they were paid less because they supervised less-skilled employees than did the male supervisors. Black was not sure that this was true.The company from which Black had moved had a good job evaluation system. Although he was thoroughly familiar with and capable in this compensation tool, Black did not have time to make a job evaluation study at Acme. Therefore, he decided to hire a compensation consultant from a nearby university to help him. Together, they decided that all 25 salaried jobs should be in the same job evaluation cluster, that a modified ranking method of job evaluation should be used, and that the job descriptions recently completed by the HR director were current, accurate, and usable in the study.The job evaluation showed that the HR director and the three female supervisors were being underpaid relative to comparable male salaried employees . Black was not sure what to do. He knew that if the underpaid female supervisors took the case to the local EEOC office, the company could be found guilty of sex discrimination and then have to pay considerable back wages. He was afraid that if he gave these women an immediate salary increase large enough to bring them up to where they should be, the male supervisors would be upset and the female supervisors might comprehend the total situation and want back pay. The HR director told Black that the female supervisors had never complained about pay differences. The HR director agreed to take a sizable salary increase with no back pay, so this part of the problem was solved.
Question 1. what kind of salary inequity prevailed in Acme?
position inequity
external inequity
performance ineuity
all of the above
Question 2. Job evaluation in the case study refers to?
evaluationg performance of employees
evaluating work done by employees
evaluating salary per job
all of the above
Question 3. How did the company get into such a situation?
inappropriate job analysis
inappropriate job evaluation
inappropriate performance management
inappropriate recruitment & selection

Question 4. Which amongst the below are not method of job evaluation
Ranking method
Field survey
Paired Comparision
Management by Objective

Question 5. what sequence of procedure Black should follow
job analysis then job evaluation
job evaluation followed with job analysis
either can be done
both are not required

Question 6. Black should pay ………………. to Jobs lying in the same job cluster
same salary
different slary
same salary range
different salary range

Question 7. How did the management decide salary prior to Black joining in?
Based on jab analaysis
Based on job evaluation
based on negotiations
none of the above

Question 8. the horuly workers salary was fixed with the help of
Job evaluation
negotiations
job analysis
none of the above
Question 9. compensation of the employee include
base salary
incentive
paid holidyas
all of the above

Question 10. If you were Black, what would you have done about salary related to female supervisors
To do nothing
To gradually increase the female supervisors salaries
To increase their salaries immediately
To call the three supervisors into his office, discuss the situation with them, and jointly decide what to do.

Block 2
CASE STUDY

In the mid-1980s Xerox corporation was faced with a problem—its performance appraisalsystem was not working. Rather than motivating the employees, its system was leaving them discouraged and disgruntled. Xerox recognized this problem and developed a new system toeliminate it.
Old Performance Appraisal System
The original system used by Xerox encompassed seven main principles:1.The appraisal occurred once a year.2.It required employees to documenet their accomplishments.3.The manager would assess these accomplishments in writing and assign numerical ratings.4.The appraisal included a summary written appraisal and a rating from 1 (unsatisfactory)to 5 (exceptional).5.The ratings were on a forced distribution, controlled at the 3 level or below.6.Merit increases were tied to the summary rating level.7.Merit increase information and performance appraisals occurred in one session.This system resulted in inequitable ratings and was cited by employees as a major source of dissatisfaction. In fact, in 1983, the Reprographic Business Group (RBG), Xerox’s main copier division, reported that 95 percent of its employees received either a 3 or 4 on their appraisal.Merit raises for people in these two groups only varied by 1 to 2 percent. Essentially, across-the- board raises were being given to all employees, regardless of performance.
New Performance Appraisal System
Rather than attempting to fix the old appraisal system, Xerox formed a task force to create a new system from scratch.The task force itself was made up of senior human resources executives;however, members of the task force also consulted with councils of employees and a council of middle managers.Together they created a new system, which differed form the old one in many key respects:1.The absence of a numerical rating system.2.The presence of a half-year feedback session.3.The provision for development planning.4.Prohibition in the appraisal guidelines of the use of subjective assessments of performance.The new system has three stages, as opposed to the one-step process of the old system. These stages are spread out over the course of the year. The first stage occurs at the beginning of the year when the manager meets with each employee. Together, they work out a written agreement on the employee’s goals, objectives, plans, and tasks for the year. Standards of satisfactory performance are explicitly spelled out in measurable, attainable, and specific terms.The second stage is a mid-year, mandatory feedback and discussion session between the manager and the employee. Progress toward objectives and performance strengths and weaknesses are discussed, as well as possible means for improving performance in the latter half of the year.Both the manager and the employee sign an “objectives sheet” indicating that the meeting took place.The third stage in the appraisal process is the formal performance review, which takes place at year’s end. Both the manager and the employee prepare a written document, stating how well the employee met the preset performance targets. They then meet and discuss the performance of the employee, resolving any discrepancies between the perceptions of the manager and the employee. This meeting emphasizes feedback and improvement. Efforts are made to stress the positive aspects of the employee’s performance as well as the negative. This stage also includes a developmental planning session in which training, education, or development experiences that can help the employee are discussed. The merit increase discussion takes place in a separate meeting from the performance appraisal, usually a month or two later. The discussion usually centers on the specific reasons for the merit raise amount, such as performance, relationship with peers, and position in salary range. This allows the employee to better see the reasons behind the salary increase amount, as opposed to the summary rank, which tells the employee very little.A follow-up survey was conducted the year after the implementation of the new appraisal system. Results were as follows: 81 percent better understood work group objectives, 84 percent considered the new appraisal fair , 72 percent said they understood how their merit raise was determined, 70 percent met their personal and work objectives, 77 percent considered the system a step in the right direction In conclusion, it can be clearly seen that the new system is a vast imporvement over the previous one. Despite the fact that some of the philosophies, such as the use of self-appraisals, run counter to conventional management practices, the results speak for themselves.

