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Career Planning &
Compensation Management


  Divya Sharma
Career Development -
Overview
 Career development is a
  continuous process where both
  employees as well as employers
  have to put efforts in order to
  create conducive environment so
  that they can achieve their
  objectives at the same time.
Importance of Career Development
 Employees continuously need to upgrade
  their skills and competencies to meet the
  current demands where as organizations
  must be ready with those employees who
  can handle the pressure efficiently and
  cease the risk of falling prey to the changed
  scenario. Therefore, understanding the
  importance of career development is very
  necessary for both the parties.
Business Environment Factors
that can Bring Undesired
Changes

 Economic Downsizing
 De-layering
 Cost Reduction Strategies of the
  Organization
 IT Innovations
Designing Career Development
Systems
 Designing career development
  systems according to specific needs
  and requirements of an organization
  can help HR specialists in bringing
  efficiency to the entire process of
  career management.
Career Development Plan
 A Career Development Plan is a
  written list of the short and long-term
  goals that employees have pertaining
  to their current and future jobs, and a
  planned sequence of formal and
  informal experiences to assist the
  employees in achieving their goals.
Purpose of a Career
Development Plan
 to assist employees in achieving their
  goals
 increases the likelihood of retaining
  employees
 helps employees set realistic
  expectations of career growth
 Helps employees becoming eligible
  for their next career milestone
Format of a Career
Development Plan
 As a manager or supervisor, encourage the use of an
  Individual Career Development Plan (ICDP) format for
  all of your employees.
 employees need to take responsibility for creating this
  form for themselves and provide the following
  information:
 Short-term career goals/objectives (1-5 years),
 Long-term career goals/objectives (+5 years)
 Development experiences in the short term:
   Summary statement
   Education and training
   Job assignments
   Developmental activities
Process for Supporting Your
Employee's Career
Development Plan
 Plans about development should
  focus on two dimensions: specific
  technical and functional expertise and
  overall demonstration, by the
  employee, of the organization's
  culture, philosophy and values.
Career planning & compensation management
1.   Meet individually with your employees to identify
     their long-term career interests.
2.   Identify resources
3.   Prepare the plan
4.   Review the proposed plan, revise it, adjust it and
     confirm alignment by providing your signature and
     obtaining the employee's signature.
5.   Assess employee progress against the plan, and
     revise the plan to adjust it, if necessary.
Useful tool for career development
practitioners
• Offer it to managers as a way to
  encourage the development of those
  they supervise.
• Help the manager in supporting
  employees for gaining new skills
• It also helps employees stay on track
  and move forward in their careers.
Components of a Career
Development System
 A career development system
   includes a variety of components for
   use in the organizations.
1. Self Assessment Tools
2. Career Planning Workshops
3. Individual Counseling
4. Organizational Assessment Program
5. Developmental Programs
Objectives of Career
Development Systems
 Fostering Better Communication in
  Organization
 Assisting with Career Decisions
 Better Use of Employee Skills
 Setting Realistic Goals
 Creating a Pool of Talented Employees
 Enhancing the Career Satisfaction
 Feedback
Career Planning

