ZENITH

(Formulating the Compensation Strategy) COURSE: STRATEGIC COMPENSATION Course Code/Section: HRPD 405-102 Course Instructor: Wood, Eileen

Contributing Students: SR. NO. 1. 2. 3. NAME Singh Paramvir Akindipe Vincent Yadav Prakash STUDENT ID NUMBER 300643655 300632516 300633228

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INTRODUCTION

In this assignment one is going to identify the major problems of Zenith Medical System Incorporated, Problems which are related to the companys compensation system and compensation practices. And also one will analyze that how the Zenith Medical system incorporateds compensation system and practices caused those identified problems. Later in the assignment part B, one will recommend solutions to the problems which have caused those problems. One will determine and recommend solutions related to company compensation system and also strategies. One will also discuss that how company can implement those strategies and solve the current identified problems. One needs to explain and also justify those strategies which have been recommended for the compensation system. In the end of this assignment one will also develop a pay for knowledge plan for the company. Author will also create job families for the company will recommend compensation strategies for each job family. In the end author will create a job evaluation plan based on point method and follow with the conclusion.

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DISCUSSION Identification of Current Organizational Problems and Analysis on their root causes. Zenith Medical System incorporated was established in year 2007 by the joint venture of a Major computer firm and a leading supplier of leading Hospital products. Both firms has invested equal amount of capital in this venture. The top management of Zenith has been appointed from both parent companies, however the majority of the Top management has been appointed from the Hospital products firm. Even the CEO of the company was originally working in the Hospital Product firm. The logic behind this Idea was that the new venture is going to deal with medical products therefore it was understood that Managers from Hospital products firm would have more experience related to Hospital products then managers who work in computer firm. The product which Zenith produces is Information management systems for health care institution, as health care institutions need more and more sophisticated database information system to work more effectively and efficiently. The health care institutions have got more complex and they need information system to keep all the records of their employees and customers. Zenith produces one system which has integrated several different kinds of systems, which includes patient records, systems which help for scheduling staff and facilities, for material management and also for the medication tracking. Also includes systems for the financial purposes of an organization. Zenith product is a very important product to the market as it is very important for medical purposes to transfer the information from one party to another, so that they can work more efficiently and if in some cases parties does not able to transmit the info to each other; it can cause a death of the patient. Zenith produce the medical products, they handle everything from system design to installation, training and maintenance. The head office of Zenith is situated in Ottawa and 5 regional offices are situated across Canada. There are total of 600 employees working for Zenith from which half of them works in Head office and rest of them are dispersed equally in 5 regional offices across Canada.

Many companies tend to practice the mix of three main types of managerial strategy either consciously or unconsciously, depending on their underlying assumptions about the nature of employees Zenith is using Classical managerial strategy, because the firm feels that the Zenith Medical System Incorporateds Page 3

inherently dislike the work and they only work for money. Under classical management, jobs are narrowly defined (which makes training, supervision and employee replacement easy), employees are controlled through procedures, policies and rules enforced by a hierarchy of management, and most decisions are made at the top of the hierarchy (ONLINE) (www.stockoptions.org.il). As we have seen the case study Zenith has easily replaced the employees and provides rewards only to the individuals who perform well. The firm is providing only extrinsic economic rewards related to individual output. For this kind of strategy, planning can adapt to and anticipate market change. Zenith is paying base pay plus large bonuses to their employees even though the company is not doing well from last 2 years. The employees of the company have individual performance pay system. In which each employee has been rewarded on their individual performance. Zenith needs to use the high involvement managerial strategy so that workers in the organization can be motivated by needs for interesting work, challenge, autonomy, personal growth, and professional development and also employees can exercise self control once zenith will provide these conditions while treating employees fairly and equally. Also High involvement managerial strategy will help zenith to enable its management to confront increasing global competition whilst providing opportunities to workers for greater rewards and security, as well as the intrinsic satisfaction that employee involvement offered. This will have an overall effect on the corporate strategies of the organization because workers will be attract to intensive training geared towards team working, functional flexibility and idea generation and information sharing, particularly about the economics and market of the business(ONLINE) (www.ddiworld.com). In year 2008 the sales of Zenith dropped down to $58,000,000 and which produced the net loss of $1,000,000. Management was not very concerned about this thing as they assumed that this kind of problems occurs initially in any new organization and these problems will be resolved with time. Management thought if revenue will be increased then it will have a positive effect on profits due to which these problems will disappear. However, Sales of 2009 were way below their expectations, the total sales for 2009 dropped down to $50,000,000 with the net loss of $5,000,000. After that Company start facing serious problems with their quality for the products. Customer starts complaining about that the systems that they do not work as promised by the marketing/sales department. The systems were installed late and have system crashes often also Zenith Medical System Incorporateds Page 4

