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Compensation & Benefits
September 2022 Examination
Read the Case and answer the questions given
at the end:-
The
firm Egon Zehnder International (EZI), is an "executive talent
search" firm that prefers to stick to the old-fashioned way of paying by
seniority. They believe that in their business seniority is a key asset since
it helps in building intuition & a good network of contacts with clients
across the globe, both of which are critical for success. For EZI, seniority is
the proxy for “experience” which means that organizational tenure adds to
domain knowledge which betters performance.
However, most Consulting and Law firms believe seniority is
irrelevant. They prefer “pay” to be based on individual performance and
so employees are paid according to the size of their client billings and how
good they are at bringing in new clients.
In
contrast, at EZI, there is no formal procedure for tracking the performance of
the branches in different countries, let alone individuals. According to the
seniority rule, at the close of a given year, a ten-year partner in any office
will receive a larger share of the firm’s profits than a five-year partner,
even if the ten-yrs partner in the first office lost money and the five-yrs
partner in the second office did exceedingly well.
Accent on QualityExplaining the huge success of his
firm, the founder, Mr. Zehnder had this to say," First, our approach to
compensation forces us to hire consultants who have little interest in
self-aggrandizement. We hire people who are true team players, people who get
more pleasure from the group's success than their advancement. These
individuals by nature tend to be highly collaborative. They eagerly share
information and ideas about existing and potential clients. Similarly, they
pass around information about the executives who might best meet a client's
needs. It is this attitude of sharing and cooperation that is sought from these
incumbents.
Second, our seniority-based
system requires us to find people who want to stay with a company for the long
haul, and these men and women still exist who want to spend their entire career
with EZI. Tenure builds experience and this means a Consultant who has a
well-developed network of executive contacts which is immensely beneficial for
EZI. We hire professionals who are not only highly educated but who is also
trustworthy and humble and who want to work for one company in their entire
careers. Such people help the organization to grow and in the end, everyone
wins, from the client to the firm to the individual professional”.
The Payment System People
join this organization as “Consultants” and later they are allowed to become "Partners" after they have proved their
worth. As Consultants, they are paid annual bonuses not on the financial value
of individual business conducted, but on how well they have supported their
colleagues and how they have contributed to the firm's reputation as a whole.
Performance is not restricted to financial matters. For instance, if a
consultant has published an article in a reputable business journal, it is marked
to his/her credit because the contribution has benefited Egon Zehnder's
reputation.
For "Partners", compensation comes
in three ways; salary, an equity stake in EZI, and profit shares. To begin
with, each partner has an equal number of shares in the firm's equity, whether
he has been a partner for 30 years or one year. The shares rise in value each
year because the Co puts 10% to 20% of our profits back into the firm. When a
partner retires or leaves the firm, he sells back the shares, keeping the difference
between the value of his shares at the time of his election to partnership and
their value at the time of his departure. Obviously, the longer you stay, the
more valuable the shares become. If you stay for five years, your shares will
probably double in value. The remaining 80% to 90% of the profit is distributed
among the partners in two ways. Sixty percent is divided equally among all the
partners, and the remaining 40% is allocated according to years of seniority.
Mr. Zehnder further adds," As we grew, I
became more convinced of the fairness of rewarding seniority. Our system, by
rewarding seniority, also helps us build the right kind of human capital for
our profession. I know that seniority is a very unfashionable idea these days,
especially in America, which worships youth and energy. But in our profession,
seniority is a key asset: it is only through experience that our consultants
can hone the intuition they need to operate successfully in a people-intensive
profession. It is also through the length of service that a consultant builds a
strong network of contacts".
Mr. Zehnder's philosophy is à No compensation
system can work unless it promotes the right kind of behavior among
professionals. Proponents of pay-for-individual-performance systems argue that
their plans encourage managers to generate more revenue, which more than
compensates for any administrative burdens the systems may impose. But those
systems have one great drawback: they encourage people to further their
interests aheadof the interests of clients and the organization as a whole.
People are the to find the "right
type" of people for EZI, the interview process is extremely intensive and
their selection has to be vetted by many people across the hierarchy. Apart
from technical and professional questions, personal questions are also posed to
the candidates, mainly to know whether the person has integrity, whether he/she
is honest, sincere, and adheres to a proper value system. This testing of
"integrity" and attitude continues even when a Consultant is elevated
to the rank of a "Partner. The transition to "partnership" is
through a rigorous process as the test is not to see the number of clients they
are bringing in, but to make sure they are hardworking, honest, collaborative,
and entrepreneurial.
Mr. Zehnder's final advice à EZI's system
cannot be copied by all types of organizations, especially in those where there
can be big differences in the types of work that people do. For example, the
reward for the head of R&D, cannot be decided in the same way as the reward
of the head of sales. But at professional services firms, like law firms, where
the work is quite homogeneous (what a lawyer does in Tokyo, for instance, isn't
all that different from what a lawyer does in Zurich), in these cases, a
compensation system similar to EZI, which reinforces common values and sets
common expectations, could be adopted.
