D7

p
u
Gro ishikt
Abh nwold
la
e
Gre Mang
shie k M.P.
u
r
A
pa umar
e
e
K
D
esh awal
n
t
Ra u Agr
Tar

Culture &
Compens
ation: SR
F
Limited
Compensa
tion & Rew
ard Manag
ement

SRFS HR POLICY TIMELINE

4 job grades compensation uniform
across grade
Annual cost-of-living salary and additional
salary increase based on individual
performance and personal growth
potential
Performance analyzed on 2 basis
Goal achievement
Improvements in work process they
initiated
Rating inflation; identical ratings
identical raise
No effect of company performance

1981

Individualized salary for Managers in same

grade
6 job grades
Job-level descriptions standardized across
units
Development Dialogue performance
review management system implemented
Compensation = Individuals performance
+ Assessed potential + Market-based
component

Early 1990s

14 job grades similar compensation

Each business unit had own compensation
structure based on market, industry
Reluctance in transfers
10-15% of employees received potential
based salary increase (eligible for promotions)

2003-04

SRFS CURRENT COMPENSATION SYSTEM

Individual
Performanc
e

Employee evaluated within key result

areas/ control points by multiple
managers
Assessment of future performance potential
prepared

Assessed
Potential

SALAR
Y

All ratings are combined into a single

subjective rating on a 3-point scale and payraise determined

Outstanding

25%

Good

Marketbased
Componen
t

Average

15%

10%

SRFS CURRENT COMPENSATION SYSTEM

POSITIVES
Multiple managers rated
each employee
objectivity and
transparency
Employee not penalized for
factors outside their control
Compensation system
benchmarked against
market every 2 years
System aligned well with
TQM-based approach
System aligned with SRFs
Vision and Values

NEGATIVES
Poor financial performance
of company not reflected
in executive employees
compensation
Potential and performance
measured together and
not separately
No short-term rewards
incorporated
lose
employees who are driven
by short-term rewards

CHANGING TRENDS IN INDUSTRY

SRFS VALUES

SRFS CHALLENGES

Developing a system to address the above

and still maintain everyones focus towards
long term goals

CONSULTANTS ADVICE
Changing the compensation system to Variable Pay that is
linked to both the individuals and the companys
performance

NEW COMPENSATION STRUCTURE

(FINANCIAL)
In addition to current progressive HR policies (like salary guarantee to
surviving spouse in case of employee death, retirement benefits etc.),
the following compensation structure is recommended:
FINANCIAL AWARDS:
1) Base Pay
2) Short term incentive: Fixed pay temporary hike (bonus)
3) Long term incentive: Variable pay linked to long term goals by
using
a) ESOPS
b) Performance shares
c) Indexed Options
d) Premium Priced Options
4) Competency-based pay: Fixed pay permanent hike/promotions

NEW COMPENSATION STRUCTURE

(NON-FINANCIAL)
Studies show that recognition has a positive impact on
performance, either alone or in conjunction with financial rewards
NON-FINANCIAL and RECOGNITION-BASED AWARDS for performance
and loyalty:
1) Employee recognition
2) Gift certificates
3) Cash rewards
4) Training programs
5) Work/life benefits

RECOMMENDED PLAN

Multiplier
Approach

MULTIPLIER APPROACH
Company Performance (weight 0.5)

Individual
Performanc
e (Weight
0.5)

Outstandi
ng

Excellent

Good

Marginal

Unacceptabl
e

Outstanding

1.00

0.90

0.80

0.70

0.00

Excellent

0.90

0.80

0.70

0.60

0.00

Good

0.80

0.70

0.60

0.50

0.00

0.00 value of
0.00
0.00 award:
0.00
0.00
To Marginal
determine the dollar
each employees
Unacceptabl
0.00
0.00
0.00
0.00or salary0.00
1)
Multiply the employees
annual,
straight-time
wage
times
e
his/her
maximum incentive award
2) Multiply the resultant product by the appropriate percentage figure from
this table.

For example if an employee had an annual salary of $20k and a

maximum incentive award of 7% and if her performance and the
organizations performance were both excellent, the employees award
would be ($20,000x0.07x0.8 = $1,120)

EQUITY THEORY OF MOTIVATION

Description

EQUITY

EXISTING

CONSULTANT

PROPOSED

Pay rate compared to

other firms

External

Benchmarked
every 2 years; low
attrition
MODERATE

Variable pay as
other firms
HIGH

Variable pay as
other firms
HIGH

Pay rate compared to

other jobs within firm

Internal

Job-level
descriptions were
standardized across
business units
HIGH

Depends on the
compensation plan

Holistic review
MODERATE

Pay rate compared to

same/very similar jobs
within firm

Individual

Individualized
salaries
HIGH

Individuals
performancebased
HIGH

Individuals
performancebased
HIGH

Fairness of process of
allocating pay rate

Procedura
l

Rating by multiple
managers;
subjectivity
MODERATE

Depends on the
measurement plan

Depends on the
measurement plan

HERZBERGS THEORY OF MOTIVATION

Description

FACTO
R

EXISTING

CONSULTANT

PROPOSED

Lower level
needs better
pay, working
conditions etc.

Hygiene

Employees satisfied
as low attrition
MODERATE

Employees prefer
variable pay
HIGH

Employees prefer
variable pay
HIGH

Higher level
needs
accomplishment,
recognition etc.

Motivat
or

Non-financial
benefits like
representation on
board, management
trainee programs etc
MODERATE

Only monetary
benefits (some
employees had
come back)
LOW

Non-financial
benefits are included
which incentivize
employees
HIGH

Thank You
!