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A

PROJECT REPORT

ON

“STUDY ON BEST HR PRACTICES AND COMPENSATION STRUCTURES”

UNDER SUPERVISION OF:

……………………………..

SUBMITTED BY

NAME :

ENROLLMENT NO :

Submitted in partial fulfillment of the requirements for qualifying
MASTER OF BUSINESS ADMINISTRATION (HR)

Institute of Management Technology
Ghaziabad

CERTIFICATE

This is to certify that …………….. a student of IMT – CDL Ghaziabad has completed project work on titled STUDY ON BEST HR PRACTICES AND COMPENSATION STRUCTURES under my guidance and supervision.

I certify that this is an original work and has not been copied from any source.

Signature of Guide :____________________________
Name of Project Guide :____________________________
Date :____________________________

ACKNOWLEDGEMENT

With Candor and Pleasure I take opportunity to express my sincere thanks and obligation to my esteemed guide ……………. It is because of her able and mature guidance and co-operation without which it would not have been possible for me to complete my project.

It is my pleasant duty to thank all the staff member of the computer center who never hesitated me from time during the project.

Finally, I gratefully acknowledge the support, encouragement & patience of my family, and as always, nothing in my life would be possible without God, Thank You!

NAME:
ENROLLMENT NO. :

DECLARATION

I, the undersigned, hereby declare that the Project Report entitled STUDY ON BEST HR PRACTICES AND COMPENSATION STRUCTURES is my original work and the conclusions drawn therein are based on the material collected by myself.

NAME:
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TABLE OF CONTENT

CHAPTER CONTENTS PAGE NO
Certificate 2
Acknowledgement 3
Declaration 4
Title of the project 6
1. Introduction to the Study
 Company Introduction
 Objectives of the study 7
38
46
2. Review of Literature 48
3. Research Methodology 84
4. Data Finding & Analysis 88
5. Findings and Suggestion 107
6. Conclusions & Limitation of the study 112
7. References 115
8. Appendix
Questionnaire 117

TITLE OF THE PROJECT

“STUDY ON BEST HR PRACTICES AND COMPENSATION STRUCTURES OF IBM INDIA”

CHAPTER – 1

INTRODUCTION TO THE STUDY

Global business confidence has surged since mid-2005 and now stands at its highest level in the present recovery. The Indian economy has demonstrated unprecedented levels of growth in recent years, and is showing no signs of slowing down. Being one of the fastest growing business markets in the world, India is attracting greater attention from corporations and investors worldwide. India’s vibrant democracy, young educated workforce and innate entrepreneurialism suggest prolonged economic growth. A series of ambitious economic reforms, aimed at deregulating the country and stimulating foreign investment have taken place. As a result, a new spirit of economic freedom is at work in India, bringing with it great change and challenges.

Today India has arrived at a place on the global stage wherein the good prospects of the growth of economy continue. India’s robust economic growth, which began in 2003, is expected to continue for a long period. According to Central Statistical Organization, real Gross Domestic Product (GDP) increased by 9.2% during the second quarter of 2006-07 against 8.4% in the second quarter of the previous year. This economic growth has been mainly due to fast rising industrial production, as well as growth in services sector. The service sector accounts for more than half of India’s Gross Domestic Product (GDP). Its rising share of GDP marks a structural change.

The considerable confidence in the sustained growth of the Indian economy relies on the demographic strength that India derives from its huge workforce. To harness these demographic advantages, it has become crucial for India’s labor force to sustain, reorient, and upgrade its skills.

Talent is at a premium, and organizations realize more than ever that quality of organizational output heavily depends on the quality of its workforce. Building a sustainable long-term business through a dedicated workforce is the key to success in today’s economic environment.

HUMAN RESOURCE – AN ELIXIR OF AN ORGANIZATION

“People are definitely a company’s greatest asset. It doesn’t make any difference whether the products are cell phones or cars or cosmetics. A company is only as good as the people it keeps.”
–Anil Ambani

The Human Resources (HR) function provides significant support and advice to line management. The attraction, preservation and development of high caliber employees give a competitive advantage for a business and are the responsibility of HR.

“Why,” one may ask, “do I need HR policies and practices for my business?” The simple answer is because there are people working for an organization. With human nature being what it is, employees test limits and act creatively in workplace situations. Thus, there is a need of strategy for developing, communicating and enforcing a set of policies and practices that reflect standards of acceptable behavior. HR satiates this requirement and a successful HR strategy is the one, which extends beyond the drawn boundaries and recognizes and addresses people’s needs. HR is finally garnering respect in companies of all sizes and across many industries. CEOs and boards of directors are learning that human resources can be one of the biggest game i.e. changers in terms of competitive advantage. The success of a business strategy lies in people’s execution. That is why the HR manager has become an equal partner at the strategic table.

The Human Resources Management (HRM) function includes a variety of activities, and key among them are deciding what staffing needs the organization has and whether to use independent contractors or hire employees to fill these needs; recruiting and training efficient and performing employees; ensuring they continue to be high performers; dealing with other performance enhancement issues; and ensuring that the personnel and management practices conform to various regulations. Other activities also include managing organizational approach to employee benefits and compensation, maintaining employee records and framing personnel policies.

There are many different types of people, and not surprisingly, they react differently to different situations. For example, some people prefer there should be a written policy for everything, while others favor having no policies at all and would leave everything open to interpretation as situations arise. Neither of these extremes contributes to a work environment that is conducive to high productivity levels. Thus a well-defined HR function is a one with the right number and types of policies and practices focusing on the primary goal of improving individual performance in the workplace.

The ultimate aim of the HR function is to ensure that at all times the business is correctly staffed by the right number of people with the skills relevant to the business needs. Also, the rate of change being faced by organizations has never been greater and they must absorb and manage change at a much faster rate than in the past. The market place for talented, skilled people is competitive and expensive. Orienting new staff to organizational goals, targets, products, processes, rules and regulations is equally important. Thus recruitment and induction are an integral part of human resource management in an organization.

A formidable challenge being faced by the HR departments of majority of corporate organizations in today’s competitive world is attracting and retaining talent. Thus it is vital for the HR to create a high level of job satisfaction that includes work, work environment, compensation.

A talented human resource base can be a competitive advantage in any economic environment. However, building this base is a challenge when organizations are faced with changing internal requirements, increasing employee demands, and competition from other organizations. Thus, organizations must anticipate their resource requirements and establish a long-term approach to securing them which includes establishing a brand in the labor marketplace, investing in talent, just as they would invest in any valuable corporate asset, by providing varied motivational incentives and monitoring the needs of employees to help ensure that HR policies continue to reflect employee as well as organizational goals. Thus the pressing need for organizations to maintain a diverse pool of talented leaders, capture expertise from existing employees, and outsource transactional activities to focus on core capabilities has heightened the importance of HR function.

WHY ORGANIZATIONS ARE ADOPTING BEST HR PRACTICES?

The best practices in the management of Human Resources are the ones, which optimize a workforce so that it can not only get more work done, but also ensure a greater level of efficiency, timeliness & quality resulting in an increase in overall productivity. The important areas in which the best human resource practices must be applied include the creation of viable & attractive benefits & compensation packages, managing the performance of employees, making sure that business practices & worker conditions stay well within the law, creating a positive, enjoyable work environment, talent recruitment and mapping out the best Human Resources strategy for the future. In the past, HR was considered as an expense rather than an investment. But today many top-performing organizations have realized that following best practices for HR is vital for long-term success.

HR involves practices that surround employees, from recruitment, orientation and training to corporate culture and non-monetary rewards, as well as benefits and compensation. HR is about creating a workplace where employees, the most valuable asset for most companies, can perform to their peak potential.

Competition for the best employees is intense, especially today as the job market has recovered after several years of slump. Thus, effective employers need to provide level playing field to employees by emphasizing their unique advantages.
One of the first features that the prospective talent looks at while browsing the job listings are the salary levels and the benefit packages. Hence an organization implementing best HR practices makes sure that these benefits and pay scales meet the company’s budget while remaining attractive and competitive enough to pull in the very best talent possible. Since managers give a voice to the company culture, training at the manager level is very critical as the best mangers are those who can motivate, communicate, retain and inspire. They hold individuals accountable, evaluate and coach their employees.

Best HR practices are also vital for retaining talent in an organization. Preferred employers are not only making endeavors to cope up and allay the long-term employees but are now devoting their HR resources to On boarding wherein an organization takes newly hired employees and immerses them in the organization.

From the very first day on the job, it is crucial for the employees to know their duties, get honest feedback on their performance and reward for exceeding expectations. Another important aspect of best practices is the accurate and productive evaluation and enhancement of performance among the employee base. Indeed, performance management is one of the key functions of a human resources department.

Another best HR attribute that organizations should stress on is career growth and succession, which may be learning opportunities or opportunities to take on more responsibility. HR functions that cannot be efficiently performed in-house are being outsourced in order to fill any gaps in building a comprehensive HR program, either for routine tasks such as payroll and benefits management or more strategic goals such as recruitment and management training.

Companies exhibiting the Best Practices have been found to have:

1) Higher Employee Engagement: Engaged employees display the behaviors that are critical to business success and developing a competitive edge. They speak positively about the company, have no immediate intention or desire to leave, and willingly put in extra effort to ensure strong company performance. Career Opportunities & Sense of Accomplishment are the key drivers of employee engagement for many companies.
2) Better Financial Results & Customer Satisfaction: Best Employers deliver better business results and are more capable of building a sustainable business model. According to the Hewitt Survey, the Best Employers have outperformed their counterparts in terms of revenue over the previous two years & have consistently demonstrated a growth in their profitability. Also, a large body of literature (A research study by Centre for Advanced Human Resource Studies) supports the notion that the work practices of an organization influence individual employee’s feelings of commitment to an organization which in turns influences employee behavior towards fulfilling customer needs.
3) A Strong Reputation That Attracts Talent: Great Places to work as per the Grow’s Talent Study, 2006 are able to attract talent based on a strong employer brand. They create an employee value proposition that differentiates their employment offer distinctly from that of other organizations.

4) Better Retention of Key Talent: Organizations with best HR practices attempt to build long-term employee relationships. They create a working environment in which their key people enjoy working for them and want to be part of the success story. Their employees also see them as promoting people who are best equipped to meet the future demands of the company. Also, the Leaders at such organizations are perceived by employees to build relationships with all levels in the organization and treat employees as their most valuable asset.

Engaged Employees have been found to exhibit:

• Higher self-motivation
• Confidence to express new ideas
• Higher productivity
• Higher levels of service quality
• Reliability & high organizational turnover
• Organizational loyalty
• Lower absenteeism

Effective employers today are learning and sharing their best HR practices with each other to improve the effectiveness of their human resource programs for higher customer satisfaction and higher productivity.

COMPENSATION – AN INVIGORATOR TO EMPLOYEES

Compensation forms an important aspect in strategic human resource management. An effective compensation strategy helps in boosting the motivation of employees and hence, enhances organizational productivity. It impacts an employer’s ability to attract and retain high performing employees and ensures optimal levels of employee performance in meeting the organization’s strategic objectives.

There are two components of compensation. These are direct compensation and indirect compensation. The former consists of financial benefits and the latter consists of non-financial benefits or perks. Today organizations are adopting more strategic approaches to compensation i.e. paying the person for individual worth (knowledge, skills and competencies) rather than for the value of job he or she performs, rewarding excellence though pay for performance compensation that establishes a clear relationship between a significant amount of pay and attainment of organizational objectives and individualizing the pay system to give the employees choices in how they are rewarded and what reward they receive.

Compensation & benefits as a tool to attract talent: Talented people are the key resources for any organization in any sector. Given the upswing in the economy, the plethora of career alternatives and employment opportunities, attracting the right talent has emerged as one of the big challenges for HR managers of today.
According to the Gallup – Business world Compensation & Benefits Study 2006, most organizations (46% in the comparator group) believe in paying competitively and stressing on high rewards for good performance. Another large section (37%) said they believe in paying competitively and stress on career growth opportunities. Career Growth & Learning opportunities, job content, compensation and benefits have been the critical drivers of talent retention across the various organizations.

Compensation & benefits as a tool to drive performance and build workforce capability: An emerging challenge being faced by HR Leaders has been to adequately equip and enable the workforce to improve performance, especially in view of increased competition in the marketplace. Companies like Ranbaxy are investing heavily to upgrade skills of its workforce and are even offering incentives and career breaks to acquire higher qualification. Capability managers are currently focusing on talent fit and job content to build workforce. Compensation is also the most important determinant of job satisfaction for most of the employees.

Compensation & Benefits as a tool to arrest attrition:

It is not enough to attract the right talent, it is equally important to retain it. Career growths opportunities are the primary reason followed by the lure of better compensation that make the employees leave their organization.

While for the junior level management and the entry levels, compensation and learning opportunities play an important role, for senior management job content is very critical followed by compensation.

Thus given the importance of compensation, preferred employers are following compensation benchmarking to identify pay-scales across the industry and to and to learn the latest and upcoming trends in compensation & benefits to frame a relative percentile guide for the organization.

Another trend observed is rise in the popularity of eSOPs, which is a defined contribution employee benefit plan that allows employees, to become owners of stock in the company they work for, thereby reducing the tax liability of the company and providing a cost-effective plan to motivate employees.

BEST HR PRACTICES

The Best Employers in India 2007 study, conducted by Hewitt Associates and Great Place to Work Study 2006 study conducted by Grow Talent provide a definitive benchmark against which one can measure how effective an organization is in providing a workplace that engages the intellectual and emotional commitment of its employees. The key parameters on the basis of which the best HR practices can be categorized and the trends observed for each of these are:

• RECRUITMENT, HIRING & INDUCTION: Modern management thought focuses attention on “people” as the key to successful deployment of resources to meet organizational goals and realize strategies. The Recruitment and Selection process promotes successful hiring decisions that can truly impact the success of a department or faculty. This constitutes initiating the Recruitment Process through advertising, screening applicants, selecting the Interview Panel, conducting the Interview Plan i.e. Interview Scheduling and the Interview Environment, making the Selection Decision (Candidate Evaluation, Reference Checking) and making the offer.

