Case Study on the Rewards Systems of Sanowara Group

1.0 Introduction
Motivating employees by rewarding sustained performance is one of the four goals identified to support and operationalize an organizations compensation philosophy. Often motivation can be achieved and enhanced through recognition. Employee rewards and recognition programs are designed to acknowledge employees contributions to the overall objectives of the agency. These recognition programs must be designed to support the mission and goals of the specific agency and may vary in approach to include planned or impromptu types of recognition. Hence, reward systems are an important aspect of human resource management. Reward systems needs special attention in organizations because it is correlated to attracting, retaining, and motivating employees, as well as provide training and promotional opportunities. Historically organizations in Asian and African countries have a poor reward system. Many of these organizations do not have provisions for rewarding superior performance or for a wage system based on merit. Promotion criteria are based on seniority and length of service. Thus the bureaucratic structure of such organizations is a basic hindrance to designing a better reward system. This case study aims to study and analyzes the reward system of Sanowara Group a Bangladeshi Conglomerate to get an idea about the reward systems of a typical Bangladeshi conglomerate.

1.1 Origin of the study

This paper is a requirement of Performance Appraisal and Compensation Systems (HRM 604) offered in School of Business in North South University. The purpose of the Case Study is to give students more in-depth understanding of the concept of Compensation Management and its components through reviewing existing data.

1.2 Implication of this study

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Case Study on the Rewards Systems of Sanowara Group

This Study will help us draw an understanding of reward systems in real world organization It also provides pointers to readers on how to incorporate reward systems that increase employee motivation.

1.3 Objective of the study

The objective of the study is to observe and provide suggestions on Reward systems of Sanowara Group.

1.4 Methodology:
The methodology of the study is as follows: 1.4.1 Data Source Secondary information has been collected from the head office of Sanowara Group, course text book, published Journals and the internet. Certain data were also collected by observing the work conditions at Sanowara Group. 1.4.2 Research Design This is basically a secondary research. The study was developed by analyzing data of qualitative type. 1.4.3 Limitations Researchers lack of experience. Not being able to collect a larger amount of data Exact monetary value of the rewards offered by the company could not be disclosed due to confidentiality.

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2.0 Literature Review

o Employee Incentive and Reward Systems - 7 Essential Basic Elements, Leone Noone, Ezine Articles The design and management of reward systems present the general manager with one of the most difficult HRM tasks. This HRM policy area contains the greatest contradictions between the promise of theory and the reality of implementation. Hence developing an employee incentive and reward system that works to everyone's satisfaction needs to ensure that 7 essential basic elements called PAMSITS. The first criterion is Performance. The purpose of incentives and rewards is to improve performance. Simply defined, performance means on job results. It's the absolute basis of any system. Second criterion is Achievability. Performance targets must be seen by employees to be achievable. If employees regard targets as very difficult or impossible you'll kill your incentive scheme stone dead. Measurability, Superiority, Integrity are also elements of a adequate reward system. Support is also an element of reward system. Many incentive and reward systems recognize those who achieve outstanding job results. When constructing reward system, it has to be ensured that support staffs participate in the rewards. It contains the essence of building rewards and incentives that improve employee performance. o Reward systems and self-managed team success, Stephen A. Furlich, Bolanle A. Olaniran Academic Exchange Quarterly, spring, 2004 Organizations are always searching for innovative ways to surpass the competition, and one way to do so is through motivating employees. When

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Case Study on the Rewards Systems of Sanowara Group

studying teams, researchers often find motivation to be a vital factor. Teams with higher levels of employee motivation are more productive and efficient than those with lower levels of motivation. Thus, it becomes vital to ensure that teams have high levels of motivation. One way to analyze methods to increase motivation within teams is to study specific variables that may have a relation to motivation such as team-based reward systems. These methods become even more important when studying self-managed teams since these teams have more control over their own behaviors than do teams that are lead by a manager. The system by which the self-managed teams are assembled must be understood since the system is the structure by which the team functions. One can argue that the reward system under which the team is working influences the behaviors of the members of the self-managed team. Moreover, the team members' motivation is influenced to some extent by the reward system that is in place and the goals set forth by the reward system . Thus, finding ways to improve team-based reward systems in self-managed teams is imperative to increase employees" motivation and subsequently their productivity. This paper explores these variables by investigating motivation within self-managed teams as influenced by reward systems

3.0 Company Background

Sanowara Corporation started its journey in 1978 by marketing imported Red Cow Milk Powder. After the Chernobyl accident in 1985 Red Cow lost its market control and to maintain the sequence of that market Unilack Sanowara (BD) Ltd. was developed in 1991. This organization started its journey by repacking Diploma Falcon Milk Powder. Unilack Sanowara Ltd. and Unilack inaugurated a partnership business with Australia at a ratio of 51:49. Later in 1998 for the manufacturing of Kwality Ice Cream and Mineral water Sanowara Drinks and Beverage was developed. Today

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Case Study on the Rewards Systems of Sanowara Group

Sanowara has 6 manufacturing plants like Sanowara Dairy Foods Ltd. (Milk Powder), Sanowara Dairy Foods Ltd. (Condensed milk), Sanowara Dairying and Industries Ltd. (Butter oil) and Sanowara Plastic Industries Ltd. In all the above mentioned organizations Sanowara has employed about 2500 people. Some of the above are foreign experts. Most of the human resources of Sanowara are trained. This rapidly developing group of companies is one of Bangladeshs leading organizations. It is indeed playing a key role in the development of our countries economy. Slowly but steadily Sanowara Corporation has developed to the well known Sanowara group of Companies.

