Compensation Management

TABLE OF CONTENTS

1. Case Study
2. Executive Summary
3. Problem Statement
4. Suggestions

Executive Summary

Purpose –

Purpose of this case study is to identify and analyze key problems in planning and mistakes in the Incentive Scheme. And find out what are the solutions and recommendations can provide to overcome such problems.

Methodology –

Find out what are the key problems, issues, in the management, and Incentive Scheme.

Findings –

• Decrease in the percentage of Production.
• Lower quality and rejects.
• Create Job Dissatisfaction.
• No proper system to identify the lower quality and rejection in the products.
• Departmental problems.
• Not attainable Standards (Targets)
• Do not have a Grievance Procedure.
• Do not pay OT according to law.

Recommendations –

• Implementation of Guaranteed piecework plan and deduct the number of lower quality and rejected products when considering the output.
• Recruit a Monitoring, Evaluation, and Internal auditor to closely control the departments.
• Implementation of Total Quality Management, and Quality Circles.
• Pay the Incentives at once in the month.
• Reduce the Targets to attainable level & do SWOT analysis before fix the targets.
• Use a Complaint box and Implementation of Grievance Handling Procedure to reduce the grievances.
• Pay the OT according to the law.

Problem Statement

1. Decrease in the percentage of Production.

A good Incentive Scheme would increase the percentage of production.

E.g. [pic 1]

But according to this Incentive Scheme 1st three months there is an increase in the production percentage but in last three months there is a huge fall in the production percentage.

[pic 2]

Main reason for this problem “where they gave 10% - 15% as an additional incentive when they produced more than the original targets given.”

According to this statement if an employee has given a target as 100 units to produce it. If he produce less than the target (90 units) then he is not entitle for the incentive. But if he produce little more than the target (110 units) then he will entitle for 10% - 15% as an additional Incentive.

If any employee produce 150 units then he will entitle for 10% - 15% as an additional Incentive according to the statement. So the Incentive for two employees are same so next time the employee who produce 150 units will produce 110 units because even though he produce 150 units Incentive will be same.

Good Incentive Scheme would be helpful to good performers. “More you produce more you get”. Then only we can expect regular increase in the percentage of Production.

1. Lower quality and rejects

At the same time, during these 06 months, lower quality and rejects rate increased by about 10 – 15%. One of the factor to be considered in designing Incentive Scheme is Information as to goal; the employee should be told about the objectives and goals of the incentive plan in clear terms. The objective may be to increase the quality and reduce the rejection rate or quantity of the production or both.

When we are designing an Incentive Scheme we have to consider lower quality and rejects rate and deduct from his production to get the number of quality products. If not the employees never consider about the quality and rejection because they have to produce more products and get the more Incentives.

In this Case they do not communicate the objectives and goals of the Incentive plan to their employees and they do not consider the lower quality and rejections when designing the Incentive Scheme.

1. Create Job Dissatisfaction.[pic 3][pic 4][pic 5]

[pic 6][pic 7]

Incentive payments should be large enough to attract the employees & geared to employee needs.

Incentive Scheme would be a Morale booster; Morale is the level of confidence one has in him/herself & the inner desire of a person to do a particular task. Incentive are commonly used as moral boosters in order to get a particular task accomplished successfully.

Finally a good Incentive Scheme create Job Satisfaction in the sense of achievement and/or feeling of recognition that follows incentives award can provide contentment in the job.