Career Planning &Compensation Management Divya Sharma
Career Development -Overview Career development is a continuous process where both employees as well as employers have to put efforts in order to create conducive environment so that they can achieve their objectives at the same time.
Importance of Career Development Employees continuously need to upgrade their skills and competencies to meet the current demands where as organizations must be ready with those employees who can handle the pressure efficiently and cease the risk of falling prey to the changed scenario. Therefore, understanding the importance of career development is very necessary for both the parties.
Business Environment Factorsthat can Bring UndesiredChanges Economic Downsizing De-layering Cost Reduction Strategies of the Organization IT Innovations
Designing Career DevelopmentSystems Designing career development systems according to specific needs and requirements of an organization can help HR specialists in bringing efficiency to the entire process of career management.
Career Development Plan A Career Development Plan is a written list of the short and long-term goals that employees have pertaining to their current and future jobs, and a planned sequence of formal and informal experiences to assist the employees in achieving their goals.
Purpose of a CareerDevelopment Plan to assist employees in achieving their goals increases the likelihood of retaining employees helps employees set realistic expectations of career growth Helps employees becoming eligible for their next career milestone
Format of a CareerDevelopment Plan As a manager or supervisor, encourage the use of an Individual Career Development Plan (ICDP) format for all of your employees. employees need to take responsibility for creating this form for themselves and provide the following information: Short-term career goals/objectives (1-5 years), Long-term career goals/objectives (+5 years) Development experiences in the short term: Summary statement Education and training Job assignments Developmental activities
Process for Supporting YourEmployees CareerDevelopment Plan Plans about development should focus on two dimensions: specific technical and functional expertise and overall demonstration, by the employee, of the organizations culture, philosophy and values.
1. Meet individually with your employees to identify their long-term career interests.2. Identify resources3. Prepare the plan4. Review the proposed plan, revise it, adjust it and confirm alignment by providing your signature and obtaining the employees signature.5. Assess employee progress against the plan, and revise the plan to adjust it, if necessary.
Useful tool for career developmentpractitioners• Offer it to managers as a way to encourage the development of those they supervise.• Help the manager in supporting employees for gaining new skills• It also helps employees stay on track and move forward in their careers.
Components of a CareerDevelopment System A career development system includes a variety of components for use in the organizations.1. Self Assessment Tools2. Career Planning Workshops3. Individual Counseling4. Organizational Assessment Program5. Developmental Programs
Objectives of CareerDevelopment Systems Fostering Better Communication in Organization Assisting with Career Decisions Better Use of Employee Skills Setting Realistic Goals Creating a Pool of Talented Employees Enhancing the Career Satisfaction Feedback
Career Planning A career develops over a lifetime and is made up of many work and life experiences. What is Career Planning? Career Planning is an ongoing process of learning what you are cut out for by:1. exploring your values, interests, skills, abilities, etc.2. exploring different occupations and industries,3. exploring different learning options, making an informed decision when setting a career goal, and developing SMART plans to achieve each career goal.
Succession planning Succession planning is one of the most important career development tools used by organizations. Identify those with the potential to assume greater responsibility in the organization Provide critical development experiences to those that can move into key roles Engage the leadership in supporting the development of high-potential leaders Built a database that can be used to make better staffing decisions.
Benefits of Formal SuccessionPlanning systematic approach for preparing employees to handle the responsibilities at higher levels. It helps in knowing why a specific individual should be developed and trained. It reduces the randomness in organization’s processes is a proactive approach to fill a top position helps in further exploitation of computer systems, HRP software applications fosters pro-active management approaches to make organization a better place to work. It establishes a logical basis for making choices establishes a specific connection between the business objectives and HR strategic planning.
Wage and salary administration Wage and salary administration affect levels of employee commitment to the organisation. Administration of employee compensation is called wage and salary administration. “Wage and Salary Administration refers to the establishment and implementation of sound policies and practices of employee compensation. The wage and salary administration aims to establish and maintain an equitable wage and salary structure and an equitable labor cost structure.
Objectives of Wage and SalaryAdministration : The wage and salary administration aims to establish and maintain an equitable wage and salary structure and an equitable labor cost structure. To establish a fair and equitable compensation offering similar pay for similar work. To attract competent and qualified personnel. To retain the present employees by keeping wage levels in tune with competitive units.
To keep labor and administrative costs in line with the ability of the organization to pay. To improve motivation and morale of employees and to improve union management relations. To project a good image of the company and to comply with legal needs relating to wages and salaries. To establish job sequences and lines of promotion wherever applicable. To minimize the chances of favoritism while assigning the wage rates.
