COMPENSATION AUDIT PAKISTAN SPACE AND UPPER ATMOSPHERE RESEARCH COMMISSION (SUPARCO)

Background Pakistan Space and Upper Atmosphere Research Commission (SUPARCO), the national space agency, was established in 1961 as a Committee and was granted the status of a Commission in 1981. SUPARCO is mandated to conduct R&D in space science, space technology, and their peaceful applications in the country. It works towards developing indigenous capabilities in space technology and promoting space applications for socio-economic uplift of the country. SUPARCO, as per its mandate is continuously developing and introducing state of the art technologies to satisfy its customers' needs and to support economic competitiveness. A wide variety of products and services in different disciplines are offered Apart from training its own employees, SUPARCO also imparts training in space related fields to scientists, engineers and officials belonging to other relevant agencies in the country as well as International Agencies of which it is a member. Various short training courses, seminars and workshops are arranged on regular basis for this purpose.

In addition to this, SUPARCO also assists various universities, colleges and other academic & professional institutions by facilitating visits to relevant SUPARCO establishments, laboratories and facilities to enhance knowledge through ongoing scientific projects and research work.

2 Presently, a full fledged Institute of Space Technology (IST) is functioning at Islamabad for providing training in space related fields at national level. IST currently conducts degree programmes and training courses in fields related to space technology, with the long term objective of becoming a world class graduate and post graduate institute in space technology. Moreover, this institute in due course of time will become a center of excellence having international recognition to provide outstanding quality education at the graduate and postgraduate level. SUPARCO is an equal opportunity employer. The bulk of the manpower at SUPARCO is related to Science and Engineering disciplines, however like any other big organization SUPARCO has various support services departments like Administration, Human Resource Management, Store & Inventory, Procurement, Information Technology, Finance etc. Organization has comprehensive and well laid out compensation system in place which has matured overtime. All essentially needed aspects of compensation are adequately addressed so that employees remain productive and satisfied. (Related compensation documents acquired from the organization are attached as annexure A)

Relativities And Significance Of Reward System For SUPARCO Reward Systems are a critical part of any organization's design. How well they fit with the rest of the systems in an organization has an important impact on how effective the organization is and on the quality of life that people experience in the organization. Over the past decade, some new reward systems practices have become popular in SUPARCO in order to align reward systems with the important changes that are occurring in the way organizations are designed and managed. The over-riding principle that that governs the reward System in SUPARCO is that in order to be effective organization must have congruence among their

3 various operating systems. Particular operating system practices are neither

good nor bad in the abstract. They must be evaluated in the context of the other systems in an organization and the business strategy of the organization. The business strategy indicates what the organization is supposed to accomplish and how it is supposed to behave. It specifies the kinds of performance and performance levels the organization needs to demonstrate in order to be effective. Thus, it is a critical guide for the design of the overall organization structure as well as information systems, human resource management systems, and of course, rewards systems, to mention some of the most critical systems in this organization. Reward systems are assumed to be effective to the degree that the core principles, processes and practices are in alignment. Conceptual Framework of Rewards in SUPARCO a. It shows that their design needs to be driven by the basic organization design and the management style of the organization which in turn, needs to be strongly influenced by the organization's strategy. Reward system in combination with the organization's design drives the performance of the organization, since it influences critical individual and Organization Behaviour b. It shows that business strategy should be the foundation for identifying the critical behaviors that the organization needs to demonstrate. This in turn is reflected as driving the design of the reward system. The challenge here is to correctly identify those features of a reward system which will produce the behavior that is needed to make the strategy come alive in terms of individual and organizational behavior. c. Finally, reward systems include actual reward system practices and structures. These are the features of reward systems that get the most attention. They include pay delivery systems such as gain sharing plans, profit-sharing plans as well as administrative polices and a host of other specific organizational programs. Reward systems are assumed to be

4 effective to the degree that the core principles, processes and practices are in alignment. Review of the Existing System in SUPARCO a. It was found that recruitments took place straight from universities, promotion practices create internal markets and long term and predictable career paths are available. Reward system supports the hierarchy. There fore organization can conveniently be categorized among defenders b. Values which are given due consideration are innovation, quality and team work c. Being time old and mature organization there are numerous unwritten rules of behaviour to include punctuality, loyalty to organization amicability and harmony. d. Organization posed reasonable trust onto its employees more so they had limited freedom to act and express themselves. e. Organization had a bureaucratic leader ship style with demanding attitude and reasonably considerate f. Employees were empowered giving responsibility for their work. g. In SUPARCO there was low involvement culture where employees opinion towards major decisions was rarely sought, giving rise to the feeling of being under estimated in employees. h. Organization is at maturity stage of life cycle, formal job evaluation is installed and a multi graded structure is designed to match the well established hierarchy. Performance appraisal and rating systems are introduced by

