Setting the Stage for Strategic Compensation and Bases for Pay - Assignment Example

Sur 14 January Setting the Stage for Strategic Compensation and Bases for Pay Introduction: The departments of human resources in any organization involves strategies for their compensation and bases for pay to the employees since they prove to be significant for the betterment of the employees as well as their services to the organization. Strategic compensation refers to the deal that a company and its management plan in order to satisfy the employees and gain better services from them. Thus such planning and bases for the pay are decided depending on the requirements of the organization and include several factors such as the work environment, health benefits, retirement benefits, working styles and other relevant factors in association with the work life in a company (Banks, 110). The present study focuses on the setting of the stage for strategic compensation and bases for pay in organizations, by answering five questions in association. Question 1: Describe the three main goals of compensation departments. Solution: The primary stakeholders for an organization’s compensation packages include the employees, the management or the executives, and the government. Thus the three main goals of the compensation departments in an organization are associated with satisfaction and gain advantages from these three above mentioned sources (Compensation’s Role in Human Resource Strategy, 22). The first and most important goal that the compensation departments have reflects on keeping the employees of the organization satisfied such that they perform efficiently and with sincere concerns working towards the achievement of the organizational goals. Secondly the concern of the department is associated with the management and executive teams since these individuals are the experts of the organizations and need to be retained for future endeavors. Thus, strategically planning for their compensation such that they are satisfied and continue to be associated with the organization is significantly necessary. Thirdly, a significant role of the compensation department is associated with the government in order to determine how the company might be able to balance the interests based on the increasing competitions that includes the wages and the compensations of the workforces. Thus the three primary goals of the compensation department could be learnt from the above section of the study. Question 2: Describe the contextual influence that you believe will pose the greatest challenge and the contextual influence that will pose the least challenge to companies’ competitiveness and explain why. Solution: A company’s competitiveness and the level of competitive advantage that it gains over its competitors depend significantly on the performance of the employees of the organization. However, with the changing world of businesses and the market trends that determine the level of competition, the compensation systems have also significantly altered and modified. This in other words reflects the influences of the contextual factors in association with the competitiveness of an organization. The most important factor that seems to influence the compensation program is the determination of the wage rates for the employees. High wage rates on one hand increases the cost of the company and thus the prices of the goods reflecting on decreasing financial performances for the company; on the other hand, it guarantees the gain of competent workforce. Thus this factor poses the greatest challenge for an organization. The factor that poses least challenges in the present times include the determination of wages according to the geography or industry, since now the satisfaction of the employees influence more depending on the needs of the organization. Thus strategic compensation system has become significantly necessary in the planning for wages within organizations (Kim, 2-5). Question 3: Describe when subjective performance evaluations might be better (or more feasible) than objective ratings.  Solution: In several cases, organizations tend to indulge in the objective evaluations for the determination of the compensation plan for their employees. However, it can be realized that the in situations where the performances of the employees need to be evaluated for the determination of their wages, the understanding and use of subjectivity has a significant influence and effectiveness on the decision of the management. This is primarily because the subjective evaluations involve the evaluations of the employee performances, thus deciding on the compensations and incentives without focusing on the objective factors. This helps in reducing the efforts of the management which is otherwise involved in the quantification of the performances (Woods, 6). Thus it can be understood that in cases where the planning of the compensation needs to be done independent of the financial losses of a company or the quantification of the bonuses through uses of formula and greater efforts of the department, then the subjective evaluations prove to be beneficial and effective. On the other hand, if the company intends to deliver a quantitative judgment for the decision of wages, then the objective evaluations prove to be effective. Question 4: Describe under what conditions profit sharing plans are not likely to motivate employees.  Solution: Although profit sharing plans have certain advantages for the employees of an organization, that primarily include the ability of the employees to enjoy the benefits of the financial gains experienced by the organization, yet there are certain disadvantages of the process of profit sharing. Such disadvantages tend to de-motivate the employees to make use of this process. The profit sharing plans have the tendency to destabilize the security levels of the employees. This occurs when the plans of profit sharing include portions of the compensations that the employees are supposed to receive. The profits of a company do not remain constant over the years. Thus such a process makes it difficult for the employees to assess their levels of earnings which in turn affect their “savings and buying behavior” (Martocchio, 97). Thus it can be understood that in such situations the employees would not be motivated with the process and would tend to leave the company if they get better opportunities from other companies that might be their competitor companies as well. This reflects on the importance of the management’s understanding this factor such that they are capable of planning compensation measures being able to retain their efficient workforce. Question 5: Based on your knowledge of pay-for-knowledge pay concepts, describe three jobs for which this basis for pay is inappropriate and explain why.  Solution: Although pay-for-knowledge pay system or skills based payment is a relevant and significant concept for several organizations and in several jobs, yet the understanding of the system is essential since it might not prove to be appropriate for all kinds of jobs. This system of compensation might lead to increasing labor costs for the company, incorporation of training and thus the relevant associated costs, and also the interests of the employees to learn about new skills and expertise (Martocchio, 116). Thus, jobs in three situations might consider the process of pay-for-knowledge to be inappropriate. These include jobs where employees would not be interested to learn and improve better skills, jobs that would not be able to afford the increasing costs of labor, and jobs that would not be able to provide with the necessary training programs. Without these factors, the pay-for-knowledge system would not prove to be a success. Although these might seem to be certain disadvantages of the process, but these are parts of the process and thus jobs that are unable to accept these issues and accordingly find policies of management. Conclusion: The above study reflects that the setting of the compensation and bases for pay within organizations depends on a number of factors that are mostly associated with the employees and other executives’ satisfaction level. The satisfaction of the employees is necessary since their performance leads to the achievement of the organizations thereby resulting in profits or losses. Thus every company would try to retain the expert workforce and accordingly strategize the compensation program that would look after not only the needs of the organization but also the wellbeing and higher levels of satisfaction for the employees. In the process a company needs to choose among many strategies available such that the compensation plan might fit the goals and discipline of the organization. References 1) Banks, Carl. HR how-to: strategy, everything you need to be strategic in your HR decisions, Chicago: CCH Incorporated, 2003 2) “Compensation’s Role in Human Resource Strategy”, SHRM, n.d., January 14, 2012 from: http://www.shrm.org/Publications/Books/Documents/5_chapter3.pdf 3) Kim, Hyondong. Strategic Impacts of Compensation System on Organizational Outcomes: An Empirical Study of the Conceptualizations of Fit and Flexibility in the Compensation Design, ohiolink, 2006, January 14, 2012 from: http://etd.ohiolink.edu/send-pdf.cgi/Kim%20Hyondong.pdf?osu1141829742 4) Martocchio, Joseph J. Strategic Compensation, India: Pearson Education India, 2011 5) Woods, Alexander. Subjective adjustments to objective performance measures: An empirical examination of the economic benefits and social costs in complex work settings, business, 2008, January 14, 2012 from: http://www.business.illinois.edu/accountancy/events/forum/papers/07-08/Woods.pdf Read More