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Case Study on the Rewards Systems of Sanowara Group

3.1 Organogram of Sanowara Group of Companies

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3.2 Pay Grades of Sanowara Group

Sanowaras Pay grade is divided into 3 grades E, N and D. These pay grades have groups. The pay grade of Sanowara is as follows Head Office & Factory Office (Office Maintenance/Operation) E 1 E 12 E 1 = Senior Manager E 12 = Assistant Officer

Depo (Distribution Centre), Factory (Production) & Construction N 1 N12 N 1 = Depo Manager/Project-in-charge N 12 = Worker/Labor

Director/ MD D 1= Director/MD

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3.3 Organogram of the Human Resource Department

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4.0 Reward System of Sanowara Group

An effective Reward Strategy plays a very important role for an organization. An effective reward system pays for the performance, Incentivizes the employee to act, creates and maintains positive behavioral change, lifts the performance, Improves the productivity, and Lifts the Company profit. Effective Reward Systems focuses on positive reinforcement. Positive reinforcement is the most effective tool for encouraging desired behavior because it stimulates people to take actions because they want to, because they get something of value (internally or externally) for doing it. The reward system of Sanowara Group consists of two elements: o Financial Rewards Compensation Base Salary Pay Incentives Employee Benefits o Non-financial Rewards Intrinsic Rewards centers on the work itself Praise, recognition, time off and other rewards given to the employee by peers or superiors.

4.1 Financial Rewards

Base Salary: Base salary of a Sanowara employee is designated based on the following criteria:

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o Level/Grade The level/grade is a placement in the company's pay structure, based on the relative content of a position, market competition and available financial resources. Salary ranges change as conditions warrant. change only when the position changes. o Job A job is a group of positions with the same title that perform similar work; require similar skills, job knowledge, education and experience; and have comparable responsibilities and complexity. Such positions are compensated similarly. o Job Description A job description is a written record of the major tasks, responsibilities, and work conditions of each job. The job description provides documentation of the essential functions of the job and the bases for performance evaluation standards. Pay Incentives Additional pay may be granted to employees in certain cases where job performance greatly exceeds normal levels. The criteria are as follows: o Overtime Overtime will be paid at the rate specified by the labor law) following provisions applicable to the company. This policy applies to non-exempt employees regardless of title. Employees who work overtime without authorization must be paid for the hours worked or appropriate compensatory time provided. However, working unauthorized overtime may be cause for disciplinary action.
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Levels/grades

Case Study on the Rewards Systems of Sanowara Group

o Special

Recognition

Awards

when employees distinguish themselves, their departments, or the company, by exceptional job performance, special bonus pay may be awarded. In such cases, a lump-sum award may be made in an appropriate amount recommended by the department head and approved by the appropriate Director. o Special Situations for Exempt Employees

In certain circumstances, additional pay may be awarded to an exempt employee whose workload has significantly deviated from the job's normal expectations. Examples of special situations include: long-term special projects; significant accomplishments, assigned work in another department; and performing a specific job or function that is significantly different from the position for which the employee was originally hired. Supervisors who wish to recognize these special situations should consult with Human Resources for direction and guidance before arranging for additional pay. Employment Benefits o Life Insurance Sanowara provides life insurance coverage for its Permanent employees at the event of joining the company. All the precessing activity of this specific benefit is motitored and administered by HR Department. Company depending on the pay grade of the employees shall pay benefits on normal death and accidental death from designated insurance company. o Provident Fund

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Sanowara offers a Provident Fund scheme for all the permanent employees. The Company and employees contribute equally. A certain percentage of the employees basic salary, is deducted each month for the provided fund. Amount collected from both the sources is pooled on the respected employees PF account. o Health Benefits Payment of medical expenses and compensation are provided to any injured employee who is either injured in a work related accident or incurs an occupational disease if compensable. It also provides for death benefits should the injury or disease result in death. A three (3)-day waiting period is prescribed no Workers' Compensation is payable for the waiting period unless the disability lasts longer than 14 calendar days, in which case payment for the three (3)-day waiting period is allowed. The first day of the three (3)-day waiting period is the next calendar day following the on-the-job injury or illness that the injured employee is unable to work as determined by the authorized physician. o Loan Permanents employees in D1, E1, and N1 pay grade may be entitled to loan if required. The loan acceptance shall be determined by HR Department and designated Bank based on the employees basic salary, financial condition and the length of service. o Bonus Sanowara provides two festival bonuses to its permanent employees based on the work hours. o Lunch
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Company provides a subsidised lunch facility to employees of pay grade D1, N1, E1 and E12. o Conveyance Employees out on official work, company tour or sales evaluation are provided with conveyance. The fund is allocated based on the kind of activity being performed. o House Rent Sanowara provides a certain amount funds for the house rent of company executives. This can range from full contribution to partial contribution depending on the designation of the employees. o Utilities Payment Company allots fund for utilities payments for its Executives. The scale of contribution in utilities payments depends on the seniority of the employee in question. o Mobile Bill Depending on the company need, a mobile telephone may be provided to an employee. Sanowara may also allot a certain amount of funds for the employees mobile bill.

