SYNOPSIS ON

A STUDY ON COMPENSATION MANAGEMENT

1. Introduction to the Study:

Compensation management is the practice of the organization that involves
giving monetary as well as non-monetary rewards to the employees, in order to compensate for
the time they allocate to their job. The use of compensation management is increasing as
organizations have started to realize the need for leveraging its human capital in order to gain
a competitive edge in the industry.Compenstation and Reward system plays vital role in a
business organization. Since,among four M's i.e., Men , Material, Machine and Money. Men
has been most important factor, it is impossible to imagine a business process without Men.
Every factor contributes to the process of production/business. It expects return from the
business process such as rent is the return expected by the landlord, captalist expects interest
and organizer i.e, entrepreneur expects profits similarly the labour expects wages from the
process.
Compensation may also be viewed as, a system of rewards that motivates
employees to perform the assigned task, also a tool used by organizations to foster the values,
culture and the behavior they require, and an instrument that enables organizations to achieve
their business goals

2. Defination of Compensation Management:

“Compensation means something, such as money, given or received as payment
or reparation, as for a service or loss. Compensation may be defined as money received in the
performance of work, plus the many kinds of benefits and services that organizations provide
their employees.”

“Compensation includes direct cash payments, indirect payments in the form of

employee benefits and incentives to motivate employees to strive for higher levels
of productivity” – Cascio
 Compensation is the remuneration received by an employee in return of hisher
contribution to the organization. It involves balancing the work employee relation by
providing financial and non- financial benefits or incentives to employees.

3. Types of Compensation:
Compensation can be classified into:
1. Financial compensation and
2. Non- Financial compensation.

1. Financial Compensation:
Financial compensation includes Direct compensation and Indirect
compensation.

1.1. Direct Compensation :

The direct compensation is used to describe financial remuneration usually cash
and includes such elements as basic pay, dearness allowance, overtime pay, shift allowance,
incentive, bonus, profit sharing bonus and commissions, etc.

1.2. Indirect Compensation :

Indirect compensation or wage supplements or fringe benefits refer to such
benefits as provident fund, pension scheme, medical and health insurance and sick leave and
various other benefits and perks.

2. Non- Financial Compensation:

Non- financial compensation includes praise and recognition and
satisfaction of employees.

4. Need of Compensation Management:

The basic need of compensation management is to meet the needs of
both employees and the employer. The employers want to pay as little as possible to keep their
costs low. Employees want to get as high as possible. The compensation management tries to
balance between these two with following specific needs:
 i. Attracting and Retaining Personnel:
From organization’s point of view, every organization wants new talent
and skill from outside ,for this purpose the compensation management aims at attracting and
retaining right personnel at right place in the organization time to time.

ii. Motivating Personnel:

Compensation management aims at motivating personnel for higher
productivity. Compensation management can be designed to motivate people through
monetary compensation.

iii. Optimizing Cost of Compensation:

Compensation management aims at Optimizing cost of compensation by
establishing link performance with compensation.

iv. Consistency in Compensation:

Compensation management tries to achieve consistency-both internal
and external-in compensating employees. Internal consistency involves payment on the
basis of criticality of jobs and employees’ performance on jobs. External consistency
involves similar compensation for a job in all organizations.

5. Scope of the Study:

The study will be conducted to know the effectiveness of compensation management
at GMG SERVICERS, Hyderabad. Since GMG Servicers has a very well organized and
established HRD, it was great opportunity for me to study this aspects in detail with the time
frame available and make a report.

6. Objectives of the Study:

1. To study the role of the employees in the organization.

2. To know the opinion of the employees on the grievance COMPENSATION procedures
and programsin the organization.
3. To study the organisation policies to maintain good relations between the employees.
4. To solve the workplace issues and problems the employees are facing in the
organization.
 5. To give motivation to the employees.

7. Research Methodology:
Sample size: 50 respondents
For the purpose of study following data has been used,

i. PRIMARY DATA COLLECTION:

The primary source of data collection was through questionnaries.Employees
has to give their feedback about performace appraisal by answering the questionnaire.

ii. SECONDARY DATA COLLECTION:

The secondary source of the data was suggestions and opinions of the
employees through direct interact with them.