Research has consistently shown a high degree of correlation between being a preferred employer and superior financial results. Being a preferred employer involves the following key criteria:

• POSITIONING THE EMPLOYER BRAND
The employer brand is an image of the organization that employees and prospective employees have. It includes perceptions of functional benefits, economic value and psychological attributes associated with the employment experience. It is a critical factor which determines the decision to apply or stay with the organization. Also, it would be aligned to the corporate brand promise to customers (As per a Hewitt Study, there is a strong linkage between employee satisfaction and customer satisfaction).

• SOURCES OF TALENT
The Best employers practice the philosophy of hiring for a career as opposed to hiring for a job. They deploy employee referral, internal job posting, internal recruitment team, external consultant, job fair, job sites, and Company internet site as the common methods of recruitment for different levels of management. At the Senior Management level, head-hunters, referrals and internal applications are the primary sources of talent. At the Middle Management level, internal applications, referrals and head-hunters are primary sources supplemented by applications solicited in advertised positions. At the Junior Management levels, all methods except job fairs are widely used by most of the preferred Employers.

• MAKING THE SELECTION DECISION
According to the Hewitt Best Employers Survey, the Best Employers lay much greater emphasis on the “softer” attributes such as fit with culture & organization values and competencies as compared to the other employers which is in line with the recruitment policy to hire for career

General criteria used by the Top 25 Employers (Hewitt Survey & GPTW Study) to make the Selection Decision Figure 2.1, Source: The Hewitt Best Employers in India 2007 study & GPTW study, 2006

These criteria are assessed through a multi-step process consisting of multiple rounds of interview with HR, potential supervisor, skip-level supervisor, senior management and a probationary period.

MEASURING EFFECTIVENESS

Preferred employers in addition to monitoring how many openings were filled and in what time period, they also use process quality metrics like rate of wrong fits and performance of new joiners. This helps them tune the process, align it with the market & business requirements and drive employee engagement.

INDUCTION/ ORIENTATION PROCESS

A key characteristic of effective employers as per the GPTW Study, 2006 is the emphasis laid on ensuring that a new joiner is completely on-board. Not only do they focus on the content of the orientation program, but also on how it is delivered and then followed through. They use the orientation program to communicate expectations forwards to the employee and backwards to the organization.

Learning & Development, Career Progression: Provision of a learning environment with systematic developmental inputs in order to grow the depth and quality of the talent pipeline at all levels and ensuring a higher return in each role is very important for an effective employer. Training is now treated as an investment rather than a cost. Research by Mercer Human Resource Consulting has shown that “Career & Opportunity” is the single most important driver of employee engagement in Asia. It suggests that people are more likely to pursue alternative employment opportunities for career development than financial reward.

A key point is the use of opportunities within the organization to the mutual advantage of the employee and organization, thus stretching the long-term benefit of each rupee spent on training. Also another key point is the use of self-learning tools like career counseling tools, company library facilities, tuition reimbursements and sabbaticals. This reflects the preferred employer’s commitment to their strong belief that development is the joint responsibility of the employee as well as the organization

DEVELOPMENT & LEARNING PRACTICES:

Hewitt’s Best Employers invest 82 hours of training in their employees and roughly 0.25-3% of gross revenue. All Best Employers use multiple sources of development – external, in-house and computer based self-paced learning.

Percentage of Best Employers using each of the following developmental practices
Table 1.1, Source: The Hewitt Best Employers in India 2007 study

Upcoming Trends in Learning & Development

 Team Concept: The team concept is useful as a low-cost alternative to formal cross-functional training programs and helps employees become familiar with broader aspects of the organization.

It helps to build general management skills, teamwork and can be leveraged to effectively solve organizational problems through internal consultants.
Also, according to the GPTW Report, effective employers use autonomous workgroups where a team of employees works together with minimal oversight by a superior, to produce results for the company.

 New Recruit Training: Newly recruited employees not only undergo an orientation program, but are also provided with job-related and behavioral skills training to begin contributing confidently and productively in the job assigned.
 Employee Suggestion schemes: Employee suggestion schemes, where implemented, build engagement through the driver influence. Not only are they a source of upward feedback from the trenches or lower levels, but develop employees as corporate citizens.
 Tuition Reimbursements: All Best employers as per the Hewitt Report provide Tuition Reimbursement programs to its employees. Most of the effective employers also offer paid and unpaid sabbaticals to its employees. While paid sabbaticals are typically offered to enhance effectiveness of employees in their current or future roles, unpaid sabbaticals are used as rewards for long serving employees with often no requirements beyond employment.

MEASURING EFFECTIVENESS

The most popular methods of measuring effectiveness of the level of learning & development in an organization remain periodic user feedback and post-training performance management data (as a measure of transfer of training).

 Talent Management: As per the GPTW report, the selected best employers also have in place focused programs to develop those employees with higher potential for contribution. These individuals are the future leaders of the organization and exist at all levels. Thus, a high potential program must be supported by a strong performance management framework that not only differentiates between high and low performers but also, is able to give a fair assessment of the employee’s potential.

 Work Environment: Best Employers have transparent and employee centered work environments that contribute towards building a total rewards experience for their workforce.

Best Employers design their strategy, programs and practices to reflect a people-friendly employer-employee relationship with the belief of communicating everything which includes sharing of product or service information and information on the branding of the organization in the marketplace with management and employees.

DOWNWARD COMMUNICATION

Senior management groups are the single most frequent source of communication for employees regarding the organizational philosophy, objectives and related business initiatives. Hundred per cent of the companies selected in the Hewitt’s Best Employers & Grow Talent GPTW had a formal communication strategy. Employee satisfaction results are the most frequently communicated pieces of information including business goals and objectives, company operating results and customer information on an annual basis among both management and employees. According to research there has been a shift from a traditional communication philosophy to a transformational communication philosophy over the years as preferred employers and many other organizations have increasingly started believing today that the more employees know the more they can act independently and contribute towards organizational success.

• Channels of Downward Communication
Downward channels of communication are widely used at the Best Employers as per the Hewitt Survey. Employers selected by GPTW Study not only communicate, but ensure that the message reaches.

Most frequent source used for communicating sharing various types of information with employees.

Table 1.2, Source: Grow Talent’s Great Place to Work Study, 2006

• Upward Communication
Communication at Best Employers is a continuous two way process between the management and employees and various mediums are used to solicit employee opinions and suggestions surrounding organizational issues.

Sources of employee input
Source of employee inputs % Selected Employers
Employee opinion surveys
Focus groups
Representative councils/ panels
Electronic or traditional suggestion boxes
Employee meetings (Large or small group)
Other 96%
88%
68%
84%
96%
44%

Table 1.3, Source: Grow Talent’s Great Place to Work Study, 2006
Effective employers use employee inputs to influence programs and policy decisions, manage changes in employee motivation, satisfaction or morale and make product/service or process improvements. Many of these organizations also use this feedback for enhancing business performance and evaluating people program effectiveness.

• GRIEVANCE RESOLUTION

Preferred employers today aim at creating a positive and employee oriented work environment to enhance productivity and engagement levels. However, they do understand that there may be individual employee concerns and suggestions to improve existing systems and processes. Therefore, they establish channels or processes through which employees can appeal or complain if they feel unfairly treated.

Processes which employees use to complain & appeal at the selected employers

Table 1.4, Source: Grow Talent’s Great Place to Work Study, 2006

• EMPLOYEE PORTALS

Preferred employers as per the GPTW Study are strong advocates of “self-management” and provide employees with the technology and resources that they need to make decisions effectively as well as the tools to implement those decisions. The use of automated employee portals helps in streamlining processes and enables key Human Resource functions such as Performance management, Compensation and Payroll Administration
• FUN AT WORK

In order to inculcate the element of “fun” at the workplace, organizations should recognize employee achievements and special days e.g. birthdays, completion of a number of years of service etc. These celebrations also extend to the employees spouse, children and family at a majority of Best Employers of Hewitt.

• QUALITY OF WORK LIFE
Hewitt’s selected best employers clearly raise the threshold when it comes to creating an employee-friendly environment. Apart from good communication practices and systems, a majority of them have formal policies or operational measures over and above legal requirements in the areas of social responsibility, health and safety at the workplace, protection of privacy and data management systems and promotion of anti-discriminatory practices.

Policies adopted by Hewitt’s Best Employers to improve the quality of Work Life

Figure 1.5, Source: The Hewitt Best Employers in India, Survey
These programs have valuable effects on satisfaction levels and engagement data validates that employees strongly believe that their organization is a responsibly social entity that adds considerable value to society. The diversity philosophy at the preferred employers is that by combining the strengths of various viewpoints, origins, opinions, beliefs and experiences, a company can deliver the best possible solutions for its employees and customers. Thus, they actively hire people of both genders and of various ages and with differing skills levels and ethnic backgrounds.

Managing Cultural Change

Organizations experience turbulence during various stages of their evolution and growth in the form of Mergers & Acquisitions, Restructuring of organizations etc. This affects various aspects like structure of the organization, locus of power, emotions of employees, employee compensation & benefits, HR policies and procedures, leadership, employee communication etc. Preferred employers follow two clear strategies:

• Communicate : Top management teams and HR personnel constantly keep employees apprised of what is going on in the organization so that they know what to expect. The aim is to eliminate the fear of the unknown (layoff situation), ensure transparency and to keep the transformation progressive.

• Compensate for losses: Best Employers provide packages such as severance pay, medical benefits etc. and assistance to displaced employees and assistance in the form of outplacement services and training help them cope with the loss in income and the changed organizational environment.

BALANCING WORK-LIFE, HEALTH AND WELL BEING

The changing landscape of the modern workplace with increased competition resulting in longer work hours, shorter timelines and a continuous pressure to perform despite odds, has resulted in major challenges in terms of work-life balance for employees. The risk of stress and burnout is a key concern for employers. The increasing proportion of women in the workforce is another dimension that preferred employers work hard to manage. Maintaining a work-life balance is a key variable in employee engagement at successful, fast-growing organizations today. Preferred employers by using a combination of innovative programs and technology and creating a supportive work culture, they are able to deliver to their employees the work-life promise as a partnership between the employees and the company.

* Convenience services and time-off are offered by a majority of selected employers, while many of them provide dependent care assistance, maternity leave beyond stipulated provision, onsite child care facilities, crèches, care for a sick dependent, and relocation services.

* Best Employers also offer alternate work arrangements to their employees for attending to their personal needs (e.g. growing children, higher/part-time education or ailing dependent family members). Best Employers link these practices directly to business results and credit alternate work programs with preventing a loss in productivity, reducing recruiting expenses, lowering training costs for new hires and a reduction in the absenteeism rate.

* The most widely offered work arrangement to employees is flextime where employees are allowed a flexible or non-standard arrival and departure time.

* Another popular work practices offered by Best Employer organizations are telecommuting i.e. working from home or an alternate work location by connecting to the company’s system network as well as using other mediums of communication and reduced hour employment.

* Health and well-being of employees is another area where effective employers implement the best of HR practices. Healthy employees are productive employees. Research done on employee productivity and absenteeism by health organizations, ergonomics institutes and labor productivity councils has consistently shown merit in investing in employee health.

* Effective employers provide preventive health programs like onsite gyms and exercise classes, domiciliary health coverage, hospital tie-ups, health and wellness reading material, organization sponsored sports teams and stress reduction workshops to all or most employees.

* These organizations also offer basic life insurance, dental coverage, personal accident insurance, annual health checkups paid for by the company and medical benefits to employees. Most of these programs are offered to all employees and their family members.

PERFORMANCE MANAGEMENT, REWARD & RECOGNITION

The most important HR process being practiced are rewarding and recognizing employees’ performance and managing it. Managing performance and rewards can be leveraged as one of the most powerful tools for talent management and thus for generating employee engagement. They help drive business results, employee engagement and also can be used to manage employee costs. Thus the 4C’s that drive the performance management system are:

Figure 1.6, Source: The Hewitt Best Employers in India 2007 study
This segment involves the following parameters:

PERFORMANCE APPRAISAL

Performance Appraisal is one of the most effective ways to control employee behavior, which involves basic human tendency to make judgments about those one is working with, as well as about oneself. Without a structured appraisal system, this human inclination to judge can create serious motivational, ethical and legal problems in the workplace.

All preferred employers have a formal performance appraisal process with 100% employees participating. Measures used to evaluate individual performance consist of performance targets (KRAs), role responsibilities and competencies / skills. Traditional Performance Appraisals is a one-way process, which had been firmly linked to the material output of an employee. The popularity of such appraisals was replaced by a discussion-based evaluation between the employee and his manager which helped in identifying the better performing employee who should be paid more. The appraisals were conducted more periodically, either annually or twice a year and were rewarded with promotions and bonuses. Self-appraisals have further strengthened HR systems by providing a forum for the employee to record his own assessment, highlight constraints under which performance was achieved and from an administrative perspective, eased pressure on the manager. Over the time, the need has been felt to have a multi-perspective evaluation, bringing into focus the sphere of influence of the individual role. Such appraisals not only provide a more holistic picture of individual performances, but also help organizations to track the performance of “sub-systems” in the organization’s often-virtual boundaries. While 360-feedback has largely been used as a developmental tool, its acceptance is gradually increasing with increased use of a formal appraisal mechanism.