 A career develops over a lifetime and is made up of
   many work and life experiences.
 What is Career Planning?
 Career Planning is an ongoing process of learning
   what you are cut out for by:
1. exploring your values, interests, skills, abilities, etc.
2. exploring different occupations and industries,
3. exploring different learning options, making an
   informed decision when setting a career goal, and
   developing SMART plans to achieve each career goal.
Career planning & compensation management
Succession planning
 Succession planning is one of the most
  important career development tools used
  by organizations.
 Identify those with the potential to assume
  greater responsibility in the organization
 Provide critical development experiences to
  those that can move into key roles
 Engage the leadership in supporting the
  development of high-potential leaders
 Built a database that can be used to make
  better staffing decisions.
Benefits of Formal Succession
Planning
 systematic approach for preparing employees to
  handle the responsibilities at higher levels.
 It helps in knowing why a specific individual should be
  developed and trained.
 It reduces the randomness in organization’s processes
 is a proactive approach to fill a top position
 helps in further exploitation of computer systems,
  HRP software applications
 fosters pro-active management approaches to make
  organization a better place to work.
 It establishes a logical basis for making choices
 establishes a specific connection between the
  business objectives and HR strategic planning.
Wage and salary administration
 Wage and salary administration affect levels of
  employee commitment to the organisation.
 Administration of employee compensation is called
  wage and salary administration.
 “Wage and Salary Administration refers to the
  establishment and implementation of sound policies
  and practices of employee compensation.
 The wage and salary administration aims to
  establish and maintain an equitable wage and salary
  structure and an equitable labor cost structure.
Objectives of Wage and Salary
Administration :
 The wage and salary administration
  aims to establish and maintain an equitable
  wage and salary structure and an equitable
  labor cost structure.
 To establish a fair and equitable
  compensation offering similar pay for
  similar work.
 To attract competent and qualified
  personnel.
 To retain the present employees by keeping
  wage levels in tune with competitive units.
 To keep labor and administrative costs in line with the
  ability of the organization to pay.
 To improve motivation and morale of employees and
  to improve union management relations.
 To project a good image of the company and to
  comply with legal needs relating to wages and
  salaries.
 To establish job sequences and lines of promotion
  wherever applicable.
 To minimize the chances of favoritism while assigning
  the wage rates.
Principles


1. Should be sufficiently flexible
2. Job evaluation must be done
   scientifically
3. It must be always consistent with
   overall organizational plans and
   programs
Principles
4. It should be in conformity with the social
   and economic objectives of the country like
   attainment of equality in income
   distribution and controlling inflationary
   trend
5. It should be responsive to the changing
   local and national conditions
6. These plans should simplify and expedite
   other administrative process
Elements Wage and salary systems should have a
    relationship with the performance, satisfaction and
    attainment of goals of individual. Wage and salary
    system has following elements (Henderson):
1. Identifying the available salary opportunities, their
    costs, estimating the worth of its members, of their
    opportunities and communicating them to employees.
2. Relating salary to needs and goals
3. Developing quality, quantity and time standards
    related to work and goals
4. Determining the effort necessary to achieve standards
5. Measuring the actual performance
6. Comparing the performance with the salary
   received
7. Measuring the job satisfaction of the
   employees
8. Evaluating the unsatisfied wants and
   unrealized goals aspirations of the
   employees
9. Finding out the dissatisfaction arising from
   unfulfilled needs and unattained goals
10. Adjusting the salary levels to help
   employees reach unleashed goals and fulfill
   the unfulfilled needs and aspirations
 HR Challenges
 How can individuals and groups be
  recognized?
 What is a pay-for-performance plan and
  how is it used in the organization?
 How is an executive compensation package
  designed?
 What are the pros and cons of different
  compensation methods?
 Pay-for-Performance (Incentive) Systems
  Assume That…
   Individuals and teams differ in level
   and quality of contribution

   Firm’s overall performance depends on
    performance of individuals and groups in
    the firm

   Firm should reward employees based on
    their relative performance to attract, retain
    and motivate high performers
 Challenges to Incentive System
 “Do Only What You Get Paid For” Syndrome
 Adversely affects cooperation
 Lack of Control
 Difficulties in Measuring Performance

 “Psychological Contract” is created that is
  often resistant to change
 Employees question fairness and
  credibility

 Potential reduction of intrinsic drives

 Leads to job
 dissatisfaction
  and stress
Developing Incentive Systems
 Link pay and performance appropriately
 Use incentives as part of a larger plan
 Use financial and non-financial incentives
 Build Employee Trust
 Promote belief that performance matters
 Use multiple layers of rewards
 Increase employee involvement
Pay-for-Performance Programs
     Micro Level         Macro Level
Individual   Team    Business   Firm
                     Unit
Merit Pay    Bonuses Gain-      Profit
                     sharing    Sharing
Bonuses      Awards Bonuses     Stock
                                plans
Awards               Awards
Piece rate
Individual-Based Plans
Best When…

