Category: Business

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Business Research

Using variable pay programs to motivate employees

Looking at an example of IBM where the sales staff are paid using variable pay programs, whereas the software engineers are not. Why is this technique used on some staff and not others?

Variable-pay programs are programs in which employees are rewarded for achieving goals or receive profit shares on certain goals based on their performance. Belcher (1994) stated that at the time of the writing of the article, variable pay programs were being “creatively designed to meet the unique and ever-changing needs of the business”.

In my opinion, the decision to not reward System Engineers is not un-wise. It is safe to assume that IBM is not financially unstable but even in a company of that size there are limited resources. A broad judgement on the situation is that it is more than likely not feasible to offer reward programs to all aspects of the business.

If a sales person succeeds well at their job we can translate their performance directly into what value they have added to the company. Signing a 3 year contract at $1mil per year means that is what the sale person has brought to the company, working out how much of that he/she can be given as a bonus is quite easy, and if we have guaranteed more income, then we are most likely able to afford to give the sales person a bonus in relation to the sale they have just made.

As far as a Systems Engineer goes, while they are vital to the successes of the company it is hard to differentiate their successes as worthy of a bonus (an outstanding performance worthy of a reward) when comparing it to what one would expect from someone in that position. One could argue the same towards a salesman but fixing a server crash is not necessarily something that wins the company new contracts and livelihood.

Another point that is quite important to consider is the salary of the two different professions. If we take a look at PayScale’s (2011) national salary data for the United States the average pay for a sales representative (including profit sharing, commissions, bonuses and basic salary) ranges between $31 900 and $50 610 per year. Comparing this to PayScale’s (2011) average salary for Systems Engineers the amount is $62 297, which tells us that the average Systems Engineer in the US earns about $12000 per year more than the highest paid sales representative, including bonus, profit share and commissions.

In my experience as being both the employer and the employee on a day to day basis (due to the fact that I outsource some development, I have clients who hire me and developers who work for me), I personally would adopt the same method of payment as it is important to drive your sales team to achieve as many sales as possible. Basic salaries of sales people are remarkably less than that of engineers and most developers are satisfied with steady, decent salaries.

This is not to say that engineers do not want rewards; that would be a very inaccurate generalisation. But without the regular sales coming in, in most scenarios, it would become difficult to sustain constant rewards and bonuses.

To conclude my discussion I would like to say that it is in my opinion that the decision toward rewarding Sales people in IBM and not Systems Engineers is not to the detriment of the company. Comparing the two professions is like comparing apples and bananas – they are too different and one cannot easily apply the rules and rewards motivation as easily or feasibly towards System Engineers as towards Sales people. I do not believe that the Systems Engineers will be dissatisfied with the choice as they are more than likely aware that regardless of the rewards the sales people make, they are still earning a higher salary and would probably prefer to be in the position they are in than the position of the sales person.

References

Belcher, J (1994) ‘Gainsharing and Variable Pay: The State of the Art’, Compensation Benefits Review, 26 (3), p.50, SAGE Journals [Online]. DOI: 10.1177/088636879402600309 (Accessed: 20 February 2011).

PayScale.com (2011) Salary for People with Jobs in Network Administration/IT/Information Systems. Available from: http://www.payscale.com/research/US/People_with_Jobs_in_Network_Administration%2fIT%2fInformation_Systems/Salary (Accessed: 20 February 2011).

PayScale.com (2011) Salary Snapshot for Inside Sales Representative Jobs. Available from: http://www.payscale.com/research/US/Job=Inside_Sales_Representative/Salary (Accessed: 20 February 2011).

Categories
Business Computing Research

Working in a large organisation vs. a small company – advantages and disadvantages for IT admins

Being from a majority small-company background I can empathise more towards the small company advantages and disadvantages. I do, however have a number of close friends who are in larger companies holding IT positions and have had numerous conversations on this subject.

Advantages for IT administrators in small companies:

  • Most of the time, the diversion from the IT administrators standard tasks will be to do other IT tasks, in this scenario I am referring to a position as “network administrator/ database administrator/ user consultant and others”. Doing these different IT tasks will enhance their ability and knowledge of other areas of the business which will increase their skill set as well as potentially increasing their skill at their assigned IT administrator position (better understanding of other elements of the business related to the IT administrator position).
  • There is less chance that the employee will become bored of doing the same thing on a daily basis. The IT administrator generally is quite a static job (physically) and performing tasks like user consulting, network administrator allow for more physical interaction which is appealing to some.
  • Working in a small business, performing many tasks helps develop the entrepreneurial abilities of the IT administrator. If the IT administrator is set to run his/her own business the experience here is valuable. Vitez (n.d.) states “Business owners can attempt to pass basic entrepreneurship principals to their workers by requiring them to complete functions outside their normal work capacity. This concept is often known as cross training”.

