Compensation

Career Development Plan Part IV — Compensation K. Srini MGT HRM/531: Human Capital Management William Young March Eighth 2010 The broad meaning of Compensation is something (like money) given or received as payment or reparation (as for a service or loss or injury). Compensation has a lot of different components and it is important that the InterClean management is able to prepare a compensation plan which will be totally satisfying and motivating to the employees, meet their immediate needs, factor in future needs, and will be aligned with the company’s goals and strategies. To succeed in an increasingly competitive environment companies must have a well-designed compensation plan that motivates employees, controls compensation costs, and ensures equity. The best compensation plans mirror the culture of the organization and is linked with the strategic goals of the business, as depicted in the figure 1.1. Fig 1.1 – Total Rewards [pic] At InterClean the compensation plan will help motivate sales staff at daily behaviors such as new business generation, maximum account penetration, team selling, and cross-selling. The new sales compensation plan focuses on three areas: 1. Takes into account the profitability of InterCleans various products and services, 2. The team composition, their skill sets and job descriptions. 3. Motivate desired sales behaviors Compensation Plan A good compensation plan will be one that will:- • Take into consideration the strategy , goals and efforts of the individuals and the company • Motivate the sales staff to perform better, and help the company to retain and recruit the best talent • Makes sure that the sales and professional goals of the sales team are aligned with that of the company. • Focus on the diversity and culture of InterClean to ensure growth and profitability • Make sure that there is a proper mix of fixed and variable components of compensation. • Ensure that the compensation plan covers all areas, but at the same time is flexible and strategic changes can be implemented quickly. Taking into consideration the points discussed above the system of compensation suitable for InterClean sales staff will be a combination of Merit Pay and Team Incentives. Merit-Pay Merit-Pay systems links performance with rewards, the new sales team which has a mix of experience and exuberance will find Merit-Pay rewarding as it gives them a chance to earn more. It is important that the teams believe in a sense of “ownership” of the system and are part of the plan creation from its inception. The components of the Merit-Pay compensation plan include a. Base Salary: The base salary will be arrived at by taking into consideration the Job Description, attitude, experience and knowledge of the individual with respect to the services offered by InterClean. b. Commission: Their will be a commission component on the sales made, incentive calculation will take into account the deals closed, invoice raised and also effort and pipeline of the individual sales person. c. Other Benefits: The compensation plan will include a basket of benefits and each individual will be able to get a customized sales plan. The cultures at InterClean believes in wealth sharing and growth, to motivate its sales team, promote team work and generate more sales, a Team Incentive plan will be integrated along with the component of Merit-pay system. Team Incentive: The management at InterClean and the Sales team will formulate "goals" and "targets" that will reflect effective performance outcomes, these will include: • Quantifiable measurements of the success and contribution of the individuals to the team, and the team as a whole. • Challenging but achievable goals and targets. • Significant opportunity to make extra incentives over the Merit-Pay. Based on targets achieved a team incentive shall be paid out, this will be half yearly for the first year. Why Pay-System will work This pay system is a combination of compensation plans, with inputs from the team, and accounts their motivators and needs. The pay-system which the paper discusses will work because: 1. It will establish high standards of performance; thus provide employees with and intrinsic rewards system 2. It has been linked to the appraisal system that focuses on job-specific, results-oriented criteria; 3. It ties rewards closely to performance; hence gives sales team an opportunity to excel and benefit more through extrinsic rewards 4. It provides a wide range of possible pay increases in the future; it acknowledges high performance and promotes teamwork and motivation. Three Components of a total rewards package Total rewards comprises of many elements, the top three included in InterClean that will motivate the sales staff to reach peak performance includes programs, practices, elements and dimensions that collectively define the company’s strategy to attract, motivate and retain employees. These elements are: • Compensation: A combination of both extrinsic and intrinsic rewards • Benefits and Incentives that will include healthcare, 401K and bonuses. • The Work Experience o Acknowledgement of high performance and teamwork. o Balance (of work and life) o Diverse Culture o Development (career/professional) o Environment (workplace) Fig 1.2 Three Components [pic] As figure 1.2 illustrates these three components which is a mix of both intrinsic and extrinsic rewards will help motivate the sales team in continuously meeting targets, motivating them and help InterClean meet its strategic goals. Benefits to the individual and the company The InteClean Compensation plan has been designed to be a “Win-Win” both for the individuals and the company. Some of the benefits of the plan are, For Individuals • Provide long-term wealth creation for key employees without disrupting continuity or creating a funding hardship for the enterprise; • Maximize tax advantages to its employees; • Enhance the quality of company benefits plan by providing a wide array of meaningful benefits to employees at all levels. • Will give individuals an opportunity to try and better themselves through a combination of intrinsic and extrinsic rewards. For the company • Maximize tax advantages to the company • Increase profitability by cutting administrative costs and tying compensation to variables that keep compensation overhead within industry norms while advancing business initiatives • Create team of loyal, motivated and charged sales person • Help achieve the strategic goals of the company in a timely manner. Conclusion This paper tries to arrive at a compensation plan that will help InterClean, implement one that will help drive sales, motivates its sales staff, reduce the trust gap between the “Field Soldiers” and the “Generals” and ultimately help the company achieve its strategic goals. Designing successful compensation plans is a mix of both science and psychology, one that has to continuously tweaked and reviewed, to ensure that it meets both the goals of the individual and the company. This attempt is the first step toward that, and we shall revisit the success or failure of this plan during the appraisal review done at the end of the second quarter. References Fig 1.1 Total Rewards: World At Work – Total Rewards Program. (www.worldatwork.org) Fig 1.2 Three Components: World At Work – Rewards Model (www.worldatwork.org) Sales Compensation Plan: Beat the “80/20 Rule” in Sales Performance, Alan Rigg. (www. 8020salesperformance.com) Compensation: Merit Pay, Cascio: Managing Human Resources: Productivity, Quality of Work Life, Profits (p.436-p.440) A guide to team incentive Systems, Jody R. Hoffman and Steven G. Rogelberg Trust Gap: Cascio: Managing Human Resources: Productivity, Quality of Work Life, Profits [pic][pic][pic][pic][pic][pic]