 contributions of individuals can
  be accurately isolated
 job demands autonomy
 cooperation is less critical to
  successful performance or when
  competition is to be encouraged
Team-Based Plans
 Best When…


 it is difficult to single out who did
  what
 firm’s culture / structure support
  teams
 task objective fosters
  entrepreneurship in self-managed
  work groups
Fringe Benefits
 Definition::
 Definition: Fringe benefits are those
  monetary and non monetary benefits
  given to the employee during and
  post-employment period which are
  connected with employment but not
  to the employees contribution to the
  organization.
You Could receive a benefit when
you
 Use a work car for private purposes.
 Are provided with a cheap loan.
 Are provided with free private health
  insurance.
 Are provided with cleaning services
  for your private residence.
Need & Importance of Fringe
Benefits:


   To retain the employees.
   To motivate performance.
   As a social security.
   Trade Union demand.
   Skill shortage.
   Employee Demand
Objective
   To recruit and retain the best employees.
   To protect employees against certain hazards e.g. life
    insurance, old age pension, etc.
   To improve motivation and morale of the employees
   To improve work environment
   To ensure health, safety and welfare of employees.
   To develop a sense of belongingness and loyalty
    among workers.
   To improve the public image of the organization.
Kinds of Fringe Benefits :

 The benefits and services to be included
  under the title ‘fringe benefits’ are
  numerous. A few of them are –
 Bonus for quality and attendance,
 contribution to group insurance plan,
 lay off and termination pay,
 travel expenses,
 suggestion awards,
 medical leave with pay,
 overtime, university and trade courses, etc.
Employee Stock Options Plans

 Employee Stock Option Plan (ESOP), is a plan through
  which a company awards Stock Options to the
  employees based on their performance. Under an
  ESOP, the employees have right to buy the shares of
  the company on a predetermined date at a
  predetermined price. The objective of ESOP is to
  motivate the employees to perform better and
  improve shareholders' value. Apart from giving
  financial gains to the employees, ESOP also creates a
  sense of belonging and ownership amongst the
  employees.
 Here’s an example of a typical employee stock option
  plan: an employee is granted the option to purchase
  1,000 shares of the company’s stock at the current
  market price of $5 per share (the "grant" price). The
  employee can exercise the option at $5 per share—
  typically the exercise price will be equal to the price
  when the options are granted. Plans allow employees
  to exercise their options after a certain number of
  years or when the company’s stock reaches a certain
  price. If the price of the stock increases to $20 per
  share, for example, the employee may exercise his or
  her option to buy 1,000 shares at $5 and then sell the
  stock at the current market price of $20.
 Companies sometimes revalue the
  price at which the options can be
  exercised. This may happen, for
  example, when a company’s stock
  price has fallen below the original
  exercise price. Companies revalue the
  exercise price as a way to retain their
  employees.
Different terms used in an ESOP
 Grant date - The date on which the
  company grants an option to its employee.
 Option price - The price at which such
  shares in a scheme are offered. It is also
  known as the ‘strike price’ or ‘grant price’.
 Exercise period - The employees would
  be given a time period, called exercise
  period, within which they are required to
  exercise the option. The date on which
  employees exercise this option is known as
  ‘exercise date’.
Different types of ESOPs
 Employee Stock Option Scheme (ESOS) -
  Under this scheme, the company grants an
  option to its employees to acquire shares at
  a future date at a pre-determined price.
  Eligible employees are free to acquire
  shares on vesting within the exercise
  period. Employees are free to dispose of
  the shares subject to lock-in-period if any.
  Generally exercise price is lower than the
  prevalent market price.
 Employee Stock Purchase Plan (ESPP) -
  This is generally used in listed companies,
  wherein the employees are given the right
  to acquire shares of the company
  immediately, not at a future date as in
  ESOP, at a price lower than the prevailing
  market price. Shares issued by listed
  companies under ESPP will be subject to
  lock-in-period, as a result, the employee
  cannot sell the shares and/or the employee
  has to continue with the employer for a
  certain number of years.
 Share Appreciation Rights (SAR)/
  Phantom Shares - Under this scheme,
  no shares are offered or allotted to
  the employee. The employee is given
  the appreciation in the value of
  shares between two specified dates
  as an incentive or performance
  bonus, that is linked to the
  performance of the company as a
  whole, as reflected in its share value.
Designing compensation and
incentive systems
 Value-based compensation design
Career planning & compensation management