1.
After a thorough analysis of this case, identify all the "explicit
and implicit factors" a part from “Seniority” that contributes to the
success of the form EZI?
Ans 1.
Introduction
The case study and
the interesting firm EZI (Egon Zehnder International), follow such an
"executive talent search" that prefers to stick to the old-fashioned
way of paying by seniority. According to the core value of this firm,
they fathom the belief that seniority is the key asset or the key factor as it
helps in building a good network of contacts of clients & intuition across
the globe, both of which are rather critical for the success of their business.
EZI, in contrast
to other consulting and law firms, follows that "seniority" is the
yardstick for "experience". This is, according to them,
organizational tenure empowers one
2.
Suppose, this company is taken over by another and this
company replaces the "Seniority" system of payment with the "Pay
for Performance" system. Discuss what could be the impact of this change
upon the i) morale ii) culture and iii) profitability of the company. (10
Marks)
Ans 2.
Introduction
Performance-based
pay structures mean encouraging employees to work harder, however, they also
can cause higher levels of stress in workers, leading to a lower label of job
satisfaction. Performance-based pay has earned popularity specifically among
employers over the years. However, according to some research findings it might
not be as effective, as many from both the groups (employers & employees)
believe. The reason is instead of motivating employees, there are a few types
of
3.
The Job Description and Job Specification
of the position of a "Payroll Assistant" in an office are given
below. Say, you are using the "Point Rating" method of Job
Evaluation.
So, what are the Compensable factors and the
sub-factors that you would select to evaluate this job? Also, decide the
appropriate weights of the factors and subfactors that you choose. (5 Marks)
A) Job Summary (Payroll Assistant)
Feeds employee "time worked"
and other pay-related data in computer to calculate wages and deductions and
issue paychecks
B) Essential Job Tasks
• Process and issue employee paychecks
and statements of earnings and deductions.
• Compute wages and deductions and
enter data into computers.
• Compile employee time, production,
and payroll data from time sheets and other records.
• Review time sheets, work charts, wage
computation, and other information to detect and reconcile payroll
discrepancies.
• Verify attendance, hours worked, and
pay adjustments, and post information to records.
• Record employee information, such as
exemptions, transfers, and resignations to maintain and update payroll records.
• Issue and record adjustments to pay
related to previous errors or retroactive increases.
• Complete time sheets showing
employees’ arrival and departure times.
C) Job Context
Works indoors in an airconditioned
environment and communicates mostly via telephone.
D) Knowledge, Skills, and Abilities Required
• Knowledge of administrative and
clerical procedures and systems such as word processing, managing files and
records, designing and completing forms, and other office procedures and
terminology.
• Knowledge of principles and processes
for providing customer service.
• Knowledge of math, arithmetic, and
statistics to analyze data and solve problems and use Microsoft Excel.
• Uses logic and reasoning to identify
the strengths and weaknesses of alternative solutions, conclusions, or
approaches to problems.
• Knowledge of the English language to
understand written sentences and paragraphs in work-related documents.
• Gives patient hearing to other people
and interacts effectively to understand pay-related problems
• Communicates effectively in writing
as appropriate for the needs of the audience.
After a careful
reading of his job duties, responsibilities, and knowledge requirement, you are
required to assess this office job and convert it into points (as per the
Point Rating Method of Job Evaluation).
Ans 3a.
Introduction
As an HR Manager,
I have to decide to use the points methods for evaluating the Payroll Assistant
job. I need to use 3 general compensable factors and 2 sub-factors for each
job. The general factors are Skill, weighted at 50%, Responsibility weighted
at 30% and Effort weighted at 20%. My next task will be to calculate the
points for each factor and finally calculate each job.
The steps needed
in this task are:
1.
I have to use the
job descriptions related to the Payroll Assistant;
2.
I need to
determine what the sub-factors percent of weighting is. For instance:
3.b. For assessing
the above job, you have selected the Compensable factors, broken them down (as
required) into sub-factors, and also allocated appropriate weights. Now, what
else needs to be done to have a suitable instrument so that you can convert
this job into equivalent points. (5 Marks)
Ans 3b.
Introduction
There are various
ways of designing a pay structure. Based on business culture, strategy, and
work content, an organization needs to ascertain or find out what approach is
best for them. For instance, HR may recommend that if the Payroll Assistant in
operations and the administrative assistant in HR perform functional tasks
Dear students, get latest
Solved assignments by professionals.
Mail
us at: help.mbaassignments@gmail.com
Call
us at: 08263069601
NMIMS
plagiarism proofed assignments available.
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