Percentage of each type of feedback source used by the preferred employers in individual appraisals

Figure 1.7, Source: The Hewitt Best Employers in India 2007 study

COMPENSATION STRUCTURE

The composition of salary structure which includes cash (basic salary, HRA, LTA, fixed & variable bonus), benefits (PF, gratuity, superannuation etc.), perquisites (Company car, Housing Loan, Fuel reimbursement etc.) helps in boosting the motivation of employees and hence, enhances organizational productivity. The compensation structure for all the three levels i.e. Top, Middle and Lower management is a key driver of employee engagement.

As per the Hewitt Best Employers Survey, in case of the preferred employers, the merit pay increases sharply differentiating between high and average performers and variable pay increases are determined on the basis of corporate, unit, team, and individual performance at all levels for these organizations. They mainly focus on evaluation of performance targets, which are high at all organizational levels. The focus on competencies increases by level and that on role responsibilities reduces with increase in organizational level and these organizations also lay a great emphasis on soft skills.

The employees’ perceptions of the appropriateness of their pay, relative to their performance and contributions, of the adequacy of the company’s benefits plan, including value and ease of use and of the acknowledgement and favorable notices they receive from others for their contributions and accomplishments in their work are the key employee engagement benchmarks.

In recent years, the necessity for organizations to control labor costs, while simultaneously increasing productivity and enhancing quality and customer service, has never been more urgent.

Thus, the present competitive environment requires new strategies toward employee compensation. Careful attention must be placed on the development of reward systems that reflect the financial capability of the company, generate a highly committed and motivated work force as well as reinforce the new directions associated with contemporary organizational strategies.

Thus, a market rate analysis of existing structures and differentials of the senior and junior employees is an integral part of determining the salary structures of the effective employers as per the GPTW survey.

RETENTION

This is the age of knowledge workers and people are the best assets that any organization can have. The corporate are grappling with the problem of high retention rate and the general exodus of their best talents to the bigger companies and better opportunities. Even with the prevailing high rate of unemployment in the country retaining good and right people is no mean task, as employers struggle with decreasing pool of talent and increasing business needs.

Employee turnover refers to changes in composition of workforce that result from release, dismissals and replacement of employees. Usually, we think of turnover from an organizational perspective that is individuals leaving an organization. However, from the perspective of the people who use services, retention occurs more frequently not only when a service provider leaves the organization, but also when she/he gets transferred or promoted. As far as the client is concerned, whenever there is a change in who provides support, there is retention.

Some people work for money, others work for love and personal fulfillment. Still others like to accomplish goals; they may have personal missions to attain through meaningful work. Others truly love what they do or the clients they serve infect they may like interaction with customers and co-workers. Any gap in the fulfillment of these could be potential causes for retention.

Area economic conditions, as well as other factors such as labor market conditions, affect general rates. These more general causes for involuntary turnover are difficult to directly manage. However there are certain causes for voluntary turnover that are associated with any specific job in a given organization (e.g. Non-competitive) compensation, high stress, unpleasant physical or interpersonal working conditions, monotony, and poor direct supervision) that can be managed.

The hospitality industry being a service oriented industry runs on the efficiency of the employees, unfortunately the Retention rate is high which has a great impact on cost as well as effectiveness of these organizations.

It is commonly assumed that attrition of staff in a work organisation is an indicator of the health or un-health of the organisation (Oliver, 1998). This may well be the case, but it is difficult to establish the links between attrition and un-health. Retention of staff beyond reasonable limits may not always be desirable either. ‘Downsizing’ is now a familiar, taken for granted term throughout the business world (Leatt et al.,1997). Downsizing is often crudely conducted by corporations, with disastrous results for them when an economy begins to recover (Kouzmin, 1996). Downsizing also does little for staff morale (Murphy et al., 1996). Employees have learnt that “loyalty” seen as long-term commitment to an organisation is not always repaid by the organisation with loyalty, so why, employees ask, should they give it? To some degree, some staff turnover is inevitable and can even be beneficial (Patrickson, 1994; Jenkins, 1998). Some trickle of leavers makes way for the recruitment of “new blood” and facilitates the career progression of those who remain. However, high and unexpected turnover can be a reflection of negative job attitudes and low staff morale and may need to be mitigated by counter-measures. Exiting staff can also bring poor publicity to the organisation from which they have resigned. Remedies are necessary to manage staff attrition in a way that causes least disruption to the lives of its staff and to the work of the organisation. A voluntary welfare organisation should, most importantly, care for its own staff.

Employee retention is now a very crucial issue, because in the 21st century, the only sustainable source of competitive advantage for any organization / company is “Human Resource”. To maintain a stable workforce, employers must deliberately engage in retention activities. These efforts range from offerings attractive compensation packages to involving employees in every sphere of the functioning of the organization. Today’s employers prefer stable, committed, flexible always heavy competition among the employees to attract the best talents to enhance their competitive positions in the market.

Becoming an employer of choice and using employer branding attract and retain the best talents available in the market. There exists a keen interest in the concept of company or workplace “climate” and its connection with an employee’s sense of ‘commitment’ to his or her employer. Author in HR field speak increasingly of the need to ensure retention by nurturing ‘affective commitment’, or simply put, an employee’s desire to remain a member of a particular organization for motives beyond compensation or obligation.

A ‘climate of commitment’ is more than just the sum of particular HR policies or retention initiatives. It is related rather to overall organizational culture, in other words, not just particular but rather how such programs fall into a company’s overall values, how it communicates with its employees about those values, and how employees perceive their own role within the company and the value that the company attaches to their individual contribution because workplace culture depends a lot on how individuals perceptions and feelings hold together, it can of course be difficult to say exactly what decisively makes up a particular company’s culture.

Branham (2001) suggests that commitment – oriented corporate climates depend on a number of objectives and sub objective elements. Climate of commitment, he writes:

 View employees as partners
 Recognize the human needs of all employees.
 Invest in the people as the primary source of competitive advantage.
 Communication clear corporate mission, vision, strategy, goals and objectives.
 Commit to long-term strategy and the people needed to carry it out.
 Reward system and management styles to support the mission and strategy.
 Focus on “managing the performance contract,” not controlling the people.
 Put a premium on employee involvement in new ideas and innovation.
 Focus on results, not on who gets credit.
 Trust employees enough to delegate.
 Tolerate “intelligent error” and experimentation.

Nevertheless, the literature strongly supports the notion that people stay with their employers if the climate of commitment is strong. Beyond this, however, it is also clear that people are more likely to stay if the perceived workplace climate- however that is communicated—is good “fit” with the individual’s own interests, orientation and attitudes. Indeed, while compensation, personal and professional development opportunities, and other incentives are important in attracting people and keeping them happy, their decision to stay with a company depends vitally on how well they fit to the company’s way of doing business, how it treats employees, what it expects of them, and how people relate to one another in the workplace.

Howell, M.A., Brumback, G.B., Newman, H.S., and Rizzo, J.R., 1968,U.S.Public Health Service, Bethesda, Maryland opine that the relationship between dimension of work satisfaction and behavioral indices of retention contention that the satisfier-dissatisfier dichotomy is supported by the fact that motivator factor are more often responded to as satisfier than dissatisfier and hygiene factors more often responded to as dissatisfiers than satisfiers does not necessarily imply the uni-dimentionality of the motivator and hygiene factors like workplace and workforce.

COMPANY
OVERVIEW

IBM is a global technology and innovation company that stands for progress. With operations in over 170 countries, IBMers around the world invent and integrate hardware, software and services to help forward-thinking enterprises, institutions and people everywhere succeed in building a smarter planet.

IBM has been present in India since 1992. The diversity and breadth of the entire IBM portfolio of research, consulting, solutions, services, systems and software, uniquely distinguishes IBM India from other companies in the industry.IBM India’s solutions and services span all major industries including financial services, healthcare, government, automotive, telecommunications and education, among others. As a trusted partner with wide-ranging service capabilities, IBM helps clients transform and succeed in challenging circumstances.

IBM has been expanding its footprint in India – and has a presence in over 200 cities and towns across the country – either directly or through its strong business partner network. IBM India has clearly established itself as one of the leaders in the Indian Information Technology (IT) Industry – and continues to transform itself to align with global markets and geographies to grow this leadership position. Widely recognised as an employer of choice, IBM holds numerous awards for its industry-leading employment practices and policies.

International Business Machines Corporation (IBM), also known as the Big Blue is a multinational computer technology and consulting corporation that is located in Armonk, New York, USA. IBM is considered as one of the few Information Technology (IT) companies with a continuous history that dates back to the19th century. The company sells computer hardware and software and offers different infrastructure services, hosting services as well as consulting services in different IT areas from mainframe computers to nanotechnology. Aside from that, IBM is considered as the world’s largest computer history and considered as the largest IT employer in the world with 355,000 employees.

Vision statement

At IBM, we strive to lead in the invention, development and manufacture of theindustry’s most advanced information technologies, including computer systems, soft are, storage systems and microelectronics. We translate these advanced technologies into value for our customers through our professional solutions, services and consulting businesses worldwide.

Mission statement

IBM main activity is to find solutions to its wide range of clients using advanced information technology. Its clients are individual users, specialised businesses, and institutions such as government, science, defence, spatial and educational organisations.

To meet and respond to its customers needs, IBM creates, develops and manufactures many of the world’s most advanced technologies, ranging from computer systems and software to networking systems, storage devices and microelectronics.(Linc, 1997)Through this mission statement IBM is striving to dynamically galvanize their props in various field and trying to maintain a stabilize balance between all above aspect like clients, government, educational organisation etc.

Firm infrastructure:

Supply-Chain Management in IBM, supply chains of IBM are becoming more complex, arder to manage and more costly to run. In fact, nearly $3.4 trillion was spent on supply chains in 2005. To address this, IBM is creating a supply-chain management business transformation outsourcing practice. The Supply chain management (SCM) solutions can help IBM to improve costs and customer service, while decreasing overall supply chain inventory. IBM’s (2006) Business Performance Management enables companies to visualize end-to-end processes across business and IT systems, analyze execution in real time against goals, and make adjustments as needed. For instance, IBM offers consulting, services and middleware to simulate and monitor business processes, and provides clients with real-time analysis of the underlying IT systems carrying out those processes.

Organisation structure:

– Sales & Distribution Group.
– Global Business Services Group.
– Global Technology Services Group.
– Software Group.
– Systems & Technology Group
– Integrated Operations Group.
– Innovation & Technology Group

HRM:

To eliminating redundancies and overhead structures to drive productivity, the integration of HRM has improves IBM’s capacity to innovate by providing greater clarity of key priorities around shared goals and objectives and leads to a sharper focus for the company on learning, development and knowledge sharing. Perhaps after this integration, IBM has acquired numbers of companies to enhance their capability. However the integration issues could appear during the acquisition process that would be the challenge of the HRM, e.g. the culture conflict.
Technology development:

IBM’s research and development, operations differentiate IBM from its competitors.IBM annually spends approximately $5–$6 billion for research and development, including capitalized software costs, focusing its investments in high growth opportunities. IBM has some of the best technology registered in its account that made revolutionary changes through-out the many of business operation through huge amount of business data transferring around the world

SERVICES:

IT services
• Business continuity and resiliency services
• End user services
• Integrated communications services
• IT strategy and architecture services
• Maintenance and technical support services
• Middleware services
• Security and privacy services
• Server services
• Site and facilities services
• Storage and data services

Other services
• Application innovation services (US)
• Application management (US)
• Outsourcing

SWOT ANALYSIS:
SWOT analysis is a strategic planning tool that is use n order to evaluate the strength, weaknesses, opportunities and threats that are involved in a project, business venture or in any other situation that requires a decision. Thus, the process of sizing up the internal strengths and weaknesses as well as the external opportunities and threats helps to provide a quick overview of the strategic situation of an organization (2007, ).

Strength:

– Advanced business performance management.
– Good organization culture.
– Strategic outsourcing, mergers and acquisitions.
– High efficient fulfilment centre.
– Flexible marketing management.
– Creative services

As company handling all most 95% of business task of top 1000 companies of wall street, the company have some of the world fastest main frame and many revolutionary technologies like: speech recognition a software with which you can work just with your voice, blue gene a supercomputer which is 500 times fastest than world fastest computer and capable of more than one quadrillion operation per second.

Through such outperforming technologies IBM is able to provide some of the best back hand facilities. The most recent merge of IBM is with the Lenovo in which Lenovo is providing the outer hardware technology and IBM providing all of its latest chip technology. IBM has been entered the wide range of fields i.e. Business continuity and resiliency services, End user services, Integrated communications services, IT strategy and architecture services, Maintenance and technical support services, Middleware services, Outsourcing services, Security and privacy services, Server services and Site and facilities services, mainframes, communications, mainframe storage, minicomputers, and personal computers. Now IBM came in market with its revolutionary Green technology through which they can save 40% of energy cost through animation, consolidation and consultancy.

Weaknesses:

-High costs in the value chain.
– Possible acquisition issues

Since, IBM spends much on its research and development then it’s earning and have very limited supplier in market. Since company owning very sensitive place in market, because of its massive organisation size the immediate change are likely impossible.

Opportunities:

– Strong and stable economic market context.
– Sophisticated service market.- High individual consumption power.
– Matured internet market.
– High level of entry barrier to the server market.
– Wireless Applications (Understanding, 2008)

Well, company possess a good place in market, just with little feasible strategies to market changes, IBM can hold a large share in market. Since, IBM has very less count of competitors in its segment; almost the star of its field, through these specifications IBM can create a monopoly in its market. The internet is one of the wide applications, that is growing faster than anything on earth, the opportunity is open for IBM, because IBM already in this field by providing huge data storage facilities. Since, IBM is almost created monopoly on server market, that’s why it’s not easy for other companies to enter in this field and compete over IBM, except some huge market giants like Microsoft. Wireless solutions enable customers to extend their reach to clients, suppliers and employees using wireless and emerging technologies.

