Matching Compensation and Organizational Strategies - Case Study Example

As per the ments which have been declared in Unilever Group’s Annual Report and Accounts (2003), the comprehensiveness of compensation plans which are practiced by the organization comprise of an effective and well-rounded ‘equity based compensation system’. The presence of this plan possesses the advantage that it allows company employees the ability to exercise their control over the provision of ordinary shareholdings (Unilever Group Annual Report and Accounts, 2003). Moreover, these plans have been further classified under six categories to suit the specific requirements of each and every employee of Unilever. For example, the ‘All-Employee Option Plans’ which are currently being regulated in sixteen of the nations where Unilever maintains its presence, the workforce has been granted with an incentive to enhance performance levels and meet targets and objectives so as to become eligible for financial rewards (Unilever Group Annual Report and Accounts, 2003). Accordingly, the company has also designed a plan to cater to the classification of senior and top executives who have maintained their presence in the company for significant periods and thus, have greater tenure. Thus, the plan declares what is defined as a the platform that awards senior officials “’between 0% and 20% of the original conditional award” after the completion of a specified period (Unilever Group Annual Report and Accounts, 2003). The rationale behind the establishment of an ‘equity based compensation plan’ that is further subcategorized into six classifications can be explained by associating the concept with Unilever’s policy of fair compensation. In accordance with this agenda the company aims to continually assess workforce issues, internal mechanisms and labor practices to improve and enhance the transparency of the compensation system on a concurrent basis in 180 nations of operations (Unilever, 2014a). Consequently, the data retrieved with respect to these matters would be compiled the following year so that the formulation of solutions can be conducted to cope with current issues. 2. According to the research presented by Balken and Gomez-Mejia (1990), the decision-making process regarding internal consistency of compensation system is reliant upon several factors, one of which is characterized by the identification of the organizational strategies that must be maintained to guide the company towards the achievement of objectives. Consequently, from the perspective of employees a fair, just or consistent pay is viewed from the perspective of whether they understand that the number of hours spent at work are being compensated in a correct manner. In this case, HR managers are recommended to adhere to the execution of various tools and strategies to evaluate the worth and value of each type of job and the respective job designation. For example, an applicable tool in this case is the point-factor rating scale which allows HR managers to evaluate jobs on the basis of the outlined compensable factors as per the skills set and qualifications of each candidate. In the case of Unilever, it can be assumed that the acquisition of consistency may seem to be a strenuous task because of the pool of candidates and the depth of skills set requirements. Nonetheless, the company cannot choose to ignore the implications of understanding the conditions within the external market before arriving at decisions regarding the settlement of compensation plans for employees. Having stated that, the position and standing of Unilever worldwide is characterized by an absence of stronghold competitors especially in developing regions like India where the company only faces direct competition from Procter and Gamble. Thus, when initiating the decision-making process for calculating a beneficial ratio that is able to grant the company with consistency in case of external and internal scenarios the company must take into account direct competition from multinationals and assess the possibility of integrating tools to evaluate internal consistency effectively. 3. Considering the fact that Unilever’s operations are dedicated towards serving a global audience, the company has more than often faced questions regarding the issue of compensation discrepancy between regional operations and the varied distribution of compensation systems. While, it is evident that a standard pay system cannot be installed because of economic and social factors, the pay structure is still expected to achieve a certain degree of consistency to cope with the impending issues of employee dissatisfaction which may be caused by pay discrepancies. A special report published in The Economist (1999) identified that Unilever had already begun to recognize discrepancy in payment issues amongst regional operations thereby, initiating a system of convergence to cope with this problem. As discussed previously, the six variations of the equity based compensation plans at Unilever have been designed to recognize employee contributions and reward them accordingly. For example, an equity-based compensation plan that has been launched under the name of ‘The North American Performance Share Plan’ provides an outline for managers that are working in the North American operations of Unilever to deliver consistent performance, match or exceed targets and simultaneously advance organizational and professional growth following a three-year period (Unilever Group Annual Report and Accounts, 2003). The positive aspects of this plan are that not only does it consider employee contributions on an organizational scale but it also recognizes the significance of promoting professional growth and personal development. Therefore, this compensation plan assists in the provision of maximum benefits for employees that are working on a managerial level as their pay is affected as per regional basis rather than converging. 4. Unilever’s discretionary practices are rooted in but not limited to the provision of employee benefits upon retirement whether it has been opted for on a voluntary or involuntary basis, with the latter referring to the scenario of early retirement. It has been evaluated that upon early retirement, the company possesses the right to apply its discretionary practices and manage the provision of retirement, pension, benefits and finance options for the employees. This notion suggests that considering or taking into account each year that an employee has opted for retiring before reaching the age of 65, the company possesses the right to impose a reduction of 5 per cent over the payments that released to the employee (Unilever, 2014b). The first recommendation applies to the establishment of scenarios where early retirement can be deemed as valid. For example, if an employee has opted for retiring early because of certain health issues and risks such as heart disease, diabetes or hypertension which may reduce his/her ability to perform their job responsibilities successfully then the reduction should be set at 2.5 per cent. Secondly, the company should also maintain thresholds for applying their discretionary policy upon employees owing to the drastic changes in social and economic scenarios since their date of joining the organization. Also to promote gender equality in the workplace, entitlement on pension and benefits should be set at an equal age for both men and women. 5. Unilever’s retirement plans have created dissatisfied pensioners if the data from 1992 is considered when the company was granted a period of seven years of the absence of releasing pensions payments to recover from the financial situation that had established at the time (Inman, Jones and Collinson, 2004). Ultimately, the company’s employees that had faced retirement during the period were not able to reclaim the lost amount in pension payments which had apparently been compensated to the senior and top level management of the company. Regardless, of this negative scenario for Unilever’s pensioners the company’s employee-sponsored retirement plan titled Unicare is understood to be a considerable 401k plan in comparison with what competing companies are offering to retirees. However, in comparison with Unilever’s policies and frameworks to manage retired employees, P&G’s system is more comprehensive and effective because it focuses on catering to the needs of the retirees’ families assuming the employees were the primary earners of the family or one of the financial contributors before retirement. For example, the company offers to assist in the funding of education of employees’ children that are currently pursuing higher education considering certain requirements of the company are met and the employee is able to satisfy certain terms and conditions of the plan. However, both companies are on similar grounds with respect to the idea that they have maintained a list of comprehensive equity-based frameworks and stock options to assist retirees. Moreover, Unilever also offers a portfolio of healthcare plans for workers which cover the expenditure of medical cost and help that maybe sought by the employee, their spouse or partner and their dependent children. Similarly, when conducting their operations within North America, P&G are expected to adhere and conform to the regulations and laws for the provision of benefits services that have been outlined and specified in accordance with each nation’s laws and regulations. The individuals that are entitled for health benefits in this case are the employee, spouse or partner and any dependent children of the employee. References Balkin, D. B., & Gomez‐Mejia, L. R. (1990). Matching compensation and organizational strategies. Strategic management journal, 11(2), 153-169. Inman, Jones and Collinson (2004). So who the devil has ruined your pension. The Guardian. Accessed from The Economist (1999). No man is an island. The Economist. Accessed from Unilever (2014a). Fair Compensation. Unilever Global. Accessed from Unilever Group Annual Report and Accounts (2003). Financial Statements. Unilever. Accessed from Read More