Compensation And Performance Management

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Question :

College : Middle East College
Module: Compensation and Performance Management (BUSS 1703)

Part 1:

Q1. Critically evaluate the strategic importance of salary survey to an organisation. Clearly discuss any two types of data gathered in a salary survey.
Q2. Evaluate how an organisation could use compensation as a means to gain competitive advantage.
Q3. Examine three responsibilities of human resource manager in compensation management.

Part 2: 

Case Study
Abdullah Ali was recruited as an executive manager in Oman Construction LLC three years ago. His role included performing duties relating to administrative work in the company. He was performing very well. In the performance appraisal 2015, he scored “1 – Excellent”. The company has a rating scale of 1 to 5 (1 – Excellent, 2-Outstanding, 3-Acceptable, 4-Poor, 5-Not acceptable). Only those in the outstanding and excellent category are eligible for a salary raise.
Due to increase of prices in 2016, total costs were increased and many job positions were terminated because of the economic problems. Those who stayed in the company were to handle different tasks to their usual workload. For Abdullah Ali, he was asked to add on other duties including procurement to his daily responsibilities. Because of his new responsibilities and work load, his performance reduced to “3 –acceptable” at the end of the year. On the other hand Abdullah Ali expects an increase in his salary.
Suppose that you are the HR manager of Oman Construction LLC. How do you deal with the situation? Please use appropriate referencing to support your position and advice.
Please answer the following questions:
Q1. Discuss performance appraisal based on performance versus based on effort. How does that relate to this case?
Q2. Why does Abdullah Ali think he deserves a raise in salary? Do you think he has a right to do so, and why?
Q3. Being the HR manager, can you give Abdullah Ali the salary raise?
Q4. Discuss different reward options that you can use instead of the salary raise.

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Answer :


Compensation is an effective and strategic approach that provides monetary & non monetary benefits to the employees in relation to the employee performance. Compensation is determined by several factors accordance to the fulfillment of the company’s goals and objectives. Compensation and reward plan motivates and encourages the employee towards improving his performance. However, one of the important figures is the HR manager and human resource team who evaluates and examines the performance and workforce (Wang,  Noe & Wang, 2014). The paper studies the important of the reward plan and the factors that govern the pay raise and the importance of hr manger in a business organization. With the reference e to the Oman construction company, the thesis presents the importance of compensation and reward management. 

Part 1:

Q1.Strategic importance of salary survey:

In an organization, meeting both the criteria like fixing the salary and making a salary survey enables your organization to attract, retain and motivate the right numbers of the right kinds of employees (Guan et al. 2014).  The salary data provides relevant information about the company. Other than that, the good salary survey process provides cater the information needed to ensure the organizations compensation plan is competitive. Comparing roles to Salary Survey market data is important, but it is not the only step to creating a competitive compensation program for the organization as it has a direct influence on the pay structure of the organization. To tailor a compensation strategy to the organization, one need to have an understanding of the organization’s compensation philosophy and strategy and by doing so the process will become so easy and simple  (Kowal, & Roztocki 2015). The clear definition of the salary survey has the key roles within the organization including current and accurate job descriptions for each position and this policy is very much helpful for strategizing the plans for the designation of the employees.  Accurate job description detail facilitates the comparison of market data to how the organization currently paying the workers, management team by providing a clear insight about the work procedure to each employee (Bonica, Rosenthal & Rothman, 2014). 

