Strat Compen

STRATEGIC COMPENSATION STRATEGIC COMPENSATION  IN ACTION STRATEGIC ANALYSIS AND  CONTEXTUAL FACTORS

STRATEGIC COMPENSATION

STRATEGIC ANALYSIS •Important to gain competitive advantage through HRM. •Compensation to align to company’s strategies. •Important to develop and implement strategic compensation practices. •Hence strategic analysis important.

WORK OF COMPENSATION SPECIALIST Step 1 Gains knowledge - company’s plans, goals, strategy, expectations and project goals. Step 2 Collect data – Industry, organization, technology, competition etc. Step 3 Job Matching – Match jobs to compensation Step 4 Benchmarking – Benchmark jobs to market supply. Competitive advantage to be achieved. Step 5 Provide recommendations and cost modeling base organizations compensation philosophy with ability to attract, motivate and retain talent * Gartner Consultancy

Strategic Analysis •

Entails examination of company’s – External market

context – Internal factors

Strategic Analysis  External

• Community culture • Competition • Economics • Industry characteristics • Labor market • Legal/regulatory • Technology • Globalization

Strategic Analysis • • • • • • • • •

Internal

Corporate philosophy Corporate mission Business strategy Human resources philosophy and strategy Total rewards philosophy and strategy Corporate culture Shareholder expectations Corporate structure Costs/resource availability

CONDUCT  INTRODUCTION  PHASE 1 – EXTERNAL ANALYSIS.  PHASE 2 – INTERNAL ANALYSIS.  PHASE 3- FACTORS INFLUENCING COMPETITIVE STRATEGIES. • NATIONAL CULTURE • ORGANIZATIONAL CULTURE • ORGANIZATIONAL AND PRODUCT LIFE CYCLE.

EXTERNAL MARKET ELEMENTS • INDUSTRY PROFILE

• COMPETITION • FOREIGN DEMAND • INDUSTRY’S LONG-TERM PROSPECTS • LABOR MARKET ASSESSMENT • LEGAL/ REGULATORAY

AVIATION INDUSTRY

AVIATION INDUSTRY •DOMESTIC AND INTERNATIONAL TRAFFIC GROWING BY 24.2 PER CENT AND 18 PER CENT, RESPECTIVELY IN APRIL-DECEMBER, 2005. PRIVATE AIRLINES NOW ACCOUNT FOR 68.9 PER CENT OF DOMESTIC TRAFFIC. •MANY PLAYERS – NEW PLAYERS JOINING THE AVIATION BOOM. •TWO STRATEGIC GROUPS. –BUSINESS. JET, KINGFISHER –LOW COST. IndiGo, DECCAN, SPICE.

•HIGH DEMAND OF PILOTS – LIMITED SUPPLY. •EACH AIRCRAFT – 12 FULLY TRAINED PILOTS. •SUPPLY CANT MEET DEMAND. 20% FOREIGN PILOTS AT CAPTAIN LEVEL.

AVIATION INDUSTRY •NO CONSOLIDATION DUE TO HIGH GROWTH. •THOUGH LOSS MAKING FOR ALL BUT AIRLINES SEE FUTURE IN TRAVEL AND AVIATION SINCE PRICE WARS HAVE MADE FARES AFFORDABLE FOR AC 2 TIER TRAVELERS. •MANY DEMANDS FOR AIRCRAFT – BOEING AND AIRBUS PLACED. •DEMAND FOR PILOTS LIKELY TO REMAIN CONSTANT AT 20% FOR NEXT 5 YEARS. 2000 -3000 PILOTS REQUIRED IN NEXT 2-3

AVIATION INDUSTRY •SUPPLY. – NEW TRAINEES INDIAN CLUBS 20-25%. –NEW TRAINEES FOREIGN CLUBS 40-50%. –FROM DEFENCE FORCES 20-30%. –FROM PREVIOUS PROFESSIONALS 10-15%. –FOREIGN PILOTS 20-25%.

•COMPENSATIONS AGGRESSIVE FOR NEWER AND SMALLER AIRLINES. •TRAINEE AFTER CPL – RS 80,000. •FIRST OFFICER RS 1,25,000. •CAPTAIN ALTPL RS 2, 25,000. •FOREIGN ALTPL RS 4-5 LAKHS.

Labor - Market Forecasts • DEMAND OF PILOTS ON RISE. • FOREIGN PILOTS 2 TIMES MORE EXPENSIVE. ON CONTACT. • INVESTMENT OF 25-30 LAKHS ON PILOT TRAINING. • LACK OF INFRASTRUCTURE IN INDIA FOR PILOTS TRAINING. • 250 AIRCRAFTS BOOKED AT PARIS AIRS HOW. 3000 NEW PILOTS REQUIRED. •www.dgca.nic.in, www.labourbureau.nic.in

Industry Profile • Used to determine

compensation practices • Uses industry characteristics, like – Sales volumes. Incentive.

– Government regulations – Technology advancements. Knowledge.

COMPETITION • Assess competition's business.

• Differentiate – Type of service.

– Low cost/ cost leadership. – Retention plans.

FOREIGN DEMAND • Foreign demand as a

benchmark for compensation. • Higher foreign demand translates to higher compensation. • Pilots to match foreign

compensation measures over time.

INDUSTRY’S LONG TERM PROSPECTS Important for strategic planning – indicates company’s future prospects. •

• Rise in fuel prices, price wars and lack of profitability has forced low cost airlines to stagnate compensations for pilots for past 6 months. •SPICE and IndiGo have aggressively poached pilots from Sahara and Deccan due to expansion policies by offering 10-15% higher packages.

LABOUR MARKET ASSESSMENT The labour market assessments are key inputs to compensation figures. •

• Published by :– VV Giri National Labour Institute http://www.vvgnli.org. – Ministry of Labour. –http://labour.nic.in/ –http://www.labourbureau.nic.in

•

Important to assess trends for framing

compensation parameters. •Other demographic status like education, age profile, availability in sectors.