Problems Faced By Business Organizations Commerce Essay

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Each and every person in the world are different from each other in terms of physical appearance ,mentally, psychologically etc…for example likes and dislikes of the person are different from each other ,so its become difficult for any person to understand other person and this is the most important problem which is faced by business organization .

It's become difficult for employer to understand the employee e.g. what they want and how? So its bit difficult to coupe up with employee in organization .one of the most important challenges for HR manager is to under stand the employee, because different employee have different objective to work within the organization Dessler G (2008) e.g. some are joining the organization for their own purpose ,some wants to work for making money, some wants to work in favorer of organization etc… so If the manager is able to understand and manage employee, then organization can easily achieve their all goals as well as objectives very easily and the simple definition of management is

"To manage the man tact fully" so that other components of management are managed it self.

-A recent survey by simply health U.K found that half of workers think their employer has ignored their wellbeing during the downturn, while 45 per cent said this will cause them to look for a new job when the economy recovers.

-So my point is you have to consider your employees as a assets of organization and you have to take care of that other wise you might be lose your valuable assets.


Nowadays employer are paying more concentrate on employee difficulty because they know very well that employee is just like the basic need of orgenizaton.Now employee are to be considered as a asset of the company,so the management of the company is always try to save and encourage their employee and they are busing different types of plan to encourage as well as save their employees . Dessler G (2008)


(ex.1)Tesco rewards their employees with vouchers

Monday, 15 December 2008

A Tesco company introduced the new reward scheme for their employee by offering them share of 25million of vouchers as well as saving.

Tesco staff will also get paid holiday its known as "personal day"

Tesco also provide a guide for all its employees to help them manage their money in the economic crisis.

(ex.2)According to Business Week's annual executive pay survey, the CEO of traveler's group sanfrod well collected $7.5 million in salary and bonuses plus $223.2 million for long-term compensation, totaling $230.7 million in 1997.

(ex.3)According to Business Week's annual executive pay survey, In the same year, The CEO of coca cola company, Roberto goizueta collected total of $111.8, including annual salary, bonus and other incentives.

(ex.4)Let's take the example of big retail company of U.K

This company always believes that employee is equal to the asset of company, because they feel "Our people work hard to deliver a service that gets our customers talking."

This company is using lots of Benefit plan to encourage as well as motivate their employees.


-----Competitive rates of pay and performance related rewards

-----Employee discount

------Pension etc…..

So now organization is spending lots of money for saving their valuable assets.

Management is using lots of method to motivate their employee which are as follows

Profit-sharing plans

in such kind of plan there are three types of plan.

1 cash plan: employee received profit share of the company on a regular interval.

2 The Lincoln incentive system: in such kind of plan profit of the company are distributed on the basis of merit of employee.

3- Deferred profit-sharing plans

under such kind of profit sharing plan predetermine profit is distributed to the employee under the trustee's supervision

Advantages and disadvantages of profit sharing


1 its improve loyalty of employee towards company as well as it reduce berries of "them and us"

2 employees are delightfully accept the changes because it increase the profit and reduce the cost.


1 the small number of share is given as compared to incentives.

2 workers fell that however hard they work it will not have noticeable effect on profit, so there for no incentives.( Robert L. Mathis, John H. Jackson2006)


This company is providing financial services

Profit Sharing Plans

-This plan allow company two types of advantages flexibility and discretion.

-If a company make little profit or no profit then no contribution is required

-The contribution is allocated on the basis compensation

-The maximum deduction limit is 25 %.( annual compensation)

Employee stock ownership plan (ESOP)

­- the organization annually contributes its own stock or cash to be used to purchase the stock

-t his is handled by the trust which is established for the employee

- the annually limit of this compensation is 15%

- The trust holds the stock in individual employee accounts and distributes it to employees upon separation from the firm if the employee has worked long enough to earn ownership of the



Advantages of ESOPs


-This plan helps employee to build a good team work.

-Employee do not behave to pay tax until they receive distribution from trust, usually at

retirement when their tax rate is lower.

