Strategic HRM Report: Analyzing Samsung Mobile Division's Bonus System

This report provides a comprehensive analysis of the human resource management (HRM) strategies employed by Samsung, particularly focusing on the mobile division's use of performance bonuses. It examines the implications of rewarding employees with high bonuses despite comparatively poor performance, considering themes such as employee motivation, retention, performance management, and diversity. The report delves into the context of the global commercial framework, emphasizing the importance of employee motivation and retention in a competitive environment. It explores the rationale behind Samsung's decision, analyzing its impact on employee morale, productivity, and the company's overall strategic goals. The report also considers the drawbacks and potential consequences of such a rewarding policy. The report uses an article summary as a case study to support its findings and provides recommendations based on the analysis.

Running head: HUMAN RESOURCE MANAGEMENT
Human Resource Management
Name of the Student
Name of the University
Author Note

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Executive Summary
In the contemporary business scenario, with increased competition and the industries
becoming globally integrated, it becomes essential for any business to perform consistently and
efficiently to survive the increasing competition and stay ahead of its competitors. For this, the
companies need motivated and dedicated employees and they also need to keep on managing
their employees such that they are efficiently retained and are not absorbed by the rival
companies. The human resource department present in the companies articulate several ways for
efficient employee motivation, retention and enhancement of their performances. One of the
most widely used and effective strategies is to reward the efforts of the employees. Keeping this
into consideration and taking reference to such a strategy of giving performance bonus to the
mobile division by the Tech giant Samsung, the report tries to analyze the implications,
significance and drawbacks of the same.

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Table of Contents
Introduction......................................................................................................................................3
Article summary (News Story)........................................................................................................4
Rewarding the employees: Human Resource Implications.............................................................5
Employee Motivation (Theme 1).................................................................................................6
Employee Retaining (Theme 2)...................................................................................................9
Employee Performance Management (Theme 3)......................................................................10
Managing Diversity (Theme 4).................................................................................................11
Recommendation and Conclusion.................................................................................................11
References......................................................................................................................................12

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Introduction
Over the last few decades, the global commercial framework has undergone considerable
modifications, much of which can be attributed to global phenomena like Globalization and
Liberalization, which have significantly contributed in making the global business environment
more integrated, inclusive as well as competitive (Gupta & Shaw, 2014). With more supply side
players entering in almost all the production sectors, the competition to capture bigger market
share and earn more profitability has increased. This in turn has resulted in changes in the
operational framework of the business across the world and the mode of utilization of the
resources present with the organizations, which also includes the human resources (Voegtlin,
Patzer & Scherer, 2012).
Keeping this into consideration it becomes apparent that the demand for workers, as the
demand for other factors of production has been increasing, which in turn increases the number
of options of employment available to the eligible work forces considerably. This has been even
facilitated by the easy and convenient mobilizations of workers across different geographical
boundaries (Jiang et al., 2012). The increased scopes of employability of global labor forces,
especially skilled ones, in turn makes it one of the crucial challenges for the businesses to retain
their existing employees and to keep on encouraging and motivating them to work more
efficiently for the same business (Alfes et al., 2013).
The concerned report takes this aspect of employee management and retaining in
consideration. For the purpose of in depth exploration, it refers to the case of the contemporary
strategy taken by the mobile division of one of the tech giants-Samsung. Samsung has rewarded
their employees with high bonuses in spite of their comparatively unimpressive performance in

