CAIIB ABM Module B Unit 4 : Employee Feedback and Reward System

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Jul 31

CAIIB Paper 2 (ABM) Module B Unit 4 : Employee Feedback and Reward System (New Syllabus)

IIBF has released the New Syllabus Exam Pattern for CAIIB Exam 2023. Following the format of the current exam, CAIIB 2023 will have now four papers. The CAIIB Paper 1 (Advanced Bank Management) includes an important topic called "Employee Feedback and Reward System". Every candidate who are appearing for the CAIIB Certification Examination 2023 must understand each unit included in the syllabus.

In this article, we are going to cover all the necessary details of CAIIB Paper 1 (ABM) Module B (HUMAN RESOURCE MANAGEMENT) Unit 4 : Employee Feedback and Reward System, Aspirants must go through this article to better understand the topic, Employee Feedback and Reward System and practice using our Online Mock Test Series to strengthen their knowledge of Employee Feedback and Reward System. Unit 4 : Employee Feedback and Reward System

Employees' Feedback

Satisfaction of employees at workplace is considered an important parameter for achieving organizational objectives. Progressive organizations always try to get the regular feedback from the employees on various human resource management aspects, and new initiatives taken in this regard through some satisfaction or climate surveys.
The information is gathered both formally and informally about the attitude and satisfaction of employees. This information is used for refining and fine tuning the policy initiatives from time to time. At formal level the information and feedback is gathered through well designed questionnaires, psychological instruments, Suggestion schemes, etc.

Feedback through Climate Surveys

Organizations used to measuring employees' perceptions of the prevailing climate in an organization are called climate surveys. The coverage of a typical survey can be as follows:

Structure: The feeling that employees have about the constraints on the groups, rules, regulations, procedures, communications channels (layers in decision making), delegation and authority, etc.
Responsibility: The feeling of being your own boss, clarity of role and responsibility vis-a-vis superior, subordinates and peers, etc.
Reward: The feeling of being rewarded for a job done well, perception about reward and punishment system, perception about pay and promotion, etc.
Risk: The sense of riskiness and challenge in the job and in the organization, and any emphasis on taking calculated risk (risk taking is encouraged and bona fide errors are protected) or playing safe is encouraged and accepted.
Warmth: The general feeling of fellowship that prevails in the workgroup atmosphere, the prevalence of informal supporting culture and social groups.
Support: The perception about helpfulness of managers and other employees in the group, emphasis on mutual support from above and below in the heirarchy.
Standards: The perceived importance of implicit and explicit goals and performance standards, the emphasis on doing a good job, the challenge represented in personal and group goals.
Conflict: The feeling that the managers and other workers want to hear different opinions, the process of conflict resolution, opportunity to express the views, etc.
Identity: The feeling of belonging to the organization and perceived value in the organization and work group, etc.

Reward and Compensation System

The wages in the form of compensation is viewed as the main attraction to join or change a job. The compensation should not be so meager that employees do not feel motivated to put in their best. the compensation should be such that it continually attracts talent, it is a major source of retention of the existing manpower and has an edge which motivates them to give their best.

'Total Rewards'

"Total Rewards" is described as the full combination of monetary and non-monetary investments, they make in their workforce to attract, retain and engage the people they need to operate its business successfully. The total rewards framework shows us that there are three primary categories of rewards that influence our decisions to join, perform in, and stay with an organisation. These three categories are Pay, Benefits, and Intangible Rewards. Total Rewards, which consists of the foundational rewards, performance-based, and career and environmental rewards.
Foundational rewards include the base salary, healthcare, retirement and insurance; performance-based rewards add up as short-term and long-term incentives, any profit sharing plans and recognition, and finally career & environmental rewardsinclude career development programs, mentoring programs, talent mobility opportunities, well-being programs and flexibility in working arrangements. Generally, there are five pillars of a comprehensive rewards system: compensations, benefits, flexibility, performance recognition and career development.

The six elements of total rewards that collectively define an organisation's strategy to attract, motivate, retain and engage employees are:

Compensation: Pay provided by an employer to its employees for services rendered (i.e., time, effort, skill). This includes both fixed and variable pay tied to performance levels.
Benefits: Programs an employer uses to supplement the cash compensation employees receive. These health, income protection, savings and retirement programs provide security for employees and their families.
Work-Life Effectiveness: A specific set of organisational practices, policies and programs, plus a philosophy that actively supports efforts to help employees achieve success at both work and home.
Recognition: Either formal or informal programs that acknowledge or give special attention to employee actions, efforts, behavior or performance and support business strategy by reinforcing behaviors (e.g., extraordinary accomplishments) that contribute to organisational success.
Performance Management: The alignment of organisational, team and individual efforts toward the achievement of business goals and organisational success. Performance management includes establishing expectations, skill demonstration, assessment, feedback and continuous improvement.
Talent Development: Provides the opportunity and tools for employees to advance their skills and competencies in both their short- and long-term careers.