Taking all the information of the organization into consideration, the hirer management can prepare one or more salary structures, as appropriate, with grades and control points and that grade will include minimum, midpoints and maximums customized to the unique organization’s needs and demand (Lo, 2015). As the employees will work in the same criteria and their pay scale will create in terms of that sense. By combining your salary structure with performance management ratings of the employees, the organization can pay for performance delivered as well as accurately anticipate, budget and plan for total compensation costs. Building an effective compensation strategy is a necessary process with varied approaches that depend on your organization’s unique priorities of the employees (Aguinis, Bradley & Brodersen, 2014). Building a market-based pay structure from scratch encompasses several major steps of the organization and the employees take the consideration of the employee designation that includes. 

i) Gathering and collecting information and resources to support the project of the organization. 

ii) The external market data need to check and after reviewing those data the company will take other financial decision. 

iii) Conducting the market data analysis and it will effectively help the organization to take up strategic implementation about the pay scale. .

iv) The organization will develop the pay structures concerning the employees and other manger level workers.

v) The organization will calculate the costs of the pay structures.

vi) Implementing and evaluating the new pay structures will be the next big step of the organization.

vii) Communication process is the important criteria in the organization and the pay scale need to be very much open, clear and concise. Communicating with employees about the system will help the organization to gain possible outcome from the employees. 

Two types of data gathered in the salary survey are the primary data and the secondary data.

Primary data:

The primary data will provide the information about the specific purposes of the study. In this case, the main criteria evolved out of the importance of salary survey. By the help of this survey the organization will get information about the elicit data and these type of data mainly taken from the organization by the help of the employees, as the employees faced various types of interview process along with the face to face communication with the management team. Other than that many time with the help of the direct observation process the organization takes out the information. The management team will take out the old papers about the payroll and salary scale and after that they will take the decision that what information they will get from it. 

Secondary data:

The secondary data collection is basically a vast process and by this procedure the organization will get to know the entire salary information of the company. The administrative data is closely related to the secondary data process. The secondary data is readily available and inexpensive to obtain and the organization will take out all the information related to the salary survey. The previous data about salary will be available to the organization and they will take the information from the papers. 

Q2.Gaining competitive advantage:

Competitive advantage is achieved when a business produces surplus profits in the market place and it is greater than the organization’s competitors are and it can cause due to unique product pricing or resource advantages. Furthermore, its profitability is greater than the average profitability of all other businesses competing for the same set of customers and in this process; the company will gain successive method of success (Hatch & Howland, 2015).

Any organization pass the competitive advantage threshold by attracting and retaining great people and then nurturing a unique culture of the organization that catch the mind of the customers and the one strategy that demonstrates passion. The organization in order to performance building,  executes with consistency, perpetuates success, breeds confidence within the employees and rewards performance that the employees and the team of management have shown over a period of time. Companies that achieve this start with, build upon a foundation of mission, values, and vision that are reinforced by, in and through every aspect of the business plan and it help the organization largely (Eckard et al. 2014). As a result, the organization commonly enjoy a shared value system with their employees because both are clear about, and compelled by, the direction the company is headed, how it's going to get there, what is expected of everyone and how each will be rewarded for the company's success. As the success of the organization largely depend on the employee performance and it will later serve the process for long-term productivity. Organizational culture is the specific collection of values and norms that are shared by people and groups in an organization and that control the way they interact with each other and with direct and indirect stakeholders outside the organization and they affect the organization. Organizational values are beliefs and ideas about what kinds of goals members of an organization need to pursue and ideas about the appropriate kinds or standards of behavior organizational members use to achieve the organizational goals (Beadles et al. 2015). From organizational values develop organizational norms, guidelines or expectations that prescribe appropriate kinds of behavior by employees in particular situation and the management along with the help of employees follow the organizational rules. 

With the aforementioned principles in mind, consider the impact on your company's ability to achieve a competitive advantage in the marketplace if the organization’s culture demanded the structure for organizational performance in its efforts to attract and retain great people in the organization who can productivity to the firm and by following this process it will earn profitability. 

i) Only talented, committed and focused people are deserving this position to get the compensation. 

ii) The people are only rewarded for achieving well-defined performance standards within the organization. 

iii) All employees need to think and behave proper way to do any work properly. 

