Lecture 01

Introduction Human Resource Management The most important "products" in today's economy are services provided by people; there is, therefore, considerable interest in the field of human resources. Indeed, it has been called the "last frontier" of management. By gaining an understanding of appropriate principles and procedures, strategies can be developed to meet the human resource management challenge presented by reinvention initiatives. In this endeavor it is well to remember that managing human resources is both a science and an art; there are accepted approaches to the subject, but no single right way. Those looking for neat answers to complex questions are likely to be disappointed by any source they consult. This course will be an integrative learning experience by emphasizing two related goals: First, scholastic goals which include the acquisition of a set of human resource concepts and their application to contemporary issues; and Second, personal career goals which encompass the development of the human resources of this class as well as individual career plans. This is an exciting and dynamic topic area that encompasses such issues as workforce diversity, drug testing, video display terminals, secondary smoke, AIDS, lie detectors, sexual harassment, total quality management, comparable worth, whistle blowing as well as more traditional management concerns. Subjects such as these will be briefly addressed in this course and examined in greater detail in "Issues in Human Resource Management" next year. Our objective will be to examine a framework for understanding the management of human resources. The cognitive map which we will jointly pursue has several critical areas: (a) the managerial environment, (b) the acquisition, allocation, development, and sanction of human resources, and (c) change and the future. Accordingly, we will initially address the professional, historical, and work context within which human resources are managed. Next, in the single largest portion of the class, personnel management will be explored as the performance of systemic functions in organizations (acquisition, allocation, development, and sanction). Finally, change and the future of human resource management in government will be probed.

Do we all need rewards and incentives to be motivated for work? Ask teachers and parents what role rewards and incentives would play in the ideal teaching situation and most of them would admit that ideally they wouldn't need them at all: that their students would be so motivated to learn and so excited by the process that rewards would be entirely beside the point. The music itself would provide more than enough satisfaction. So most of us who use rewards do so with a hint of reluctance, regret or guilt. We wish they weren't necessary. And, in addition, some of us worry about the message we are sending with our rewards. Are we reducing the enjoyment of the music and the learning process by distracting our students with extrinsic rewards? Are the children going to become more interested in the reward than the musical task undertaken to earn it? Are we turning everything, even the wonderful gift of music-making, into a carefully measured economy where every effort and accomplishment is purchased with a sticker? There is good reason to be wary of the role rewards and incentives are used. Recently good studies, articles and books have been published which call into question even our most accepted uses of incentives. But by thoughtfully considering the way in which we use rewards, we can avoid many of the most common pitfalls. First, we should think about the why we are using our reward. The most obvious, though arguably the most risky reason, is to provide a supplementary motivating drive for a student to do a particular task. We could also use rewards to express respect for the child and our appreciation of exceptionally good work. We might use a reward to publicly recognize or draw attention to good work. It might be that we wish to draw the student's own attention to the magnitude of what he has accomplished, as though he has scaled a mountain and we are encouraging him to enjoy the view. And we might use a reward system to make tangible, or objectify, the process of learning. These all seem like perfectly reasonable reasons to consider rewarding a student. However, it is important to realize that the message we intend to send with our reward and the message which is actually received by the student might be very different. For instance, if we use a reward to supplement motivation, what we mean to say is "this task is so important that I am giving you something special to ensure that you do it". But it is very easy for the child to get the message that "this task is not worth doing on its own merit; some bonus must be included to make it worthwhile". And similarly, if we use a reward (say, a graduation award) to call public attention to an accomplishment, what we want to say is "this student has accomplished something wonderful". But what might be understood by the student and others is "students who have not completed this repertoire are not doing anything worthy of recognition".

If we use a sticker-chart to quantify progress as a beginning student polishes up her first "Twinkle Variation", we are hoping to show the student that although daily improvement might be too slight to see, as the stickers add up real learning is taking place and longterm progress will result. Instead, the student may get the idea that the repetition and the accumulation of rewards is the primary objective, rather than the learning that this is symbolizing. Probably the easiest way to avoid sending the wrong message is to be aware of the possibility. We need to be receptive to the student's possible misinterpretation of our goals in giving rewards. If we find ourselves bargaining with the student about the reward, or if we find that interest is primarily in the reward rather than the process which earns it, we need to change tactics quickly! And it certainly wouldn't hurt to be quite open and up-front with students about why we are using a reward. Even young students can benefit from the explanation that although they will receive a Book 1 graduation ribbon at the recital, what you are most proud of is not that they have finished Book 1, but that they struggled to overcome the difficulties they were having with tone, worked very hard at this, and can now play with a beautiful legato style. Or it might very well help a seven-year-old to hear that a proper bow-hold is SO important to you, and to his ultimate progress on the instrument, that you would be willing to pay him for it for a couple of weeks. This tells him why you are using the reward, prevents any misunderstandings, and encourages him to stay focused on the skill in question, rather than the gimmick used to achieve it. In the remainder of this newsletter we will look at some of the controversies involved in the use of rewards, the ways in which many of us are using rewards and incentives, and examples and comments concerning individual experiences. Read on!