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the recent period. The report tries to discuss the causes and implications of such rewarding policy
taken by the company and the issues of concern arising out of the same (Alfes et al., 2013).
Article summary (News Story)
The article by Kris Carlon, dated January 27, 2016, discusses about the reward and
motivational practices adopted by the management of the mobile production unit of Samsung
company, for their employees, in the year 2015. As per the assertions of the article, the mobile
division of the company did not perform up to the expectation in the concerned year, much of
which can be attributed to the increasing number of competent rivals with more cost efficient
production process, which helped them to capture a major share of the global mobile phone
market (Carlon, 2018). However, instead of penalizing the employees for relatively poor
performance of this specific division for that year, the company actually resorted to the strategy
of paying them maximum bonus (which is capped at half of their individual salary) for their
dedication and contribution to the operations of the division. This has been mainly done by the
company to encourage as well as enhance their ability to handle the challenges, which the
division has been facing in the contemporary period (Chang, 2012). This also had a positive
implication on the employee retaining aspects as the company was saved from a credible mass
walk out of the employees, which would have most likely happened if the bonuses were not paid
to them (Buller & McEvoy, 2012) .
However, as the article suggests, this high bonus of 50% of the salary of the employees,
has been awarded to poorly performing mobile division of the company, while most of the other
divisions of the company have not been treated equally. The battery division, for example
received only 3% and the electronics division got 10%. The only division to get bonus at par

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with the mobile division is the highly profitable semiconductor sectors of the company, while
another profitable division of software and technology of the company received 45% of their
salary as bonus (Jung, 2014).
The above decision of the company regarding awarding bonus to their employees,
especially to those in the comparatively low performing mobile sector, can be analyzed and
interpreted with the help of the Strategic Human Resource Management framework and the
implications of the same in the global scenario (Sparrow, Brewster & Chung, 2016).
Rewarding the employees: Human Resource Implications
From the above discussion it can be asserted that there has been a slow down in the
otherwise highly profitable and flagship section of Samsung, that is the mobile and smart-phone
division, which apart from the concerned article, has also been supported by other empirical
evidences, as can be seen from the following figure:
Figure 1: Revenue generation of the Samsung mobile unit over the years
(Source: Statista.com, 2018)

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As can be seen from the above figure, the surging profit and revenue generation of the
firm, which had been consistently increasing from 2010 to 2013, plunged deep down post 2013
and in 2014-2015, the sector performed considerably poorly than its previous performances in
terms of profit generation (Njanja et al., 2013). Much of this can be attributed to the increased
competition, which the company has been facing in the recent few years, with more and more
credible and competent players coming in the global mobile phone market, with equally good or
better devices at lower costs (Budhwar & Debrah, 2013). Another reason behind the company
losing out its profitability considerably has been the incidents of malfunctions of some of the
popular handsets of the company, which led to the losing out on a significantly large clientele
(Manzoor, 2012).
However, the company still decided to pay high bonuses to the employees of the mobile
division, instead of penalizing them due to their poor performance. This decision on part of the
company though may seem to be irrational and non-profitable for the same has significant
implications in the human resource management of the company (Clegg, Kornbergernn & Pitsis,
2015). There may be several crucial reasons behind this strategic plan of the company, which are
discussed as follows:
Employee Motivation (Theme 1)
In the contemporary global scenario, with increased competition in every industrial
sector, it is of immense importance for the companies to continue to improve the efficiency of
their operational framework in order to sail through and to keep on having competitive edge over
their rivals. This in turn helps the companies to increase their profitability and future prospects in
a sustainable manner (Dobre, 2013).

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For the purpose of ensuring profitability and sustainability, the companies need to take
into account that the resources which they use for production process are efficient and productive
enough. As employees fall in the category of most vital and long term resources required for any
kind of business, it is of utmost importance to ensure that the work force within the companies
are competent and more productive than their counterparts in the rival companies (Ramdhani,
Ramdhan & Ainissyifa, 2017). For the purpose it is needed to keep the employees motivated
enough to keep on working with increased enthusiasm and vigor for the company with time. A
motivated and dedicated work force can contribute significantly in the long-term prospects and
profitability of the company, whereas a de-motivated employee structure reduces the
productivity and competitiveness of the companies to a considerable extent (Bradler et al., 2016).
Keeping this into consideration, in the recent global framework, there exists several
strategies in the hands of the human resource department of the companies, to keep their
employees motivated and dedicated to their work. Of these strategies, one of the most effective
ones is the strategy of rewarding and recognizing the employees of the concerned company
(Njoroge & Yazdanifard, 2014). Recognizing the efforts of the employees make them feel
important and appreciated by the company, which encourages them to put even more effort and
improve their quality of their work even more (Jackson, Schuler & Jiang, 2014). Small initiatives
on part of the company, of recognizing the extra efforts of the employees also makes them feel
free to think and come out with innovative ideas for increasing the productivity and profitability
of the firms, which thereby benefits the company and takes it closer to its long term goals
(Muogbo, 2013).
However, though these verbal recognitions work to some extent in encouraging the
employees, it is not sufficient to keep them working with same enthusiasm. For this