5 personnel department as the basis for carefully centrally controlled performance related pay decisions. Existing Reward Philosophy

A Total Rewards Philosophy translates an organizations vision, and values into a framework that guides the design and decision making of base salary, short and long-term incentives, recognition and benefits. In the development of Total Rewards Philosophy SUPARCO has gone beyond the competitive rhetoric, while creating a meaningful and practical philosophy statement. The Remuneration Committee regularly reviews the reward philosophy and principles to ensure they remain contemporary and consistent with generally accepted market practice. Salient features of reward philosophy as under stood are: attract, recognize and foster top talent; recognize capabilities and promote opportunities for career and professional development motivate people with energy and passion reward those who deliver superior performance provide fair and consistent rewards, benefits and conditions within an integrated national strateg provide rewards that are competitive Innovation is key to organizations success Encourage those showing knack for Research and Development

SUPARCO,s reward philosophy has been translated into a number of tangible reward principles. Central to this is that the highest performers and those Showing greatest potential and future capability should receive the greatest rewards. The reward principles set out the manner in which performance should be assessed and recognized, and how performance should then impact the components of total reward.

Existing Reward Strategy Employers today are acknowledging the increasingly important role of reward programs to achieve their business goals in terms of enabling organisations to deliver the right amount of rewards, to the right people, at the right time, for the right reason. Employers are also realising that rather than replicating the reward practices of other companies, their reward strategy must be deliberately created to support its own unique human capital strategy that is, the people' side of business design. Increasing complexity and rapid change in the business environment mean organizations today must rethink their compensation and reward strategies for any of a number of reasons and do so more frequently than in the past. Moreover, they can no longer look at compensation strategy in a vacuum, but must also consider the role of other rewards in supporting their business and workforce objectives An organizations compensation strategy plays a critical role in engaging employees to achieve business results. However, compensation programs cant work in a vacuum. They must be designed in the context of other reward elements, as well as internal and external perceptions, desires and demands.

Key features of reward strategy at SUPARCO are outlined below

Competitive Rates

Varying levels of rewards depending on the contribution of the individual , team, and operating company to overall organizational success

Strategy was not seen as personal initiative but rather as something which was owned by the organization as a whole

Strategy seems to have balanced individualism versus team approach, work groups versus overall performance and achievement of goals versus calculated risk taking

Diagnosis
After careful study of the compensation system, diagnosis focused on understanding the problems including their causes and consequences. It involved an analysis of information gathered through audit process. By adopting a professional approach towards diagnosis, opportunities and problems figured out. Focus remained on the identification of gaps in the existing compensation/reward system. The problem in many organizational diagnosis and design situations is that the organization cannot specify the behaviors that it wants the reward system to produce. There are a variety of reasons for this, ranging all the way from an unclear organizational strategy to a failure on the part of the organization to understand the potential array of organization design elements that can influence behavior. Main step in an organizational diagnosis was to compare the actual impact of the reward system with the desired impact. It is this step which combines the strategy driven specification of what the reward system should do with the assessment of existing practices. It typically revealed significant gaps between what the reward system needs to do, and what it actually does.

Strategy
This identification must go beyond such simple statements as to attract and retain the best employees or to motivate effective performance. The strategy needs to identify the kind of people to be attracted and retained, how long they need to be retained, what kind of skills the people should have, and so forth. Similarly, in the area of performance, it needs to be very clear what kind of performance is to be motivated how much emphasis is to be placed on group and team performance. Attention also needs to be placed on the issue of organizational structure and the

9 desired degree of integration and differentiation. Gaps were identified in following aspects of SUPARCOs strategy:-

Values Risk Tolerance Create a culture where entrepreneurship and prudent risk taking are encouraged and rewarded.At present zero error syndrome prevails in SUPARCO Excellence Should be the best in quality and in everything. Extend rewards to excellence only. Motivation To celebrate success, recognizing and rewarding the achievements of individuals and teams. Innovation To innovate in everything, from products to processes.