4.2 Non Financial Rewards

Employees are motivated by both intrinsic and extrinsic rewards. To be effective, the reward system must recognize both sources of motivation. All reward systems are based on the assumptions of attracting, retaining and motivating people. Financial rewards are an important component of the reward system, but there are other factors

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that motivate employees and influence the level of performance. Non Financial Rewards offered to a Sanowara Employee are:-

Employee of the Month:Employees are awarded the employee of the month award based on individual performance. Employee contribution is measured based on his/her job and the top performer is nominated employee of the month Mentor Sanowaras mentoring activity is based on a informal approach. In this approach a senior level employee seeing something in a younger employee and taking a younger employee under his or her wing and providing them advice and guidance to assist them with their current job or career goals. Advanced training Sanowara will support employees who wish to join and participate in careerrelated organizations when:

the affiliation is consistent with the mission and values of the company, membership will benefit the employee and the company, and adequate funding is available to sponsor the membership.

Attendance at seminars or conferences Employees are sent to attend seminars and conferences both on national and international level based on their area of work and merit.

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5.0 Analysis
From our analysis of Sanowara group we have observed that the reward system of Sanowara is predominantly monetary. Financial rewards are an important component of the reward system, but there are other factors that motivate employees and influence the level of performance. Alfie Kohn argues that monetary rewards actually hamper employees and companies by decreasing employees motivation, interest, and job satisfaction. Alfie Kohn (1993) argues that monetary incentives encourage compliance rather than risk-taking because most rewards are based only on performance. As a result, employees are discouraged from being creative in the workplace. So we suggest Sanowara to maintain a balance of Nonmonetary and monetary rewards. We have also noticed that the rewards and incentives are highly bureaucratic. The financial rewards provided to the employees depend on their level of seniority. Just because seniority or length of services implies a certain degree of superior performance it does not indicate a fresh recruit will not exert superior performance. Reward systems should not be based solely on the length of service. Sanowara have to develop a reward system which encourages superior performance not just the length of service, so that pay and wage administration will be an effective tool to promote performance, motivation, and satisfaction.

6.0 Recommendations
We propose the following recommendations for Sanowara Group: Provide a clear job description, performance standards, and performance appraisal to help in evaluating work and rewarding people for meritorious service.

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Develop an Employee Suggestion Program that gives the company a scope

to recognize what rewards employees actually desire.

Develop Job Evaluation Committees that hear appeals by departments on job evaluation issues. So that a sound performance based evaluation method is developed and ensures adequate rewarding.

Utilize new and unconventional nonmonetary reward systems to promote performance, motivation, and satisfaction. The key to selecting the most effective nonmonetary reward is having a large number available from which to choose. The approaches may include: o Letter of appreciation o Employment anniversary note o Lunch with senior management o More autonomy to determine how the work is completed o More frequent assignment of responsibilities the employee enjoys o Employee photo boards or "Hall of Fame" o Certificate of accomplishment o Tickets to local events o Invitation to "higher-level" meetings

7.0 Conclusion
We understand that people seek employment for financial independence hence, making it an important motivating factor. However financial motives are only one side of the coin. People also seek employment to satisfy their needs of self-worth, social status and other needs that satisfy our emotional needs. These needs can be better catered by Informal rewards. This form of rewards act as a "common sense" approach to employee recognition and refer to the innumerable ways in which supervisors can demonstrate their appreciation of a job well done. Informal rewards

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focus on spontaneous, sincere and personal appreciation of employee efforts. These types of rewards successfully recognize employees, while generally requiring very little or no funding to implement and maintain. Informal rewards, when delivered correctly and consistently, improve both performance and morale.

8.0 Bibliography Sanowara Group of Companies, Human Resource Dept. & Management Dept. Bunmi Omolayo and A.B. Owolabi, 2007, Monetary Reward: A Predictor of Employees Commitment to Medium Scale Organizations in Nigeria, Bangladesh e-Journal of Sociology. Volume 4. No. 1. Vijayaragavan, 1994; Swanson, Farmer, & Bahal. 1990 Kohn, Alfie. 1993. Why incentive plans cannot work. Ultimate Rewards. A Harvard Business ReviewBook, edited by S. Kerr. Boston, MA: Harvard Business School Press. Nelson, Bob. 1999. Incentives for all generations. Nelson Motivation Inc John G., Manage People, Not Personnel, A Harvard Business review book, 1990

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