Advantages of ESOPs (cont)

The company

-A tax deduction is equal to the fair market value of share.

- An income tax deduction for dividends paid on

ESOP-owned stock.

The Employee Retirement Income Security Act

(ERISA) give fdreedem to firm for borrowing aginest employees security.

- Firms offering ESOP had higher shareholder

returns than did those not offering ESOPs

.( Robert L. Mathis, John H. Jackson2006)

(ex.6)Starbucks Issues Stock Options to Chinese Employees

For the purpose of attract and retain local talent of china, Starbucks has implemented an incentive plan called Bean Stock. In such type of plan foreign companies are offering stock options to the host country employee.

(ex.7)United Airlines is using the ESOP plan for making their employee happy

This company believes that such kind of plan makes the progress of the company.

(ex.8)Lets take the example of Reliance Retail Ltd (RRL), the wholly owned subsidiary of the Mukesh Ambani led Reliance Industries limited

This company is using ESOPs plan to encourage the top and important high rung employees in the Retail business of Reliance

This company believe that ESOPs are fruitful to the employees

(ex.9)White & Case's strong presence in the leading financial centers, his recent survey said that most of companies are to be successful in attracting and retaining employees by offering them additional compensation based on equity in the company.

Scanlon Plan

-- Philosophy of cooperation

• No "us" and "them" attitudes that inhibit employees from developing a sense of ownership in the company.

- Identity

• Employees understand the business's mission and how it operates in terms of customers, prices, and costs.

- Competence

• The plan depends a high level of competence from employees at all levels.

- Sharing of benefits formula

• Employees share in 75% of the savings (reduction in Payroll expenses divided by total sales).


2005 LONG-TERM EQUITY INCENTIVE PLAN .this plan includes different section on the basis of that the incentive of the worker is decided.

Gain sharing Plans

-In such kind of plan all the gain of the company are distributed among the company as well as employee

-employees always try to put all efforts for making high productivity of company for gaining high profit.



1 it improves the performance of the company.

2 increase employees awareness and focus.

3 increase the felling of ownership and accountability.

4 Promotes morale, pride, and more positive attitudes toward the organization

5 rewards only performance improvement.


its does not related with the profit ,if profit are goes down then also company has to pay gain to the employee.

It paid on the basis of group performance rather then individual.

It basis on participative style of leadership.

It increases the organization stress.

It rewires the team work rather then individual.

(ex.11)Gain sharing at Texas Nameplate Company

"We are especially proud of one program. Our financial gain-sharing program...

where we share with our employees the money saved from defect-free work...

produces results second to none. Last year alone we were able to share an additional

$240,000 or 10.78% of net earnings among our employees for their defect-free work.

1998 Malcolm Baldrige National Quality Award acceptance speech

by Dale Crownover, President and CEO,

Texas Nameplate Co. February 4, 1999

Annual Bonus

Plans that are designed to motivate short-term

Performance of managers and are tied to

Company profitability.

Increasingly used substitute for merit pay

Not built into base pay

Viewed as less of an entitlement than merit pay

Less expensive than merit pay over the long run. .( Robert L. Mathis, John H. Jackson2006)


In India most of the small scale businesses are providing annual bones to their employees one of the largest steel manufacturing company ESSAR STEEL of India is using this plan for rewarding their employee.

(Money news paper of India)

(ex.13)Bonus schemes of Asda

This bounces is provided on the basis of performance and profit plan target to meet, while staffs in distribution centers have a bonus plan based on cost performance. Head-office employees' bonus is based on total company profits. But the condition is that employee must be worked for asda for more then 6 months.

(ex.14)Annual bonus scheme of

The annual Bonus Scheme is for every one who is the member of m&s .the annual bonus is depend on the performance of team as well as company.

The new member is also eligible for annual bonus, but the company has right to withdraw the Scheme.