Empowerment To empower talented people to take the initiative and to do whats right. Acting with absolute integrity Collaborating, supporting and respecting one another Communicating openly, honestly and frequently Developing a highly motivated, valued and diverse workforce Optimizing financial and physical resources Simplifying and improving processes continuously Its an R&D and manufacturing firm

Alignment with Business Strategy

where business strategy should be to differentiate through concentrating on quality. Reward strategy should therefore focus on aspects of design, development, manufacturing and administration. The strategy to also include the intention to conduct research on how best to measure contributions to quality.

10

Desired Behaviour

Teamwork Promote and support a diverse, yet unified, team. Working together to meet common goals.

Respect To honor the rights and beliefs of fellow associates, customers, manufacturers and community. Treating others with the highest degree of dignity, equality and trust.

Accountability To accept individual and team responsibilities and take responsibility for performance in all of decisions and actions.

Integrity Highest ethical standards, demonstrating honesty and fairness in every action being taken.

Innovation To be more creative in delivering value to fellow associates, customers, shareowners, manufacturers and community.

Policy The aim of employee reward policies and practices is to help attract, retain and motivate high-quality people. Personnel and development professionals will be Involved frequently in reward issues, whether they are generalists or specialize in people resourcing, learning and development or employee relations. An integrated approach to human resource management means that all these aspects have to be considered together so that a mutually reinforcing and interrelated set of personnel policies and practices can be developed. Gaps identified towards guidelines for decision making and actions are as under:-

11 Rewards should be given for significant outstanding performance that advances unit goals, and should be tied to a specific accomplishment. Rewards are most effective when they are meaningful to the individual. Care should be taken in communication and distribution of rewards so that they are not viewed as entitlements. Rewards may be designed to reflect the unique nature of the unit's work culture and organizational structure. Rewards should not be substituted for a competitive salary plan. For example, rewards should not be used as a long-term alternative to permanent salary adjustments when these adjustments are appropriate for consistently high performance, significant changes in responsibility, increased value of a position, or internal pay equity. Rewards are not adjustments to base salary, supplemental compensation, or variable pay programs (such as commission). Rewards should not be used as a substitute for supplies, support services, or training Degree to which internal equity is kept as prime consideration need to be redefined More flexibility is required in operating the reward system There is a need to ensure that salaries and benefits remain competitive with the leading companies in order to attract employees of highest quality Challenging task award should not be confined to technical work only as this policy is likely to generate feeling of deprivation in non technical staff.

12 Provision should be made to extend this award to non technical employees also R&D award has been specified for those employees managing to publish their research in renowned journals. Seeing the magnitude of achievement and utility for SUPARCO award should accompany monetary benefits to be included in variable pay as permanent feature. House rent is not admissible on running base pay rather on minimum pay scale. Running base pay should be a yard stick to extend the benefit. Availing pick and drop facility should not result into elimination of conveyance allowance rather some percentage may be deducted.

Job evaluation Job evaluation helps in determining the relative worth of each job in an organization. The basic purpose of job evaluation is to ensure the systematic assessment of jobs to determine their worth for the purpose of wage and salary administration. IN SUPARCO The process of job evaluation starts with a plan, moves to the identification of job dimensions and classification of the jobs and finally Criteria The system of job evaluation in SUPARCO utilizes a total of ten measurement factors. The various factors analyze a position in relation to the skills and experience required for competent performance, the demands made on the job and the overall structure and responsibility/accountability involved. A point rating is derived for each factor and the sum of these points represents the total points value of the job. ends with the implementation of the evaluation.

13 Basic Evaluation Rules The basic rules followed in SUPARCO when evaluating each position are: The current position is evaluated without being influenced by what the job is Likely to be in the future or what it may have been in the past. The position is evaluated and not the job holder. The Job Evaluation Factors In SUPARCO The job evaluation system comprises the following factors: Education The level of formal education required to perform the functions required of a position. In case of overlap between education and experience, the education level that would be expected of a new incumbent recruited externally is considered Experience The length of practical experience and nature of technical/managerial familiarity required. This experience is in addition to formal education. Scope of Work The managerial breadth or scope of the position. The complexity and scope of work factors tend to be related to the education and experience level required of a position. The calculation of points for each of these factors is based on the application of a percentage rating of the sum of the points derived in the evaluation of Education and Experience. Problem Solving The nature and complexity of problem solving expected of the job. Supervision Received The extent of supervision, direction or guidance imposed on the job holder and the freedom the executive has to take action. Results of Decisions decision is taken. Contacts The requirement for human relation skills in dealing with other personnel and external contacts. The level of decision making taken solely by the job holder and the risk or degree of damage which may result if a wrong