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Career planning & compensation management

  • 1. Career Planning & Compensation Management Divya Sharma
  • 2. Career Development - Overview  Career development is a continuous process where both employees as well as employers have to put efforts in order to create conducive environment so that they can achieve their objectives at the same time.
  • 3. Importance of Career Development  Employees continuously need to upgrade their skills and competencies to meet the current demands where as organizations must be ready with those employees who can handle the pressure efficiently and cease the risk of falling prey to the changed scenario. Therefore, understanding the importance of career development is very necessary for both the parties.
  • 4. Business Environment Factors that can Bring Undesired Changes  Economic Downsizing  De-layering  Cost Reduction Strategies of the Organization  IT Innovations
  • 5. Designing Career Development Systems  Designing career development systems according to specific needs and requirements of an organization can help HR specialists in bringing efficiency to the entire process of career management.
  • 6. Career Development Plan  A Career Development Plan is a written list of the short and long-term goals that employees have pertaining to their current and future jobs, and a planned sequence of formal and informal experiences to assist the employees in achieving their goals.
  • 7. Purpose of a Career Development Plan  to assist employees in achieving their goals  increases the likelihood of retaining employees  helps employees set realistic expectations of career growth  Helps employees becoming eligible for their next career milestone
  • 8. Format of a Career Development Plan  As a manager or supervisor, encourage the use of an Individual Career Development Plan (ICDP) format for all of your employees.  employees need to take responsibility for creating this form for themselves and provide the following information:  Short-term career goals/objectives (1-5 years),  Long-term career goals/objectives (+5 years)  Development experiences in the short term:  Summary statement  Education and training  Job assignments  Developmental activities
  • 9. Process for Supporting Your Employee's Career Development Plan  Plans about development should focus on two dimensions: specific technical and functional expertise and overall demonstration, by the employee, of the organization's culture, philosophy and values.
  • 11. 1. Meet individually with your employees to identify their long-term career interests. 2. Identify resources 3. Prepare the plan 4. Review the proposed plan, revise it, adjust it and confirm alignment by providing your signature and obtaining the employee's signature. 5. Assess employee progress against the plan, and revise the plan to adjust it, if necessary.
  • 12. Useful tool for career development practitioners • Offer it to managers as a way to encourage the development of those they supervise. • Help the manager in supporting employees for gaining new skills • It also helps employees stay on track and move forward in their careers.
  • 13. Components of a Career Development System  A career development system includes a variety of components for use in the organizations. 1. Self Assessment Tools 2. Career Planning Workshops 3. Individual Counseling 4. Organizational Assessment Program 5. Developmental Programs
  • 14. Objectives of Career Development Systems  Fostering Better Communication in Organization  Assisting with Career Decisions  Better Use of Employee Skills  Setting Realistic Goals  Creating a Pool of Talented Employees  Enhancing the Career Satisfaction  Feedback
  • 15. Career Planning  A career develops over a lifetime and is made up of many work and life experiences.  What is Career Planning?  Career Planning is an ongoing process of learning what you are cut out for by: 1. exploring your values, interests, skills, abilities, etc. 2. exploring different occupations and industries, 3. exploring different learning options, making an informed decision when setting a career goal, and developing SMART plans to achieve each career goal.
  • 17. Succession planning  Succession planning is one of the most important career development tools used by organizations.  Identify those with the potential to assume greater responsibility in the organization  Provide critical development experiences to those that can move into key roles  Engage the leadership in supporting the development of high-potential leaders  Built a database that can be used to make better staffing decisions.