Merit plan

-In such type of system personal quality of employees are being rated according to organization requirements and pay is increased or bounces is given on the basis of merit rate

-This system is used form 1950s

- Unlike new performance-related pay systems, which focus rewards on the output of an employee, merit rating examines an employee's input to the organization" for example, their attendance, adaptability, or aptitude" the quality or quantity of work and on the basis of all the employees are rewarded. (Robert L. Mathis, John H. Jackson2006)



1. It does allow employer to made a pay of employee on the basis of performance.

2. It's allow employer to differentiate individual and company performance.

3. On the basis of this system employees get satisfactory reward for accomplishing a task.


1 this plan has only one disadvantages it is subjective.


They believed in recognizing good talent and reward them with some great benefits, but they are using competitive salary it means that they are using performance as well as merit base plan for make their employee happy.

(ex.16)Fair Competition provided by DHL

DHL is always assignee their employees on the basis of merit they always believe that merit base compensation is the fair compensation plan and it helps the company to identify the skills and ability level of each employee.

(ex.17)Let's take the example of AIG group

NEW YORK-American International Group Inc. has introduced a new merit-based incentive compensation plan for its employees.

In this system there are four rank is given on the basis of performance.

Four stages are as follows.

1. Top 10% - highest pay

2. Followed by 20%

3. Followed by next 50%

4. Remaining 20%

THE AIG group explains that these ra4ring make our people more accountable.

(ex.18)Let's take the example of short term incentive plan of TESCO

Short Term Incentive Plan 2008




The tesco corporation was introduced short term incentive plan (" STIP" ) for motivate employees of tesco, its affiliated with short term goals as well as objective of tesco and such kind of incentives are provided on merit basis.

The STIP is approved by the board of director of Tesco.

Plan Parameters 

For providing reward to the individual employee on the basis of their performance STIP considered two major area.

Financial Objectives: Return on Capital Employed (" ROCE" ) 1 

 Personal Objectives : Individual performance against established objectives 

The incentive is paid as a percentage of base salary, and the targets and percentage decided by the Board of Directors.

(ex.19)I think that it is the best plan to provide compensation to the employee of organization. and this short term plan of tesco was run good and with the help of this plan tesco has increased their efficiency as well as profitability, on the other hand employee got incentive on the basis of merit.

(ex.20)Let's take the example of Toyota.

Toyota was eager to thank its UK staff for their best-ever August performance, beating their German counterparts with an 11% sales increase on the previous year. Within days of receiving this information, the Managing Director of Toyota

Was identify employee, who made a good performance and he would receive a 'thank you' in the next day's mail. This was an attractive gift wallet containing a Marriott incentive award branded especially for Toyota, giving two nights' deluxe accommodations for two people at any Marriott Hotel in the UK. Toyota also arranged with Marriott that all major extras such as breakfast and dinner would be included. Marriott also set up dedicated toll-free phone reservations number for easy booking.

So my point is with such kind of award is good because its encourage other employees to make more efforts to achieve gift form employer.

Skill-Based or Knowledge-Based Compensation

Under such type of program compensation is decided on the basis of skill and knowledge of employees.

High skill -knowledge= high compensation

Low skill--knowledge=low compensation

For example, public school teachers revived pay on the basis of their knowledge.

Bachelor's degree receive the lowest rate of pay

Master's degree receive a higher rate

Doctorate receives the highest.

Individual Spot Awards

Viewed as highly or moderately effective

Typically awarded for exceptional performance

Special projects

Exceptional performance

(ex.21) Manhattan Plaza Pharmacy -

The best part about the Marriott Incentives is they are very reasonably priced. We are located in New York City and many of our employee's are lower middle class. And they would never be able to afford a night at the Marriott or dinner at one of your fine restaurants. By being able to offer these awards, it gave them an opportunity to spend time at a luxury hotel without having to worry about where they would get the money from. It also made them better employees and gave them incentive to want to move up in the company and get better jobs.

Steve Kaufman, President

Manhattan Plaza Pharmacy


When Jane Callanan was appointed as a position of vice president in human resources at Cambridge, at that time the it counceltig firm was deal with just 130 employees but after he got position growth rate increased as well as Razorfish was pushing 500 employees.