8. Limitations of the study:

In project of this nature, one cannot claim 100% accurate and authenticity.
However every possible efforts has been made to make it genuine and authentic.It is possible
that some errors might have crept in while collecting data or in the preparation of the report
due to the following reasons
1. Lack of experience on part of the researcher.
2. Errors in tabulation and analysis of the data may weaken the exactitude.
3. Sample size may not be enough.
4. The answers given by the respondents may be biased or not true.

9. Review of literature:

1. Matthew Freedman and Renata Kosova1 (2012) ,writes a paper entitled “Agency
and Compensation: Evidence from the Hotel Industry” in ‘The Journal of Law, Economics,
and Organization’ and examined how agency problems in the workplace interact with
compensation policies by taking advantage of the structure of the hotel industry, in which many
chains have both company-managed and franchised properties.There results suggest that the
timing of pay and the propensity to use performance-based incentives relate to the extent of
agency problems within establishments.
 2. Maria Joutsenvirta (2013), published a paper “Executive Pay and Legitimacy:
Changing Discursive Battles over the Morality of Excessive Manager Compensation” in
‘Journal of Business Ethics’.This study investigated discursive processes through which
heavily contested executive pay schemes of the Finnish Energy Giant Forum were constructed
as (i) legitimate in public during 2005–2009.The analysis highlights a change in moral
reasoning by social actors as they adapt their justifications to a changing social context. This
study has important implications for our understanding of the ethical aspects and socio-political
embeddedness of manager compensation.

3. Yusuf Mohammed Nulla (2013), published “The Examination of Top Manager

Compensation System of NYSE Energy Companies” in ‘Strategic Management Quarterly’.
This study investigated CEO compensation system of NYSE energy companies. It was found
that, there was a relationship between CEO salary, CEO bonus, total compensation, firm size,
accounting performance, and corporate governance.

4. Amit Hole and Ashutosh Misa (2013) ,published a paper entitled “Impact of
Compensation Strategies on Performance of Insurance Agents in General Insurance
Companies” in ‘Tactful Management Research Journal’. This research paper analyzes impact
of compensation policies on performance of insurance agents for general insurance sector. It
helps to improve the market share of public sector general insurance company by improving
performance of insurance agents by motivating them by technique of compensation
management.

5. Rim Ben Hassen (2014), writes on “Executive Compensation and Earning

Management” in ‘International Journal of Accounting and Financial Reporting’.The objective
of this paper is to examine one of the motivations that could encourage managers to manage
the
accounting results, namely the managerial remuneration. The resultof this study shows that
executive compensation is determined by the requirements of earning management.
Specifically, our litters indicate that total compensation is negatively related to the absolute
value of accruals. This result confirms the theoretical hypothesis alignment of interests of
executives with those of shareholders.

6. Uthra (2014), published an article entitled “A Study on Compensation

Management at Sri Steel Industries Limited, Coimbatore” in ‘The International Journal of
Business and Management’.The objectives of the study are to study the compensation
management practices in the organization and also to identify the type of compensation and
analyze the satisfaction of workers with regard to compensation.

7. Avinash Pawar and Charak (2014) ,writes and article entitled “A Study and
Review of Employee Value Proposition: A Tool of Human Resource Management” in
‘Review of Research’. The Employee Value Proposition (EVP) represents the perceived
overall
deal between employer and employee. This paper takes the Review of Concept of Employee
Value Proposition and its relationship with Human Resource Management.

8. Emmanuel Erastus Yamoah (2014), in his paper entitled “Exploratory Analysis

of Compensation and Employee Job Satisfaction” published in ‘Developing Country
Studies’, organizations are made up of people and the success or failure of these organizations
are dependent on the people in the organization.This study examined the issue compensation
and employee job satisfaction. The result indicated that there is no significant relationship
between compensation and employee job satisfaction among the respondents. The study
recommended that better career development opportunities should be given to the employees
to increase job satisfaction.

9. Sunil Dutta and Qintao Fan (2014), writes on “Equilibrium Earnings

Management and Managerial Compensation in a Multiperiod Agency Setting” in ‘Review
of Accounting Studies’.To investigate how the possibility of earnings manipulation affects
managerial compensation contracts, the authors studied a twoperiod agency setting in which a
firm’s manager can engage in window-dressing activities to manipulate reported accounting
earnings. When the manager is privately informed about the payoff of an investment project to
the firm, the authors identify plausible conditions under which prohibiting earnings
management can result in a less efficient investment decision for the firm and more rents for
the manager.