Threats:

– Customers have high experience on the service.
– Customers have low switching costs.
– IBM has high switching costs on the core hardware.
– Intense competition.
– High threat of substitutes.

As being one of the oldest players of its field, Customer may look for change. Todayas market is so flexible; IBM may face threat from small companies like Compaq because of their small size they can change rapidly with customer environment. IBM high spending than its earning on research and development can be a loophole for IBM. Because of very limited suppliers during value chain process, IBM can barely afford to substitute.

OBJECTIVES
OF
STUDY

Fixing the objective is like identifying the star. The objective decides where we want to go, what we want to achieve and what is our goal or destination.

Every study is carried out for the achievement of certain objectives.

1. To study the HR practices and compensation structure of IBM India.
2. To identify best HR policies to recommend suitable for the organization.
3. To review compensation structures being offered by IBM India.
4. To study the benefits of best HR Practices and compensation structure for company employees.
5. To find how best HR practices and policies help to reduced attrition rate.

CHAPTER – 2

REVIEW OF LITERATURE

The literature for review to be collected from secondary sources such as magazines, articles, reports, budgets, news paper etc to highlight the problems and findings of the study done by many research and business professionals to understand the significance of Best HR Practice and compensation structure of the companies.

Compensation is one of the most important human resource management functions in an organization. For many organizations, compensation is the biggest single cost of doing business. An organization’s compensation system helps to reinforce the key corporate values, and facilitate the achievement of organizational objectives. By rewarding performance, an organization’s compensation and benefits policies and practices can fortify employee engagement and employee behavior that realizes its business objectives.

Compensation Policy of an organization firstly is influenced by the organizational philosophy and culture (Mission, goals, values, attraction and retention of talent) and secondly by the level of parity within the industry (inter/ intra level relativity, comparator ratio).

Thus for the organizations prevalent in today’s competitive environment a benchmarking of the existing salary structure for the employees of all levels of an organization is vital to motivate the employees and achieve the organizational goals. Benchmarking is an on-going, systematic process for measuring and comparing one organization to another which signals management’s willingness to pursue a philosophy that embraces change in a proactive rather than reactive manner. It is a guiding measurement tool in the process of continuous improvement which leads a company to best-in-class performance and establishes meaningful goals and performance measures.

 Compensation Review provides an opportunity to learn and understand the changing practices in compensation and benefits. This also helps in firming up the percentile positioning of the organization to formulate and review its pay policy through analysis of data collected for the various organizations in the comparator group
 It also helps in providing a rationale for salary corrections by facilitating with timely and accurate information.
 Review of salary structure also helps in identifying the best practices in the area of compensation structuring and employee engagement measures.
 Taxability is another important aspect of the compensation structure which influences employee engagement as a less burdensome tax on salary structure implies more motivated and efficient employees.
At the same time the compensation structure needs to be cost efficient to the organization along with being beneficial to the employees and increasing their productivity.

The Human Resources Management (HRM) function includes a variety of activities, and key among them is deciding what staffing needs you have and whether to use independent contractors or hire employees to fill these needs, recruiting and training the best employees, ensuring they are high performers, dealing with performance issues, and ensuring your personnel and management practices conform to various regulations. Activities also include managing your approach to employee benefits and compensation, employee records and personnel policies.

There are many different types of people, and not surprisingly, they react differently to different situations. For example, some people prefer there should be a written policy for everything, while others favor having no policies at all and would leave everything open to interpretation as situations arise. Neither of these extremes contributes to a work environment that’s conducive to high productivity levels. Thus a well defined HR function is a one with the right number and types of policies and practices focusing on a primary goal of improving individual performance in the workplace.

The ultimate aim of the HR function is to ensure that at all times the business is correctly staffed by the right number of people with the skills relevant to the business needs. Also, the rate of change facing organizations has never been greater and organizations must absorb and manage change at a much faster rate than in the past.

The market place for talented, skilled people is competitive and expensive. Taking on new staff can be disruptive to existing employees. Also, it takes time to develop ‘cultural awareness’, product/ process/ organization knowledge and experience for new staff members. Hence, recruitment, hiring and induction are an integral part of human resource management in an organization.

An important challenge facing the HR of majority of corporate organizations in today’s competitive world is attracting and retaining talent. Thus it is vital for the HR to create a high level of job satisfaction which includes work, work environment, compensation. A talented human resource base can be a competitive advantage in any economic environment. However, building this base is a challenge when organizations are faced with changing internal requirements, increasing employee demands, and competition for employees. Thus organizations must anticipate their resource requirements and establish a long-term approach to securing them which includes establishing a brand in the labor marketplace, investing in talent, just as they would invest in any valuable corporate asset, by providing varied motivational factors and monitoring the needs of employees to help ensure that HR policies continue to reflect employee goals.

Thus the pressing need for organizations to maintain a diverse pool of talented leaders, capture expertise from existing employees, and outsource transactional activities to focus on core capabilities has heightened the importance of HR function.

COMPENSATION REVIEWS AND SALARY SURVEYS CONDUCTED ACROSS THE COUNTRY

Various salary surveys and compensation review studies have been conducted in India by the several HR consulting firms. Synergy consultants have carried out such surveys in various sectors such as Compensation Synopsis Study – Electronics & Telecom Industry, Compensation Benchmarking – Automobile Industry, Salary & Benefits Survey in Consumer industry etc.

While, Ernst & Young conducts the CFO survey on a regular basis Mercer Human Resource Consulting and Hewitt conduct compensation benchmarking and salary surveys for various countries across the world.

Culpepper Compensation Surveys provide the data needed to attract, retain and motivate key talent by providing comprehensive data on base salaries, incentives, allowances, CTC, equity based compensations as well as job description.

The Gallup-Businessworld Compensation & Benefits Study aims at identifying pay-scales across levels for select industry sectors and understanding how aspirations and expectations of white-collar employees are shaping up through the years.

Hewitt’s Salary Increase Survey for India focuses on overall increases in employee compensation for the current year and salary projections for the next year. It identifies the salary increases and attrition rates across various sectors like banking, insurance, FMCG, IT and also across various employee groups. It also lays emphasis on recognition of compensation as a key motivator attempting to attract and retain scarce talent.

The Annual Compensation & Benefits Benchmarking Survey conducted by SVB India Advisors Pvt. Ltd. includes Compensation Benchmarking (Job evaluation & grading, Position wise Component structure & analysis, Customized percentile positioning, Variable pay, stock options trends & analysis etc.), Benefits Benchmarking (Quantitative & Qualitative Analysis, Market trends on benefits practices etc.), HR practices & Trends (Rewards & Recognition, Career Ladder, Employee referral programs, Retention Strategies, Other practices including Leave, Relocation, Travel policies etc.), Compensation Forecasting (Model based on quantitative & qualitative analysis of various influencing factors such as supply, demand, economic, social etc.) .
Thus, due to the increased demand for organizational competencies and capabilities, the need for accurate and comprehensive information on the compensation trends has become more imperative now than ever before.

These surveys provide a platform for organizations belonging to various sectors study the market for compensation and benefits in a cost effective and relevant manner. They enable organizations to be prepared for the changing trends and plan their compensation budget accordingly and provide a detailed analysis of variable pay and market trends in Stock options practices.

Most of us would have heard the term “compensation” in the context of getting paid for the work that we do. The work can be as part of full time engagement or part time in nature. What is common to them is that the “reward” that we get for expending our energy not to mention the time is that we are compensated for it. From the perspective of the employers, the money that they pay to the employees in return for the work that they do is something that they need to plan for in an elaborate and systematic manner. Unless the employer and the employee are in broad agreement (We use the term broad agreement as in many cases, significant differences in perception about the employee’s worth exist between the two sides), the net result is dissatisfaction from the employee’s perspective and friction in the relationship.

It can be said that compensation is the “glue” that binds the employee and the employer together and in the organized sector, this is further codified in the form of a contract or a mutually binding legal document that spells out exactly how much should be paid to the employee and the components of the compensation package. Since, this article is intended to be an introduction to compensation management, the art and science of arriving at the right compensation makes all the difference between a satisfied employee and a disgruntled employee.

COMPENSATION TRENDS IN INDIA

• History: India’s transition to a market driven economy began in 1991 with the introduction of liberalization. Prior to 1991, the Government was the biggest employer and job creator, accounting for over 85% of High School jobs. Pay was largely determined by high-level agreements between employee unions and the Government and was largely guaranteed in nature. A similar situation was prevalent in the private sector, where Government pay scales were often used as a benchmark in fixing and revising pay. Compensation packages were low on cash and high on fringe benefits such as accommodation, cars, and subsidized loans. Variable pay was largely restricted to top and senior management in few private sector enterprises. Grading systems were largely industry-wide and salary progression was purely determined by length of service.
• Current Scenario: Productivity gains (6% in 2005-06), fast growth in real wages (40% over the last 5 years), a booming but extremely competitive economy (GDP growth of over 9%), simplification of tax rules and emergence of knowledge-based industries such as Information Technology & Outsourcing Services, Healthcare, biotech etc are key factors that have influenced compensation in India post liberalization. Compensation is now characterized by a Total Cost of Employment approach, a rapid movement to flexible benefits, and increasing levels of variable pay (variable pay now forms about 7% – 35% of fixed pay). Grade structures have become organization specific and salary progression is driven by market forces and individual performance. Average salary increases over 2005-06 ranged from 8% – 25%. While most organizations benchmark compensation nationally within a select group of competitors, a few organizations are beginning to benchmark themselves internationally at senior management levels. India has the fastest compensation increase rate in the Asian region at around 12% and it also has the highest labor turnover in the region.
• Indian Outsourcing Industry: The BPO Industry has been amongst the best of India’s recent successes and is characterized by imbalance in supply and demand with demand far exceeding supply, high rates of employee attrition, and consequently high rates of salary increases. Average salary increases over the last 2 years have been in the region of 20% – 25%. Currently, junior level workers earn approximately 400 US$ per month (twice the national average wage) and the amounts go up to 4000 US$ per month at middle management and as high as 6000 US$ per month at senior management levels. Variable pay ranges from 10% at the level of junior level workers to 40% in the case of senior management. Many organizations have also chosen to reward employees, especially at middle and senior management, with other incentives such as deferred cash bonuses, and share plans pushing the cost of employment even further. This has put significant pressure on the competitiveness of the industry
• Sector wise Analysis: According to the Gallup-BusinessWorld Compensation & Benefits Survey Report 2006, IT clearly comes across as the top paymaster overall. It is the market leader at the Entry, Junior and Middle levels of the Management. At the senior levels, however, it is the Financial Sector, which pays Top Dollar while manufacturing is competitive only at the Entry level. Retail is now becoming the new BPO as it seems to have a lot of parallels with the BPO sector where people issues are concerned such as high attrition, huge headcount, blinding growth rates, and low entry barriers.
• Salary Increases: As per the Hewitt Salary Increase Survey 2006, the overall salary increase has been 14.4 percent in 2006. The highest average salary increase across all industries has been observed in the Insurance sector at 17% followed by banking and ITES sectors.

Also, the highest average increase for 2006 was seen for the employees in Professional/ Supervisor/ Technical group at 16%. The variable pay as percentage of CTC is highest for senior management among all the employee groups at around 20%.

The average overall turnover rate across the various industries as per the Gallup-BusinessWorld Compensation Survey Report 2006 has been 14.4 percent.

• Drift towards Flexible and Performance based Pay Structure
The credo most leading organizations seem to follow is to pay competitively and stress on high rewards/ career growth for good performance. This is perhaps because employees understand the monetary benefits and perhaps because employees’ working for organizations where pay for performance exists are significantly more likely to feel that his/ her company is competitive in terms of salary offered to employees at his/ her level and that Promotions are accompanied by a commensurate increase in salary. This has caused them to view their compensation package more positively.

The graph below confirms that employees welcome the trend towards performance-based pay across sectors especially in the manufacturing industry.

Perception of performance based pay among employees across various sectors

Figure 2.1, Source Gallup-Businessworld Compensation & Benefits Survey Report, 2006
Performance-based pay is increasingly becoming popular even among the support functions. The variable component of the pay depends on both individual/team and organizational performance and increases across levels of the management hierarchy.

Performance-based Rewards are used as a tool for recognition, motivation and sometimes even for attracting and retaining employees. Rewards are fast gaining popularity and the trend is towards providing one time reward/ recognition rather than compensation renegotiation.

• ESOPs on a comeback Trail:
ESOPs are again becoming the flavor of the season among HR Leaders in the new economy sectors of the industry. The exceptional performance of stock markets is a factor behind this. Some lessons have however been learnt from the past and employers are more discriminating while offering ESOPs. Besides, ESOPs will have a higher lock-in period. HR leaders however feel that ESOPs are a potent retention tool and also boost performance by giving employees a stake in the organization’s fortunes. Senior management has been found to seem more positive towards ESOPs as compared to middle and lower management as per the Gallup report.