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materialistically rewarding them poses as a better strategy. The reward may be in kind or in cash.
In general, the most widespread ways of rewarding the employees, that are practiced by the
companies across the world is that of providing them with monetary incentives and cash prizes,
which are given to them in terms of performances bonuses after the completion of a specific
period or task (Pichler, 2012).
The practice of providing the employees with cash prizes and rewards, according to their
performances increases their welfare and contributes significantly in motivating them to work
harder. Often there exists rewarding frameworks in the management structure of the companies
which rewards the employees a percentage of their individual salaries, the percentage increasing
according to the efforts paid by the employees (Brewster et al., 2016). The benefits of rewarding
the employees are mainly as follows:
 The employees view these cash rewards as the worth and appreciation given to their
efforts and get motivated to increase their efforts for their personal benefits.
 Rewards set transparent, high yet achievable performance standards for the employees,
who try to achieve the milestones to receive the rewards kept for the specific milestones,
thereby increasing the productivity, efficiency and long term sustainability of the
company itself (Cho & Perry, 2012).
 Rewarding the work teams, motivates and facilitates productive cooperation among the
members of the teams and increase their individual as well team performances, creating a
relaxed yet productive work culture in the companies contributing to increased
cohesiveness among the employees (Tiwari & Saxena, 2012).
 The employees feel that their efforts are not taken for granted.

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Often the companies resort to reward their employees even when they have not increased
the profitability of the companies. This is mainly done with the objective of preventing the
employees from getting demoralized and to make them feel that their efforts are appreciated,
thereby motivating those to increase their efforts even more, taking into account the long term
benefits of a motivated and loyal work force (Kim & Sung-Choon, 2013). This can considerably
explain the decision of Samsung Mobiles, of rewarding their employees with high bonuses in
spite of less than standard performance of this sector in 2015.
Employee Retaining (Theme 2)
Apart from employee motivation, another important reason behind the implementation of
various reward and recognition strategies present in the commercial framework is the aspect of
employee retention in the company itself (Oladapo, 2014). The employees, especially the skilled
ones and the ones who have been working with the company for prolonged periods are the assets
for the companies and it is important for the companies to retain them. This is specifically
because if they are absorbed with higher salaries by the rival firms, then it can reflect
considerably in the fall in the profit and sustainability of the company itself (Das & Baruah,
2013).
In this aspect, the practice of rewarding the employees often proves to be effective for
retaining the employees in the companies themselves, especially when the companies go through
rough patches and there are high chances of resignations on part of the employees, with more
lucrative options in the industry (Aguinis, Gottfredson & Joo, 2012). Financial rewards, mostly
in form of bonuses to the employees in terms of their performances and efforts increases their
economic welfare, which decreases their incentives to search for other jobs (James & Mathew,
2012). Retention of productive and skilled forces, though may increase the short-term costs of

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the firms, it may have long-term positive implications on the profitability of the companies. This
also makes the rewarding strategy of Samsung relevant in the real case scenario, as the same has
managed to retain its workforce over the years and keep the number of employees more or less
consistent as can be seen from the following figure:
Figure 2: Samsung electronics employees (in thousands) from 2009 to 2016
(Source: Statista.com, 2018)
Employee Performance Management (Theme 3)
Rewarding the employees is also one of the most common practices by the commercial
companies in the aspect of the management of the performances of the employees (Awadh &
Alyahya, 2013). Rewards and incentives, especially in the form of cash or financial incentives
are mostly treated by the employees as a reward for their superior performance and encourages
them to improve their performances and come out with ideas and practices, which by
augmenting their productivities benefits the companies considerably (Jiang et al., 2012).

