In recent years, human resources is no longer as the cost in past but as an important resource that caused more and more enterprises to pay attention to. Compensation management is one of the core contents of human resource management, performance pay system involves the economic efficiency of enterprises and the vital interests of employees, this system used properly or not will directly affect the management and operation of the entire enterprise. This article will analyze the misunderstanding on the traditional compensation management methods as well as three innovative compensation management measures.
I believe that every enterprise is considering the question. How enterprises enable to remain invincible in the fierce market competition? Where is the power for a long-term development of enterprises? Numerous outstanding business practices tell us: “human resources, as a strategic resource of the modern enterprise, has became one of the most critical factor for enterprise development ” (Zhihui Lu, Based on performance salary management system 2011(3)). Among all the human resource management problems, the motivation problem is one of the important content.
The science of motivation pattern is directly related to whether the human resources management will be good or not. Brain drain has become a serious trouble for many companies. Unable to retain talents has become an important factor to restrict the development of enterprises. Effective motivation is the key to solving this problem. In essence, the extrinsic rewards in compensation management, one of the main motivation pattern impacts on employee’s enthusiasm in enterprise management is a non-mandatory contract. It is based on relative performance.
An agreement will be signed by companies and staff through this contract; it combines the performance and the rewards and promises that wages paid based on each employee’s work performance; it means who has the better performance will get the higher pay, and the aim of improve employee performance will also be achieved. The Misunderstanding of Compensation Management Recently, the compensation management system has been regarded as the most important means to improve employee performance by a considerable part of enterprises, and even the one and only method.
However, the simple pay rise rather than a fundamental solution to the enterprise will hit staff’s enthusiasm for work, gradually weakened the motivation of extrinsic rewards management methods, thereby affecting the efficiency of the staff, so, the business goals will be difficult to achieve. A single remuneration in the form of extrinsic rewards motivation has a poor incentive effects. In Haining Sun’s report, there is an interesting data: only 9% of the employees stay with the reason of salary satisfaction, but on the other hand a number of 21% staff leaving because of the dissatisfaction with the right salary.
This shows the strategy that keeps people to stay, money is the foundation, but the career development prospecting is the first motive force for employees to stay. However, many companies still use single extrinsic rewards system stimulation, so that this incentive method will gradually lost its appeal. Besides, merely regard the compensation as the cost of business, or use a short-term motivation instead a completed extrinsic rewards system is also a main misunderstanding on enterprise compensation management.
A great amount of managers do not understand the extrinsic rewards; simply regard it as a part of the cost of production. They incentive a period of corporate performance growth with short-term bonus pay and don’t know how to improve the quality of the staff with the different pay levels. All of these cannot enhance the level of enterprise; instead, it will lead to employees to have a one-sided pursuit for short-term interests and overlook enterprises’ long-term development. Three Innovative Compensation Management Measures
Broad banding model is to assess corporate positions system and to classify. The so-called broadband, is changing a large number of jobs into a limited number of ranks and increase the scope of rewards for each ranks, thus reducing the job-level chains, and increase the wage gap between different ranks. For example, Nokia China is a representative model to use the broad banding system. The remuneration has been divided into more than a dozen levels, staff positions and personal skills to determine the different wage levels. Each level has a floating wage range.
In this remuneration system, seniority is no longer linked to salary, everything are decided by the performance. In general, there will be a 120% to 80% floating for one level, staff’s performance and workload will determine its level (Zhihua Wu, Resolve Nokia Internal Performance compensation management system. Talent Outlook 2004 (5)). Therefore, the lowest wage in one level can be lower than the highest wage in the next level. As long as the outstanding work performance, the general staff’s remuneration will exceed or even much more than high-level employees.
Employees no longer need to blindly through the pursuit of promotion to increase the level, even if do not have to promotion in a long-term, the salary can still be enhanced with the hard work. Thus, employees will show great enthusiasm for the work, more concerned about the role itself, constantly to achieve the goals and corporate strategic objectives at work. In addition, there still have full remuneration model and self- remuneration model. The first one is including the extrinsic salary; such like bonuses, housing allowances and the intrinsic salary.
Self- remuneration model is based on individual needs and have a flexibility choosing by staff themselves. Simply in short, employee motivation and compensation management is the core issue of modern human resource management, different enterprises or different departments has its own different characteristics, only consider the conditions of the business to establish a scientific and reasonable compensation management system can create an efficient, stable workforce, in order to achieve the sustainable development of enterprises.
