Hi all, A thought just came into my mind about the subject.
Almost all companies are going for variable compensation structure.
Perhaps the reason it came into existence was that the performers should be rewarded.
But my dilemma is How HR People decide what should be the %age of variable component. In other words, what is the optimum mix of fixed and variable components?
This structure may be working well in Sales as Performance measurement is easier. Is a Variable pay structure worth it when it comes to different functional domain?
Is it a good policy to have a uniform variable pay structure right from top to bottom?
I put forward this as a discussion to the forum.
In anticipation of responses.
From India, New Delhi
4Almost all companies are going for variable compensation structure.
Perhaps the reason it came into existence was that the performers should be rewarded.
But my dilemma is How HR People decide what should be the %age of variable component. In other words, what is the optimum mix of fixed and variable components?
This structure may be working well in Sales as Performance measurement is easier. Is a Variable pay structure worth it when it comes to different functional domain?
Is it a good policy to have a uniform variable pay structure right from top to bottom?
I put forward this as a discussion to the forum.
In anticipation of responses.
From India, New Delhi
I think that the fixed / variable ratio lies generally is
for Sales
40% fixed and 60% variable
for marketing
60% fixed and 40% variable
In other departments
80% fixed and 20% variable
But in anycase it depends on how fairly the output can be measured and whether the company wants to give performance oriented remunaration...
From India, Ahmadabad
for Sales
40% fixed and 60% variable
for marketing
60% fixed and 40% variable
In other departments
80% fixed and 20% variable
But in anycase it depends on how fairly the output can be measured and whether the company wants to give performance oriented remunaration...
From India, Ahmadabad
hi Ajmal
Thanks for your input.
a) How do we justify these figures i.e. why 40-60 and not 45-55? is there any objective calculation to arrive at 40-60 figure? I think I cannot have 40% fixed and 60% variable as a rule because a sales executive and VP sales both are in sales function but when I impose this rule it would be sales executive whose salary comes below sustainable level. [Just a thought]
Now does that mean in organizations we should have a Variable Variable pay structure that varies with individual's role. If yes, How one devise it or come to an optimum figure of percentage
b)We all know how difficult it is for organizations to move from fixed pay structure to a variable one. You have all the hurdles on earth in its implementation. It would be great if we share our experiences regarding same on this thread so that we all can learn and let Best practices prevail.
Cheers
Saurabh
From India, New Delhi
Thanks for your input.
a) How do we justify these figures i.e. why 40-60 and not 45-55? is there any objective calculation to arrive at 40-60 figure? I think I cannot have 40% fixed and 60% variable as a rule because a sales executive and VP sales both are in sales function but when I impose this rule it would be sales executive whose salary comes below sustainable level. [Just a thought]
Now does that mean in organizations we should have a Variable Variable pay structure that varies with individual's role. If yes, How one devise it or come to an optimum figure of percentage
b)We all know how difficult it is for organizations to move from fixed pay structure to a variable one. You have all the hurdles on earth in its implementation. It would be great if we share our experiences regarding same on this thread so that we all can learn and let Best practices prevail.
Cheers
Saurabh
From India, New Delhi
Hi Saurabh
Maybe i was not very clear in my Reply...
The Ratio of 40-60 is just indicative and not hard and fast rule... It differs totally from organisation to organisation and industry to industry...
The are certain companies who give on fixed pay while there are certain organisations who give very high weightage to the variable pay... It highly varies with the organisational objectives and the strategies adopted to attain that objectives
From India, Ahmadabad
Maybe i was not very clear in my Reply...
The Ratio of 40-60 is just indicative and not hard and fast rule... It differs totally from organisation to organisation and industry to industry...
The are certain companies who give on fixed pay while there are certain organisations who give very high weightage to the variable pay... It highly varies with the organisational objectives and the strategies adopted to attain that objectives
From India, Ahmadabad
Hey
Just came across this article in reference with this topic
Thought I should share it...
Saurabh
--------------
Moving Towards Dejobbing
With the constant increase in technological innovations and the shift towards globalization, more and more organizations are now heading towards flexible work assignments and performance-based reward systems that enable them to become more competitive. Accordingly, well-defined job descriptions are now being replaced by more flexible and boundaryless ones, and employees are urged to focus on what needs to be done to accomplish the projects at hand – regardless if that was originally within their scope of work or not. In 1994, William Bridges used a new term “dejobbing” to describe today’s challengingly changing jobs (Santry, 1996). This term more specifically refers to the act of “broadening the responsibilities of the company’s jobs, and encouraging employees not to limit themselves to what’s on their job description” (Dessler, 2003, 82).
Today, people working in firms that have started applying the concept of dejobbing will be given the advantage of taking decisions previously reserved for managers, their span of responsibilities and authorities will widen, and they will be allowed to share in their firm’s profits; they will be viewed as business partners rather than mere employees. However, coping with the new trend of boundaryless jobs is still not easily accepted by many. Years ago, employees exchanged company loyalty for job security – now things have changed – high performance is exchanged for job security. Employees need to demonstrate an ongoing ability of working on multi-tasks simultaneously, invest longer hours at work, and take more risks in order to accomplish the projects they are working on; they will no longer have the option of refusing to do something based on: “this is not my job”.