Disadvantages for IT administrators in small companies:

  • While the IT administrator’s skill set may be growing, the figure of speech “jack of all trades, master of none” springs to mind. If they are constantly working on multitudes of different IT “specialties” they will not have as much time to master their abilities. Comparing to an employee who spends all of their time doing any one of the tasks the small business IT administrator is doing, the IT administrator will more than likely be the less competent of the two when it comes to that singular skill.
  • On the contrary to the advantage of not becoming bored, there is the possibility that the small business IT administrator will become bored with their job. If the passion lies with being an IT administrator and they have a dislike for dealing with users, SQL or any of the other tasks they may become bored or more likely annoyed with their job. Perhaps the tasks they are required to perform are demeaning and “beneath them”.
  • The extra roles may end up being very demanding, the IT administrator could be overworked and burned out from the stress of performing too many different tasks. Small businesses usually do not have the funding for a multitude of employees for each function so the pressure may not be relieved due to financial restraints. Perhaps the business owner could afford a salary increase, but not a new employee.
  • Small companies often are new and do not offer great job stability.

Advantages for IT administrators in large companies:

  • Larger companies have employees for specific tasks. The IT administrator will not be required, or seldom be required, to perform tasks outside of the specific role. Almost all of the IT administrator’s time is devoted to performing and mastering their skills for their role allowing for them to become very specialised in the specific tasks.
  • Larger companies often have budget for furthering employee education. As shown by Buchanan & Huczynski (2010, p.156) the example of Barclays Bank setting up its own corporate university. This will allow the IT administrator to acquire more qualifications which bring more value to his/her expertise.
  • Larger companies often have larger budgets. Along with increased specialisation aided by my above two points, the IT administrator potentially has better earning potential within the organisation. The IT administrator also has potential for a subordinate to be employed to carry out the “menial” tasks required of their position.
  • Stability of working for a large company provides the feeling of job security.

Disadvantages for IT administrators in large companies:

  • The requirement for skills outside of their specific role is replaced by other employees. The IT administrator may become stagnant and may begin to feel redundant. The repetition of the same function may become boring. Vitez (n.d.) mentions an example of the Ford motor company which brought about the assembly line / mass production method of business. While the IT administrator is certainly not an assembly line worker, the same feeling of “disappointment or unrest” may occur as with the assembly line worker, doing the same task over and over again.
  • The IT administrator may not feel important or involved in the company. Lack of involvement in the everyday running of the business may lead to a feeling of detachment with the core value and identity of the business.
  • Larger organisations are often stuck in their ways, using legacy systems or processes decided by a predecessor and this may be a system/process the IT administrator is unhappy with or does not like. Changing systems and processes in a large company is an expensive task and often is “not an option”, creative thinking is therefore limited if it does not fit within the current bounds of the organisation.

The small vs large company employer does generally boil down to personal preference. From my experiences and discussions, a large company offers a more recognisable feeling of importance (eg: if working for a well-known brand), while small companies tend to be more casual and easy going. As Buchanan and Huczynski (2010) point out, different types of people prefer different types of working environments.

References

Buchanan, A. & Huczynski, A. (2010) Organizational Behavior. 7th Edition. Upper Saddle River: Prentice Hall.

Vitez, O (n.d.) Specialization of Labor [Online] chron Small Business. Available from: http://smallbusiness.chron.com/specialization-labor-3890.html (Accessed: 13 February 2011).

Categories
Business

Managerial lessons I’ve learned while working in teams

My initial studies to enter the IT world was for a Computer Science Diploma which was a yearlong course covering the basics of many computer science areas – project management, linux/windows, networking, technician work, SQL and two programming languages as well as a few other short modules. Due to the fact that I was a first-time employee I was not going to be employed as anything managerial of course, so I worked as a programmer for around 3 years.

After 3 years of programming, most of the theory I learned on non-programming subjects such as the management/project management area were long and forgotten. I had just been awarded a lead programmer position where the boss had encouraged me to be the teams leader as well and I was quite interested in this despite being the youngest member of the team.

