The Problem with ESOP’s
February 12, 2025
After having read lots of stuff about participative management and its implementation, lots of questions arise in the mind of the reader. Is participative management really beneficial? What are the pros and cons? What are the challenges involved in implementation? What effect does it have upon ROI, after all change comes at a cost! These […]
The relationship among the employees plays an important role in deciding the fate of the organization. Employees must respect each other and come to each other’s help whenever required and look forward towards achieving the organization’s targets. If the employees do not enjoy a healthy relationship among themselves, problems are bound to arise and ultimately […]
Job evaluation as evident from the word itself aims at evaluating the job and not the person. It is a process of evaluating and determining the value of the job for an organisation. The evaluation is always in relative and not absolute terms. The idea is evaluate a certain job against other jobs in the […]
Why do Entrepreneurs Exit ? Entrepreneurs launch new ventures some of which go on to become successful and game changing businesses. When the ventures become hits in their own right, some entrepreneurs hand over the reins to others whereas some sell their ventures or their stakes to other investors and businesspersons. Think of Sabeer Bhatia […]
Forced bell curve systems are a statistician’s way of looking at the organization. Much like everything else that statisticians do, the forced bell curve is also a mere hypothesis. However, this hypothesis has been largely romanticized and adopted by many companies. In fact about a decade ago, forced bell curve was the norm and companies […]
It is one thing for organizations to institute reward processes and it is another thing for them to evaluate whether the reward processes are being effective.
In other words, organizations need to constantly evaluate whether their reward processes are serving the purpose for which they were instituted. For instance, despite high salary and perks, if the attrition rate is high, then organizations must check whether the reward systems in place are effective to guard against attrition. Next, there are many organizations that have good reward systems but are not doing well in the marketplace. Third, if quality talent is migrating to other companies, then the affected organizations must review and evaluate their reward processes. The easiest way to do this would be to obtain feedback from the employees about whether they are satisfied with the rewards and whether their contributions are being matched by the rewards.
These satisfaction surveys and assessments done in a confidential manner can be effective sources of evaluation of the reward processes. The key aspect here is that blind surveys must be carried out which means that the identity of the employees must not be revealed or know to anyone except for the HR personnel. The other aspect about evaluating the reward processes are the exit interviews conducted when employees quit the company. These exit interviews can have questions about whether the organization’s reward processes are adequate and whether the rewards are too low for the contributions of the employees.
The evaluation of the reward processes can be done from the organizational perspective as well which means that instead of only asking employees about the adequacy of the reward processes, organizations can conduct market rate surveys and engage consulting firms to evaluate their reward processes. For instance, an external evaluation of the reward processes in an organization is objective and unbiased and hence, can be used to improve or fine-tune the reward processes. Apart from this, matching reward systems with performance is usually the key to reward systems. An evaluation of this can be done by checking whether the high performers are being rewarded or whether quality talent is languishing because of lack of rewards for their performance.
In many organizations, politics plays an important role in the rewards process and hence, this is a crucial aspect that cannot be ignored. Without saying so much as that politics should be avoided, the intention here is that there must be a balancing act between the competing interests for rewards and the desirability of rewarding talent.
In other words, while the practice of playing favorites by managers cannot be ruled out completely, efforts must be made to ensure that a proper evaluation of rewards for the employees is done which precludes those who are victims from not leaving the company.
The bottom line of any organizational process is whether it is effective and efficient. Hence, as with other organizational processes, reward processes must be evaluated for their effectiveness periodically. Only then would organizations have an idea whether their reward processes are doing the job.
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