This course is designed to provide you with an understanding of the role of data and technology in human capital management. Every topic in the course will be covered in the most practical way so that learners get hands-on experience. In the course we use the 4Ts principle: Task, Theory, Technique and Technology so that there is always a connection to organizational performance objectives, an overview of underlying theories and principles, and specific tools which help achieve business objectives. You will learn ● what combination of data, technologies, and tools can be used in people management processes to improve organization’s performance ● how to use some of these tools and how to select the ones that suit your objectives and budget ● to design individual and team development plans and measure its ROI for the organization ● how to figure out the qualities that lead employees to their best performance so you know what to encourage in current and look for in new employees ● how to identify the right channels to recruit your employees or team members ● what combination of monetary and non-monetary motivation tools work best for your organization ● how to predict what people will leave in the near future and how to make sure some of them stay ● how to measure engagement and make a strong organizational culture improve performance
Lecture 2 Compensation Models
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来自 Moscow Institute of Physics and Technology 的课程
人力资源分析概论
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从本节课中
Compensation
In this module we will talk about various compensation models and you will learn how to do compensation benchmarking. In your second peer-reviewed assignment you will apply the new knowledge to conduct your own benchmarking project.
与讲师见面
Ilya BreymanAdjunct Professor
Center of Innovative Educational Technologies
Alexey DolinskiyAdjunct Professor
Center of Innovative Educational Technologies
Welcome back.
The influence of compensation on performance is very nuanced,
even though compensation is the most easily quantifiable aspect of
people management, and it is usually the largest expense of any organization.
Connecting compensation to performance is very tricky.
It may motivate or demotivate the employees.
Some go as far as suggesting that linking compensation to performance
is self-defeating and demoralizing and
hurts not just poor performers but also top performers.
On the other hand, some believe there is no alternative as to pay for
performance, this is the only model.
At Netflix, it's a video streaming company known for
its very strong performance-driven culture,
high performers are paid top of the market compensation.
That applies not just when they're hired.
Their compensation is reviewed regularly to make sure it is still in line with
the market value of any particular employee regardless of the job title.
The formula goes as follows, what could the person get elsewhere, what would
we pay for replacement of this person, what would we pay to keep that person?
Very simple.
Mercer consultants call this model membership or efficiency wage.
In this model, the organization keeps an above the market pay level and
employees are motivated to perform in order to stay and grow within the organization.
This model is different from the tournament model where employees compete
for career advancement, not for bonuses or
other incentives within their current level.
Finally, there is a third model.
Bonding, it puts an employee into a trajectory of planned pay increases from
early to late in their career once performance is credibly demonstrated.
Employees and
their firm-specific knowledge are retained over the long period of time.
At the same time, there are strong proponents of traditional pay for
performance model, although it may create an overly competitive environment
in an organization if established improperly.
But with no pay for performance at all you're at risk to demotivate high performers
because of the people's, in their sense of equity.
And equity almost never means equality and is almost always relative.
High performers expect to be rewarded more relative to those who underperform.
And in cultures where effort is valued,
poor performers who expect the reward for
great effort feel left out and underappreciated.
Wrong calculations with regards to compensation can lead to
unexpected consequences, sometimes disastrous for an organization.
A case in point is a credit card processing company called Gravity Payments.
The founder decided to make $70,000 annual payment the minimal salary
at his company.
His good intentions actually backfired as
senior employees who spent a lot of time with the company and
invested a lot of effort in it felt that the decision was unfair because
the underperformers got a huge raise while senior employees actually didn't get one.
Indirectly the decision affected both the minority shareholders and
employees holding stock options which both disliked it and the company suffered.
Some companies seek to strike balance between pay-for-performance model and
nonequitable model
where pay is not connected to performance.
SAS Institute, for example, doesn't set individual goals for its sales people.
Instead it uses team metrics.
One of the problems with team metrics is, of course, the free rider dilemma.
Many employees will try to shun their responsibilities in the expectation that
someone else will do their work.
That can be mitigated by what James Sesil and other researchers call mutual or
reverse monitoring.
It is a practice when team members have an incentive to both help and
monitor each other and incentivize to work with more effort.
Another concept worth mentioning is choking.
A series of experiments demonstrated that
high stakes can reduce one's ability to perform due to stress.
Modern MRI equipment allowed some researchers to see how brain regions
responsible for encoding reward information get deactivated once the stakes are too high.
They also noticed that some people see the opportunity for victory in critical
situations and the reward level does not correspond to their actions.
The opposite of choking is paying too little.
Researchers found that sometimes
it is better not to pay at all than to pay less than fair.
Benefits also cost money, and
it is critical to carefully analyze their effects on productivity and performance.
The fact that employees appreciate them is not enough.
What's important is that the appreciation is translated into increased
productivity and reduced attrition,
and overall improved performance.
In 2007, Google was trying to solve the problem of turnover of new mothers,
their departure rate was twice the average.
After conducting research, they introduced a new policy.
They gave five months of paid time off with full benefits for
the new mothers at their headquarters in California.
And seven weeks elsewhere globally.
The results were phenomenal.
50% reduction in turnover among the new mothers.
A huge deal, given the replacement costs.
We'll be thinking about replacement costs of employees in the future module
on recruitment.