  • 18. Benefits of Formal Succession Planning  systematic approach for preparing employees to handle the responsibilities at higher levels.  It helps in knowing why a specific individual should be developed and trained.  It reduces the randomness in organization’s processes  is a proactive approach to fill a top position  helps in further exploitation of computer systems, HRP software applications  fosters pro-active management approaches to make organization a better place to work.  It establishes a logical basis for making choices  establishes a specific connection between the business objectives and HR strategic planning.
  • 19. Wage and salary administration  Wage and salary administration affect levels of employee commitment to the organisation.  Administration of employee compensation is called wage and salary administration.  “Wage and Salary Administration refers to the establishment and implementation of sound policies and practices of employee compensation.  The wage and salary administration aims to establish and maintain an equitable wage and salary structure and an equitable labor cost structure.
  • 20. Objectives of Wage and Salary Administration :  The wage and salary administration aims to establish and maintain an equitable wage and salary structure and an equitable labor cost structure.  To establish a fair and equitable compensation offering similar pay for similar work.  To attract competent and qualified personnel.  To retain the present employees by keeping wage levels in tune with competitive units.
  • 21.  To keep labor and administrative costs in line with the ability of the organization to pay.  To improve motivation and morale of employees and to improve union management relations.  To project a good image of the company and to comply with legal needs relating to wages and salaries.  To establish job sequences and lines of promotion wherever applicable.  To minimize the chances of favoritism while assigning the wage rates.
  • 22. Principles 1. Should be sufficiently flexible 2. Job evaluation must be done scientifically 3. It must be always consistent with overall organizational plans and programs
  • 23. Principles 4. It should be in conformity with the social and economic objectives of the country like attainment of equality in income distribution and controlling inflationary trend 5. It should be responsive to the changing local and national conditions 6. These plans should simplify and expedite other administrative process
  • 24. Elements Wage and salary systems should have a relationship with the performance, satisfaction and attainment of goals of individual. Wage and salary system has following elements (Henderson): 1. Identifying the available salary opportunities, their costs, estimating the worth of its members, of their opportunities and communicating them to employees. 2. Relating salary to needs and goals 3. Developing quality, quantity and time standards related to work and goals 4. Determining the effort necessary to achieve standards 5. Measuring the actual performance
  • 25. 6. Comparing the performance with the salary received 7. Measuring the job satisfaction of the employees 8. Evaluating the unsatisfied wants and unrealized goals aspirations of the employees 9. Finding out the dissatisfaction arising from unfulfilled needs and unattained goals 10. Adjusting the salary levels to help employees reach unleashed goals and fulfill the unfulfilled needs and aspirations
  • 26.  HR Challenges  How can individuals and groups be recognized?  What is a pay-for-performance plan and how is it used in the organization?  How is an executive compensation package designed?  What are the pros and cons of different compensation methods?
  • 27.  Pay-for-Performance (Incentive) Systems Assume That…  Individuals and teams differ in level and quality of contribution  Firm’s overall performance depends on performance of individuals and groups in the firm  Firm should reward employees based on their relative performance to attract, retain and motivate high performers
  • 28.  Challenges to Incentive System  “Do Only What You Get Paid For” Syndrome  Adversely affects cooperation  Lack of Control  Difficulties in Measuring Performance  “Psychological Contract” is created that is often resistant to change
  • 29.  Employees question fairness and credibility  Potential reduction of intrinsic drives  Leads to job dissatisfaction and stress
  • 30. Developing Incentive Systems  Link pay and performance appropriately  Use incentives as part of a larger plan  Use financial and non-financial incentives  Build Employee Trust  Promote belief that performance matters  Use multiple layers of rewards  Increase employee involvement
  • 31. Pay-for-Performance Programs Micro Level Macro Level Individual Team Business Firm Unit Merit Pay Bonuses Gain- Profit sharing Sharing Bonuses Awards Bonuses Stock plans Awards Awards Piece rate
  • 32. Individual-Based Plans Best When…  contributions of individuals can be accurately isolated  job demands autonomy  cooperation is less critical to successful performance or when competition is to be encouraged