The organization needs to put forth on the performance of the employees and by the motivation process the organization will help the employees to strategically perform in an appropriate way. When the employees will perform in a better way, the organization will provide them compensation for their good performance in the work criteria. Execution of the company's strategy is key to its success and the organization can achieve it with the help of successful implementation of planning (Eckard, Rosener & Scripps-Hoekstra, 2014). Capital and cash flow need to be managed properly, marketing initiatives need to be crafted and launched, operations need to be well executed, superior products or services need to be developed, and excellent customer service needs to be rendered and by the help of these process the organization will get to see growth and success. All of these functions depend upon the applied intelligence of a dedicated workforce and the performance of the employees (Hodgson, 2015). These elements need to be reinforced by compensation strategies that are effectively engineered and tied to roles and expectations that are well defined and communicated within the organizational process. 

Q 3.Compensation management:

Three responsibilities of human resource manager in compensation management-

Human resource management has the responsibility to take each plan and implement those things for the well-being of the organization. Human resource takes over the responsibility of the ownership, leadership of change management projects fir bringing a good prospect to the organization, and it has a significant impact on the business performance (Kaur, 2016). The policies and practices that used in the human resource management helps the employees to built the competitive culture. 

The three responsibilities that the human resource manager has and it helps to bring growth and productivity to the organization. 

i) Motivation and satisfaction given by the human resource management team can help the employees to gain compensation from the organization.  

ii) Designing of the unique corporate culture will help the employees to gain compensation, as the employees will effectively work within the organization because of the good environment they will get. 

iii) The competitive advantage theory for the employees will help them to gain compensation from the organization. 

Part 2:

Q1.Performance appraisal based on performance versus based on effort:

Employee performance appraisal refers to the process where the management team of Oman identifies a d evaluates the employees job performance. The evaluation is based on employees and as well as leader’s performance skills, performance and productivity. The performance chart or graph outlining the detailed information provides opportunities of increase payment and promotions. Appraisals of various kinds help the employees and members in improving their performances as the employees tends to work hard and perform well in receiving the rewards and offers. In addition appraisal based on performance serves significant aspects by  providing a head start through which companies needs to address responsibilities in accordance with Oman’s trends, objectives, management procedure and decision making process (Gupta & Shaw, 2014). The company needs to foster healthy communication in order to balance work force and productivity. In order to maintain performance based appraisal the owner of Oman need to consider the visions of an appraisal system that include improvement of Oman Construction’s productivity and decision making process; needs to make employees and members aware of the decisions in regards to promotion, job changes, and termination and evaluate, identify and record employee's performance in relation to the attainment of Oman’s vision and mission. In order to foster the employee’s performance the company Oman Construction needs to develop employee's efforts through the evaluation of feedback and experience and the owner and leaders need to commit themselves in the involvement of decision making process and performance. Employee performance appraisal differs slightly from effort appraisal. The effort of the employee is determined through their work and what efforts do they put towards improving their performance. Performance and efforts go parallel, without any effort in the improvement and strategic functioning of performance have no worth. The performance of the employee is identified and assessed through the efforts made by the individual in enhancing its performance. Therefore there are certain offerings and appraisals in reference to the effort made by the employee.  The appraisal comes in the form of bonus, incentive, increment in payment etc. Performance appraisal serves as a motivation tool. The evaluation of performance and efforts of the individual employees can be determined through the process of the tasks achieved. The appraisals method thereby helps motivating the employees in performing better and strategizes their effort (Chadwick, Super & Kwon, 2015). The Oman company need to set a specific and appropriate performance appraisal that would help the leader and the team manager in training the employees towards curving policies and programs and examine the strengths and weaknesses of employees. In addressing the issues the human resource manager will be able to train them for further development.