Do companies really motivate their employees in the real sense for target achievements? If yes then how ? Beware of the Employee of the Month Programs Many Companies use employee-of-the-month awards. This award may include a photograph of the honoree with an engraved nameplate in the lobby of the business, perhaps a reserved parking place and/or a small cash bonus. Variation on employee-of-the-month programs are almost endless. At Acapulco Restaurants in Long Beach, CA, the honoree also gets a paid day off. At Gregson's Foods, a retail grocery chain in Cadlsden, AL, the employee receives a silver name tag inscribed with the title, month and year of the award to wear as long as he/she works for the company. As popular as these programs are, they may not be the best for motivating today's employees. What's Wrong with Them? It's difficult to motivate employees through a "program". Programs are often too distant and formal to get excited about. Motivation is very personal and stems primarily from the interaction between an employee and his or her manager. What is motivating to an individual also varies from person to person. The best motivation comes from daily positive reinforcement by management of desired performance with as many employees as possible - not something that occurs once a month for a single employee. When new, an Employee of the Month program can stimulate much excitement, hovever, over time much of the thrill is often lost. Oftentimes the selection criteria for the program aren't clear, and overheard are such things as "Let's give it to someone in Accountingthey never get it" or "Sally can't get it - she already received it earlier this year". In other instances the program reaches a saturation point where so many employees have received the award that it no longer seems special. A program's reputation can also be tarnished. In one company I consulted with, management was seeking to improve the employee-of-the-month award, which many felt was ineffective. By talking with employees, I quickly learned that some employees who received the award were not considered deserving by other employees, I also learned it was a great administrative burden for managers to nominate someone for the program and a humiliating experience for both the manager and employee if "corporate" subsequently rejected the application. Getting More from a Program

If you have to have an employee-of-the-month program, there are some things that can help it be more successful. They are as mentioned belowFirst, make sure other things are systematically being done to recognize employee performance in the workplace on a daily basis. Second, employee-of-the-month programs can be improved if nominations are open to everyone, not just management. This keeps the program from being biased to favor employees who have greater visibility with management. Third, a program can be further improved if it's not limited to being given one a month so as to seem like a quota - whenever that happens. Fourth, for best results, strive to keep the program fresh and flexible, and make changes in the program as it begins to feel stale to targeted employees. In summary, there are more effective ways to improve employee motivation, morale, and initiative than are typically obtained from employee-of-the-month programs. But if used in conjunction with other techniques - and with an awareness of the potential pitfalls employee-of-the-month programs still have a place in motivating today's employees.

LESSON 1 Role of Compensation and Rewards in the Organization Learning Objective •

Understand the meaning of Compensation and Rewards

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Types of Compensation and Rewards

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Basic purpose for establishment of a sound Compensation and Reward administration

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Importance and purpose of Compensation and Rewards

What is Compensation? In a layman’s language the word Compensation means something, such as money, given or received as payment or reparation, as for a service or loss. On the other hand, the word Reward means something given or received in recompense for worthy behavior or in retribution for evil acts. The word Compensation may be defined as money received in the performance of work, plus the many kinds of benefits and services that organizations provide their employees. On the other hand, the word Reward or Incentive means anything that attracts an employees’ attention and stimulates him to work. An incentive scheme is a plan or a programme to motivate individual or group performance. An incentive programme is most frequently built on monetary rewards (incentive pay or monetary bonus), but may also include a variety of non-monetary rewards or prizes. Types of Compensation : Compensation or rewards (incentives) can be classified into: (1) direct compensation and (2) indirect compensation. Money is included under direct compensation (popularly known as basic salary or wage, i.e. gross pay) where the individual is entitled to for his job, overtime-work and holiday premium, bonuses based on performance, profit sharing and opportunities to purchase stock options.