the maintenance department seems to show very little enthusiasm for fixing these problems. The company is using the pay for performance compensation strategy, where each individual gets the base salary plus some incentives on top of it. According to us this strategy is not a good fit for this organization in this particular time because this way the company has been divided into promotions and contests, the employees in the company are not working with the same vision. Incentive programs create competitiveness, and that's not necessarily best for a company like Zenith which is still at its growing stage. It is not necessary that people are always motivated by rewards and bonuses they can be motivated because they're excited about their jobs or because they're doing something that provides a service to the world. Motivation is very important to develop commitment amongst workers in an organization. Herzberg constructed a twodimensional paradigm of factors affecting people's attitudes about work. He concluded that such factors as company policy, supervision, interpersonal relations, working conditions, and salary are hygiene factors rather than motivators. Osteraker supports that An examination of the values, as well as a general understanding of the needs that influence motivation, help to understand the factors which motivate the employees of a specific occupation. According to the theory, the absence of hygiene factors can create job dissatisfaction, but their presence does not motivate or create satisfaction (Herzberg, 1959). The sales team got affected the most because their sales have been decreased because of the bad market reputation, which made them make more promises to the customer to close the deals. The marketing team has to promise for extra features in the systems in comparison to the market to make customers. As the marketing representatives base pay was set low and their pay was all based on their commissions which depend on the total value of system contracts are signed. There was decrease in company revenue in the sense that there were so many problems with all the departments, most of the deadlines given out to customers were not met and the ones met did not reach customer specification. This led to low reputation in the part of customers making sales reduced. These problems are caused as a result of compensation system on the part of the company. Most sales staffs were paid on commission basis and they were not satisfied with them.

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Company start facing several different kind of problems, firstly all employees start focusing on their own jobs, hardly any employee feel little need or desire to cooperate with workers from another departments. This clearly shows the environment in the company is begun to be Individualism, there is no team work and employee has no motivation to work together in the team. In fact employees start assuming that other department do not do their job properly and because of them company is facing problems. Because of the entire problem, this leads the company to poor relationship between departments. The above mentioned problems occurred due to poorly designed reward system in which each department are paid bonuses and some are not paid lead to a situation whereby employee focus on their own job feeling little need or desire to cooperate with other departments. It also leads to a situation whereby different departments tend to blame each other for their own lapses. This causes relations in all departments to be very bitter and personnel in each department try to avoid talking to any one in other departments unless absolutely necessary, these leads to a lot of problem in the company. There was decrease in the morale of sales staffs because they were not majorly having high sales like they used to. The sales staffs are paid majorly by commission meaning the higher they sell, the higher they earn. If they make more sales, they earn more. The problem due to the inability of the company to meet up with customer satisfaction led to the company losing its customers and makes it more difficult for them to get more customers. The moral of the sales force which was high at the beginning dropped because they were not able to gain more customers, get new projects and finally they end up getting little bonuses. Secondly, the morale is generally low in all the departments of the company. Each department blame other department for being incompetence. For example, system development department blames the marketing department that they do not understand or convey the requirement of the customer properly. By the end of the second year system development department faced more difficulties to meet their targets. Because the systems which were promised by the marketing department were fancier in terms of extra features in order to attract the customer and close the deals. Therefore it was almost impossible for the system development department to meet the target as there was no increase in the cost to the customers and also there was increase in time and hours budgeted for each system. By the end of the year system development literarily could not meet their client timelines and consistently over budgeted hours.

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Thirdly, system installation department usually does not receive the systems from the system development departments on time because of the above mentioned reasons. Because of this system installation targets are never met and when system installation staff reaches to install the systems, they have to face the clients misbehaviour. Since the new system installation manager saw the problems with not meeting the target deadlines, he decided to install basic systems within targeted time; He said that we will worry about the extra features on the system after installing the basic system. He also thought that extensive system testing is waste of time, including staff training, extra expense therefore he cut off all the unnecessary things and with this he was able to bring in some projects under budgeted hours. However by doing these customers who were promised with the fancy system features did not get what they actually required and this lead to a decrease in customer satisfaction.

In general there are three kinds of employee behavior which is important for the firm. The first of these is membership behaviour, the second of these is task behaviour and the last one is citizenship behaviour (Long, 2010). The employees of Zenith particularly show the Task behaviour which simply refers willingness of employees to perform their assigned tasks. Zenith is practicing the classical managerial strategy in which they want to control and reduce the turn over costs and because of the tight control exercised by the firm the employees has very little scope for citizenship behaviour. The employees at Zenith do not have freedom to take decisions and supervised directly under the supervisors. In order to increase employee performance Zenith needs to introduce high involvement managerial strategy which will lead their employees to practice high levels of membership, task and citizenship behaviour for its success. And the Zenith needs to make a compensation system to achieve this kind of employee behaviour within their organization. To achieve this behaviour Zenith need to apply Skill-based pay which provides an incentive for employees to develop broad skill sets, allowing flexibility of workforce deployment. Group performance based pay changes the focus from individual self-interest to the interests of the group or team. Organization performance-based pay provides the incentive to look beyond departmental interests to the good of the organization as a whole. Use of group and organizational pay plans also plays a role in assuring employees that they will share in the fruits of their labour. Zenith Medical System Incorporateds Page 7