The salary structure across various industries and levels mainly constitutes the following main components:

• Annual Base Salary: This varies by level, grade or salary band
Taxability: 100% taxable
• Dearness Allowance: It is calculated as a percentage of basic salary
Taxability: 100% taxable
• Annual Fixed Bonus: Fixed bonus which is given to the employees on the basis of performance.
Taxability: 100% taxable
• Variable Pay: This component depends on individual, departmental or company performance. It can vary by grade, salary band or line of business
Taxability: 100% taxable
• Conveyance Allowance: This varies as percentage of CTC by grade, level or salary band.
Taxability: Tax free upto 800 p.m or 9600 p.a
• Canteen/ Lunch Allowance: Food allowance or coupons
Taxability: Taxable
• House Rent Allowance: This varies by level or location depending on metro/ non-metro.
Taxability: Exempted upto the formula (Income Tax rules)
1) Actual rent received
2) Rent paid – 10% of basic
3) 60% of basic
The least of all is deducted from HRA and the balance is taxable.
• House Maintenance Allowance: Varies by level or salary grade
Taxability: Taxable
• Car Allowance: This varies by level, grade or salary band
Taxability: 100% Taxable
• Medical Allowance: This generally is applicable to all employees and varies as percentage of CTC by level, grade or salary band
Taxability: Tax free upto 15000 p.a (Reimbursement of bill)
• Entertainment Allowance: This varies by level, grade or salary band
Taxability: Taxable
• Leave Travel Allowance: This is generally applicable to all employees and varies as percentage of CTC by level, grade or salary band. This amount covers employee, employee’s spouse, dependent children and dependent parents.
Taxability: Tax free if availed or bills reimbursed.
• Domestic Help Allowance
Taxability: Taxable
• Special Allowance: This is a balancing figure or an adjustment factor. It is a discretionary component generally applicable to all employees and varies by level. It may also include other allowances like education allowance, city compensatory allowance, professional development allowance etc.
Taxability: 100% Taxable
• Superannuation (Defined Benefit/ Defined Contribution): This is generally applicable to all employees and is fixed at 15% of the basic.
Taxability: Tax free
• Provident Fund: This applicable to all employees and is fixed at 12% of the basic per month. It is a contribution made both by the employer and the employee.
Taxability: Tax free
• Gratuity: This is applicable to all the employees and is fixed at 4.8% of the basic. It is calculated as (Last basic salary * No. of years of service * 15)/ 26. It is applicable only after 5 years of completion of service.
Taxability: Tax free
• Medical Insurance: This is applicable to all employees generally through a tie up with an insurance company and it includes room, nursing expenses etc. It varies by level or salary band.
Taxability: Taxable
• Life Insurance: This is applicable to all employees generally through a tie up with an insurance company. It varies by level or salary band.
Taxability: Taxable
• Accident Insurance: This is applicable to all employees generally through a tie up with an insurance company. It varies by level or salary band and constitutes a very small percentage of CTC
Taxability: Taxable
• Company Car: This is generally applicable to senior and managerial levels. It covers road tax, insurance costs etc. and is in the name of the company. It varies by salary band or grade.
Taxability: Only the perquisite value as fixed by the IT guidelines is taxed.
• Fuel Reimbursement: This is generally applicable to senior and managerial levels and varies by salary band or grade.
Taxability: Tax free (official use)
• Chauffeur: This is generally applicable to senior and managerial levels and varies by salary band or grade.
Taxability: Only the perquisite value as fixed by the IT guidelines is taxed.
• Housing Loan: This generally involves a tie up with a bank with interest subsidy provided to the employees. This varies by level or grade.
Taxability: Taxable
Where the employee pays the employer any amount less than prescribed rates as interest on loan amounts of above Rs. 20,000, the difference between the prescribed and actual interest is taxable as a perk. However, loans below Rs. 20,000 are exempted from this provision.
• Car Loan: This generally involves a tie up with a bank with interest subsidy provided to the employees. This varies by level or grade.
Taxability: Taxable
Where the employee pays the employer any amount less than prescribed rates as interest on loan amounts of above Rs. 20,000, the difference between the prescribed and actual interest is taxable as a perk. However, loans below Rs. 20,000 are exempted from this provision.
• Hard Furnishings: This generally includes white goods like refrigerator, AC, washing machine etc. This varies by level or grade.
Taxability: Only the perquisite value as fixed by the IT guidelines is taxed.
• Telephone Reimbursement: This generally varies by level or salary band.
Taxability: Tax free (if bills presented).
• Club Membership: This generally involves corporate membership to senior level employees and varies by salary band or grade.
Taxability: Taxable upto a fixed limit.

COMPENSATION:

Most of us would have heard the term “compensation” in the context of getting paid for the work that we do. The work can be as part of full time engagement or part time in nature. What is common to them is that the “reward” that we get for expending our energy not to mention the time is that we are compensated for it.

From the perspective of the employers, the money that they pay to the employees in return for the work that they do is something that they need to plan for in an elaborate and systematic manner. Unless the employer and the employee are in broad agreement (We use the term broad agreement as in many cases, significant differences in perception about the employee’s worth exist between the two sides), the net result is dissatisfaction from the employee’s perspective and friction in the relationship.

It can be said that compensation is the “glue” that binds the employee and the employer together and in the organized sector, this is further codified in the form of a contract or a mutually binding legal document that spells out exactly how much should be paid to the employee and the components of the compensation package. Since, this article is intended to be an introduction to compensation management, the art and science of arriving at the right compensation makes all the difference between a satisfied employee and a disgruntled employee.

Though Maslow’s Need Hierarchy Theory talks about compensation being at the middle to lower rung of the pyramid and the other factors like job satisfaction and fulfilment being at the top, for a majority of employees, getting the right compensation is by itself a motivating factor. Hence, employers need to quantify the employee’s contribution in a proper manner if they are to get the best out of the employee. The provision of monetary value in exchange for work performed forms the basis of compensation and how this is managed using processes, procedures and systems form the basis of compensation management.

As the module progresses, readers would be introduced to other aspects of compensation management like the components of compensation management, types of compensation, inclusion of variable pay, the use of Employee Stock Options etc. The aspect of how skewed compensation management leads to higher attrition is discussed as well. This aspect is important as studies have shown that a majority of the employees who quit companies give inadequate or skewed compensation as the reason for their exit. Hence, compensation management is something that companies must take seriously if they are to achieve a competitive advantage in the market for talent.

Considering that the current trend in many sectors (particularly the knowledge intensive sectors like IT and Services) is to treat the employees as “creators and drivers of value” rather than one more factor of production, companies around the world are paying close attention to how much they pay, the kind of components that this pay includes and whether they are offering competitive compensation to attract the best talent. In concluding this article, it is pertinent to take a look at what Jack Welch had to say in this regard: As the quote (mentioned at the beginning of this article) says, if the right compensation along with the right kind of opportunities are made available to people by the firms in which they work, then work becomes a pleasure and the manager’s task made simpler leading to all round benefits for the employee as well as the employer.

If we take a look at the components of a compensation system, we find that employers decide on what is the right compensation after taking into account the following points.
1. The Job Description of the employee that specifies how much should be paid and the parts of the compensation package.
a. The Job Description is further made up of responsibilities, functions, duties, location of the job and the other factors like environment etc.
b. These elements of the job description are taken individually to arrive at the basic compensation along with the other components like benefits, variable pay and bonus.
 It needs to be remembered that the HRA or the House Rental Allowance is determined by a mix of factors that includes the location of the employee and governmental policies along with the grade of the employee.
 Hence, it is common to find a minimum level of HRA that is common to all the employees and which increases in proportion to the factors mentioned above.
2. The Job Evaluation that is a system for arriving at the net worth of employees based on comparison with appropriate compensation levels for comparable jobs across the industry as well as within the company.
a. Factors like Experience, Qualifications, Expertise and Need of the company determine how much the employer is willing to pay for the employee.
3. It is often the case that employers compare the jobs across the industry and arrive at a particular compensation after taking into account the specific needs of their firm and in this respect salary surveys and research results done by market research firms as to how much different companies in the same industry are paying for similar roles.

The components of compensation that have been discussed above are the base requirements for any HR Manager who is in charge of fixing the compensation for potential employees.

There are other variables as well that would be discussed in subsequent articles. This article has introduced several concepts around the topic of components of compensation and these concepts are crucial for HR professionals as well as those aspiring management professionals who want to make a career in the corporate world.
Before concluding this article, it needs to be remembered that exit interviews have shown that over 70% of employees who quit their jobs do so because they are dissatisfied with the compensation that they are getting. Hence, all HR professionals and managers must take this aspect into account when they determine the compensation to be paid to employees.

The rationale for these components is that an employee would be better motivated to perform individually, contribute to the group to which he or she belongs and finally, perform well keeping in view the overall growth of the company. Hence, these sub components of compensation have been designed to spur the employee to excel not only in an individual capacity but as a team member and finally, a responsible employee of the company. The idea here is to discourage silo based performance and instead concentrate on all round performance.

FACTORS AFFECTING COMPENSATION:

The component of the compensation and how each is used to assess the relative importance of an employee as far as remuneration is concerned. We look at some of the factors that determine how much compensation is to be paid out to the employee by looking at the issue from the perspective of the employer. The subsequent article would take a look at how the employee can influence the compensation setting process with negotiation and bargaining.

From the perspective of the employer, the factors that affect compensation are:
 The Overall Macroeconomic situation where in the state of the economy of the country in which the firm is situated plays a major role in determining the compensation to be paid. For instance, if an economy is booming or is in a high growth trajectory, chances are that the employers would pay the employees more and conversely, if the economy is in a downward trajectory, chances are that the employers would pay the employees less. We often hear about how because of the recession, salary hikes have been deferred or cut down. This is a direct result of the linkage between firm performance and the performance of the economy.
 The Demand for a particular skill weighs heavily on the way in which the employer fixes the compensation for the employee. For instance, premium skills like Consulting and Accountancy are paid more as are the Technology Professionals who might be experts in their chosen field. As discussed in earlier articles, it is the expertise and the relative scarcity of such experts that determines how much the employer is willing to pay.
 The Position of the company in the Business Cycle often determines how much the company is willing to offer to the employee. For instance, if a company is a start-up, chances are that the company would pay more because of the need to get the best possible talent into the company. Further, many start-ups give their employees ESOP’s or Employee Stock Option Plans wherein the employees can redeem their stocks after the lock-in period.
 Finally, the urgency of the firm in filling up the position plays an important role in determining how much the employer is willing to pay the employee and in many cases, if the time to get on board the employee is less, staffing managers along with the line manager in charge of hiring the employee might decide to pay more because they want the employee to come on board as quickly as possible.

These are some of the factors that determine the compensation to be paid to the employee from the perspective of the employer. This is not an exhaustive list but an indicative one and as the module progresses, we shall be revisiting some of these factors along with adding additional information.

The factors that help the employers determine the level of compensation to be given to employees. The factors that affect compensation from the perspective of the employee. What this means is that the employee should not be constrained by the amount of compensation that the employer provides him or her and can and should negotiate with the prospective employer until he or she is satisfied with the outcome. Of course, there are several kinds of negotiation with the employer. For instance, the employee can negotiate at the time of the hiring process or can negotiate at the time of the appraisal cycle. In this article, we consider the strategies available to the employee at the time of the hiring process. There are several parts to the employee’s strategy to negotiate with the employer. Some of them are:
 Plan and Communicate: The most important part of the employee’s strategy must be to research the compensation trends in the market and then negotiate with the employer based on how much the other companies are willing to pay for a similar role combined with the fact that the company hiring him or her pays for the same role. Hence, it is advisable for the employee to keep in touch with compensation trends in the marketplace and also talk to other employees before he or she decides to communicate his or her expectations to the prospective employer.

 Timing makes the difference: In any negotiation process, time is the key element and hence timing the negotiation process is important. The best possible option for the employee would be to wait for the company to make an offer and then pitch in his or her expectations about the compensation. There is something called overkill which must be avoided and the employee must avoid going overboard. At the same time, the employee must also ensure that he or she does not start the negotiation process early on in order not to lose out on the offer. Hence the timing of the pitch makes all the difference.

 Consider the Alternatives: When you are deciding about prospective offers, ensure that you make the pitch for your expected compensation level after taking into account all the alternatives and not simply rush into something that does not value your experience and expertise adequately. At the same time, do not harangue the prospective employers though you might have several alternatives available to you. The point to be noted is that different companies react to compensation negotiations in different ways and hence you must play the field according to these points.

Many a time, prospective employees lost out on compensation either because they asked too high or asked too late. At the same time, they should also remember not to coerce the employers. The best possible strategy is where you are confident about yourself and your worth as measured by the employer must reflect your own sense of self worth. When there is a meeting point between these, then you can rest assured that you have arrived at the ideal compensation for yourself.

NEGOTIATION IN COMPENSATION MANAGEMENT:

It is impossible to talk about compensation management without referring to the process of negotiation and bargaining that is an integral part of compensation management. As anybody who has worked in the formal or even the informal sector knows, the process of negotiating one’s salary and perks is fundamental to the process of hiring and selection. In this article, we look at some of the strategies employed by professionals’ world over when they negotiate with their prospective employers regarding their compensation.

Have a Plan in Place
The first element of negotiation is to plan for the process by deciding on how much more you want and how much you think the employer is willing to give. The fine art of knowing how much you should ask for and at what point should you strike the deal is something that experienced professionals know and rookies should learn. Without having a clear idea of the target level of compensation that you are aiming for, the negotiation process would turn out to be an exercise in futility.

Communicate Your Needs
Once you have arrived at a figure that you think you deserve, the next step is to communicate the same to the prospective employer without delay. The important point to note here is that the way in which you articulate your needs is as important as the need to drive a bargain. For instance, without expressing yourself clearly to the HR manager of the prospective employer, there is little chance that he or she would understand your needs and respond appropriately. Hence, once you have sorted out the target compensation that you want, you should also have a strategy to communicate it to the employer.

Timing is everything

You need to remember that there is something called being too early when you negotiate and too late as well. Hence, the timing of your articulation forms the basis for a successful negotiation. For instance, if you start your demands early on in the hiring process, the prospective employer might stall the process or even put a stop to your hiring. On the other hand, if you put forward your demands as you are about to join the firm, there is precious little anyone can do about your demands. Hence, you should have a keen eye for when you should communicate your demands.

The three aspects of having a plan, communicating the need and then timing it in such a way as to derive maximum advantage are essential to the negotiation process. Of course, there are many firms that do not entertain any sort of negotiation and there are firms that put up pretence of negotiation when in reality, they do not budge at all. In these cases, it is better to adopt a wait and watch policy and make your move once they get into the details of your compensation.