  • 33. Team-Based Plans Best When…  it is difficult to single out who did what  firm’s culture / structure support teams  task objective fosters entrepreneurship in self-managed work groups
  • 34. Fringe Benefits  Definition::  Definition: Fringe benefits are those monetary and non monetary benefits given to the employee during and post-employment period which are connected with employment but not to the employees contribution to the organization.
  • 35. You Could receive a benefit when you  Use a work car for private purposes.  Are provided with a cheap loan.  Are provided with free private health insurance.  Are provided with cleaning services for your private residence.
  • 36. Need & Importance of Fringe Benefits:  To retain the employees.  To motivate performance.  As a social security.  Trade Union demand.  Skill shortage.  Employee Demand
  • 37. Objective  To recruit and retain the best employees.  To protect employees against certain hazards e.g. life insurance, old age pension, etc.  To improve motivation and morale of the employees  To improve work environment  To ensure health, safety and welfare of employees.  To develop a sense of belongingness and loyalty among workers.  To improve the public image of the organization.
  • 38. Kinds of Fringe Benefits :  The benefits and services to be included under the title ‘fringe benefits’ are numerous. A few of them are –  Bonus for quality and attendance,  contribution to group insurance plan,  lay off and termination pay,  travel expenses,  suggestion awards,  medical leave with pay,  overtime, university and trade courses, etc.
  • 39. Employee Stock Options Plans  Employee Stock Option Plan (ESOP), is a plan through which a company awards Stock Options to the employees based on their performance. Under an ESOP, the employees have right to buy the shares of the company on a predetermined date at a predetermined price. The objective of ESOP is to motivate the employees to perform better and improve shareholders' value. Apart from giving financial gains to the employees, ESOP also creates a sense of belonging and ownership amongst the employees.
  • 40.  Here’s an example of a typical employee stock option plan: an employee is granted the option to purchase 1,000 shares of the company’s stock at the current market price of $5 per share (the "grant" price). The employee can exercise the option at $5 per share— typically the exercise price will be equal to the price when the options are granted. Plans allow employees to exercise their options after a certain number of years or when the company’s stock reaches a certain price. If the price of the stock increases to $20 per share, for example, the employee may exercise his or her option to buy 1,000 shares at $5 and then sell the stock at the current market price of $20.
  • 41.  Companies sometimes revalue the price at which the options can be exercised. This may happen, for example, when a company’s stock price has fallen below the original exercise price. Companies revalue the exercise price as a way to retain their employees.
  • 42. Different terms used in an ESOP  Grant date - The date on which the company grants an option to its employee.  Option price - The price at which such shares in a scheme are offered. It is also known as the ‘strike price’ or ‘grant price’.  Exercise period - The employees would be given a time period, called exercise period, within which they are required to exercise the option. The date on which employees exercise this option is known as ‘exercise date’.
  • 43. Different types of ESOPs  Employee Stock Option Scheme (ESOS) - Under this scheme, the company grants an option to its employees to acquire shares at a future date at a pre-determined price. Eligible employees are free to acquire shares on vesting within the exercise period. Employees are free to dispose of the shares subject to lock-in-period if any. Generally exercise price is lower than the prevalent market price.
  • 44.  Employee Stock Purchase Plan (ESPP) - This is generally used in listed companies, wherein the employees are given the right to acquire shares of the company immediately, not at a future date as in ESOP, at a price lower than the prevailing market price. Shares issued by listed companies under ESPP will be subject to lock-in-period, as a result, the employee cannot sell the shares and/or the employee has to continue with the employer for a certain number of years.
  • 45.  Share Appreciation Rights (SAR)/ Phantom Shares - Under this scheme, no shares are offered or allotted to the employee. The employee is given the appreciation in the value of shares between two specified dates as an incentive or performance bonus, that is linked to the performance of the company as a whole, as reflected in its share value.
  • 46. Designing compensation and incentive systems  Value-based compensation design