Question 1. What was the major cause of dissatisfaction amongst the employees?
biaseness in rating
no proper system of performance appraisal
absence of feedback
all of the above

Question 2. what kind of biasness was involved in the old performance appraisal system?
biasness of central tendency
recency effect
halo effect
stereotyping
Question 3. what kind of performance system was the new one?
self appraisal
mbo
360 degree feedback
ranking system
Question 4. which of the statement is correct?
performance appraisal is a sub set of performance management
performance management is a subset of performance appraisal
both are same
both are not related
Question 5. the old performance appraisal system was…..
past oriented
future oriented
both
performance management oriented
Question 6. the new performance appraisal system is
past oriented
future oriented
both
360 degree based
Question 7. According to the forced ditribution method the employees were forced into how many groups in the old performance appraisal system
continuously distributed evenly in many groups
no groups formed at all
two major gorups were formed
all employees were ranked in the same group
Question 8. which mehtod was more objective?
old appraisal method
new appraisal method
both were equally objective
none of the above
Question 9. which amongst the below are not future oriented method of performance appraisal?
360 degree
MBO
720 degree
Graphic rating scale
Question 10. Merit pay given to employees are part of ……..?
incentive
increase in base pay
bonus
all of the above

CASE STUDY
Cadbury made life sweeter for workers
Housing and education were key features of the employee benefits package at Cadbury Brothers in 1952, thanks to founder John Cadbury’s sons.
In 1861, Richard and George Cadbury took over management of the Cadbury factory on Bridge Street, Birmingham, and began to take an interest in employees’ welfare. They created a new factory outside
Birmingham, which they named Bournville, which became known as ‘the factory in the garden’.
In 1895, the brothers built housing for their workforce, which turned into the Bournville Village Trust in 1900.
Young staff attended the Bournville Day Continuation College for one day a week until they were at least 18 years old. Cadbury-funded scholarships were available on graduation.
Shop committees were the first point of contact for employees’ work-related issues, except wages and hours, which were negotiated by trade unions.
Savings vehicles included the Bournville Pension Fund, into which employers and staff made contributions.
There was sick pay of up to 90% of base wage, and Workers’ Funds available for prolonged illness. A Dependant’s Provident Fund paid a lump sum to the next of kin if a male worker died under the age of 65.
Question 1. which Maslows need is the benefit plan at Cadburry focusing to?
Self esteem
Social need
physiological need
self actualisation
Question 2. which of the below Cadbury does not have according to the case study?
grievaiance handling
bargaining and negotiation
employee welfare
mentoring
Question 3. Provident fund is a?
short term investment
long term investment
moderate investment
does not depend on time
Question 4. scholorship given at Cadburry would be considered as a?
incentive
bonus
employee benefit
increment
Question 5. the salary given to employees were in which form?
consolidated
on pay grade
no such information is given
both a and b
Question 6. Which of the below is not a part of employee benefits?
scholorship
incentive
provident fund
housing facility
Question 7. which form of compenastion is given to employees at Cadburry?
direct compenation
indirect compensation
long term benefits
all of the above
Question 8. which of the below is not a component of direct compensation
salary
wage
incentive
all are part of dircet compensation
Question 9. Employee stock ownership plan is a?
long term incentive
short term incentive
can be both
it is not an incentive
Question 10. Which statement is not correct?
salary and wage are different from each other
incentive and increment are synonyms for each other
bonus is different from incentive
any kind of insurance cover given to employees is a part of compensation

