Case Questions

The Sushma Case

1. How should compensation systems align with the contexts of an organization's life

cycle, industry, and country considerations?

Organization’s life cycle:

Startup: Emphasis should be on long-term incentives and share options instead of

benefits and salaries.

Growth: The organization's goal at this stage is to create a market-based pay structure.

Employees are identified, differentiated, and motivated to achieve goals via performance

pay and rewards systems.

Mature: At this phase, the corporation aligns its pay structure to keep top employees by

maintaining internal equity. To optimize the workforce involved, key talent is retained

using a performance-based compensation scheme. At the same time as the company

expands into new market categories, critical market talent is recruited employing an

aggressive compensation approach to retain the employee brand.

Ageing: The organization attempts to retain critical talent and downsize the workforce at

this stage by implementing compensation structures that help in the retention of important

talent and the downsizing of the workforce through layoffs. Very little importance is

given to long-term incentives, here salaries and benefits are the key.

Industry:

• If the company is in an industry where hot skills are in demand, the pay structure should

be based on going rate and competitive remuneration.

• If the company operates in a niche market, the compensation system should be

aggressive.
 • Internal equity and a performance-based compensation structure are essential if the firm

is part of a well-established matured sector.

• In any case, the business should review and examine its compensation structure to

ensure that it is not paying more or less than the industry average.

Country:

• Within the same company, the workplace varies from country to country.

• As a result, to recruit and retain talent, the compensation system, particularly in terms of

benefits and career development, should be aligned with the country's economic, foreign,

and inflationary policies.

• Furthermore, hot skills in certain nations may be readily available in others, and vice

versa; this should be considered when establishing compensation schemes.

2. What is "total rewards" and what are the typical pitfalls and success factors of a

reward strategy?

Through a combination of financial and non-financial rewards linked with specific business

goals, a total rewards approach is used to attract, motivate, retain, and engage employees.

Compensation, benefits, work-life effectiveness, recognition, performance management,

talent development, and other components make up the transactional and relational rewards

system.

Success factors: Employees' basic needs are met by base pay, which provides a minimal

degree of income stability (filling the employee's security and safety demands) for long-term

job motivation. Employees are motivated to improve their performance through intangible

rewards and recognition programs. Employee performance can be directly linked to their

salary through performance management. Employees have clear career paths as a result of

this. It helps employees in creating a feeling of organizational citizenship.

Increased understanding of the employer's benefits across all stakeholders

Individual and group acclaim

Progress and improvements are visible to a large number of people.

HR's impact on the organization is seen as it improves and evolves.

Aligning awards with the company's strategy and objectives

Compensation and performance are related

Pitfall Factors:

The company's total rewards system may lag behind the market due to budgetary constraints.
Employees may not be attracted to and retained in the organization as a result of this.
Individuals focus on achieving individual benefits and prizes contained in a total rewards
scheme to enhance competitiveness and impede group performance. If the firm does not
provide the necessary leadership and work environment, a total incentives program can be
costly and counterproductive.

• Self-focus to obtain individual benefits

• Lack of team chemistry if the team and individual rewards conflict

• Lack of long-term benefits for the organization

• Employee impression of rewards – quantitative vs. qualitative

• Negative perception of overall rewards not providing tangible financial rises

3. Propose a total rewards strategy for SIPL. Suggest an implementation plan, and

timeframe and estimate cost impact on organization EBITDA.

Total Reward Strategy:

Compensation: Salary correction to increase the base pay of employees with experience to

create disparity from new employees in the same designation.

Base pay to be corrected to be at least be par with the market benchmark.

Providing training and development programs for employees to give them growth

opportunities for promotions, learning, etc.

Using Attendance Management Program to provide work-life balance for employees with

fixed working hours.

Benefits: Providing Insurance Benefits, communicating these benefits with employees with

clarity.

Limiting to estimating increase cost of 80% organization’s cost base due to revised

compensation structure for SIPL.

This Strategy would be successfully implemented in the tenure of over 3 years, where first-

year would be dedicated to revising compensation structure for critical job roles. The next

two years would be for implementing a revised structure for the whole organization.

4. Evaluate Padmanabhan's process in developing the total reward strategy for SIPL

and suggest and develop a pay grade structure for SIPL (Excel exercise).

Padmanabhan developed the total reward strategy in the following manner:

 Job evaluation: he revaluated job descriptions to clearly define competencies and skills

required for job roles. He observed overlaps in responsibilities and pay structures. To

ensure internal equity was there in the organization he tried to remove such overlaps.

 Employee Survey: Through his research, he got to know dissatisfaction from employees

regarding pay structures. Most of them felt pay was below market standards. Variable pay

for performance was given anyway regardless of results. The salary structure was on an

ad-hoc or as-needed basis and there were no minimum wages.

insurance and life insurance had not been renewed since 2012. Also, SIPL had not made

payments of gratuity payments for 2014 and 2015. So, insurances were renewed and

gratuity payments were made.

 Survey for Benchmarking: he researched a sample of 50 employees to estimate market

standards as he felt that existing reports were too expensive for such investment.

 Revised Structure: Increased base pay for some to provide a buffer for statutory

deductions, protecting their net pay.

Suggestions:

We will go through an excel sheet and using job evaluation points will compare job

value.

 First job evaluation points would be considered and checked if any corrections are

required. Then according to evaluation points and frequency of jobs 5 grades can be

classified.

 We can then suitably assign different designations and roles to these grades

 We will then calculate minimum, maximum, median, range spread, and the overlaps with

grades.

 As earlier the evaluation was according to people and not positions, the aim will be to

reduce overlaps and create a disparity between existing experienced employees and new

hires.

 Based on market standards, we can then determine employees below minimum pay range

and as well as maximum pay range and accordingly make corrections.

5. How should the revised compensation plan be implemented at SIPL?

year would be dedicated to revising the compensation structure for critical job roles.

The next two years would be for implementing a revised structure for the whole

organization.

 First, the plan would be communicated to the whole organization with clarity. Several

Training sessions would be conducted.

 Feedback sessions would be conducted as feedback from managers and employees is

very crucial to see improvements or corrections in the implementation.

 Salary range, median, would be decided on basis of market value for key role and

talent i.e., matching with an external pay line.

 The salary budget can be determined based on employees in grade structures.

 Pay structures would be revised and corrected for employees above maximum salary

range and minimum salary range to market standards.

 Analysis of this plan would be done to understand the pros and cons along with the

cost associated with the implementation.

 The final step would be getting approval from top management for implementing a

basic salary structure for the whole organization.

 The next two years would be the implementation of this plan for the whole

organization

- Group 1

Priyanshu Shekhar (MBAHR01010)

Nilesh Kumar Gupta (MBAHR01008)

Rudraksh Goswami (MBAHR01011)