Recommendations for solving the problems

If a company wants to get what they expect from their workers, than company has to provide what worker expect from the company. The strategic-management process does not end when the firm decides which strategy or strategies to pursue. There must be a translation of strategic thought into strategic action. This translation is much easier if managers and employees of the firm understand the business, feel a part of the company, and, through involvement in strategyformulation activities, have become committed to helping the organization succeed. Without understanding and commitment, strategy-implementation efforts face major problems (ONLINE) (http://www.flexstudy.com). According to our group Zenith has failed to clear their objectives to their sales and marketing employees, for example sales executives were never sure what to sell, what to advertize and specially what is their unique strength. Zenith should use profit sharing compensation strategies, which will bring groups of employees to work together toward a common goal (the success/benefit of the company), it will help the employees focus on profitability of the organization, and company will not have to worry about the cost to implement the strategy as it will be directly connected to companys performance. However, in current situation Zenith is not making any profits therefore in this event Zenith should introduce performance pay compensation strategy for a time being in order to increase the company income and at the same time employees will get encouragement to perform well. Each employee needs to be covered under profit sharing compensation strategy and author will discuss further that what additional strategies will work for an individual departments. To keep the sales executives on track, company needs to design sales compensation strategy which should tie with sales compensation goals to the business objective of the company in direct way. Zenith need to establish annual objectives, which is a decentralized activity that directly involves all managers in an organization. Annual objectives are essential for strategy implementation because they represent the basis for allocating resources, determine a primary mechanism for evaluating managers and also are the major instrument for monitoring progress towards achieving long-term objectives(ONLINE) (http://www.cirano.qc.ca). Firstly, company need to train their sales executives to identify their major responsibilities, accountabilities and goals. At the same time the sales managers need to understand their particular roles, in which he or she has to be responsible for communication and administration of the sales executive which will be Zenith Medical System Incorporateds

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determined by conducting frequent performance audits of sales executives. Zenith need to discuss performance measures with their sales executive, they need to explain them that on what basis their performance will be evaluated. Often profit which is made by employees related to marketing is the major part of the revenues in sales department. Zenith need to tie sales executives in the overall business plan of the company, which will motivate sales executives to achieve their sales revenue. The major problem which our group has figured out that, Zenith compensation strategy for their sales executives had many loop holes in them, for example sales executives only focused on individual sales, and the criteria for measuring their performance had a major setback, for example sales executives only focused on finalizing deals, whereas they should be measured on other factors such as, what have they offered, what time frame they have mentioned to the clients, if that time frame is in actual achievable by Installation department, what kind of feedback client has given on finalizing the deals with marketing/sales department. In order to bring up sales and also motivate employees, Zenith need to clearly define sales expectations and goals that are realistic but challenging. Zenith need to introduce commissions which are tied to short term as well as long term goal attainment. Managers in the sales department then need to track and accurately measure performance against expectations of each sale executive and also a whole team. Zenith need to implement a compensation strategy which rewards achievement with competitive compensation and motivational features that provide a Win/Win for both the company and the sales department. Also while implementing short term goals attainment strategy, company need to implement incentives/bonuses tied to annual sales results. Managers need to monitor the results on a regular basis and modify the plan when needed and the most important keep an individual sales executive informed about any updates. System development department also face problems in there department, they were not able meet clients timelines for most of the systems and also they were consistently over budgeted hours. Managers are paid base salary plus a large bonus if they meet or exceed the target, however nonmanagerial employees receives base pay plus indirect pay. According to our group we strongly believe that system development executives should get base pay, indirect pay plus incentives on the number of systems developed by each team. The higher the incentives available for any particular job, the more dedicated the staffs tend to be. There should also be a specialised guideline for developing systems; a particular number of days to develop a particular system Zenith Medical System Incorporateds Page 9

should be put into place, the more complex it is to develop a system, the longer the hours assigned to the job. Simple systems requested for by the customer should take only little time to work on. This should be a base for their compensation in terms of bonus and indirect pay. This will also reduce the number of hours wasted during system development. Managers should also be held responsible for the action of their team members and ensure that targets are met. This will motivate the employees and make them work in teams to achieve their targets so that they can earn incentives. Zenith should introduce strategy where an individual effort will count by producing each number of system parts and also company should establish a performance threshold for system development department to qualify for incentive payments overall. Managers should clarify every individual their each responsibility, importance in their teams and create shared commitment in that every individual contributes to organizational performance and success. As Zenith is facing major problem with their system development department, this department handles core work of the company as they design systems as per the clients requirements. System development department has certainly heavy responsibility on their shoulders because of this our team believe system development executives should get bonuses and criteria of bonus should be set for cost reduction and quality improvement. System installation department faced problems majorly because they do not receive systems from system development department on time. Managers get a base salary and get large bonus based on meeting or exceeding their targets. System installation department work as a team and company should introduce team incentive payments for which company need to set performance measures upon which incentive payments are based. This way teams will be more motivated towards their job and will put their full effort to install the systems on time. However from the study one cannot find any flaw in the system installation department as their performance has been directly hampered by system development team. To rectify this error, our team has come to an idea that System development department should have a sub department, which will be called system development review. In this department employees will be responsible to check the compatibility between system requirements sent by the marketing department and system development department. The main purpose of this department will be to determine whether the requirements which has been sent by the marketing department are achievable or not and if yes then how long time will it take to develop the system. System department will review the order and make a report and send back to marketing department, so that they can communicate with Zenith Medical System Incorporateds Page 10