Reward Strategy

Armstrong & Murlis (Reward Management, 5th edition, 2007) described the importance of direction as an element in a reward strategy:

"Reward strategy determines the direction in which reward management innovations and developments should go to support the business strategy, how they should be integrated, the priority that should be given to initiatives and the pace at which they should be implemented."

Types of Compensations

Compensation is expressed in terms of money. It would thus include: wages or salary, bonus, cash allowances and benefits such as accident, health insurance cover, employer's contribution to the retirement funds, provision of accommodation, etc. The jobs are broadly classified in four groups and the compensation for them is commonly referred to as shown below:

Managerial (top, middle, junior) ... remuneration
Supervisory ... salary
Clerical or Administrative ... salary
Unskilled, semi-skilled, skilled and highly skilled ... wages

Compensation Base

Compensation policy is an important element in personnel management. What is the basis or factors on which compensation gets decided? It could be:

Company objectives
Market situation or prevailing market rate
Internal and external pressures.

Compensation Theories

Let us now consider conceptual and theoretical aspects of compensation. A good compensation package should cover factors like adequacy, societal considerations, supply and demand position, fairness, equal pay for equal work and job evaluation. These concepts are explained briefly:

Adequacy of Wages

The Committee on Fair Wages pronounced certain wage concepts such as:

Minimum wages
Living wages
Fair wages
Need-based minimum wages

Alignment of Corporate Strategy, HR Strategy and Compensation system

Strategy	HR Program	Compensation System
Innovator	Committed to agile , risk taking, innovative People	Reward innovation in products Market based pay Flexible
Cost Cutter	Efficiency Operational Excellence	Focus on competitors labour cost increase variable pay Emphasize productivity Focus on system control and work Specifications
Customer Focused	Delight Customer Exceed Expectations	Customer Satisfaction Incentives Value of Job and Skills based on Customer contact

Societal Consideration and Legal Framework

The level of compensation in any industry, theoretically, gets decided by the socio-economic considerations. Skewed distribution of wages will make the flow of supply shift and with the application of basic principle of demand and supply the equilibrium will be attained. This means that the compensation levels will, more or less, tend to be at par for the comparable work. In practice, however, this happens very rarely. In the free economy the Government does not control the aspect of wage administration and normally the market forces determine the compensation level. However, the administration is bound to protect the workforce from irrationally low wages. Taking this as the prime objective the Indian Government has enacted:

The Payment of Wages Act, 1936,
The Minimum Wages Act, 1948
The Payment of Bonus Act, 1965, and
The Equal Remuneration Act, 1976.

Job Evaluation

This is one important measure to determine the level of compensation package. A scientific job evaluation will ensure parity of compensation levels for similar or equal jobs. It also helps in distinguishing jobs in the level of complexity, skills required, the risk involved and link compensations accordingly. Job evaluation is a method of appraising the value or worth of one job in comparison to other jobs in the organization. The objectives are:

To determine the compensation rates
To link pay with the requirement of the job
To provide for pay differentials taking into account skills, efforts, hazards required in each job
To establish a compensation structure.

Job Evaluation Techniques

Non-quantitative Methods:

Ranking or Job Comparison
Grading or Job Classification

Quantitative Methods:

Point Rating
Factor Comparison

Designing Compensation Structure

Step1: Create a complete job Description for Jobs
Step 2: Calculate the Job evaluation point for the Job, provide a rationale for assigning specific degree to the various Jobs.
Step 3: Outliers to be considered, (assume no extreme data points exits in the dataset)
Step 4: Conduct a simple regression in Excel to create a market pay line by entering the job evaluation point (on the X axis) and the respective weighted average market base pay (on the Y axis) for each benchmark job.
Step5: Finding out R squared (Variance explained)? Is it sufficient to proceed?
Step 6: Calculate the predicated base pay for each benchmark job.
Step 7: Assuming company wants to lend in base pay by 3%, adjust the predicated pay rates to determine the base pay rate you will offer for each benchmark job.
Step 8: Create pay grades by combining any benchmark jobs that are substantially comparable for pay purpose.
Step 9: Determine the pay range (Minimum & Maximum) for each pay grade.
Step 10: Given the pay structure you have generated.