14 Authority Exercised Authority level expressed in terms of routine expenditure, capital expenditure and investments, granting of loans, hiring and firing staff, etc. Supervisory and Managerial Responsibility The responsibility for the control and management of human resources within the organization

Objectives
a. To design a reward system that is very effective at retaining the most valuable employees. To do this, a reward system must distribute rewards in a way that will lead the more valuable employees to feel satisfied when they compare their rewards with those received by individuals performing similar jobs in other organizations b. In order for employees to believe that performance-based pay relationship exists, the connection between performance rewards must be visible, and a climate of trust and credibility must exist in the organization. c. System should operate flexibly with maximum amount of authority delegated to line managers d. Line management, employees and their representatives should be involved in the development of new system e. Emphasize on development and continuous improvement f. Pay for the person rather than just the job g. To institute more effective Built-in controls and cost constraints h. An understandable and equitable system i. Parallel career paths for managers and technical employees j. Flexibility to adapt quickly to market changes k. Management flexibility to assign a range of duties l. Reinforcement of future competencies required by SUPARCO

15 m. Employees must believe effective performance (or certain specified behavior) will lead to certain rewards. For example, attaining certain results will lead to a bonus or approval from others. n. Employees must feel that the rewards offered are attractive. o. Employees must believe a certain level of individual effort will lead to achieving the corporation's standards of performance

New Reward System

Set pay in a way that takes into consideration the 3 compensation equity issues: -Implement the organizations external equity pay policy -Achieve internal equity (Appropriate pay differences across the jobs in the organization) -Achieve individual equity (Appropriate pay differences across employees who perform the same job) Define a set of compensable factors which are:-Education -Experience -Knowledge -Physical demands -Mental demands -Responsibility for equipment & work processes -Responsibility for materials & products -Responsibility for safety -Responsibility for the work of others

16 -Working conditions -Job hazards

Set the pay for each employee doing each job (where the employee falls inside the pay range for the employees job) Methods Seniority: Each employee moves up their pay range by the same amount (usually determined as a percentage pay increase) Create incentives for a stable, experienced workforce Merit Pay: Each employee moves up their pay range based on their job performance (creates incentives for improved job performance) Skill-based Pay: Each employee moves up their pay range based on the skills & knowledge mastered by the employee (incentives to add skills) Equal Pay ,equal pay for equal work No discrimination in pay when the employees perform the same job in the same organization If a man and a woman are both doing the same job in the same organization, dont pay them differently because of their sexes Pay differences based on other factors to be worked out (e.g., seniority, job performance, etc.) Comparable worth equal pay for equal worth If a man and a women are doing different jobs, but the company evaluates that both jobs are of equal value to the company, then they should be paid the same i.e. If a companys job evaluation determines that a secretarial job (held mostly by women) and a maintenance job (held mostly by men) make contributions of equal value to the company, then the two jobs should be paid the same

17

Pay increases for head office and unit management will be set within a centrally agreed pay award matrix, which refers to employees merit rating and their position on the salary spine for their grade An employees salary will be set within appropriate salary range according to the knowledge, leadership, qualification, and communication and problem solving skills In future entire staff will receive an across the board pay rise plus a merit increase based on individual performance review. Automatic increments will no longer be paid.

Benefits The new structure and supporting policies will: a. Facilitate decision making within departments through clear classification and compensation guidelines b. Assist in career discussions development and progression c. Enable more of a push toward pay for performance d. Increase ability to attract and retain top performing staff in critical positions e. Establish a better compliance model and mitigate risk to the Institute Timeline
Below is a timeline of the project phases:

a. January 2012: New job descriptions, policies and structures will be online for
review.

b. February 2012: Training will be provided for managers.

18 c. March 2012: New titles, grades and salary structures become effective.
Managers will communicate the new compensation philosophy and structure changes to individual employees.

d. April - May 2012: Salary adjustments may be made for select individuals below
the new minimum of the new salary structures who meet performance requirements. e. December 2012 feed back about new structure will be obtained