the customer and give then realistic time frames upfront. With the help of this department, our team believes that there will be fewer conflicts and orders will be reviewed and right information will be given to the customers. Like this the customer satisfaction will also be increased. Also Zenith needs to implement spot bonus plan in their company to reward individuals at times. By keeping this thing in mind employees will use their full potential to perform outstanding to be able to get spot bonuses. System maintenance department has faced lots of problems, as it is the last stage of the operation cycle, due to improper marketing, missing deadlines by development team, just basic systems installed by installation department creates whole mess for the maintenance department. Employee in maintenance department has to face the customer unpleasant behaviour. This department has faced the highest employee turnover. Maintenance department managers a paid a base salary plus a bonus based on a percentage of the extra revenue the department generates. As we can see since company has started producing systems, since then company is in loss and therefore maintenance managers have not made any bonuses. On top of it system maintenance department faced major problems with the client, as they have to face the clients personally when they go to fix the problems even though they have not caused the problems they are always the one berated by panicky, frustrated, angry customers. Therefore, we believe that system maintenance department need to get good base pay, indirect pay and Incentive plan. The incentive plan has to be made in such a way that it should measure the performance on each time system maintenance team will work out and solve the customer problem. By implementing this strategy, maintenance department team will highly motivated to solve the clients system problem regardless of they are being angry. The team needs to be awarded on the number of problems they have been resolved in one visit. Such target measures needs to be set that for employees they seem to be achievable and make them feel worth combating the angry clients. As discussed earlier once the system development review department will be in place then the problems will certainly be decreased for the system installation department as well. Because the root cause of the problems has been arise from the sales/ marketing department. Now system development review department will keep control of orders sent by marketing department to system development department. This department will certainly help to reduce the functional problems and will definitely help to increase customer satisfaction. Zenith Medical System Incorporateds Page 11

PAY-FOR-KNOWLEDGE PLAN Pay-for-knowledge plan is consists of two categories, first it has competency base pay which increases with an individual competencies while at work, it consists of time an individual has spent in an organization. Individual competencies develop with time while working in an organization, however on the other hand the second category is skill base pay which does not require as much time as competencies need to develop. It is easy to get skilled employee rather than employee with competencies or in other words knowledge which he or she has gained from her work experience in a particular field. Zenith should encourage system development, system installation employees to learn as much as they can about their career by compensating them for learning new skills about their job and the company. Paying employees based on job knowledge is not necessarily for the task he is assigned to, but it is based on what he learns to enhance more skills and knowledge of additional tasks. By paying pay for knowledge will not only benefit the employee but it will also help Zenith because once the employee learns all he can about his job and the company, he becomes a part of the organization. This will help to hire, maintain, and retain employees who will be a contributing factor to the mission and goals of the organization. The more Zenith will encourage its employees to enhance their skills as an employee, the greater morale, turnover, absenteeism, and productivity will improve overall in the company. Our main reason for choosing a compensation mix which is based on performance is because there is a high decrease in employee morale in Zenith Medical services due to the practice of paying bonuses based on the number of contracts signed which is seen as meeting sales targets and this lead to the development of employees behaviours that are not beneficial to the organization. Therefore the use of performance pay plans that are properly designed will signal key employees behaviours and motivate employees to achieve them. Our pay-for-knowledge plan has 4 levels of pay. Level one is the level at which the employee is hired, The person progresses level two when that person has learned to perform a sufficient number of jobs in that work team to be considered a flexible team member so that the person can move around and share work with other people, replace other people when they are absent, level three is when the person has learned to perform all of the jobs in a team in a satisfactory manner and the last level, which is level four, is a team coordinator or team leader type level. Typically, Zenith Medical System Incorporateds

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only one employee on the team can be designated as a team coordinator and the team is usually the one that designates which team member can function as a team leader. However, Zenith should keep marketing department out of this grid. The compensation for marketing department should be based on base salary plus a certain amount of percentage based commission on the number of sales per employee in market department has done. In addition the starting salary of the marketing department employees should start from $1100 as a base salary and percentage of commission made on actual sales done by an individual. For example, a threshold target needs to be set and upon achieving 50% of the sales the employee should be eligible to get $300 commission in his salary. On the top of it, the commission of $500 should be available for each team member as a team performance bonus. This compensation mix will maintain a healthy relationship between employees and will also motivate to achieve their targets as well as teams target. System development System Installation Analyze system requirements, plan hardware layout of the new system $2800 Initiates tests of systems and application programs and module interface $2400 Able to install basic systems and application software and test software operations $2000 System installation training section, conducting training sessions $1800 System Maintenance Expert in trouble shooting, determining new system requirement and changing hardware $2800 Able to determine the problem with new systems and fix the problems $2400 Able to fix problems with the basic systems Installed $2000

Level 4

Level 3

Level 2

Expert in programming of financial, material, medication, record, scheduling system section $2800 Intermediate in programming of financial, material, medication, record, scheduling system section $2400 Able to process financial, material, medication, record, scheduling system section $2000

Level 1

Apply basic knowledge of computer plus entering data codes $1800

System maintenance training section conducting training sessions $1800

Skill Grid for Zenith Medical System Incorporateds (Figure: 1.1)

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In figure 1.1, one can notice that the initial basic pay for the system development will be only $1000 because in this level an employee has to use basic knowledge of computer plus entering data codes into the systems. After minimum of twelve months of time frame, an employee will step into the level 2 depending on the performance in which one has to able to process financial, material, medication, record and scheduling system section. The basic pay of an employee will get the raise of 20% and will have to stay in this level for minimum of one year time. After this an employee will then go to the level 3 in which one has to do the programming of the financial, material, medication, record and scheduling system section. An employee develop his or her skills step by step in this department as the work done in this department is the core product of the company and one has to get well trained to keep up the quality of the systems made by the company. The third level is also called as intermediate level of system development. After this level one has to go to the level 4 stage but to get qualified for this level one has clear examination. In level four an individual is fully trained in the integration, applications and programming of the systems. An individual get expert in system development and will be eligible for the pay raise and the salary of an individual will go up to $1800. It is understandable that when an employee gain more experience and get expert in their job that employee becomes more valuable asset to the company. To retain the experienced employees company has to train their employees and promote them according to their abilities. In System installation department the new employees have to go through hardcore system installation training as the system installation is a very vast and complex process. An employee has to go through the training period 3 months in which one has to conduct several training sessions. Once the training is done and employee has to do practical training, which is sometimes called on job training in which new employees need to install systems under the supervision of a supervisor or a senior system installation executive. After spending minimum period of one year employee is then eligible to step in to the level 2 an employee gets the pay raise of 20% of the base pay. In the level 2 employees must be able to install basic systems and application soft wares. Also they must know testing the software operations. An employee has to spend minimum of one year time in level two. After completing and getting expert in level 2 employee then promotes to level 3 in which an employee must be able to test the installed systems and must be able to test application software module interface. In this level an employee get the raise of $200 on their base pay. After minimum of two year time in level 3 and employee is eligible to Zenith Medical System Incorporateds Page 14