In conclusion, a successful negotiation hinges on the willingness of both the parties to hear each other and an ability to arrive at a common denominator in a spirit of accommodation. Hence, do not be overtly rigid and at the same time do not give in to the employer totally.

COMPENSATION AS A HYGIENE FACTOR:

Hertzberg’s theory of motivation lists hygiene factors as those conditions when absent cause an employee to be dissatisfied. The point about this theory is that factors like adequate compensation, a congenial working environment and additional benefits are necessary to motivate the employee and they ought to be present to keep the employee happy. The absence of such factors makes the employee lose focus and drive and hence the lack of “hygiene” makes it difficult for the employee to continue.

How to Manage Compensation Expectations

The appraisal time or the time of the year when employees are graded on their performance is usually the time when employees put forth their aspirations and expectations regarding the compensation and other aspects of their job. Hence, the line managers and the HR managers must make it a point to “manage” the expectations of the employees during this period. The attrition is usually the highest when employees are handed their raise letters that specify how much their compensation is increased. This is because the employees might expect more than what they have been awarded which leads to dissatisfaction.

Though compensation in recent years has ceased to be the “be all” of employee satisfaction with the nature of work and the responsibilities that an employee has becoming more important in determining job satisfaction, it still is one of the most important factors behind an employee’s decision to quit a company. Hence, it is incumbent upon HR professionals and the senior management that they devise compensation plans keeping in mind the various factors that drive an employee’s psyche. Only when an employee is satisfied with his or her condition in a company can they perform at the desired levels.

Executive Compensation

When one writes about executive compensation, the thought of jet setting CEO’s who enjoy luxurious lifestyles and live in gardened villas at the company’s expense comes to mind. While the stereotypical image of a CEO enjoying such extravagance is indeed true to a certain extent, there is more to the topic of executive compensation. For instance, the practice in recent years has been to offer generous packages to executives that include stock options, benefits and variable pay over and above the basic components.

The point to note is that executive compensation is as removed from the compensation packages offered to middle and lower tier employees as they are in the hierarchy of companies. The reason for this has been the trend of CEO’s and executives being vested with more responsibilities as well as an emphasis on holding them responsible for top line and bottom line growth.
Gap between CEO and Worker Pay

Among the many causes attributed to the ongoing global financial crisis was the one about flawed incentives and high compensation packages to the executives which resulted in skewed priorities for the executives who were bent on registering profits at any expense and in the process throwing caution to the winds. It was also pointed out that the gap between the compensation of the CEO’s and the lower most employee was in the ratio of 300: 1 for companies like GE (General Electric) and GM (General Motors) where the CEO’s of these companies raked in Millions of Dollars of compensation when compared to the workers who were barely making five digit salaries. This has spurred a debate over the efficacy of paying executives so much when the end result is not commensurate with the pay.

Perks and Benefits

While salary is one part of executive pay, the associated perquisites and benefits that executives are granted by the board of directors is another important aspect. Things like paid vacations, children’s education, preferred neighborhood housing and access to the best clubs and other benefits make the job of executives an aspirational one for many business graduates. Further, the humungous bonuses offered to the executives (in the range of 100% to 300%) makes one wonder whether the stratospheric levels of executive pay is something that needs a rethink by the collective conscience of the corporate world.

The point that this article is making is that while executive compensation needs to be commensurate with the level of experience, the ability to articulate vision and imbue the organization with a sense of mission and at the same time the capability to take risks, there needs to be a line drawn somewhere which caps the compensation and packages offered to executives at levels that are more earthly. While the intention is certainly not to begrudge the compensation being offered to executives, the incentive system must be more tied in to current market realities as is the case with compensation at other levels. Hence, the lessons learned from the recent financial crisis about asymmetric risk and reward systems must not be forgotten in a hurry.

FUTURE ENHANCEMENT:

Compensation systems are designed keeping in minds the strategic goals and business objectives. Compensation system is designed on the basis of certain factors after analyzing the job work and responsibilities. Compensation provided to employees can direct in the form of monetary benefits and/or indirect in the form of non-monetary benefits known as perks, time off, etc.

Compensation does not include only salary but it is the sum total of all rewards and allowances provided to the employees in return for their services. If the compensation offered is effectively managed, it contributes to high organizational productivity. A good compensation package is important to motivate the employee’s to increase the organizational productivity. An ideal compensation system will have positive impact on the efficiency and results produced by employees. It will encourage the employees to perform better and achieve the standards fixed.

It will enhance the process of job evaluation. It will also help in setting up an ideal job evaluation and the set standards would be more realistic and achievable. Such a system should be well defined and uniform. It will be apply to all the levels of the organization as a general system. The system should be simple and flexible so that every employee would be able to compute his own compensation receivable. It should be easy to implement, should not result in exploitation of workers. It will raise the morale, efficiency and cooperation among the workers. It, being just and fair would provide satisfaction to the workers. It should motivate and encouragement those who perform better and should provide opportunities for those who wish to excel. It aims at creating a healthy competition among them and encourages employees to work hard and efficiently and the system provides growth and advancement opportunities to the deserving employees. The perfect compensation system provides platform for happy and satisfied workforce. This minimizes the labour turnover. The organization enjoys the stability

Newstrom and Pierce (2002)
Contrary to modern belief, monetary compensation is not the highest employee motivator. According to the Harvard Management Update, “nine of tenmanagers think people stay or go because of money. We know that’s not the case. Money and perks matter, but employees tell us again and again that what they want most are challenging, meaningful work, good bosses, and opportunities for learning and development” (as cited in Kaye, 2000, p. 9). Modern corporate structure has become so multi-layered that often employees do not ever see the fruit of their labors. Newstrom and Pierce (2002) agree: “Banks are being stymied…often by their own structure. McKinsey studied one company where the new product process required 223 separate committees to approve an idea before it could be put into production” (p. 113). Another area contributing to decreased employee satisfaction is that of a Bank’s motivational style. For example, Weinberg states that:
“Most companies relied in the past on two traditional strategies for managing turnover. First, they raised wages until the situation stabilized. If that didn’t work, they increased training budgets for new hires and first-level supervisors. These solutions don’t work anymore. Especially misleading is the myth that paying low-wage service workers and extra $.25 or $.50 per hour will dramatically reduce turnover rates. Even if higher pay rates were economically feasible-the extra few dollars has little influence on workers.

According to Gary W. Loveman1 in 2006:
The service profit chain is a simple conceptual framework linking employee satisfaction and loyalty, customer satisfaction and loyalty, and financial performance. Although widely used by practitioners, the service profit chain’s series of hypothesized relationships between employee, customer, and financial outcomes has not been rigorously tested using data that span all components of the model. Panel data from the branches of a large regional company are used to test individually each of the service profit chain’s constituent hypotheses. The results generally support the model, but there are some exceptions. Further work is needed to refine and simplify several critical measures and to enhance the analysis to test the service profit chain as a complete system of related hypotheses.

Weinberg (2000), “…an employee survey covering topics such as compensation, benefits, safety, work rules, manager behavior, and teamwork” can have a dramatic effect in minimizing employee turnover. These types of surveys provide employees an outlet for concerns and serve as a means for employers to identify areas in need of change before they become a problem of greater proportions. He notes that exit interviews given to employees upon resignation can also give companies insight into the concerns of workers.

Even a simple acknowledgement of an employee’s good work can be quite a motivator. In a survey conducted by Office Team, 60% of executives polled believed that companies do a somewhat effective job of acknowledging top performers, while 33% believe that staff recognition efforts are inadequate (Clarke, 2001). Clarke highlights that “…a pat on the back or a word of praise after they have worked hard to deliver for the company goes a long way toward building individual and group morale” (p. 1). Paris (2002) agrees, stating that “…incentives provide the ‘golden handcuffs’ that keep employees from getting away”

As organizations continue to face mounting competitive pressures, they seek to do more with less and do it with better quality. As goals for sales volume, profits, innovation, and quality are raised, employment growth is often tightly controlled and in many cases, substantial cuts in employment have been made. To accomplish more with fewer employees calls for effective management of human resources. Typically, the employee compensation system, the focus of this chapter, plays a major role in efforts to manage human resources better. Employee compensation plays such a key role because it is at the heart of the employment relationship, being of critical importance to both employees and employers.

Employees typically depend on wages, salaries, and so forth to provide a large share of their income and on benefits to provide income and health security. For employers, compensation decisions influence their cost of doing business and thus, their ability to sell at a competitive price in the product market. In addition, compensation decisions influence the employer’s ability to compete for employees in the labor market (attract and retain), as well as their attitudes and behaviors while with the employer. Employee compensation practices differ across employment units (e.g., organizations, business units, and facilities) on several dimensions. The focus of the employee compensation literature has been on defining these dimensions, understanding why organizations differ on them (determinants), and assessing whether such differences have consequences for employee attitudes and behaviors, and for organizational effectiveness. In the following discussion, we briefly describe the basic dimensions of compensation and summarize some of the key theories used to explain the consequences of different compensation decisions. A discussion of pay determinants can be found in Gerhart and Milkovich (1990, 1992).

According to Bernacki &Edward J. MD, MPH; Tsai, in 2006:

This work presents 10 years of experience using an Integrated Workers’ Compensation Claims Management System that allows safety professionals, adjusters, and selected medical and nursing providers to collaborate in a process of preventing accidents and expeditiously assessing, treating, and returning individuals to productive work. The hallmarks of the program involve patient advocacy and customer service, steerage of injured employees to a small network of physicians, close follow-up, and the continuous dialogue between parties regarding claims management. The integrated claims management system was instituted in fiscal year 1992 servicing a population of approximately 21,000 individuals. The system was periodically refined and by the 2002 fiscal year, 39,000 individuals were managed under this paradigm. The frequency of lost-time and medical claims rate decreased 73% (from 22 per 1000 employees to 6) and 61% (from 155 per 1000 employees to 61), respectively, between fiscal year 1992 and fiscal year 2002. The number of temporary/total days paid per 100 insureds decreased from 163 in fiscal year 1992 to 37 in fiscal year 2002, or 77%. Total workers’ compensation expenses including all medical, indemnity and administrative, decreased from $0.81 per $100 of payroll in fiscal year 1992 to $0.37 per $100 of payroll in fiscal year 2002, a 54% decrease. More specifically, medical costs per $100 of payroll decreased 44% (from $0.27 to $0.15), temporary/total, 61% (from $0.18 to $0.07), permanent/partial, 63% (from $0.19 to $0.07) and administrative costs, 48% ($0.16 to $0.09). These data suggests that workers’ compensation costs can be reduced over a multi-year period by using a small network of clinically skilled health care providers who address an individual workers’ psychological, as well as physical needs and where communication between all parties (eg, medical care providers, supervisors, and injured employees) is constantly maintained. Furthermore, these results can be obtained in an environment in which the employer pays the full cost of medical care and the claimant has free choice of medical provider at all times.

Lvan L.; Rhoades, Linda (2003) three studies investigated the relationships among employees’ perception of supervisor support (PSS), perceived organizational support (POS), and employee turnover. Study 1 found, with 314 employees drawn from a variety of organizations, that PSS was positively related to temporal change in POS, suggesting that PSS leads to POS. Study 2 established, with 300 retail sales employees, that the PSS-POS relationship increased with perceived supervisor status in the organization. Study 3 found, with 493 retail sales employees, evidence consistent with the view that POS completely mediated a negative relationship between PSS and employee turnover. These studies suggest that supervisors, to the extent that they are identified with the organization, contribute to POS and, ultimately, to job retention.

There is a wide variety of employee benefits, such as paid time-off, insurances (life insurance, medical/dental insurance, and work disability insurance), pension plan, company car, and more. A benefit plan is designed to address a specific need and is often provided not in the form of cash. Many countries dictate different minimum benefits, such as minimum paid time-off, employer’s pension contribution, sick pay, and more.Compensation is reward that employees receive in exchange for their performance. It is concerned with wages and salaries, pay raises, and similar monetary exchanges for employees’ performance (Holt, 1993). Compensation is a part of transaction between employees and employer that results in employment contract. From the employees point of view pay is necessity for life. The compensation received from work is one of the basic reason people seek employment. From the employers’ point of view, it is one of the most important human resource management functions and constitutes a significant portion of organization cash out flow. Compensation often equals 50% of cash out flow of organizations, for some service organization is even larger. It may be the major instrument used to attract employees as well as way to motivate employees towards more effective performance (Ivancevich and Glueck, 1989). Higher education system in the country is rapidly expanding both in the number of universities and student intake. The number of public universities has grown significantly in recent times. In 2007, the public higher education sector consists of 21 universities (8 old and 13 new ones).

The construction of additional 10 universities in different regional states is underway under the direct supervision of the Ethiopian Ministry of Education. There are also three specialized institutions under different Ethiopian government ministries/agencies and more than eight teacher-training colleges under the supervision of governments of the regional states (Kasirim, 2008). It is believed that there is significant movement of individuals from one university to another or out of higher education. Altogether movement is pervasive throughout Ethiopia. Staff turnover takes place at all levels, driven by the desire to improve earnings and to move from rural toward urban areas. Constant staff turnover wreaks havoc on an institution’s capacity to operate efficiently and to manage long-term planning and development. To overcome this problem attempt is being made to design compensation and benefit system that fit with general standards working environment, competitive remuneration, compensation and reward system integrated with good institutional governance and shared values and beliefs of their organization that can attract, retain and motivate the desired man power. Different Universities are trying to make their compensation and benefit package as attractive as possible.