10. Jaideep Chowdhary (2014), writes on “Impact of Financial Constraint on

Incentive Compensation and Product Market Behavior” in ‘Economics Bulletin’. The
paper introduces financing constraing in a model of incentive compensation and product
market and develops key insights about the interactions of product market behavior, financial
constraint and incentive compensation.The paper generates the testable hypotheses that a
financially constrained firm will offer higher incentive compensation to its manager which has
not yet been tested empirically.
10. References:
10.1.Books:

i. Strategic Compensation: A Human Resource Management approach

- Joseph J. Martocchio
A Human Resource Management Approach demonstrates the art and science
of compensation practice and its role in a company's competitive advantage.This book focuses
on the context of compensation practice, the criteria used to compensate employees,
compensation system design issues, employee benefits, the challenges of compensating key
strategic employee groups and pay and benefits around the world.

ii. Compensation
– George T. Milkovich
This book examines the strategic choices in managing total compensation. The
total compensation model introduced in chapter one serves as an integrating framework
throughout the book. The authors discuss compensation issues in the context of current theory,
research and real-business practices.This is the market-leading text in this course area. It offers
instructors current research material, in-depth discussion of topics, integration of Internet
coverage, a modern design, excellent pedagogy and a truly engaging writing style.

iii. Compensation Management in a knowledge-based world

– Richard I. Henderson
This book offers a practical exploration of the systems, methods and procedures
involved in establishing and administering a compensation system within any
organization.Some of the topics covered are Macroeconomics Compensation Concepts,
Compensation and No compensation, Organizational Structure : Strategic and Tactical
Compensation Issues, Legislation and Compensation, Job Analysis, Description and
Evaluation, Job Evaluation : Two Point-Factor Methods and much more.

10.2.Journal Articles:

I. Bijan Abedini, (2013): Analysis of the Relationshipbetween Managers’ Compensation

and Earnings in Companies Listed in the Tehran Stock Exchange. Journal of
Educational and Management Studies. Vol. 3. No. 4. 2013. P. 455-464.
 II. Adisa Delic and Amra Nuhanovic (2014): Management Compensation and the World
Economic Crisis: Evidence from Bosnia and Herzegovina. Asian Journal of Business
Management. Vol. 2. No. 3. June 2014. P. 160-175.

III. Sorasak Tangthong (2014): A Causal Model of Compensation and Benefits and
Reward Management on Organizational Effectiveness of MNCs. Asian Journal of
Management Research. Vol. 5. No. 1. 2014. P. 44-65.

IV. Marina Riga (2014): Medical Errors in Greece: An Economic Analysis of

Compensations Awarded by Civil Courts (2000-2009). Open Journal of Applied
Sciences. Vol. 4. 2014. P. 168-175.

10.3.Bibliography:
Bibliography as a discipline, is traditionally the academic study of books as
physical, cultural objects; in this sense, it is also known as bibliology. The field of bibliography
has expanded to include studies that consider the book as a material object. Bibliography, in its
systematic pursuit of understanding the past and the present through written and printed
documents, describes a way and means of extracting information from this material.
Bibliographers are interested in comparing versions of texts to each other rather than in
interpreting their meaning or assessing their significance. Carter and Barker (2010) describe
bibliography as a twofold scholarly discipline—the organized listing of books (enumerative
bibliography) and the systematic description of books as physical objects (descriptive
bibliography). These two distinct concepts and practices have separate rationales and serve
differing purposes. Innovators and originators in the field include W. W. Greg, Fredson
Bowers, Philip Gaskell, G. Thomas Tanselle.
Descriptive bibliographers follow specific conventions and associated
classification in their description. Titles and title pages are transcribed in a quasi-facsimile style
and representation. Illustration, typeface, binding, paper, and all physical elements related to
identifying a book follow formulaic conventions, as Bowers established in his foundational
opus, The Principles of Bibliographic Description. The thought expressed in this book expands
substantively on W. W. Greg's groundbreaking theory that argued for the adoption of formal
bibliographic principles (Greg 29). Fundamentally, analytical bibliography is concerned with
objective, physical analysis and history of a book while descriptive bibliography employs all
data that analytical bibliography furnishes and then codifies it with a view to identifying the
ideal copy or form of a book that most nearly represents the printer's initial conception and
intention in printing.