Despite being “thrown into the deep-end” the boss of this company was a fantastic manager who was hands on and involved, watching him and listening to his methods was a great learning experience for me as he had all the employees proud to be part of the business, it was almost like a ‘cult’, without the negative connotations. His biggest focus was on communication and he stressed me to have group meetings with my team every week, which I ended up doing every Monday and Friday.

Another vital issue that was stressed across the entire organisation was quick and efficient responses to any form of communication amongst employees and of course with clients. If the issue requested was not yet completed, or required a few hours to complete, all employees had to respond instantly to any communications stating that they were “on it” and with any questions that came to mind, sooner rather than later. Failure to do so resulted in the boss questioning the misconduct in-front of all of the other employees (open-plan working environment). This, in retrospect, I would imagine was a tactic of making the rule stick in one’s mind.

These lessons that I had learned I have carried with me and into the past 4 years of running my own business and I believe, besides the obvious requirement of good work, that this has been the prime reason why almost none of my clients have left my services.

While these lessons may seem obvious in theory to most people, the ability to stick to it and actually carry through good communication is surprisingly lacking.

To generalise the lessons I have learned, I would consider training potential employees – managerial and non-managerial – on some fundamental guidelines of communication (stating my above “story” to help realise the lessons to be learned):

  • Put yourself into the “shoes” of the recipient of your communication. If you are dealing with a colleague, client or employee and require information pertinent to what you are doing, always communicate your actions or intentions of actions as efficiently as possible. Waiting on a response can cause irritation, stress and/or anxiety – which can lead to a negative attitude and can cause resentment and many other negative consequences. You are the expert on what you are doing and this needs to be conveyed correctly and within a reasonable timeframe.

Kumar, Kalwani & Dada (1997) state that “waiting experiences are typically negative and have been known to affect customers’ overall satisfaction with the product or service”, while this states a product or service I am comfortable in relating it to communications as well.

Especially in the current fast-paced world, the introduction of the internet, email, mobile accessibility and access to information, people require instant gratification and their needs must be met in order to keep good relationships.

My initial lesson learned regarding the team leadership and watching my boss lead the company, I would outline as follows:

  • Always be aware of the activities of the members in your team and let the members of the team be aware of each other’s activities.

Bring your team together as a group and have regular (without being regular enough to interrupt progress) progress reports from each member of the team, it is important that all members are listening to the progress reports of each other in case they are needed to help or take over at a point in time, they will not be completely in the dark.

Monitor your deadlines carefully against the progress of your team, speak to your team if deadlines aren’t being met to identify problems/causes of delays.

Do not let time wear away on your level of planning and meetings. Persist with your progress reports and meetings regardless of capacity and other potential external factors. It is important to keep to your managerial routine and maintain efficiency. Letting meetings slip, or become too casual can result in members of the team not paying attention, yourself losing track of the teams doings and deadlines being missed.

Maintaining these qualities, I believe, is an important element in maintaining good and successful business relationships.

References

Kumar P., Kalwani M. & Dada M (1997) ‘The Impact of waiting time guarantees on customers’ waiting experience’, Marketing Science, 16 (4), pp.295-314, Marketing Science [Online]. Available from: http://mktsci.journal.informs.org/cgi/content/abstract/16/4/295 (Accessed: 13 February 2011).

Categories
Business Research

Solving the issue of poor performance in a large service organisation

If a Hospital is to optimise/improve the performance of their emergency waiting times, we have two approaches to solving the problem:

Option A – Monitor the patient numbers, bed numbers and availability of resources as well as waiting and treatment times.

Option B – Speak to the hospital staff – Doctors, Ambulence crew, Nurses etc. to gather their views on what are the areas that need improvement.

Buchanan and Huczynski (2010) challenge us to ask “why?” and tell us how difficult it is to have a single correct answer; I’d like to pose the same thinking pattern to this situation and not choose a single correct method for solving this solution.

As discussed by Buchanan and Huczynski (2010) throughout the first chapter, we should not expect an organisation to be bound by the rules of natural sciences; looking at just the numbers as proposed by the first group would give us good measurements and accurate figures on how things should be working – where the problems lie – but, if we are running a hospital inundated by overworked, underpaid emergency room doctors, nurses and orderlies then simply adding more beds and more underpaid employees will not necessarily solve our problem.