take examination to step into level 4, in which an employee should be able to analyze system requirements and should be able to plan hardware layout of the new system. In level four an employee gets a raise of $400 on the base pay. In system maintenance department the entry level employee also has to go through a hardcore training as their job is the most important job in the organization. As they are the one who needs to know each and everything about the system. They need to know what does the system do and how to operate the system. The entry level employees get the base pay of $1000 and after spending 3 months of training period plus one year working under the supervision of supervisor in level one, they are eligible to move to level two. In level two the employee should be able find and fix the problems with the basic systems installed. The employees need to learn each and every part of the basic systems installed. The base salary of an employee in level two will get a raise of 20% of their total base pay. After completing one year in level two an employee than is eligible to step into level three, in this level system maintenance employees must be able to cope up with the problems of new systems installed which are much more complex then the basic systems. Also an employee will get the raise of $200 in its base pay. After completing the level 3, an employee is eligible to take examination to step into level 4 after being in level 3 for minimum period of 2 years. The level four employees should be able to trouble shoot and determine the new system requirement with changing hardware. In this stage an employee if fully trained for his job and should be able to cope up with any kind of problems with the system. The base pay of an employee goes to $1800. From figure 1.1 one can find out that the pay for knowledge plan consists of defined progression of paths through the skill level blocks, specification of minimum time frame, training, Rate of pay for each skill block.

COMPENSATION STRATEGY Zenith need to concentrate on the job families to apply the appropriate compensation strategy. According to the text book job family is defined as A job family is defined as a series of progressively higher, related jobs distinguished by levels of knowledge, skills, and abilities (competencies) and other factors, and providing promotional opportunities over time(Long,2010). A job family is a series of jobs involving work of the same nature, but Zenith Medical System Incorporateds Page 15

requiring different levels of skill and responsibility. For example in a restaurant a waiter is hired to complete the daily tasks and duties. A waiter can be a high school graduate student who has very little experience, whose skills are being developed and who would be given responsibilities at a lower level than those with experience. On the other hand the senior waiter which is also called head waiter would be one with many years of experience whose skills and competencies are fully developed and who completes the job duties of high level. Thus, the value of the waiters varies widely based on the experience, competencies and the responsibilities he or she has. The main purpose of Job family is to improve competencies of the workforce through better selection and placement and it also help to increase training and development participation of the employees. Zenith need to determine the job family so that they can increase the retention of competent employees and also it will help to improve an individual employees performance and contribution. Determining the job families has a huge impact on managers to make staffing decisions which allow flexibility to managers to assign job duties. Job Family Names of the Job included in the Job Family

Administrative job family

Secretary, Clerks

Communication job family

Marketing and sales

Application programmer job family

Junior, intermediate, senior application programmers

Specialist professionals job family

System Installation, System Integration, Systems Marketing specialist

Leadership job family

Directors, managers, supervisors of all departments

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Human Resource Job family

Compensation clerks and officers

Job Families Table (figure 1.2) Our team has made a table of job families for Zenith, in which one can see that there have been six job families. And under each job family certain number of jobs has been listed. The first job family is Administrative job family under this job family the secretaries and clerks of all departments in Zenith has been listed. The second job family is communication under this job family the marketing and sales executives has been listed. The third job family is Application programmer under this job family junior, intermediate and senior applications programmers have been listed. The fourth job family is specialist professionals under this job family the System Installation, System Integration; Systems Marketing specialist has been listed. The fifth job family is Leadership in this job family all the directors, managers and supervisors are listed. The last job family which our group has made is Human resource management under this job family all the jobs of Human resources are listed. The first job family is administrative in which secretary and clerks have been listed (figure 1.3). The work which is done by clerks and secretaries are routine work in which they follow the orders of their seniors and accomplish a work given by them on daily basis. This kind of work needs very little knowledge and also fewer skills, therefore this kind of job require task behaviour from the employees. In which employees can take orders from there seniors and get the job done in given time frame. The employee which fall under this job family should get fixed base pay salary plus Zenith should provide their employees with meaningful affordable healthcare benefits. This strategy mix will help the employees to job security plus benefits will attract and retain the existing employee. Base salary of the employee is to be determined by experience level, the market rate, and internal equity for new hires, transfers, promotions and adjustments. Future increases in base salary should be determined by individual performance as assessed through the performance management process. Required Behaviour Task Behaviour Compensation mix Base pay, pension plan Mandatory Benefits Zenith Medical System Incorporateds Task of compensation mix Job Security Retain employees Page 17

Health care benefits Performance Incentives (threshold) Pension plan (Figure 1.3)

Attract new employees Motivation for work Retention

The second job family is Communication in this job family the employees from marketing and sales are listed because they are the one who communicate with the customers and use their communications skills to persuade the customers to buy companys product (figure 1.4). For this job family the membership behaviour is required, as they are first channel through which company get introduced to the new customers. Also marketing and sales employees has to behave like a companys ambassador and represent the company to existing and new customers. As discussed earlier in the report that the sales and marketing employees should get the good base salary which should be little higher than the market base pay. Also individual targets needs to be set plus a team incentive plan, which will motivate an individual to work hard as well as employees will work in teams to accomplish the team incentives. This compensation mix will bring a healthy internal competition as well as company will be benefited simultaneously.