Block 4
CASE STUDY
Companies continually test ways to incent employees to perform more effectively, often turning to worker-motivation tools such as bonuses, “up or out” employee ranking tournaments, and employee of the month rewards.
Behavioral scientists warn that these programs, if not constructed carefully, can open a box full of unintended consequences that ultimately harm rather than help the organization.
The financial crisis of 2008 was partially fueled by origination bonuses paid to bank loan officers who were incented to approve bad loans. Less well understood, but uncovered in HBS research several years ago, is that those bank bonuses also caused loan officers to perceive reality differently—they believed those loans would succeed.
It’s not just financial incentives that are under study. Employers seek to change the behavior of workers in all manner of ways: to make more ethical decisions, to get flu shots, to lose weight, to be wiser about personal financial planning. Behavioral scientists are becoming the new HR superstars in some organizations.
Research through the years at Harvard Business School has explored this good intentions-bad outcomes dilemma in many settings, from the glitzy world of Las Vegas to steamy laundry plants in Asia. The results these studies have uncovered are important to understand for org designers, compensation committees, and any function such as sales that depends on incentives to drive performance.

Question 1 Which need of Maslow’s hierarchy theory will not be fulfilled by giving incentives but will be more accomplished by giving recognition
Physiological need
Safety Need
Social Need
Self esteem need
Question 2 Which amongst the below will help employee to stay motivated
incentive
training
flexible working environment
all of the above
Question 3 Biased incentives will result to what kind of employees
satisfied
motivated
dissatisfied
nuetral
Question 4 When incentives are planeed, the target or goals set should be
realisitc
difficult to achieve
easy to achieve
unrealistic
Question 5 Is the statement true “incentives impact behaviour of employees”?
absolutely true
somewhat true
FALSE
none of the above
Question 6 Which is a type of incentive?
merit pay
base pay
hourly pay
bonus
Question 7 Pick up the odd one out
gain sharing
esop
bonus
profit sharing
Question 8 Group pay-incentive plan designed to motivate employees in improving the productivity of their workgroup through more efficient use of resources is called as
gain sharing
esop
bonus
profit sharing
Question 9 incentives are primarily dependent on
profit
sales
productivity
all of the above

Question 10. Which of the below concept is not related to compensation
Adam’s equity theory
Vroom’s expectancy theory
ERG theory
Kirk Patrick model