Compensation decision is influenced by internal and external factors. Internal factors include internal equity, job evaluation, and individual reaction to pay. External factors are those factors outside organizations mainly the external labor market condition, market pricing, external competitiveness, union influence, and government. Compensation has an impact on various human resources out comes like performance, productivity, satisfaction, attendance, retention, and attraction of employees. Studies show that there is a direct relationship between compensation and these human resources out comes. Compensation comprises financial and non-financial components. Financial compensation can be either direct or indirect. Direct compensation includes wages, salaries, bonuses, and commissions. The indirect compensations are different forms of benefits an employee receive like insurance plans, retirement benefits, educational assistances, employee services, and paid
absences (Mondey and Noe, 1990)

Compensation need to be high enough to attract applicants to a position. Pay level must respond to the supply and demand of workers in the labor market since organizations compete for employees (Werther and Davis 1996). Attraction of employees is likely to be influenced to some extent by individual pay policies and practices. Job seekers who have choices between two or more job alternative might express an interest in just how their pay be expected to increase in time, if hired.

It is the most important factor for employees when choosing to leave a job; it is less of a factor for why they stay in a job. When broken down by gender, attractive compensation is the top reason for staying in a job for men, while women focus more on working relationships and desirable working hours. A gender breakdown does not alter the results for why employees leave a job. Furthermore, inadequate compensation remains the top reason employees leave a job.

An Over View Compensation

Employees are the backbone of an organization. The attainment of organizational objectives largely depends on the motivation of employees to work. Among other things employees are motivated to work when they are provided a fair financial and non-financial compensation for service rendered to the organization. “Compensation is the reward employees receive in exchange for their performance. It is concerned with wages and salaries, pay raises, and similar non-monetary exchange for employee’s performance” (Holt, 1993). Well designed compensation system enables organizations to attract qualified employees required and retain and motivate the existing work force towards goal achievement. The most obvious reward employees get form work is pay (Decenzo and Robbins, 1999)

On the contrary, if compensation is not tied to work, employees are likely to look for better paying job. Moreover, where employees are dissatisfied with the type of compensation, their contribution towards goal attainment tends to be lower. In severe cases, pay dissatisfactionmay lower performance, causes strike, increase grievance, and leads to formsofphysical or psychological withdrawal ranging from absenteeism and turnover to increased visit to dispensary and poor mental health (Werther and Davis, 1996).

The objectives of compensation system is to create a system of reward that is equitable to employers and employees alike, so that employees are attracted to work and motivated to do good job for the employer. Through effective compensation Werther and Davis (1996) has identified the following seven objectives: Acquire qualified personnel, retain current employees, ensure pay equity, reward desired behavior, control cost, comply with legal considerations, and facilitate understanding.

Types of Compensation

In general, there are two types of compensation:

Financial compensation

Financial compensation includes direct compensations, which is paid to employees in the form of wages, salaries, bonuses, and commission in exchange for their performance and indirect 11compensation in the form of insurance plans( life, health, social assistance), Retirement benefits, educational assistance, employee services, and paid absence for vacation, holydays, sick leave, etc.(Mondey and Noe, 1990)

Non- Financial compensation
Non- Financial compensation includes any satisfaction which employees receive from the job, such as the need for recognition, responsibility, personal growth and the like or from environment in which they work including comfortable working condition, competent supervision, pleasant work companion and other related physical and social needs of
Employees(Mondey and Noe, 1990).

CHAPTER – 3

RESEARCH METHODOLOGY

Research was more of Explorative research and is the moral fiber of the project. In order to bring about the objectives of the Project, it is important to eloquent the approach in which it is to be conducted, i.e. the research practice was to be carried out in a certain framework. Purposes of the research are to rummage around for acquaintance. Also research defines a systematic and organized search for applicable information on a particular topic.

METHODOLOGY ADOPTED:- This research is aimed at studying of best HR Practices and compensation structures of IBM India.
RESEARCH DESIGN: – The research design used in this study was both ‘Descriptive’ and ‘exploratory’.
DATA COLLECTION METHODS:

The data was collected using both by primary data collection methods as well as secondary sources.
PRIMARY DATA: Most of the information was gathered through primary sources. The methods that were used to collect primary data are:

a) Questionnaire
b) Interview

SECONDARY DATA

The secondary data was collected through:
• Text Books
• Magazines
• Journals
• Websites

SAMPLING TECHNIQUE:-
The technique used for conducting the study was convenience sampling technique as sample of respondents was chosen according to convenience.

SAMPLING UNIT: This was presented to concern people at IBM India 50 admin employees from the organization were contacted for the purpose of getting the required information. The information gathered analyzed and presented in this report.

STASTICAL TOOLS:

The tools used in this study were MS-EXCEL, MS-WORD. MS-EXCEL was used to prepare pie- charts and graphs. MS-WORD was used to prepare or write the whole project report.

METHOD USE TO PRESENT DATA:

Data Analysis & Interpretation – Classification & tabulation transforms the raw data collected through questionnaire in to useful information by organizing and compiling the bits of data contained in each questionnaire i.e., observation and responses are converted in to understandable and orderly statistics are used to organize and analyze the data:

• Simple tabulation of data using tally marks.
• Calculating the percentage of the responses.
• Formula used = (no. of responses / total responses) * 100

Graphical analysis by means of pie charts bar graphs etc.

NUMBER OF RESPONDENTS
50

AREA OF STUDY
GURGAON

LIKERT SCALES:

Likert scales are the four, five, six, seven, eight or nine point scales much used in various fields of research.
Often the scale is used as a semantic differential. A statement is given, and the endpoints correspond to agree strongly and disagree strongly. Use of the scales is practical and interesting. Scales with an even number of points do not have a midpoint and in that sense force a choice.
The Likert Scale is an ordered, one-dimensional scale from which respondents choose one option that best aligns with their view. There are typically between four and seven options. All options usually have labels, although sometimes only a few are offered and the others are implied. A common form is an assertion, with which the person may agree or disagree to varying degrees. In scoring, numbers are usually assigned to each option five-point Likert scales are perhaps most commonly used. With a five-point scale the points can be labeled, agree strongly, agree somewhat, neutral, disagree somewhat, disagree strongly. It is interesting to consider different patterns of probabilities across a population of potential respondents.

RESEARCH METHODS:

• Educational Research: Educational Research: Quantitative, Qualitative and Mixed Approach. Have lectures, concept maps and more. Linked to a textbook by Burke Johnson and Larry Christiensen
• Research Design Explained: Lectures, PowerPoint presentations and additional material. The goal of the text was to provide a user-friendly book that could engage students while offering practical advice about how to read, conduct, and write up research. The book explains fundamental concepts clearly and illustrates with many real-life analogies.
• Research Methods Resources on the WWW: One of the most comprehensive sites that we have ever run across. Links to a wide coverage of research topics. Includes links to free online books, electronic journals, research methods, ethics and software.
• The Qualitative Report: A journal devoted to Qualitative Research from Nova Southeastern University, Florida. It also has links to other Qualitative Research sites.
• Qualitative Research: Originally designed as a private repository of information for graduate students learning about qualitative data analysis software this site has developed through the contribution of other people from many qualitative persuasions.

CHAPTER – 5

DATA FINDINGS AND ANALYSIS

Keeping in mind the objectives of the study, the surveys were being done & following interpretation were being drawn:

Evaluation:-

Keeping this point in view and to fulfill the evaluation variants of which may form the basis for objectives of the studies an attempt has been made to segment the various respondents on the basis of some aspects collected from them through questionnaire. There are depicted through tables and graphs.

The copy of questionnaire administered is enclosed and the sample size was 50 respondents are enclosed at the end of this project. All the calculations and numerical interpretations are for 100%

Q1. Age Profile

TABLE-1.1

Age No. of respondent Percentage
20 – 30 25 50%
31 – 40 12 24%
41 – 50 8 16%
51 And Above 5 10%

.

ANALYSIS AND INTERPRETATION:

50% of the respondents fall in the age group of 20 – 30, 24% of the respondents fall in the age group of 31 – 40, 16% of the respondents fall in the age group of 41 – 50and 10% of the respondents fall in the age group of 51 And Above.
1.2 Gender profile:

TABLE-1.2

Gender No. of respondent Percentage
Male 13 26%
Female 37 74%

.

ANALYSIS AND INTERPRETATION:

74% of the respondents were male and26% of the respondents were female.

Q2. Years of Service in Present Organization:

TABLE – 2

Criteria Frequency Percentage
Less than 1 years 8 16%
1-3 years 6 12%
3-5 years 12 24%
5 years 8 16%
Above 5 years 16 32%

ANALYSIS AND INTERPRETATION:

32% sample of respondent has been working above 5 years for Years of Service in Present Organization, 24% respondents are working 3-5 years, 16% working for 5 years or less than 1 years and 12% respondent has been working 1-3 years.
Q3. Do you agree that in HR Practice increased in scope and responsibilities in the last three years?

TABLE – 3

Options No. of respondent Percentage
Strongly Agree 10 20%
Agree 24 48%
Neutral 12 24%
Disagree 3 6%
Strongly Disagree 1 2%

ANALYSIS AND INTERPRETATION:

As per shown in the above pie graph the 48% of respondent agree that in HR Practice increased in scope and responsibilities in the last three years, 24% of respondent neutral, 20% of respondent strongly agree with above statement.
Q4. Do you agree that HR Practice and Strategies is very beneficial for any orgnisation progress?

TABLE – 4

Options No. of respondent Percentage
Strongly Agree 16 32%
Agree 24 48%
Neutral 8 16%
Disagree 2 4%
Strongly Disagree 0 0%

ANALYSIS AND INTERPRETATION:

As per shown in the above pie graph the 48% of the respondent agree that HR Practice and Strategies is very beneficial for any orgnisation progress, 16% of respondent neutral, 32% of respondent strongly agree with above statement.
Q5. Do you feel that the HR Practice and Strategies has reduced the time and effort in preparing the job description and job specification?

TABLE – 5

Criteria Frequency Percentage
Strongly Agree 12 24%
Agree 21 42%
Neither Agree nor Disagree 15 30%
Disagree 2 4%
Strongly Disagree 0 0%

ANALYSIS AND INTERPRETATION:

It is evident from the above pie graph that 42% of respondent Agree, 30% of respondent Neither Agree nor Disagree, 24% of respondent Strongly Agree and only 4% of respondent are disagree.
Q6. The pre-selection stage, interviewing and other assessment activities done via HRIS process are effective.

TABLE – 6

Criteria Frequency Percentage
Strongly Agree 13 26%
Agree 19 38%
Neither Agree nor Disagree 15 30%
Disagree 3 6%
Strongly Disagree 0 0%

ANALYSIS AND INTERPRETATION:

It is evident from the above pie graph that 38% of respondent Agree, 30% of respondent Neither Agree nor Disagree, 26% of respondent Strongly Agree and only 6% of respondent are disagree.
Q7. What are the main tools of handling the main Human resource challenges?
TABLE – 7

Criteria Frequency Percentage
Training 23 46%
Consultancy 12 24%
Tools 11 22%
Any other 4 8%

ANALYSIS AND INTERPRETATION:

It is evident from the above pie graph that 46% of respondent said Training main tools of handling the main Human resource challenges.

Q8. Which of the following factors are most important for an effective HR department?

TABLE – 8

Criteria Frequency Percentage
Planned Management 14 28%
Management of Talent and Competency 19 38%
Re constructing the Human Resources 12 24%
Mention the other relevant ones. 5 10%

ANALYSIS AND INTERPRETATION:

It is evident from the above pie graph that 38% of respondent said Management of Talent and Competency, 28% of respondent said Planned Management system, 24% of respondent said Re constructing the Human Resources and other said mention the other relevant ones.
Q9. Do you think that the best HR practices help to control attrition rate in your organization?

TABLE – 9

No of respondents Most of Time Often Sometimes Rarely Almost Never
50 16 10 18 6 0
Percentage 32% 20% 36% 12% 0%

ANALYSIS AND INTERPRETATION:

As per shown in the above pie graph, 32% of respondent think that the best HR practices help to control attrition rate in the organization, 12% of respondent said rarely, 20% of respondent said often, 36% of respondent sometimes, and other 0% of respondent almost never.

Q10.The pay structure has been clearly defined in the HR department.

TABLE – 10

OPTIONS NO. OF RESPONDNET PERCENTAGE (%)
Agree 43 86%
Don’t agree 7 14%

ANALYSIS AND INTERPRETATION:

As per shown in the above graph, 86% of respondent agree that pay structure has been clearly defined in the HR department and 14% of the respondent said no category.

Q11. HR Practice and Strategies applies long term HR policies to improve Organizational performances.

TABLE- 11

Criteria Frequency Percentage
Strongly Agree 24 48%
Agree 13 26%
Neutral 11 22%
Disagree 2 4%
Strongly disagree 0 0%

ANALYSIS AND INTERPRETATION:

As per shown in the above pie graph, 48% of the respondent strongly agree that HR Practice and Strategies applies long term HR policies to improve Organizational performances, 26% of the respondents agree, 22% neutral, and 4% of the respondents disagree.

Q12. Do you feel that best HR practices and policies help to create effective compensation structure in the organization?

TABLE- 12

No of respondents Most of Time Often Sometimes Rarely Almost Never
50 28 14 5 3 0
Percentage 56% 28% 10% 6% 0%

.

ANALYSIS AND INTERPRETATION:

As per shown in the above pie graph, 56% of the respondent most of time feel that best HR practices and policies help to create effective compensation structure in the organization, 6% of respondent said rarely, 28% of respondent said often, 10% of respondent sometimes, and other 0% of respondent almost never .
Q13. Rate HR practices and compensation structure of IBM India.

TABLE – 13

No of respondents Good Fair Poor
50 23 16 6
Percentage 46% 32% 12%

ANALYSIS AND INTERPRETATION:

From the graph given above, it is clear 46% of respondent said good HR practices and compensation structure of IBM India, 32% of respondent said fair, and 12% of respondent said poor.