Q2. Increase in salary in regards to Abdullah Ali’s performance: 

As per the case study Abdullah Ali was recruited as an executive manager in Oman Construction LLC three years ago with the assigned role of performing duties in relation to administrative work in the company. He performed well with excellence but with the increase in total costs in the year of 2016, many job positions were terminated because of the economic problems thereby there was no increment in the salary of Ali. For Abdullah Ali, he was assigned with more duties along with the usual responsibilities due to economic problems without any increase in salary.  He was performing well along with putting effort in meeting all the duties and responsibilities assigned. He deserves to have higher salary as he has been performing well. Therefore, Ali needs to approach its owner with a report of his achievement, duties and approach in attainment of company’s targeted goals (Gupta & Shaw, 2014). In addition Ali need to determine as to how his performance will help boost the company and has so far benefited the company in relation to productivity improvement and management, staff development, project development, customer service and other accomplishments Ali needs to record, and prepare a report that will outline his achievements that will help justify a pay increase. Furthermore, Ali should formulate his additional responsibilities assigned to his usual job structure and the arsons behind his payment increase. Apart from the several significant factors Ali needs to set a pay increase goal that will help the owner and the leader in arranging rewards for the additional responsibilities that has been reported. It is important to be upfront when it comes to pay raise and request the supervisor or the owner for a raise (Obeidat & Abdallah, 2014). Every detail from the initial time to the present needs to be analyzed and assessed and then be documented in the scale so that the supervisor be able to understand and examine the request of raise in salary. 

Q3.Importance of HR in pay rise:

Human resource (HR) manager are one of the important components of business management who is involved with the recruitment process, training and career development, compensation and benefits, employee relations, compliance, redundancies etc. HR manger can help raise the salary of Ali in relation to the acceptance of the declaration of the owner. However the Hr manager needs to comply with the owner’s salary increment regulations and examine the arsons behind the salary increment report presented by Ali. The appreciation of salary increment enhances the performance of the employee (Farge et al. 2013). Therefore, if Ali’ is given the salary increment and are given rewards in place of raise in salary that will motivate Ali towards handling additional responsibilities.  Hr manager has the authorial power in analyzing the report of increment and can request the higher authority in raise in pay scale.The Human Resource Manager is responsible for offering of rewards and benefits in relation to the perforation and experience of the employees. The HR manager helps with fixing the compensation practices that examine the performance that determine promotional opportunities. With the increment in salary and offerings of promotion ensure motivation and desire for working better.  With Oman Construction Company the HR manager is given the power of raises that depends on various factors of Ali’s performance. The Human Resource Manger helps with the determinants of raise that include motivation, skill, talent that distinguishes every employee from one another. In reference to Ali’s request it is understood that the increment if salary is justified. Therefore, HR needs to comply with the decision of Ali and raise his payment (Boehm, Kunze & Bruch, 2014). With the consideration of economic issues, Human Resource Manager might not be able to meet his justification but appreciate his performance by providing reward and can promote him to a higher position. 


Q4.Different reward options that you can use instead of the salary raise:

Reward management is conducted by the Hr manager in relation to the examination of performance, experience and efforts of employees.  In accordance to the reward management the leader applies and implements strategies and policies that will adhere towards rewarding fairly.Providing rewards motivates and encourages the employee in improving and developing his work structure and performance. Rewards can be considered as an organizational strategy established by the leaders in organizational policy that determines and fosters individual and team management and performance (Xavier, 2014). The implementation of rewards is a struggle and a state of complexity for the leaders. Implementation of rewards is a challenging facto r in relation to the leaders. Although, employee rewards varies in costs. There are several kinds of reward programs that deal with vouchers, holiday package programs, bonus and incentives, local restaurant embellishments, gift certificates, concert and opera tickets, cricket and other related sport tickets, holiday programs (Renwick, Redman & Maguire, 2013). Apart from the materialistic rewards and offers in place of salary increment there are other advantageous facets such as early release, work allocation reduction, work limitation, work hour reduction, long breaks, work from home day.


From the above study it can be concluded that reward management is a significant strategic policy implemented by the HR manager and Hr team in governing and motivating the work force and annual productivity of the company.Oman Construction Company needs to adopt are such strategies that would retain interest and fulfill the demands and interest of the employee. Alongside, the reward management program will help the company motivate the employees in fulfilling the company’s objectives and customer satisfaction.