Required Behaviour

Compensation

mix

(Base

pay, Task of compensation mix

Performance pay, Indirect pay)

Membership Behaviour

Lead Base pay, pension plan Mandatory Benefits Individual Incentive plan Team incentive plan Commissions

Job satisfaction Job security Exerts Motivation Focus on shared Goal

(Figure 1.4) The third job family is application programmer in this job family there are junior, intermediate and senior application programmers are listed (figure 1.5). They are the one who are skilled workers; people with specific qualifications such as university degree in computer science can only work as a application programmers. The main duties of an application programmer are Zenith Medical System Incorporateds Page 18

entering program codes into computer system, application generators such as RALLY or Oracle forms. This job family is a core family of the company therefore organization citizenship behaviour will be required from this job family. In this job family, the employee needs to voluntarily undertake special behaviours beneficial to the organization. The employee creativity to come up with new software development will definitely help company to stand out in the market. Zenith need to use a very healthy compensation mix for this job family. Every employee in this job family will get base salary plus flexible benefit plans that enable individual employees to choose the benefits that are best suited to their particular needs. However, a basic or core benefits package of life and health insurance, sick leave, and vacation ensures that employees have a minimum level of coverage will be provided to all employees. The flexible benefits plan will help the employees gain greater understanding of the benefits offered to them and the costs incurred. Zenith can maximize the psychological value of their benefits program by paying only for highly desired benefits. By this plan Zenith will gain competitive advantage in the recruiting and retention of the employees. Zenith should also include the this job family into profit sharing plan of the company which will motivate the employees to use their potential to find out innovative ways to enhance their skill to develop software for the company.

Required Behaviour

Compensation

mix

(Base

pay, Task of compensation mix

Performance pay, Indirect pay) Organization citizenship behaviour Lead base salary, pension plan Mandatory Benefits Flexible Benefits plan Profit Sharing plan (Figure 1.5) Job satisfaction Security Attract and retain employee Motivation for development

The fourth job family is specialist professionals in this job family System Installation, System Integration, Systems marketing specialist are listed (figure 1.6). The employees from this job family are either qualified from a very good university degree holder with some specialized field or else an employee has several years of experience in one field of work. Zenith require Task behaviour from these kinds of employees, these employees are generally used for training purposes and perform tasks that have been assigned by the management. These kinds of Zenith Medical System Incorporateds Page 19

specialist are very important for the organization because the new employees in the organization have to go through proper training so that they can develop their skills in the particular area of work. And a very well experienced and highly qualify trainer is needed to train the employees well. Therefore to attract and retain this kind of job family, Zenith needs to pay a good amount of base salary to retain them plus bonuses. Also a non-contributory pension plan should be add into the compensation mix in which the contribution to a plan are made solely by the company. This kind of compensation mix will motivate this job family to do well in their tasks. Also with noncontributory pension plan employees will be always tempted to stick with the organization.

Required Behaviour

Compensation

mix

(Base

pay, Task of compensation mix

Performance pay, Indirect pay) Task Behaviour Lead Base salary Mandatory benefits Bonuses Non-contributory pension plan Group and Individual performance (Figure 1.6) Job satisfaction Security Motivation to perform well Retention

The Fifth job family is Leadership in this job family the Directors, managers, supervisors of all departments except Human resource management are listed (figure 1.7). The employees from this job family are very well seasoned in their particular field of study. Employees in this stage have several years of experience and expertise in their relevant field. It is very important for an organization to have stable employees at this level, therefore Zenith need to make sure they compensate these employee in a way in which they are satisfied and eager to stay with the organizations for longer period of time. Zenith need to acquire citizenship behaviour from these kinds of employees and in order to obtain this behaviour Zenith need to pay a very high base salary plus defined benefit plan in which the amount an employee is to receive upon retirement is specially set forth. Plus gain sharing plans need to be offered to this job family to keep the employees motivated to achieve the targets set by the organization.

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Required Behaviour

Compensation

mix

(Base

pay, Task of compensation mix

Performance pay, Indirect pay) Organization citizenship Behaviour Lead Base salary Mandatory benefits Defined benefit plan Gain Sharing plan Group and Individual performance (Figure 1.7) The sixth job family is `Human resource management` in this job family the compensation clerks, officers and managers are listed(figure 1.8). Human resource department is a very important part of an organization. Employees of this job family need to practice competitive strategies to recruit and select right employees for an organization. An organization needs task behaviour from this job family. In order to acquire this behaviour from this job family zenith need to pay moderate base pay plus bonuses. Zenith also needs to apply commission based compensation strategy for the employees. However the commissions need to be measured on the stability of the employees. This will motivate this job family employee to attract or recruit employees who are looking for long term jobs in the company. Because nowadays the biggest challenge which organizations are facing is to maintain low employee turnover. Due to high turnover organizations product quality is hampered indirectly and therefore customer satisfaction also decreases and it directly have a impact on sales of the company. Job satisfaction Security Retention Motivate leadership Motivate individuals in Team

Required Behaviour

Compensation

mix

(Base

pay, Task of compensation mix

Performance pay, Indirect pay) Task Behaviour Match Base salary Mandatory benefits Commissions Profit Sharing plan Group and Individual performance (Figure 1.8) Job satisfaction Security Individual motivation Motivate Team

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In order to apply effective compensation mix, zenith needs to concentrate on one of their compensation policy. The policy which requires that compensation levels and decisions about employee compensation be kept secret and prohibit employees from revealing their compensation information to anyone. This policy will avoid misperceptions and distrust of compensation fairness and pay for performance standards among employees.