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Managing Diversity (Theme 4)
Diversity in a workforce helps the companies to achieve profits and to manage diverse
operational framework. To increase the productivity and long term sustainability of the company,
it its therefore necessary to manage diversity in the workforce of the company (Barak, 2016).
Rewarding and recognizing the diverse workforce in the company according to their abilities and
encourage productive and efficient working of the same in the company (Nankervis et al., 2013).
Those receiving rewards are motivated to work more while those who do not thrive to work
better, thereby making the company excel in every aspect. This explains the strategy of Samsung
of rewarding their mobile division in spite of their inferior performance in the concerned year
(Urbancová, Čermáková & Vostrovská, 2016).
Recommendation and Conclusion
The step taken by the Samsung Company, of rewarding their mobile division workers,
can be categorized under the common strategic human resource management practice rewarding
the employees to motivate them, retain them and improve their performance and efficiency.
However, their policy of giving high bonuses to the comparatively less productive mobile
division, while keeping the same low for other divisions, especially the battery division, may
lead to negative implications on the productivity of the workers of the latter sections, as they
may feel de-motivated and taken for granted. This can be reflected on the quality and the
quantity of production of these sectors. This needs to be taken into account by the management
of the company and steps need to be taken to ensure designing of the rewarding their framework
in such a way that none of the sectors or employees feel left out or under-appreciated. This can
thereby ensure a loyal and motivated workforce within the company, which can benefit the same
in terms of long-term profitability and sustainability.

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Appendix 1
Article:

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News Story 3:Samsung rewards Mobile division employees despite poor
performance in 2015
https://www.androidauthority.com/samsung-rewards-mobile-division-employees-669904/
BY KRIS CARLONJANUARY 27, 2016
Samsung typically doesn’t pay so fantastically, supplementing its employees’ base salary with
annual bonuses. These bonuses are capped at 50% of the employee’s salary and are usually
awarded for exceeding internal profit targets for each division. Despite Samsung Mobile
performing relatively poorly in 2015, employees will still receive the maximum bonus for their
“sincere contribution to keeping the division running despite numerous challenges”.
Not exactly encouraging words – “keeping the division running” – but at least Samsung won’t
see a mass exodus of staff, which might have been the case if the Mobile division got diddly
squat for their 2015 efforts. Samsung officials admitted that “last year, performance at
Samsung’s handset division wasn’t that strong. But the division fared well despite growing
challenges such as the rise of cheap Chinese vendors amid the new market landscape.”
Samsung’s audited Q4, 2015 earnings will be released this week with the full financial year
report not far away. Earnings guidance figures were issued for the quarter a couple of weeks ago
and showed a 15% profit increase for the quarter over Q4, 2014, although revenue remained the
same. Cost cutting exercises were the cause of increased quarterly profit, but Samsung Mobile
obviously hasn’t fared too well on its own.

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The news of the maximum 50% bonus being awarded to a poorly performing division must be a
bitter pill to swallow for other employees of Samsung Electronics that weren’t treated so
favorably. Samsung’s battery division employees will be walking away with just a 3% bonus for
the year due to a failure to increase its business throughout 2015.
Samsung’s consumer electronics division employees are being awarded a 10% bonus, network
business employees get a 20% bonus and Samsung TV staff will receive 21% bonuses. Three
more divisions – digital media research lab, technology center and software center – are all
picking up a 45% bonus, while Samsung’s highly profitable semiconductor division is the only
other department to earn the top salary bonus of 50%.
As one Samsung official said: “Samsung will try to motivate workers through proper
compensation. The decision for maximum bonuses to mobile employees includes the company
management’s hopes to proceed on their given mission under new leadership.” If bonuses equal
motivation, don’t expect anything exciting out of Samsung’s battery division in 2016.