The Problem with ESOP’s
February 12, 2025
Career Options in Our Parents and Grandparents Generations In our grandparents and parents generations, it was the norm to choose careers that offer job security, preferably life-long employment, and those that provided pension and other benefits. Indeed, such was the lure of these aspects that many among those generations chose to work for the government […]
Most of the organizations do not feel much about managing their talent. Here is why they should – Typically, labor accounts for about 65 % of every business in any industry. The percentage is more for labor intensive businesses for example those in manufacturing. The performance difference between talented and lesser talented employees is huge. […]
While Jack Welsh may deserve his fair share of credit for implementing the 360 Degree Feedback mechanism for the first time in his pioneering initiative at GE, the history of this feedback mechanism dates back all the way to the first world war and to the American Army. While the Americans did not think the […]
Defining the performance objectives can be very useful as it defines the performance expectations. Objectives which are written down and are verifiable can be far more useful if they are SMART in nature which means Specific, Measurable, Achievable, Realistic and Time Bound. Many organizations set goals and objectives through a formal process known as Management […]
Is Something Wrong with the Millennials/Gen Zers, Slacking Out of The Workforce Anybody who is somebody would have heard of The Great Resignation, the trend of American and Canadian Millennials and Gen Zers quitting their jobs en masse for no apparent reason, other than to make a “statement”, driven by tech driven viral events. While […]
The previous articles have discussed how reward systems must be put in place that would ensure that the internal skills and attributes of the employees are aligned with the external reward systems. This article discusses how reward processes have to be developed in organizations.
To develop effective reward systems, the line managers and the HR managers must act in tandem. What this means is that the development of the reward systems must not be left to the HR department or the line managers alone. This is because the HR managers would be able to take a theoretical stance whereas the line managers would be able to apply theory to practice and design reward systems that match the conditions of alignment and orientation. In particular, in the services sector there is a need for the direct managers of the employees to be involved in the process of development of reward systems as they would have the clear idea of what the work entails which the HR function alone cannot visualize.
Broadly, speaking, organizational policies related to how employees are rewarded have a greater bearing on the development of the reward systems when compared with the inputs that the HR function and the Line Managers provide.
In other words, the overall edifice of the reward systems stands on the foundation built by the organizational policies and the specifics are left to the HR function and the Line Managers.
Of course, it goes without saying that whereas the basic components have to in tune with organizational policies, the variable pay and the components that are specific to individual bands of employees are at the discretion of the division or the group that the employees belong.
Further, the yearly bonus and the pay hikes are again dependent on the organizational policies, which are broadly related to industry standards and the growth of the company in the previous year.
The other aspect related to the development of reward systems is that they must be based on the prevailing market conditions and the demand and supply dynamics that the industry has with respect to demand for skills and availability of employees. Again, this is especially important in the services sector where competition for highly skilled employees is intense and hence the reward systems must reflect the market trends rather than what the organization thinks is a fair reward system.
Finally, the non-financial component of the reward systems is an aspect that is organization specific since each organization has its own way of incorporating reward and recognition systems that are non monetary in nature. For instance, it is common for multinational companies to have liberal non-financial reward systems in the form of special events and celebrations in resorts, annual day awards that bring glory to the employees etc. Indeed, this is something that the manufacturing sector pioneered where the trend was to have non-financial rewards that were grand when compared to the base salary and financial incentives.
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