Total rewards and Employee Engagement.

Managing Compensation

Every person has the right to receive a compensation for the labour or job given to a company. This compensations are the single most important cost in almost all the firms. The total compensation is divided in different parts.

Base compensation is the fixed pay an employee receives on a regular basis, either in the form of a salary or as an hourly wage. (Gomez-Mejia, L.R., Balkin, D.B. and Cardy, R.L. , 315)

Pay incentive is a program designed to reward employees for good performance. (Gomez-Mejia, L.R., Balkin, D.B. and Cardy, R.L. , 315)

When managers come to deciding which compensation system fits the best in their company they have to take a look in diferent aspects, because there are diferent indicators, types of compensations that can affect a person economically, sociologically or psychologically. For example, internal versus external equity. Will the compensation be fair inside the company compared to other employees or will be fair compared to the compensation given inside the industry in other companies?

Is it going to be a fixed compensation or a variable pay with different criteria that can fluctuate. Is the company going to pay more focused on the job done, or individual pay focusing on each skills. Is it going to be monetary? For example a normal salary, or are employees going to get paid with stock options or rewards such as interesting work and job security? Is it going to be a closure that prohibits the employee share his/her salary or it can be public?

Also there are different ways of compensate employees. Job-based compensation plans will pay each member a established salary depending on their role while skill-based plans will pay depending on the skills done during their work time.

Usually the second approach is not common at all, that’s why companies have to decide beforehand how much worth an employee is going to be developing the role they’ve been hired for in order to settle a proper compensation.

Rewarding Performance

“Attempting to motivate employees with pay incentives can backfire” (Gomez-Mejia, L.R., Balkin, D.B. and Cardy, R.L. , 353).

Getting paid for performance is a system that rewards employees and work teams differ in how much they contribute to the firm. Workers believe that those who work harder should be rewarded accordingly. But this method has a lot of challenges, the “Do only what you get paid for” syndrome. For example, in schools or universities where the teachers’ pay depends on the scores of their alumni, it’s proven that their grades are higher than normal.

Also it leads into Unethical behaviors, like cuting corners, deceive managers, misinform them or hide negative information in order to get a better performance grade.

We could name tones of examples, like doctors who get paid for prescribing generic pills, or the use of devices in healthcare systems.

ALl this challenges lead into difficulties in measuring performance. Being one of the hardest tasks managers face. This programs sometimes are not beileved by employees creating a credibility gap. If employees do not consider the system legitimate and acceptable, it may have negative rather than positive effects on their behavior. (Gomez-Mejia, L.R., Balkin, D.B. and Cardy, R.L. , 357)

In order to solve this, managers have to develop a complementary relationship between extrinsic and intrinsic rewards. For example google has a policy of giving outsized rewards to people who come up with outsized ideas. Also linking pay and performance has to be done correctly, the most easy way is a piece-rate system, which employees are paid accordingly to the “pieces” or “jobs” done. With this types of compensations, companies end up building employee trust that will lead into an improvement of their performance in the long-term, promoting the beilef inside the company that performance makes a difference.

There are two type of employees that must be treated differently in this topic, those are executives and salespeople. They have short-term bonuses, long-term incentives and perks in order to motivate them. This heavy reliance on their performance is related to the company trying to increase their sales.

What is Employee Engagement?

Employee engagement is not related to happiness of the employees, nor their satisfaction but the emotional commitment the employee has with the organization and its goals. Employees that care about their work, that they wake up every morning and go to work trying to improve themselves, trying to improve the company.

They will help improve the company even if their superiors aren’t watching to record the action. This leads into higher service, higher customer satisfaction that leads into increased sales and higher levels of profit which means higher shareholder returns. (Kruse K,Forbes 2012)

How to Establish a Culture of Employee Engagement

In order to have a successful business, companies have to emphasize in employee engagement. In order to do that, managers have to follow some rules.

-Keep your employees onboard and trained, constantly giving them training or educational sessions will encourage them to stay, also keeping them updated in all company actions will make employees feel part of the whole company. In order to do this is easier to set Company Goals that a base employee can help with that. In order to do this this goals should be achivable and mesurable by workers in order for them to feel motivated.

-Aknowledging employees doesn’t mean saying thanks. Managers need to give a sense of comfortability and camaraderia with the business in order to employees to feel part of a big family. Sometimes managers need to invest in their development in order to achieve this.

References

How To Establish A Culture Of Employee Engagement. Kappel M.,2018 URL: https://www.forbes.com/sites/mikekappel/2018/01/04/how-to-establish-a-culture-of-employee-engagement/#7f8ea43a8dc4 Accessed: 15/04/2020

What Is Employee Engagement. Kruse K.,2012 URL: https://www.forbes.com/sites/kevinkruse/2012/06/22/employee-engagement-what-and-why/#2fda32667f37 Accessed: 14/04/2020