Callanan always try to spent her time with employee and try to understand their problems as well as she was always asking them, what they really thought of their employer, in context of compensation and benefits and she decide to give shine award on the basis of performance.

All the above plans are being used by different companies for encourage the employees. Among this all plans I think that the merit plan is the best one because if the employees are given pay on merit base then they are paying more concentration on their performance as well as its increase the competition among the employees.

-This kind of plan help the organization to identify the hidden abilities as well as skill of employees, so each employee are trying to improve their performance to become a first on the merit, as a result company performance is also goes up, so its win-win situation for employee as well as company. Dessler G (2008)

Some person is not agree with merit base payment system because they think that it increase the competition within the organization that might be the reason of conflict between employee. But in my point of view such type of people are negative thinker they are not showing the positive result of merit base plan, so "Think always positive in life".



These are the factor, which are belonging to organization.

Experience in Field: for providing compensation to employee management must try to consider the experience in the field, because experience makes the person difference. Most of companies are providing compensation on the basis of experience. Beardwell, Ian (2007)

Level of Ability: ability of a person is best way to define person, so management can use ability level foe deciding compensation of employee.

Educational Background: education plays important role in today's organization. The educated person makes organization better and efficient also, so organization should conceder educational background for deciding compensation.

Willingness to Work: this is the most important factor that have to consider for deciding compensation, because if employee don't have willingness towards their work then there is no need to give them compensation.

Decision Making Ability: As an employee you must have decision making ability, if employee takes good decision, which is becoming fruit full for the company, so manager has to consider this ability also. Beardwell, Ian (2007)

Problem Solving Ability: in organization employee have to coup up with lots of problem, so they must have problem solving ability and manager always try to consider this factor while deciding compensation.) Price, A (2007)

Intelligence: this is the most important skill that has to consider at the time of fixing compensation of employee.


These are the factor, which are belonging to out side the organization.

Market Growth Rate: the growth rate of the company in the market should be considered at the time of deciding compensation, because it shows the position of the company in the market. Beardwell, Ian (2007)

Level of Competition: this is the most important factor that has to consider because its affect the profitability of company from which compensation is paid.

Probability of Future Problems: at the time taking decision regarding compensation you have to consider the entire problem that might be accrued in the future. Price, A (2007)

-The management should try to consider all the above factors for the purpose of deciding compensation of employee ,because all the above factors helps the management to identify ability as well as skill of the employee.

-most of the management is using performance appraisal method for deciding compensation of employee. Because performance appraisal consider the entire above factor for identify the performance of employee.

(ex.23) let's take example of transport for London

The Access and Mobility Team can assign the performance of all the buses, tubes as well as individual members of staff for the performance appraisal on the basis of CCTV camera.


In my point of view employee should be rewarded on the basis of merit and performance, because I believe that "NO PAIN, NO GAIN", it's a rule and we can't change it. The hard you work you will get more pay. And I thin that this system is good for employee because it creates competition within the organization and with the help of that each employee wants to be a first as a result it increase efficiency as well as performance of employee ,on the other hand company also increase their profitability.

I think that with the help of such kind of plan employee learn something form the other employee and it ensure the team work as well as strong relationship among the team.

So, I believe that employee should be awarded on the basis of merit.


Dessler G (2008) Human Resource Management (11th edn) Prentice Hall,

Robert L. Mathis, John H. Jackson(2006) Human Resource Management(6th edn), Thomson Learning

Beardwell, Ian (2007) Human Resource Management: A Contemporary Approach, (5th edn) Prentice Hall

Price, A (2007) Human Resource Management, (3d edn) Thomson Learning

Sisson, K and Storey, J (2000) The Realities of Human Resource Management: Managing the Employee Relationship Open University Press

Jack J. Phillips, Ron D. Stone, Patricia Pulliam Phillips(2008), The human resources scorecard: measuring the return on investment(2nd edn),butterworth-heinemann. i

Money news paper of India

Business Week journal