Block 5
CASE STUDY
Clare Bettelley speaks to Luke Savage about insurance market Lloyd’s titanic battle to retain employees at the not-for-profit Corporation
The challenge in attracting staff to Lloyd’s, the specialist insurance market formally known as Lloyd’s of London, is compounded by the fact that it is a not-for-profit organisation and lacks the ability to lure prospective staff with share schemes and lucrative stock and option awards. As part of its answer to responding to the competition for talent in the provider-rich global insurance market, the Corporation is in the throes of rolling out a cash bonus scheme.
Luke Savage, director, finance, risk management and operations at Lloyd’s, has been instrumental in the creation of a retention-focused scheme for its 700-strong staff, entitled the Lloyd’s Performance Plan. “When you’re a not-for-profit organisation, [you] need to counter the appeal of people being able to leave when the market’s doing well,” he says.
Bonuses are based on the Corporation’s pre-tax profit for the last full financial year multiplied by a percentage based on employee grade, which is then multiplied by salary. For example on a profit of £2.5 billion someone earning £50,000 a year would receive 12.5% of their salary.
“We had looked at far more complex ideas that effectively created shadow investment schemes to follow the results of the shares of the listed vehicles in the market, but we [decided to keep] it very simple, specifically to make it easier for people to understand.”
Long-term incentive plan
Savage says that he expects the cost of the scheme to be absorbed through Lloyd’s members’ annual subscriptions. “The scheme has been calibrated so that we should be able to operate it without having to go back to the market for more money.”
The scheme is open to all staff and capped according to their grades. It will supersede Lloyd’s existing executive long-term incentive plan (L-tip). On whether executives can earn more than is possible under their existing L-tip, Savage says: “For a given level of profit and a given point in the cycle, one may or may not earn more. The reason I’m being cagey is that the old scheme looked at average results over three years on one basis while the new scheme looks at results for a particular year on a different basis, so the amount you get paid, will vary as a function of where you are in the cycle.”
Awards under the old L-tip were calculated as a percentage of the Corporation’s aggregate profits for the relevant three-year period for each £1m of participants’ salaries.
Savage’s estimated long-term bonus as at 31 December 2006 was £13,000, which increased to £19,000 with the addition of his performance bonus.
“As a Corporation we have to pay a lot more attention to our reward package and work a lot harder by making sure that we provide an overall attractive package to [all] our staff – [not simply] those who have equity.”
Hence, Lloyd’s offers staff a number of non-financial rewards. It offers a defined benefit (DB) pension scheme, which it shifted from final salary to career average for new joiners in 2005. “It was part of a means to manage our risk to the Corporation in the long term. But we made a very clear choice not to close a DB scheme in favour of a defined contribution scheme. We think the DB scheme is valuable to people, certainly for the more mature members of staff, so while we’ve modified the terms, we have kept that scheme open,” he says. The Corporation also introduced employee contributions of 5% for most staff.
Savage says he manages reward costs as part of the ongoing programme of driving efficiency through the Corporation. “Take the area that looks after all the assets we hold on behalf of members – ‘market services’. We’ve managed to shrink its head count by 50% in the last five years and with the savings generated, we’ve invested in new heads in growing areas or made sure that the reward for the rest of our staff stays in line with the market.”
Lloyd’s core benefits Basic employee benefits for new joiners (excluding executives): • Lloyd’s Performance Plan and a performance-related bonus • Career average defined benefit pension with 5% employer contribution • Life assurance • 25 days minimum holiday allowance • Flexible benefits, including private medical insurance, childcare vouchers, additional holiday, cycle-to-work scheme • Car or cash alternative (for managers)
Question 1. which according to you is not linked with performance?
Incentive
increment
bonus
promotion
Question 2. Are the non financial benefits considered as a part of compensation?
yes
no
depends on the benefit given
depends upon the position you are giving the benefit

