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Section A

problem1)i) Briefly outline the steps involved in developing a pay structure.

ii) What are the key components of group level diagnosis? Discuss how the absence of any one of these components can impact outputs.        

problem2)i) Describe how executive compensation differs from compensation packages provided for other employees in the organization. Identify the main criticism regarding executive compensation in India today.

ii) Under what conditions are customer-centric structures appropriate? What challenges does this type of organization structure face and why?

Section B

Case Study:

The northern division of Gautam Appliances met every month to analyze its targets and the actual sales. Shravan Kumar, a jovial and friendly manager who was respected by all sales personnel headed the meeting. His suggestions and other contributions during meetings always helped sales personnel exceed their targets. He also gave the patient listening to employee problems and suggestions. During one such review meeting, one of the sales executives, Pavan Kumar, raised issue of the uniform compensation system being  implemented by management. He felt that in spite of their achieving a greater percentage of the sales than southern division, they were not being compensated suitably. The incentives being received by the employees of both regions were also the same. There were times when northern division achieved double sales of the southern division. But, the management did not recognize or acknowledge this. Pavan felt that it was demotivating for them to work hard and put in additional effort when the other division was not matching their performance, but were getting the same compensation.

Shravan described his inability to provide the solution to problem as it was an organizational issue.  He told employees that despite his suggesting to management that they adopt the performance-based variable pay system, they had not considered it. He said the management believed in standard pay system based on number of days the employees worked. Though, he assured employees that he will put forward this suggestion to the top management at the next meeting. The meeting was adjourned and sales personnel left the room in a state of hope.

After the month, when staff assembled again for review meeting, Shravan was not his usual jovial self. The employees realized that management had not reacted positively to the idea of performance-based compensation packages. Shravan tried to convince the employees that the management was looking into this issue and will resolve it as quickly as possible. Though, even two months later the sales personnel did not receive any information from management on this issue. Next two months saw the very high employee turnover rate in the northern division of Gautam Appliances. Employees who remained also did not put in their best efforts. Their sales performance came down drastically. At the monthly meetings, top management problemed Shravan about poor performance and the high employee turnover. Shravan made it clear to management that even at this stage if they did not consider rewarding employees for their performance, they will be losing a valuable employee base. He suggested that they must at least consider giving employees incentives to reward their performance. After two days, Shravan was called and asked to present his views on designing an suitable performance-based compensation system for the organization.


(a) The organization was following traditional method of compensation. What are these methods and how do they function?

(b) Shravan requested manager to provide the employees with at least incentives based on the targets being achieved. What are the different incentive schemes that could be implemented?

Management Theories, Management Studies

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