In his book JobShift, Bridges talked about the psychological impact of dejobbing and applied Elisabeth Kubler-Ross's five stages of the grief cycle that identifies the emotional responses of humans to change, from denial to acceptance. According to this cycle, employees who are working in organizations that are dejobbing will most probably have to go through the following 5 phases before adapting to this new trend:
1. Denial
At this stage the employees will think – or will want to think – that maybe yes the new trend of dejobbing is finding its way through in other organizations, yet, it will not be implemented in their own organization, and accordingly they will not suffer from it. In other words, employees will still stick to their job descriptions while doing their jobs and will neglect all attempts having them do otherwise.
2. Anger
At this stage the employees will start realizing that their organization is “actually” implementing the new concept of boundaryless jobs and therefore they will turn angry – they will resist to the maximum – they may even take some irrational decisions like submitting their resignation.
3. Bargaining
Moving ahead to the third stage of the grief cycle, employees – who have not resigned –
will start looking for ways to negotiate the new situation they are in, they may try to bargain with their direct supervisors/mangers: “I cant do all those tasks, this will jeopardize the quality of my work – let me concentrate at this and maybe we can have someone else do that”.
4. Despair
When employees start realizing that bargaining is doing them no good, and that all their attempts are deemed unsuccessful, they will start exploring the new trend in despair –
thinking that it is probably in their very best interest to try this new thing out – and maybe it will not be as bad as it may seem and that they will be able to survive it.
5. Acceptance
Finally, this is the stage were the employees will recognize that dejobbing is now becoming a fact in their work environment, and decide that if they want to move ahead with their career goals, they ought to accept it and adapt to it.
To conclude, employees are humans – and humans by nature – resist change; consequently, moving throughout this grief cycle does not always happen in a smooth step-by-step methodology, employees may move back and forth from one stage to another – which in most cases is very normal – however risk emerges when they get stuck in one of those stages and decide to quit the cycle before completion.
References
Dessler, G. (2003). Human Resource Management. (9th ed.). New Jersey: Prentice Hall.
Santry, K. (1996). Bridges says workers of the future must flex and change with the needs of the job market. [Electronic Version]. Journal of Career Planning and Employment, 56 (3), 36.
From India, New Delhi
Just came across this article in reference with this topic
Thought I should share it...
Saurabh
--------------
Moving Towards Dejobbing
With the constant increase in technological innovations and the shift towards globalization, more and more organizations are now heading towards flexible work assignments and performance-based reward systems that enable them to become more competitive. Accordingly, well-defined job descriptions are now being replaced by more flexible and boundaryless ones, and employees are urged to focus on what needs to be done to accomplish the projects at hand – regardless if that was originally within their scope of work or not. In 1994, William Bridges used a new term “dejobbing” to describe today’s challengingly changing jobs (Santry, 1996). This term more specifically refers to the act of “broadening the responsibilities of the company’s jobs, and encouraging employees not to limit themselves to what’s on their job description” (Dessler, 2003, 82).
Today, people working in firms that have started applying the concept of dejobbing will be given the advantage of taking decisions previously reserved for managers, their span of responsibilities and authorities will widen, and they will be allowed to share in their firm’s profits; they will be viewed as business partners rather than mere employees. However, coping with the new trend of boundaryless jobs is still not easily accepted by many. Years ago, employees exchanged company loyalty for job security – now things have changed – high performance is exchanged for job security. Employees need to demonstrate an ongoing ability of working on multi-tasks simultaneously, invest longer hours at work, and take more risks in order to accomplish the projects they are working on; they will no longer have the option of refusing to do something based on: “this is not my job”.
In his book JobShift, Bridges talked about the psychological impact of dejobbing and applied Elisabeth Kubler-Ross's five stages of the grief cycle that identifies the emotional responses of humans to change, from denial to acceptance. According to this cycle, employees who are working in organizations that are dejobbing will most probably have to go through the following 5 phases before adapting to this new trend:
1. Denial
At this stage the employees will think – or will want to think – that maybe yes the new trend of dejobbing is finding its way through in other organizations, yet, it will not be implemented in their own organization, and accordingly they will not suffer from it. In other words, employees will still stick to their job descriptions while doing their jobs and will neglect all attempts having them do otherwise.
2. Anger
At this stage the employees will start realizing that their organization is “actually” implementing the new concept of boundaryless jobs and therefore they will turn angry – they will resist to the maximum – they may even take some irrational decisions like submitting their resignation.
3. Bargaining
Moving ahead to the third stage of the grief cycle, employees – who have not resigned –
will start looking for ways to negotiate the new situation they are in, they may try to bargain with their direct supervisors/mangers: “I cant do all those tasks, this will jeopardize the quality of my work – let me concentrate at this and maybe we can have someone else do that”.
4. Despair
When employees start realizing that bargaining is doing them no good, and that all their attempts are deemed unsuccessful, they will start exploring the new trend in despair –
thinking that it is probably in their very best interest to try this new thing out – and maybe it will not be as bad as it may seem and that they will be able to survive it.
5. Acceptance
Finally, this is the stage were the employees will recognize that dejobbing is now becoming a fact in their work environment, and decide that if they want to move ahead with their career goals, they ought to accept it and adapt to it.
To conclude, employees are humans – and humans by nature – resist change; consequently, moving throughout this grief cycle does not always happen in a smooth step-by-step methodology, employees may move back and forth from one stage to another – which in most cases is very normal – however risk emerges when they get stuck in one of those stages and decide to quit the cycle before completion.
References
Dessler, G. (2003). Human Resource Management. (9th ed.). New Jersey: Prentice Hall.
Santry, K. (1996). Bridges says workers of the future must flex and change with the needs of the job market. [Electronic Version]. Journal of Career Planning and Employment, 56 (3), 36.
From India, New Delhi
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