I am inclined to think that option B (speaking to the employees) would provide an answer to option A but it is not safe to assume based on the opinions of others only so I do believe that the numbers must also be produced. An article by Ference (2001) on Improving Organizational Performance illustrates a trademarked process used by a Casino in Las Vegas which is survey based to produce what they call a “Service-Culture Map” which focuses on “employee satisfaction, commitment, and customer responsiveness as the keys to a strong return on owner investment”. It might be considered “cold” to compare a hospital to a casino but I think that the same rules could quite well apply which would, in-turn, support option B’s approach.

The case study in the paper by Ference (2001) talks about cross-functional meetings, and I believe that this is something that would also support option B – issues may lie with miscommunication between doctors and nurses, without conducting an equal-opportunity meeting between the two parties the problem may never be solved.

To conclude it may seem like I have strayed more towards group B, while I am more inclined towards that approach, the problem could simply lie in the number of beds available or the efficacy of the booking system. Perhaps an approach of using option B to narrow down areas of concern and option A to back up where necessary the problem could be solved or improved.

References

Buchanan, A. & Huczynski, A. (2010) Organizational Behavior. 7th Edition. Upper Saddle River: Prentice Hall.

Ference, G (2001). Improving Organizational Performance [Online]. Available from: http://www.hvs.com/emails/newsletters/ference/Cornell-Q.article.pdf (Accessed: 6 February 2011).

Categories
Business Computing Research Software

How can IT enhance a Managers Function, Role and Skill?

Managers have many functions, roles and skills, below I will illustrate one of each and how IT is able to improve performance in each of these examples.

  • FUNCTION – Manage Time and Resources Efficiently

As described by Management-Hub.com (n.d.), and as we all know well, time is “precious and vital”. A manager needs to manage his/her time well between his/her team and superiors as well as his/her time spent on organisational goals that require his/her personal capacity and skills.

I.T has introduced calendar software, such as Google’s Calendar (www.google.com/calendar) that is able to send SMS (text), E-Mail and Pop-up (if the calendar happens to be open) alerts to users on their cellular phone, laptop, computer or land line (depending on the carriers ability to read and/or receive text messages). Assuming that the manager will have with him at least one network enabled or communication enabled device at all times (which I think is a fairly safe assumption) this allows him/her to be constantly reminded of his appointments.

  • ROLE – Intermediary between employee groups and top management

About-Personal-Growth.com (n.d.) describes a manager as the “middle person in between top management level and the team that reports to him”. As most organisations are hierarchical, as well as the requirement for efficiency, managers are usually the liaison between upper management and regular employees. Due to the sheer size of certain organisations it would be difficult for a manager to keep track of exact discrepancies, complaints, issues, performance reviews and other requests from either party. I.T has brought with it the ability to track accountability and exact details of communications with tools as basic as E-mail. A manager will be able to refer to messages from management/employees directly when addressing issues with either party without missing any details.

  • SKILL – Good Planning

This is, in my opinion, one of the most important skills a manager requires – some may perhaps think more when referring to a project manager but I do think it’s equally important in all areas of management. Without organised planning the manager is unable to assess progress on achieving organisational goals. As About-Personal-Growth.com points out, “having goals and planning out the directions allow for effective time management and saves cost and resources”.

Planning also ties up with adaptability to change, both positive and negative. I think this would tie in with Buchanan and Huczynski‘s (2010, p.52) quotation of Ansoff in which Ansoff states that managers who are unable to develop an entrepreneurial way of thinking “must be replaced”.

References

About-Personal-Growth.com (n.d.) Managers – Roles and Responsibilities [Online]. Available from: http://www.about-personal-growth.com/managers.html (Accessed: 6 February 2011).

Buchanan, A. & Huczynski, A. (2010) Organizational Behavior. 7th Edition. Upper Saddle River: Prentice Hall.

Management-Hub.com (n.d.) Roles & Responsibilities of a Manager in an Organization [Online]. Available from: http://www.management-hub.com/hr-manager-roles.html (Accessed: 6 February 2011).

 

Categories
Business Money Research

TCO vs. ROI – Which one to use?

Firstly, I’d like to outline the basic definitions of the two measures.

  1. Return on Investment: This is calculated by the basic mathematical equation:
    ROI = (Gain from Investment – Cost of Investment) / Cost of Investment
    It is defined by “a performance measure to evaluate the efficiency of an investment or to compare the efficiency of a number of different investments” (Investopedia, n.d.). An important note here is that the ROI calculation can be modified to suit its situation, you may include the running costs in as the cost of investment (Investopedia, n.d.).
  2. Total Cost of Ownership: “In general, the purchase price of an asset plus the additional costs of operation” (Investopedia, n.d.).

