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Performance-based pay key to sound corporate culture

Says management expert

Sarwar A Chowdhury
Performance-based pay structure should be introduced for employees in order to develop a sound corporate culture in the country's public and private sectors, says a management expert, AKM Shamsuddin.
An organisation should evaluate an employee on the basis of performance and the performance review should be a 2-way communication process between the employee and the superior, he said.
"The annual performance report should not be kept confidential to the employee,” said Shamsuddin, adding that, "The fundamental purpose of performance review should be motivational."
Every organisation sets its annual objectives at the beginning of a year and the organisation fixes its staff performance criteria on the basis of the objectives in agree-ment with employees, Shamsuddin, chairman of E-Zone, an IT firm focusing on for education, human resources management and social development, told The Daily Star in an interview.
Referring to a recent study conducted by his firm on compensation pattern in Bangladesh, he said now a days many private companies are doing such performance evaluation in discussion with executives. “The government can take a lead from the examples," he said.
Shamsuddin, founding managing director of Social Marketing Company, said the compensation
package offered by multinational companies operating in Bangladesh and local big business houses generally is composed of 5 components— basic salary, cash allowances, variable benefits, non-cash benefits and deferred benefits.
According to the study, cash allowances include house rent allowance, conveyance, festival bonus and medical reimbursement, while variable benefits are performance bonus, variable pay, sales incentive and profit sharing.
The non-cash benefits are interest free or low interest rate loans, company car, fuel and maintenance expenses for car, driver, club membership and insurance premium, while the deferred benefits are provident fund, gratuity and superannua-
tion, Shamsuddin said.
"We found each company in our study has the five different kinds of benefits for their employees,” he said, who also worked as chief executive officer of two multinational medicine companies.
"The higher is the position of an employee, the more scopes for variable benefits. Thus senior executives within the organisation are encouraged to actively contribute to the achievement of the organizational objectives.”
E-Zone also studied compensation status at workers' level and found the workers are not concerned too much about variable pays. The workers want to get rewards for their contribution to the company's business.
Basic salary and cash allowances with some kind of non-cash
benefits such as medical and insurance benefits are very important to workers, said Shamsuddin, also the founding chairman of Central Depository of Bangladesh Limited.
“Young executives, holding mid-level managerial positions, are interested in short-term benefits instead of long-term ones,” he said, adding that they want to get the benefits today and do not to wait for tomorrow.
"They also do not want longterm benefits such as profit sharing, provident fund and gratuity," he said.
"Mid-level executives want to get rich quickly or get some funds so that they can compete with their more affluent friends and this may be a reason for seeking short-term benefits. Otherwise, we do not know the actual reason of this trend," he said.
The study also identified a developing corporate culture within the local private sector, in general, and in the large private organizations, in particular, as the large local companies are now interested in managing their organizations as a corporate entity rather then a family enterprise.
The tradition of boss orders and the subordinate follows' is now changing, Shamsuddin observed.
"Some local companies such as Rahimafrooz and Square are rapidly developing a corporate culture, which is a very good sign," he said.
These companies are allocating around 10 percent of their personnel cost for 'need based training and development' of their employees, which is also a very good sign, he added. "This practice has long been done by the multinational companies," Shamsuddln said.