While benefits come under indirect compensation, and may consist of life, accident, and health insurance, the employer’s contribution to retirement (pensions), pay for vacation or illness, and employer’s required payments for employee welfare as social security. While French says, the term “ Incentive system” has a limited meaning that excludes many kinds of inducements offered to people to perform work, or to work up to or beyond acceptable standards. It does not include: (1) Wage and salary payments and merit pay; (2) Over-time payments, pay for holiday work or differential according to shift, i.e. all payments which could be considered incentives to perform work at undesirable times; and (3) Premium pay for performing danger tasks. It is related with wage payment plans which tie wages directly or indirectly to standards of productivity or to the profitability of the organization or to both criteria. Compensation represents by far the most important and contentious element in the employment relationship, and is of equal interest to the employer, employee and government. (1) To the employer because it represents a significant part of his costs, is increasingly important to his employee’s performance and to competitiveness, and affects his ability to recruit and retain a labor force of quality. (2) To the employee because it is fundamental to his standard of living and is a measure of the value of his services or performance. (3) To the government because it affects aspects of macro-economic stability such as employment, inflation, purchasing power and socio – economic development in general. While the basic wage or pay is the main component of compensation, fringe benefits and cash and non-cash benefits influence the level of wages or pay because the employer is concerned more about labor costs than wage rates per se. The tendency now is towards an increasing mix of pay element of executive compensation has substantially increased in recent years. Basic purpose for establishment of a sound Compensation and Reward administration The basic purpose of establishment of a sound compensation and reward administration is to establish and maintain an equitable compensation structure. Its secondary objective is the establishment and maintenance of an equitable labor-cost structure, an optimal balancing of conflicting personnel interests so that the satisfaction of employees and employers is maximized and conflicts minimized.

A sound wage and salary administration tries to achieve these objectives: (a) For employees: Employees are paid according to requirements of their jobs, i.e., highly skilled jobs are paid more compensation than low skilled jobs. This eliminates inequalities. (2) The chances of favoritism (which creep in when wage rates are assigned) are greatly minimized. (3) Job sequences and lines of promotion are established wherever they are applicable. (4) Employees' morale and motivation are increased because a wage programme can be explained and is based upon facts. (b) To employers: (1) They can systematically plan for and control their labor costs. (2) In dealing with a trade union, they can explain the basis of their wage programme because it is based upon a systematic analysis of job and wage facts. (3) A wage and salary administration reduces the likelihood of friction and grievances over wage inequities. (4) It enhances an employee's morale and motivation because adequate and fairly administered wages are basic to his wants and needs. (5) It attracts qualified employees by ensuring and adequate payment for all the jobs. According to Beach, wage and salary programmes have four major purposes: (1) To recruit persons for a firm; (ii) To control payroll costs; (iii) To satisfy people to reduce the incidence of quitting grievances, and fractions over pay and (iv) To motivate people to perform better. Tutorial Activity 1.1 Discuss the role and importance of Compensation and Rewards.

Tutorial Activity 1.2 What is the basic purpose behind the establishment of a sound Compensation and Reward administration system in the organizations? Tutorial Activity 1.3 Knowledge of the importance of compensation management makes you in becoming a hard core Human Resource manager. Throw light on the validity of this statement with the help of a corporate example. Tutorial Activity 1.4 Now let us study the role of the Supervisor in Compensation Supervisors must be actively involved in discussing the institution's compensation program with employees. The supervisor’s role in compensation encompasses the following: Ensure employees know their job title, salary range and responsibilities. Respond to employee questions to clarify and resolve issues quickly and efficiently. Conduct a formal performance review once a year. In addition, you should communicate your expectations when employees are promoted or transferred into a new job. Remain knowledgeable of your employees' salaries, skills and experience. Ensure the job descriptions are current and accurate. Develop desk or departmental job descriptions to more clearly define what is done in your particular area, unless the generic job description is a very close match. The education and experience requirements of the job description must match the generic job description. Review your staff’s salaries at least once every fiscal year in order to determine and make salary changes. Use the Job Changes/Salary Actions and Merit Program guidelines for assistance. Familiarize yourself with non-base salary benefits such as paid leave, insurance, retirement, recreational facilities, and flex schedules. Direct your questions to the Benefits Department. Reward employees with non-monetary rewards such as sincere praise, thanks for a job well-done, and lunches, pizza parties, cakes, etc., for achieving milestones.

When a job changes significantly or you need to develop a new job, a compensation analyst can assist you to determine if an existing job title/description is suitable. Tutorial Activity 1.5 Let us understand from the case below the role of Compensation and Rewards management with regard to HEALTH CARE PROVIDERS. The National Environmental Education & Training Foundation's (NEETF) Health & Environment Program provides environmental education and training for health professionals to improve health care and public health, with a special emphasis on protecting children and other populations disproportionately effected by environmental pollutants. Given current trends in the American health care system, we believe it is also critical to form partnerships with managed care organizations to incorporate environmental measures into mainstream health care delivery systems. To further protect children's health, in addition to working with health care providers, NEETF has initiated a healthy schools program to reduce environmental pollutants in schools. NEETF's Health & Environment Programs are designed to integrate environmental health into health care provider education and practice settings (e.g. medical and nursing schools, continuing education programs, private health care organizations) and improve environmental health conditions in the United States, with an emphasis on children's environment. “Health Care Providers: The Role of Compensation and Incentives”, in Disease Control Priorities in Developing Countries, second (DCP2) Charles Hongoro and Charles Normand Section 1.0: The Nature and Role of Health Care Providers in Disease Control This section will focus on the following issues: 1.1 A brief description of health care providers and their role in health systems Health care provider problems. These will be analysed at three levels: (1) Individual health worker level---issues related to morale/motivation, productivity, informal activities, internal capacity, remuneration, work environment, etc; (2) Organisational level (including independent individual providers)—issues related to funding methods, level of autonomy, referral hierarchy (role), accountability structures, etc; and (3) Health system level—issues related to the level of decentralisation, funding arrangements, regulations, system capacity, etc.