Question 3. Cafetaria plans comes under?
direct incentive
fringe benefits
lexible benefit
non monetary benefit
Question 4. Which statement is true for Lloyd’s organsation
Bonus is given to all the employees
Bonus is linked to performance
both a and b are correct
none of the above
Question 5. In which of the below scheme both employer and employee contributes together?
pension scheme
esop
paid holiday
paid maternity leaves
Question 6. ______________ is a systematic approach used by Lloyd’s to provide monetary values to employees
Salary
Allowance
Compensation
Rewards
Question 7. The entire case study is based on deciding ________________
direct compensation
indirect compensation
both a and b are correct
perfromance compensation
Question 8. The purpose of compensation setting in Lloyd is to _______
increase employee’s performance
make recrtuitment easy
need recognition of employees
retaining employees
Question 9. What type of compensation system exist in Lloyd?
Grading system
Direct compensation
Indirect compensation
all of the above
Question 10. which amongst the below perquisite is being given by Lloyad to its staff?
pension scheme
life insurance
gratuity
Vouchers
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CASE STUDY
Multi-sector giant GE faced a huge challenge in trying to harmonise perk for its 19,000 employees and the key was a new flexible benefits scheme, says Rebecca Patton
GE introduced a flexible benefits scheme for its entire 19,000-strong UK workforce last November in an effort to harmonise the benefits it offers across its four main business divisions (see below).
Before the arrival of the scheme, which is called FlexChoice and provided by Vebnet, each of the businesses operating within the four divisions, which span the aviation, healthcare, energy solutions and finance sectors, ran their own, separate payroll, HR, and compensation and benefits teams, and the benefits they offered varied widely. For example, employee access to GE’s 30-plus mostly defined contribution (DC) pension schemes and private medical insurance (PMI) plan was inconsistent across the group.
Core levels of benefits now available to all GE employees via FlexChoice include PMI, provided by Cigna HealthCare, life assurance, group income protection (GIP) and two DC pension schemes provided by Legal and General and Aviva, respectively. A third DC scheme, provided by Phoenix Life, is closed to new members.
GE also offers a range of voluntary benefits through FlexChoice, including childcare vouchers, bikes for work, life insurance for employees and their partners, gym membership and travel insurance. A health reimbursement
plan offers staff £60 each to spend on products and services to keep them healthy, such as trainers or exercise equipment.
Employees also have access to a health and wellbeing savings scheme, with GE matching staff contributions up to a maximum of £300.
Kerrie Rowland, UK pensions and benefits manager at GE, says: “Flex was the tool with which we could deliver the harmonisation and at the same time offer flexibility. For example, for those who had never had medical benefits before, if they didn’t want to have these going forward and [wanted to] maintain the status quo, that was absolutely fine. The scheme allowed for them to take the baseline benefit through flex and then flex up.”
GE also restructured its pension arrangements before launching the flex platform. This involved consolidating its 30-plus schemes, which were mostly DC. In addition to its DC schemes, GE now has six defined benefit (DB) plans that are all closed to new entrants.
Boosted take-up
Rowland says the closure of GE’s DB pension schemes to new members helped to boost the take-up of benefits under FlexChoice, which stood at 96% in year one. “The take-up for year one was phenomenal and was largely because we closed the DB plan and people had to go in and tell us which pension plan they wanted to be a member of. If they didn’t go in and tell us they wanted to continue being a member of the DB plan, they would have to be defaulted out [of the scheme], the default being the DC plan.”
GE is currently recruiting employee volunteers as ‘pension pioneers’ to help it communicate its pensions strategy more consistently across the business, as well as to relay employee concerns and queries back to the organisation.
Despite its success in communicating its pension schemes, Rowland says communication was one of the biggest challenges in implementing FlexChoice. “There are nearly 20,000 employees to be communicated to and consult with, all at the same time, on some fairly significant changes,” she says. “Even on the basics, we found our employees were very unfamiliar with considering a pension to be a benefit. To them, it is a contractual right, not a benefit.”
Exacerbating the communications challenge was the fact that so many GE sites are run as self-contained businesses in locations without internet access, nullifying email and website strategies. There were also employees who preferred traditional face-to-face consultation.
Nevertheless, Rowland says the benefits of implementing FlexChoice far outweigh the challenges. One of the biggest advantages is replacing several flex enrolment windows a year with just one.
Rowland adds: “There is one method of understanding throughout the HR department, there is one system, there is one change for everybody unless they have a life event, and a lot of the systems are connected to one another, so updates are made automatically.”
Future additions
GE is now planning future additions to its flexible benefits plan, says Rowland. “For next year, we are going to be adding a benefit from My Family Care. This is largely back-up care and also access to a provider that can find care for [employees], not just childcare but also elder care, which works well for our diversity objectives.
“We will also be expanding the health reimbursement account. Other than that, we don’t anticipate too many changes into year two because, with a flex plan, you just need to be there to work on comfort levels and you can’t do that if you are constantly changing the plan.”
GE’s expansion of its health reimbursement account will see the plan repositioned to focus on employees’ lifestyles and work-life balance, with the account possibly being renamed to reflect this shift. This means employees will be able to use the benefit to pay for treatments designed to improve work-life balance, such as acupressure and massage, as well as for relevant further education courses.
GE also plans to enable employees to use health reimbursement to fund gym membership. Rowland says: “We have looked at what our overall objective is and what we are trying to achieve with this account, and the point is, we are trying to say to employees that we want them to be healthy and have a life outside of the organisation which is supported by GE.”
GE’s implementation of FlexChoice resulted in it being highly commended in the ‘Most effective use of a flexible benefits plan’ category at the 2012 Employee Benefits Awards.
Question 1. Pension according to you is a ___________
expense
contractual right
perquisite
fringe benefit

Question 2. As the GE HR Head, what would have been the biggest challenge that you would have faced in such scenario?
prepering the compenastion Plan
communicating the plan and convincing employees
getting money for so much of workers benefit
no problem at all as GE is a big professional organisation
Question 3. Flexible benefit introduced by GE pertains to which theory?
Maslow’s theory
ERG theory
Vroom’s expectancy theory
all of the above

Question 4. Which beneffit would employees try to gain when they want to achive their social needs?
insurance policy
health benefit
dicounted vouchers
flexible work timings

Question 5. Flex choice introduced by GE are examle of____________
cafetaria plans
basket benefits
flexible benefits
all of the above

Question 6. The indirect compensation been included by GE would be categorised in _______________
base pay
benefits
variable pay
salaries

Question 7. The benefits introduced by GE are linked to ___________
performance
position
person
all of the above

Question 8. According to total rewards approach, the variable pay of the employee is
added into base pay
subtracted from base pay
multiplied to base pay
divided to base pay

Question 9. The systematic way GE will be using to determine the worth of all the jobs will be________________
compensable evaluation
job evaluation
benchmark job
job promotion structure

Question 10. Which is the equity that GE will have to ensire while fixing the benefit plan?
internal equity
external equity
procedural equity
performance equity
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Compensation & Reward Management (EDL 409)-Semester 4

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