Compensation Strategy Template for Each Job Family

Job Family: Administrative Base Pay Job Evaluation Market Pricing Pay For Knowledge Proportion of total 50% 40% 10%

Performance Pay Individual Performance Pay Commissions Team Performance Pay

Proportion of total 10% 10% 30%

Indirect Pay Mandatory Benefits Pension Plan Health And Life Insurance Employee Services Other Benefits

Proportion of total 30% 5% 5% 3% 2%

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Job Family: Communication Base Pay Job Evaluation Market Pricing Pay For Knowledge Proportion of total 50% 40% 10%

Performance Pay Individual Performance Pay Commissions Team Performance Pay

Proportion of total 10% 10% 30%

Indirect Pay Mandatory Benefits Pension Plan Health And Life Insurance Employee Services Other Benefits

Proportion of total 30% 5% 5% 3% 2%

Job Family: Application programmer Base Pay Job Evaluation Market Pricing Pay For Knowledge Proportion of total 50% 40% 10%

Performance Pay Individual Performance Pay Commissions

Proportion of total 10% 10%

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Group Performance Pay

30%

Indirect Pay Mandatory Benefits Pension Plan Health And Life Insurance Employee Services Other Benefits

Proportion of total 30% 5% 5% 3% 2%

Job Family: Specialist professionals Base Pay Job Evaluation Market Pricing Pay For Knowledge Proportion of total 50% 40% 10%

Performance Pay Individual Performance Pay Commissions Group Performance Pay

Proportion of total 10% 10% 30%

Indirect Pay Mandatory Benefits Pension Plan Health And Life Insurance Employee Services Other Benefits

Proportion of total 30% 5% 5% 3% 2%

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Job Family: Leadership Base Pay Job Evaluation Market Pricing Pay For Knowledge Proportion of total 50% 40% 10%

Performance Pay Individual Performance Pay Commissions Group Performance Pay

Proportion of total 10% 10% 30%

Indirect Pay Mandatory Benefits Pension Plan Health And Life Insurance Employee Services Other Benefits

Proportion of total 30% 5% 5% 3% 2%

Job Family: Human resource Base Pay Job Evaluation Market Pricing Pay For Knowledge Proportion of total 50% 40% 10%

Performance Pay Individual Performance Pay Commissions Group Performance Pay Zenith Medical System Incorporateds

Proportion of total 10% 10% 30% Page 25

Indirect Pay Mandatory Benefits Pension Plan Health And Life Insurance Employee Services Other Benefits

Proportion of total 30% 5% 5% 3% 2%

EVALUATION PLAN FOR THE ZENITH

At this stage, we will introduce our proposed job evaluation plan which will be constructed using the point method. We will look into the set of job families we already created for Zenith and evaluate each job using the compensable factors we have selected, the factors scale we are using, the factor weight applied and the reason for this. For Zenith, we are selecting four evaluation factors. These factors includes: Skill. Effort. Responsibility. Working Conditions.

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SKILL: Basically, skills here involve education, experience, and the complexity of the decision making aspect of the job. The skill involved in performing jobs in Zenith has to be well spelt out, Different skills are required at different stages and department in Zenith. The skills of a system analyst are different from the skills of a system maintenance officer. Skills needed by the marketing department is also different from that needed by the system development, all departments need different skills to perform their duties, the higher the skills acquired, the more an employee earns.

EFFORT: This is the personal ability put into the job, it involves the measure of direction received and level of job control required performing each job, it explains if a worker works under close supervision or is independent. It is the measure of the ability a worker puts into the job to improve the quality of output. The effort put in by employees of the maintenance department determines if they will be highly productive in the maintenance of customer computers, that of the systems development determines if systems are developed at the right time to meet up with customers need and that of the system installation determines if the systems are installed in a perfect way that also meets up with customers specification. RESPONSIBILITY: This measures the ability of the workers to take responsibility for their actions. It measures the ability of workers to be able to detect errors in the line of each development, installation or maintenance in Zenith. Responsibilities include supervision and work relationships. It goes ahead to explain what the error at anytime detective could have on the company. The errors here in Zenith led to lower sales and losses; Responsibility goes a long way to explain who is doing what and who is supposed to be responsible for what. The higher the responsibility, the higher the job is.

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WORKING CONDITIONS: This includes the conditions of work that employees of an organization are exposed to. It may include exposure to dirt, chemicals, extreme weather conditions and exposure to all other types of unfavourable working environment. Here in Zenith, there is very few or no bad working environment or unfavourable working conditions except for installation and maintenance department who are exposed to customer's anger due to the present condition of the company. MEASURING SCALE: These factors apply to different families of job in Zenith department in different ways. The skill factor applies to all employees of Zenith, the higher the skills shown on the job process, the higher an employee is rated, Skills are needed in all department of Zenith, including the marketing department which needs highly skilled marketers to be able to convince customers to be able to sell the company's product. For Responsibility, all employees are involved but employees at a higher level are more involved in Zenith. All employees take responsibility for jobs assigned to them but some have more responsibilities than others as long as other things like positions and experience are put into consideration. All staffs are also expected to put in their efforts in the process of working for Zenith, the higher the effort put in, the more the job duties involved. Effort is a part of the job evaluation factor that is very important in Zenith. The working environment of Zenith is less hazardous, the working environment is safe to a high extent in the sense that employees are not exposed to hazards or a dangerous work environment except for the installations and maintenance workers who might face angry customers and this is not really a serious issue.