Health care system’s response to health care provider problems--- health sector reforms? Common solutions to disparate issues? Where are we getting it wrong? Section 2: Health care provider incentives What are Incentives? This will address definitional issues based on a thorough review of literature. The focus will be on developing a common view and understanding of the meaning of incentives at both theoretical and operational levels. Formal classification of incentives: to include health system, organisational and individual incentives. The distinction between monetary and non-monetary incentives will be made for each of these categories. The links between types of incentives and disease control priorities will be explored─ incentive and objective alignment. The need for aligning health system, organisational and individual incentives, and the problems associated with doing so will be highlighted. Contextual issues: The context is defined here from an individual and /or organisational viewpoint. This will include issues on working culture, norms and regulations, health systems organisation Incentives in practice: This section will draw on empirical evidence of what matters to health care providers in developing countries. The source of information will be published and unpublished material, and a technical paper focusing on a country (Bangladesh) or region. This will include a box highlighting a success story or failure in using incentives. Section 3: Health care provider compensations The section will include a description of health care provider compensations in developing countries focussing on individuals (public health workers), organisations (public, NGOs, and private) and independent individuals (e.g. General Practitioners, and traditional healers) 3.1 Current practices on health care provider compensations: types of payments for individuals and organisations or independent private practitioners─ fee-for service, capitation, case payments (e.g. DRGs, per diem, flat rate (bonus payment), salary, global budget. The interplay of mechanisms and incentives will be discussed. Problems associated with each method will be highlighted for example paying for group effort (will draw on concepts of co-operative behaviour, and the “prisoner’s dilemma”)

This section will highlight what seems to work and what does not ---and why using specific examples from both developing and developed countries where appropriate. The dimensions of analysis will include rationale, design, implementation, impact on incentives (incentive alignment issues) and ultimately health care provider behaviour. Two boxes highlighting a success story and a failure will be included in this section. Vertical versus integrated programmes. The key question to be addressed here is how the design of a diseases control programme influences health care provider incentives and behaviour particularly looking at effects of compensation methods, management regimes, work environment, accountability, input procurement (as a micro-system analysis of the system), etc. Examples of vertical and integrated programmes that introduced innovative compensation and incentive structures will be used to demonstrate possible effects of programme design and implementation on health care provider behaviour and draw implications for disease control. Performance related compensations: This section will be devoted to an analysis of health care compensation methods based on some form of contractual arrangement. Theoretical and practical arguments for and against use of such methods will be discussed. Compensation methods and sustainability issues. A discussion of health system’s capacity to sustain different types of compensation methods--- funding arrangements, relationship with other public sector workers, labor migration etc. Formal classification (based on theory and evidence) provider compensations, predicted and observed behaviour. Material from this section will draw from literature Example: Type of compensation E.g. bonus payments

Rationale

Design

Incentives

Increase productivity

Based on quantitative outputs

Increase volume of activity and not quality

Empirical evidence E.g. confirmatory evidence but risk of opportunistic

4.0 Is there an optimal combination of health care provider compensation and incentives for DCs? This section will focus on the following issues: Cross cutting issues: linking compensation to performance, managerial autonomy over health care providers, markets or hierarchies for what types of disease control activities, National issues: diversity of perceptions of incentives coloured by contextual issues such as norms, culture, customs, religion, regulations, politics and the economy.

The notion of different compensation and incentive packages for different contexts. Each package should include the core elements (see cross-cutting issues) for promoting desired performance behaviour. 5.0 What governments must do and not do: To adapt and not to imitate: To put health care provider compensation and incentives to the fore in designing disease control strategies and programmes, emphasis on strengthening health system incentives that promote appropriate health care provider behaviour. The health system should on one hand be able to support the attainment of positive outcomes of organisational and individual incentives, and on the other suppress negative or unintended outcomes. For example, promoting dual practice as an incentive to public health workers in a poorly monitored or regulated system might not help achieve public health goals. Implications of increased demand for health workers in the context of scaling up to MDGs Need for different approaches for different contexts, and the cost implications of suggested solutions to current provider compensation and payment problems. 6.0 The R & D Agenda Based on the literature review and analysis above, this section will devoted to highlighting areas where information is absent or incomplete. The foregoing will form the basis for suggesting a research agenda that will help further our understanding of the role of health care provider compensation and incentives in disease control in developing countries. Questions: (1) Discuss the case analysis with respect to compensation and Rewards management.