Personally, I prefer the Return on Investment approach. While it is inherently not 100% accurate due to the fact that we cannot predict the exact gains from the investment, it will give us not only the negative aspect of the investment, but also allows us to compare it to the financial gain the investment offers.

In my opinion, a Total Cost of Ownership has the potential shock value that may scare off investors due to it only showing the capital layout as opposed to the potential benefits.

Nash (2008) conducted a study that surveyed 225 technology managers with a result showing that 59% of the managers reported that ROI calculations influenced whether they pursued a project in the past 12 months compared to 41% reporting that TCO justified their decision. Nash’s article (2008) goes further to quote a CIO who states “ROI has to be the answer. TCO only looks at one side of the equation”. As per my comments above, I concur with this statement whole heartedly.

My experience in my career has been involved in mostly development of business tools for companies. Management reporting, investment reports etc. and I have not come across a single project that has required a TCO report, but many that have requested ROI’s. I see the place of a TCO report being more of an investigation into areas of business that do not necessarily return an investment, or hold ‘asset’ value; such as weighing up the costs of ‘perk’ items for employees to see if the business has enough excess profit to justify the expense incurred.

References

Investopedia (n.d.) Return on Investment – ROI [Online]. Available from: http://www.investopedia.com/terms/r/returnoninvestment.asp (Accessed: 19 December 2010).

Investopedia (n.d.) Total Cost of Ownership – TCO [Online]. Available from: http://www.investopedia.com/terms/t/totalcostofownership.asp (Accessed: 19 December 2010).

Nash, K (2008) TCO versus ROI [Online] CIO.com. Available from: http://www.cio.com/article/331763/TCO_versus_ROI (Accessed: 19 December 2010).

 

Categories
Business Research

How does the lack of non-financial operational performance measurements negatively impact business performance

Measuring performance in business terms most certainly conjures up a financial equation in my mind more than anything else and I am sure that the same goes for many other business professionals.

Sliwka (2002) makes a valid point that “managers work too hard on operational issues and do not spend enough effort on strategic activities”. He goes on to point out that the reason for this is most often because managers spend their time on improving immediate business relations which reflect short term financial gains, securing their managerial position and to show constant achievements in their position.

Personally, I would compare this to majority of my experiences in purchasing second hand vehicles (of which I have done a few times), the sales person is very focused on selling a vehicle now to get his commission at the end of the month that he will say just about anything you want to hear in reference to the car you are wanting to purchase (a nice way of saying, he will lie about the car to make the sale), after the sale has gone through and you find out about the lies; they couldn’t be bothered to even respond to your enquiries. Perhaps an extreme scenario but that is what the effect of a lack in nonfinancial operational performance measures can be. Unsatisfied customers who do not return and a poor reputation due to poor long term service.

Said, HassabElnaby and Wier (2003) have researched the effects of implementing a nonfinancial operational performance measure and have found that improvements lie in both current and future stock market performance, but only partially improve accounting performance. Of course this is, as always, subjective and dependent on a variation of issues such as the firms characteristics itself.

Ironically, the implementation of nonfinancial operational measurements should be considered against the costs and risks imposed on the manager the measures are being implemented on (Said, HassabElnaby and Wier, 2003). I agree with this as focusing too much on nonfinancial performance measures could adversely affect financial performance due to the lack of concentration on those measures. As with anything; one needs to use their knowledge of the organisation at hand to assess the amount of focus each task requires.

References

Said, A, HassabElnaby, H & Wier, B (2003) ‘An Empirical Investigation of the Performance Consequences of Nonfinancial Measures’ Journal of Management Accounting Research, 15, pp.193-223, EBSCOhost Discovery Service [Online]. Available from: http://search.ebscohost.com/login.aspx?direct=true&db=buh&AN=11734673&site=eds-live&scope=site (Accessed: 19 December 2010).

Sliwka, D (2002) ‘On the use of Nonfinancial Performance Measures in Management Compensation’ Journal of Economics and Management Strategy; Fall2002, 11 (3), pp.485-509, EBSCOhost Discovery Service [Online]. Available from: http://search.ebscohost.com/login.aspx?direct=true&db=buh&AN=7188663&site=eds-live&scope=site (Accessed: 19 December 2010).