Q14. Do you agree that the company follow best HR policies and to recommend suitable suggestion to the HR Department.
TABLE – 14

Options No. of respondent Percentage
Highly agree 12 26%
Agree 22 44%
Neutral 12 24%
Disagree 2 4%
Highly disagree 1 2%

ANALYSIS AND INTERPRETATION:

As per shown in the above pie graph 44% of respondent agree that the company follow best HR policies and to recommend suitable suggestion to the HR Department.

Q15. Always renew compensation structures being offered by IBM India. Do you agree this statement?
TABLE – 15

Options No. of respondent Percentage
Highly agree 12 24%
Agree 28 56%
Neutral 9 18%
Disagree 1 2%
Highly disagree 0 0%

ANALYSIS AND INTERPRETATION:

As per shown in the above pie graph 56% of respondent agree that always renew compensation structures being offered by IBM India, and 24% of the respondent highly.
Q16. Do you agree that benefits of best HR Practices and compensation structure for company employees?

TABLE – 16

Options No. of respondent Percentage
Highly agree 12 24%
Agree 14 28%
Neutral 20 40%
Disagree 4 8%
Highly disagree 0 0%

ANALYSIS AND INTERPRETATION:

As per shown in the above pie graph 40% of respondent neutral that benefits of best HR Practices and compensation structure for company employees 28% of respondent said Agree that benefits of best HR Practices and compensation structure for company employees, 24% of respondent said highly agree, and 8% of respondent said disagree.
Q17. Do you think that best HR practices and policies help to reduce attrition rate.
[
TABLE – 17

No of respondents Most of Time Often Sometimes Rarely Almost Never
50 17 13 11 5 4
Percentage 34% 26% 22% 10% 8%

ANALYSIS AND INTERPRETATION:

As per shown in the above pie graph, 22% of respondent think sometimes, 10% of respondent rarely, 34% of respondent Most of best HR practices and policies help to reduce attrition rate, 26% of respondent often, and other 8% of respondent almost never.
CHAPTER – 6

FINDINGS AND SUGGESTION

Findings:

1. 74% of the respondents were male and 26% of the respondents were female
2. As per the outcome of the study 32% sample of respondent has been working above 5 years for Years of Service in Present Organization, 24% respondents are working 3-5 years, 16% working for 5 years or less than 1 years and 12% respondent has been working 1-3 years.
3. From the outcome of the study it is evident that 48% of respondent agree that in HR Practice increased in scope and responsibilities in the last three years, 24% of respondent neutral, 20% of respondent strongly agree with above statement.
4. As per the outcome 8448% of the respondent agree that HR Practice and Strategies is very beneficial for any orgnisation progress, 16% of respondent neutral, 32% of respondent strongly agree with above statement .
5. 42% of respondent feel agree that the HR Practice and Strategies has reduced the time and effort in preparing the job description and job specification.
6. As per the outcome of the study 38% of respondent agree pre-selection stage, interviewing and other assessment activities done via HRIS process are effective 46% of respondent said Training main tools of handling the main Human resource challenges.
7. 46% of respondent said Training main tools of handling the main Human resource challenges.
8. 32% of respondent think that the best HR practices help to control attrition rate in the organization.
9. 86% of respondent said pay structure has been clearly defined in the HR department and 14% of respondent are no category
10. Most of the respondent strongly agree that HR Practice and Strategies applies long term HR policies to improve Organizational performances
11. Most of respondent feel that best HR practices and policies help to create effective compensation structure in the organization.
12. 28% of respondent said Agree that benefits of best HR Practices and compensation structure for company employees.
13. 34% of respondent Most of best HR practices and policies help to reduce attrition rate,

Suggestions:

Creating a Winning climate begins with our own behaviors, attitudes and actions. There are lots of things which you can do to make the difference between a great and a dismal culture. By Creating a Winning Culture/climate, it gives your business an extra dimension – like its one big being, rather than loads of individuals working together.

CREATING A WINNING CLIMATE:

 Behaving equitably like treating others in a way they would wish to be treated themselves and encourage that in their business for all.
 Be honest and trustworthy through a deep understanding of what is truly important, one must realize that they must be open, honest and keep promises.
 Care about people and be supportive, employees understand that they are dealing with real human beings who have feelings, passions, emotions and sensitivities. And they make sure they treat them with respect.
 Coaching and feedback generate a wonderful learning organisation which fosters growth and challenge, also recognizes that some employees just want to do well and enjoy the roles they have, doing a great job.
 Acknowledge good performance and recognize it in ways that will give value to the individual. They celebrate a job well done and reward appropriately.
 Communicating well is very important because, ultimate listeners, those who enable the best cultures/climate are truly interested in what others have to say. What is important to their people is appreciated. Information is openly shared and their people can contribute fully and comfortably.
 Delegating well is the best business cultures/climates; people do what they are best at. Those Creating a Winning Culture/climate let go of the things they don’t need to do and use delegation as a development tool. Bringing new skills and successes to others and enabling them to focus on growth and future.
 Building relationships making the best of their interactions of others is a talent. Great business cultures are personified by the nature of the way people interrelate, making for a synergistic explosion of shared ideas and integration.
 Appreciate Differences – Everyone is part of a great team and business. There are many individuals who contribute their particular and unique skills and abilities into the pot of success. The exponents who are great at Creating a Winning Culture appreciate this variety.
 Have Fun -They are all at once, completely trusting each other and without ‘side’. That frees them to have fun a lot – and you can see it and feel it wherever you are in the business.

TO BE BETTER AT CREATING A WINNING CLIMATE

 Great Environment – Have the place you work comfortable, with all resources in place. You have to get this right first, before expecting a great culture.
 Be Very Clear – Through having a set of standards you state clearly and a process for identifying to people exactly what is expected of them, there will be no surprises. People will have their goals and targets. It will be easy for them to understand and deliver.
 Encourage Sharing – Through your own modeling, you can help all of your people to work closely together in a generous and supportive way. Be the ‘shining beacon’ in this.
 Be a Champion – Shout your loudest for how proud you are of your people as individuals and as a team. By flying their flag you will gel positive team spirit with individual performance.
 Listen and Talk – Make contact with your people regularly, both formally and informally. Just listen to what they have to say, value their contribution (really, and show it!) and tell them the stuff they need to know.
 Be a Part – Get yourself into the team. Show you are interested in the work they do – and even work with them too. Take the time and trouble to understand their work, their issues and their experiences.
 Watch for Opportunity – Times will come when more can happen to bond your people together. They may not be obvious – so get alerted to these chances offered. Fine tune your awareness and go for it.
 Appreciate Effort – Say ‘thank you’ and let people know they have done well – especially when they’ve gone an extra mile for you. Not only will they do it again, but you will also build your personal relationship with them and the culture.
 Encourage – Where you have the opportunity, take the time to encourage the next phase of their growth.

CHAPTER – 7

CONCLUSION & LIMITATIONS OF THE STUDY

The analysis of the company shows that company tries to maintain good relation among members and their work involves in socially relevant issues. Achievement of result is of main importance here people are selected for their competence and also given freedom to do their work whereas in comapny the Managers/ Supervisors control the particular department/unit and they employee their own in-group members who tends to be loyal to them. Thus, people’s work practices play an integral role in the sustenance and growth of this sector.

Also employee engagement has become a major organizational challenge today. An organization with engaged employees would have a strong customer focus, would yield better financial results and would be most effective in attracting & retaining talent. Thus, it has become vital for organizations to achieve higher employee engagement levels. Organizations implementing best HR practices have been found to have a considerably high employee engagement.

Unique HR practices, which fit best into IBM India structure suggested in some of the HR functions, are:

• Learning & Development: Self Development can be linked to performance plans. This grooms more employees for higher responsibility thus generating leaders who are committed to the organizational goals
• Recruitment, hiring & Induction: Internal job posting and Employee referrals generate healthy competition and motivates the employees leading to greater job satisfaction.
• Work Environment: A drop box facility can be introduced for redressal of grievances and generating an active feedback from the employees. This leads to high employee engagement.

These have been a few recommendations made for IBM India in order to develop a motivated and an engaged workforce. Compensation is an important benchmark that effects employee engagement. Best practices in compensation would lead to a salary structure, which is employee friendly, tax efficient and at the same time cost beneficial for the company. A few suggestions made and implemented in this respect have been:

• Special Allowance: The contribution of this highly taxable element towards the CTC need to be reduced.
• Hard Furnishings: This being beneficial both to the employee and the employer, can be introduced as an element in the compensation structure

LIMITATIONS OF THE STUDY:

No study is complete in itself, however good it may be and every study has some limitations. Some of the limitations which I had confronted are as follows:

1. The size of the research may not be substantial and it is limited to the particular area.
2. There may be lack of time on the part of respondents.
3. There may be some bias information provide by company professionals.
4. As only single cities are surveyed or covered. It does not represent the overall view of Indian Market.
5. It is very much possible that some of the respondents may have given the incorrect information.

REFERENCES

1. “A Handbook of Employee Reward Management and Practice” by Michael Armstrong
2. “Best Practices for managers: a guide on selection, hiring and compensation” by Stan Lomax
3. BNET articles and journals
4. Business World Magazine
5. Compensation by George T. Milkovich
6. Compensation & Benchmarking Study by Mercer Human Resource Consulting
7. Economic Times
8. Gallup-BusinessWorld Compensation & Benefits Report 2006
9. Grow Talent GPTW Study 2006 Report
10. Hewitt Best Employers in India 2007 Report
11. Hewitt Reports on Compensation
12. “The HR Professionals’ Best Practices Collection” by Aspatore Books Staff
13. “The Human Capital Edge” by Bruce N. Pfau and Ira T. Kay
14. Tyler, K. (2006). Retaining repatriates: pre-assignment planning, ongoing communication and mentoring help retain valuable repatriates. HR Magazine, March 2006: 97-102.
15. Sparrow, P., Schuler, R., & Jackson, S. (1994). Convergence or divergence: human resource practices and policies for competitive advantage worldwide. The International Journal of Human Resource Management, 5(2): 267-299.
16. Rosenzweig, P. & Nohria, N. (1994). Influences on human resource management practices in multinational corporations. Journal of International Business Studies, 25(2): 229-251.
17. 401 Proven Ways to Retain Your Best Employees by Gregory .P. Smith
18. Keeping Good People by Roger E. Herman
19. Ladika, S. (2005). Working together. HR Magazine, June 2005: 87-91.

APPENDIX
QUESTIONNAIRE

Dear Respondents,

I am BHAWANA PANWAR, a student of PGDHRM, as a part of my curriculum; I am to take a research Project on “STUDY ON BEST HR PRACTICES AND COMPENSATION STRUCTURES OF IMB INDIA” To enable to undertake above mentioned study, I request you to give your fair views. Your insights and perspective are important and valuable for my research.

Policy on Confidentiality: Please feel free to give your honest responses. The confidentiality of the information provided by the respondent is completely assured.

PERSONAL DATA

Name of the Respondent:

Q1. Age:

a) 20 – 30
b) 31 – 40
c) 41 – 50
d) 51 And Above

Gender:

a) Male
b) Female

Department:

a) Administration
b) Finance
c) HRD
d) Customer Support

Q2. Years of Service in Present Organization:

a) Less Than One Year
b) One To Three Years
c) Four To Five Years
d) More Than Five Years

Q3. Do you agree that in HR Practice increased in scope and responsibilities in the last three years?

a. Strongly Agree
b. Agree
c. Neutral
d. Disagree
e. Strongly Disagree

Q4. Do you think that HR Practice and Strategies is very beneficial for any orgnisation progress?

a. Strongly Agree
b. Agree
c. Neutral
d. Disagree
e. Strongly Disagree

Q5. Do you feel that the HR Practice and Strategies has reduced the time and effort in preparing the job description and job specification?

a. Strongly Agree
b. Agree
c. Neither Agree nor Disagree
d. Disagree
e. Strongly Disagree
Q6. The pre-selection stage, interviewing and other assessment activities done via HRIS process are effective.

a. Strongly Agree
b. Agree
c. Neither Agree nor Disagree
d. Disagree
e. Strongly Disagree
Q7. What are the main tools of handling the main Human resource challenges?
a. Training
b. Consultancy
c. Tools
d. Any other

Q8. Which of the following factors are most important for an effective HR practices?

a. Planned Management
b. Management of Talent and Competency
c. Re constructing the Human Resources
d. Mention the other relevant ones.

Q9. Do you think that the best HR practices help to control attrition rate in your organization?

Most of the time
a. Often
b. Sometimes
c. Rarely
d. Almost never

Q10.The pay structure has been clearly defined in the HR department.

a. Agree b. Don’t agree

Q11. HR Practice and Strategies applies long term HR policies to improve Organizational performances.

a. Strongly Agree
b. Agree
c. Neutral
d. Disagree
e. Strongly Disagree

Q12. Do you feel that best HR practices and policies help to create effective compensation structure in the organization?

a. Most of the time
b. Often
c. Sometimes
d. Rarely
e. Almost never

Q13. Rate HR practices and compensation structure of IBM India.

a. Good,
b. Fair,
c. Poor

Q14. Do you agree that the company follow best HR policies and to recommend suitable suggestion to the HR Department.
a. Highly Agree
b. Agree
c. Neutral
d. Highly disagree
e. Disagree

Q15. Always renew compensation structures being offered by IBM India. Do you agree this statement?
a. Strongly Agree
b. Agree
c. Neutral
d. Disagree
e. Strongly Disagree

Q16. Do you agree that benefits of best HR Practices and compensation structure for company employees?

a. Highly Agree
b. Agree
c. Neutral
d. Highly disagree
e. Disagree

Q17. Do you think that best HR practices and policies help to reduce attrition rate.

a. Most of the time
b. Often
c. Sometimes
d. Rarely
e. Almost never

*****

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