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MEASURING SCALE Factors Skill Effort Responsibility Working Conditions System Dev High High High Low System Main. High High High N/A System Prog. High High High N/A Sales High High High N/A

FACTORS Formal Education; these factors deals with the formal education acquired by an employee Degree 1: Completion of grade 9 Degree 2: Completion of high school Degree 3: One year post secondary Degree 4: Two years post secondary Degree 5: University bachelor's degree/professional designation Degree 6: University Degree and professional designation Degree 7: Masters Degree and professional designation.

SKILLS Degree 1: Knowledge of Computer application Degree 2: Systems development knowledge Degree 3: Ability to apply systems knowledge

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Degree 4: system application knowledge and staff training Degree 5: System development/ maintenance Degree 6: System development/ maintenance/Integration Degree 7: General knowledge of all systems stages.

JOB EVALUATION RATING DEGREE OF RATING JOB TITLE - SYSTEM DEVELOPMENT Education Experience Mental Skill Mental Effort Physical Effort Accuracy Responsibility Work Environment 5 10 10 20 10 20 10 20 0 0 20 30 5 10 0 0 15 20 25 30 40 50 30 40 50 30 40 50 0 0 0 40 50 50 15 20 25 0 0 0 30 35 60 70 60 70 60 70 0 0 70 80 30 35 0 0 140 280 280 280 0 340 140 0 1 2 3 4 5 6 7 ALLOCATED POINTS

Total points for this job is 1460

1460

DEGREE OF Zenith Medical System Incorporateds Page 30

RATING

POINTS JOB TITLE - SYSTEM 1 2 INTEGRATION Education Experience Mental Skill Mental Effort Physical Effort Accuracy Responsibility Work Environment 5 10 5 10 10 20 10 20 0 0 20 30 5 10 0 0 15 20 25 15 20 25 30 40 50 30 40 50 0 15 20 40 50 50 15 20 25 0 0 0 30 40 30 35 60 70 60 70 25 30 70 80 30 35 0 0 145 140 280 280 90 340 140 0 3 4 5 6 7 ALLOCATED

Total points for this job is 1415

1415

DEGREE OF Zenith Medical System Incorporateds

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DATING POINTS JOB TITLE - SYSTEM MAINTANANCE Education Experience Mental Skill Mental Effort Physical Effort Accuracy Responsibility Work Environment 5 10 5 10 10 10 10 20 0 0 20 30 10 10 0 0 15 20 25 15 20 25 30 40 50 30 50 50 0 10 20 40 50 50 20 20 20 0 0 0 30 40 30 35 60 70 60 70 20 30 70 80 30 30 0 0 145 140 270 290 80 340 140 0 1 2 3 4 5 6 7 ALLOCATED

Total point 1405

Looking at the tables above, all departments have different job evaluations and are rated in different ways; the different departments have different jobs and are evaluated in different ways. All departments have their own point values for each job and it explains how jobs are rated depending on how important it is to the company. Zenith has three major departments represented here, the system development have the highest number of points allocated followed by the system integration and lastly the system maintenance department.

CONCLUSION Zenith Medical System Incorporateds Page 32

The most important empirical finding of this assignment is that compensation of an organization exerts a strong positive influence on internal and external service quality. Compensating employees in such a manner that they internalize and identify with the organizations goals, objectives and values will thus enhance internal and external service quality through increases discretionary effort. Organizational compensation strategy from the discussion, one may

establish a distinction between the role of compensation strategy and the motivation reinforced by the compensation system. It might be concluded that, in todays competitive and rapidly changing environment, compensation mix is must applicable in organizations in order to adapt easily to changes. Compensation mix derives employee motivation which is a major factor in terms of administrative tasks as well as for realization and achievement of the strategic goals. Author has also discussed Hertzberg theory in order to understand the motivational needs of employees.

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REFERENCES:
http://www.stockoptions.org.il/Admin/App_Upload/Performance%20Pay%20and%20TopManagement%20Incentives.pdf (ONLINE, Accessed on 10th April, 2011)

http://www.ddiworld.com/DDIWorld/media/white-papers/gettingthemost_wp_ddi.pdf?ext=.pdf (ONLINE, Accessed on 05th April, 2011)

HERZBERG, F., MAUSNER, B., SNYDERMAN, B.B., 1959. The Motivation to Work. New Jersey: John Wiley & Sons.

KANE, B. AND PALMER, I., 1995., Strategic HRM or managing the employment relationship? International journal on manpower, 16 (5/6), 6-21.

LONG, J, Richard 4th edition, Strategic, 2006 Compensation in Canada, (ONLINE, Accessed on 15th April, 2011)

http://www.flexstudy.com/catalog/schpdf.cfm?coursenum=9560a (ONLINE, Accessed on 13th April, 2011)

http://www.cirano.qc.ca/pdf/publication/2003s-45.pdf (ONLINE, Accessed on 16th April, 2011)

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