Principles1. Should be sufficiently flexible2. Job evaluation must be done scientifically3. It must be always consistent with overall organizational plans and programs
Principles4. It should be in conformity with the social and economic objectives of the country like attainment of equality in income distribution and controlling inflationary trend5. It should be responsive to the changing local and national conditions6. These plans should simplify and expedite other administrative process
Elements Wage and salary systems should have a relationship with the performance, satisfaction and attainment of goals of individual. Wage and salary system has following elements (Henderson):1. Identifying the available salary opportunities, their costs, estimating the worth of its members, of their opportunities and communicating them to employees.2. Relating salary to needs and goals3. Developing quality, quantity and time standards related to work and goals4. Determining the effort necessary to achieve standards5. Measuring the actual performance
6. Comparing the performance with the salary received7. Measuring the job satisfaction of the employees8. Evaluating the unsatisfied wants and unrealized goals aspirations of the employees9. Finding out the dissatisfaction arising from unfulfilled needs and unattained goals10. Adjusting the salary levels to help employees reach unleashed goals and fulfill the unfulfilled needs and aspirations
HR Challenges How can individuals and groups be recognized? What is a pay-for-performance plan and how is it used in the organization? How is an executive compensation package designed? What are the pros and cons of different compensation methods?
Pay-for-Performance (Incentive) Systems Assume That… Individuals and teams differ in level and quality of contribution Firm’s overall performance depends on performance of individuals and groups in the firm Firm should reward employees based on their relative performance to attract, retain and motivate high performers
Challenges to Incentive System “Do Only What You Get Paid For” Syndrome Adversely affects cooperation Lack of Control Difficulties in Measuring Performance “Psychological Contract” is created that is often resistant to change
Employees question fairness and credibility Potential reduction of intrinsic drives Leads to job dissatisfaction and stress
Developing Incentive Systems Link pay and performance appropriately Use incentives as part of a larger plan Use financial and non-financial incentives Build Employee Trust Promote belief that performance matters Use multiple layers of rewards Increase employee involvement
Individual-Based PlansBest When… contributions of individuals can be accurately isolated job demands autonomy cooperation is less critical to successful performance or when competition is to be encouraged
Team-Based Plans Best When… it is difficult to single out who did what firm’s culture / structure support teams task objective fosters entrepreneurship in self-managed work groups
Fringe Benefits Definition:: Definition: Fringe benefits are those monetary and non monetary benefits given to the employee during and post-employment period which are connected with employment but not to the employees contribution to the organization.
You Could receive a benefit whenyou Use a work car for private purposes. Are provided with a cheap loan. Are provided with free private health insurance. Are provided with cleaning services for your private residence.
Need & Importance of FringeBenefits: To retain the employees. To motivate performance. As a social security. Trade Union demand. Skill shortage. Employee Demand
Objective To recruit and retain the best employees. To protect employees against certain hazards e.g. life insurance, old age pension, etc. To improve motivation and morale of the employees To improve work environment To ensure health, safety and welfare of employees. To develop a sense of belongingness and loyalty among workers. To improve the public image of the organization.
Kinds of Fringe Benefits : The benefits and services to be included under the title ‘fringe benefits’ are numerous. A few of them are – Bonus for quality and attendance, contribution to group insurance plan, lay off and termination pay, travel expenses, suggestion awards, medical leave with pay, overtime, university and trade courses, etc.
Employee Stock Options Plans Employee Stock Option Plan (ESOP), is a plan through which a company awards Stock Options to the employees based on their performance. Under an ESOP, the employees have right to buy the shares of the company on a predetermined date at a predetermined price. The objective of ESOP is to motivate the employees to perform better and improve shareholders value. Apart from giving financial gains to the employees, ESOP also creates a sense of belonging and ownership amongst the employees.
Here’s an example of a typical employee stock option plan: an employee is granted the option to purchase 1,000 shares of the company’s stock at the current market price of $5 per share (the "grant" price). The employee can exercise the option at $5 per share— typically the exercise price will be equal to the price when the options are granted. Plans allow employees to exercise their options after a certain number of years or when the company’s stock reaches a certain price. If the price of the stock increases to $20 per share, for example, the employee may exercise his or her option to buy 1,000 shares at $5 and then sell the stock at the current market price of $20.
Companies sometimes revalue the price at which the options can be exercised. This may happen, for example, when a company’s stock price has fallen below the original exercise price. Companies revalue the exercise price as a way to retain their employees.
Different terms used in an ESOP Grant date - The date on which the company grants an option to its employee. Option price - The price at which such shares in a scheme are offered. It is also known as the ‘strike price’ or ‘grant price’. Exercise period - The employees would be given a time period, called exercise period, within which they are required to exercise the option. The date on which employees exercise this option is known as ‘exercise date’.
Different types of ESOPs Employee Stock Option Scheme (ESOS) - Under this scheme, the company grants an option to its employees to acquire shares at a future date at a pre-determined price. Eligible employees are free to acquire shares on vesting within the exercise period. Employees are free to dispose of the shares subject to lock-in-period if any. Generally exercise price is lower than the prevalent market price.
Employee Stock Purchase Plan (ESPP) - This is generally used in listed companies, wherein the employees are given the right to acquire shares of the company immediately, not at a future date as in ESOP, at a price lower than the prevailing market price. Shares issued by listed companies under ESPP will be subject to lock-in-period, as a result, the employee cannot sell the shares and/or the employee has to continue with the employer for a certain number of years.
Share Appreciation Rights (SAR)/ Phantom Shares - Under this scheme, no shares are offered or allotted to the employee. The employee is given the appreciation in the value of shares between two specified dates as an incentive or performance bonus, that is linked to the performance of the company as a whole, as reflected in its share value.