Designing Compensation Systems - Case Study Example

Marshall & Gordon is a leading public relations firm. It provides a wide range of services intended at managing, protecting and enhancing a client’s reputation, brands and product. Traditionally, Marshall & Gordon has been a market leader in the international market. However, the firm was hard hit by the economic recession that took place in 2008-2009. Furthermore, Marshall & Gordon lost part of its customers due to high competitors in the market. Marshall & Gordon target international market. The company has developed various products so that they can be different from its competitors. Currently, the company is committed to pursuing a strategy that adds executive positioning to the traditional public relations services. However, its current compensation system is not strong enough to support the new strategy. The company has been facing financial problems that were caused by poor performance. The CEO and her directors had dropped bonuses because they could not offer them. Employees, especially high ranked employees, were worried about their bonuses and other benefits they normally receive. The industry’s management was not able to pay all the benefits as it use to be because of the economic downturn that had hit Marshall & Gordon. A dropped in revenues by 40% was reported forcing the industry to cut costs by laying off some of its employees. The situation was challenging and the CEO, Kelly Browne, had no option other than to cut down industry’s expenses by suspending consultant salaries by 5% and all other matching funds that are provided for the employees as a retirement benefit. This strategy of reducing expenses is risky because it does not only support the company’s new strategy, but risk core client-service activities. This compensation system does not work in a competitive environment. It does not support new strategies, in fact, it can cost the company. The compensation system of Marshall & Gordon does not support the implementation of executive positioning to the traditional public relations services because of the following reasons. First, the system is very discouraging. Employees are likely to walk if they fail to receive a certain level of bonus they expect to receive. Employees are essential determinants of the success of the implementation process. They are the ones who are going to market the product, talk to clients and convince them. Besides, employees are the image of the company, the position of the company depending on how they are treated. Thirdly, employees will always see the reward and the effect and they are likely to repeat the behavior. It is, therefore, essential to have a strong compensation system that rewards the employees. Employees will be effective when they know that their hard work will be recognized and appreciated. To the contrary, the compensation system of the Marshall & Gordon does not reward nor recognize the hard work of the employees. This system will not support the implementation of executive positioning. In every organization there is the department of human resource which helps the organization in discovering the weakness and strengths of the needed human resource. The human resource manager is therefore hired to deal with the issues concerning all the human beings working tin that organization. The role of human resource is quite diversified and it begins from recruiting new employees, motivating the employees, organizing for programs that help to improve the skills of employees, interviewing the employees and attending to the needs of the employees. It is therefore the responsibility of every human resource manager to design a strategy that will enable the employees and all the subordinates to work towards attaining the organization goals. Human resource manager therefore must have the skills and competence that will help them to design better strategies for the organization employees. The expertise of a human resource manager should guide them to identify various strategies, including those for solving issues arising from the subordinates. Designing strategies is complex and requires a human resource manager to be familiar with all strategies. This involves researching and developing models that represent the real strategy. Consultants are therefore needed to work with the human resource managers in order to develop effective strategies which will help an organization in achieving its objectives. The strategies that are usually designed by human resource managers include these of expanding the activities of an organization by opening new branches, offering new services and also those that include creating new posts for the subordinates who have been promoted. A compensation strategy is one of the strategies that a human resource manager has to design. This is a strategy that explains the rewards that the employees and the subordinate will get to compensate for their efforts. It is always obvious that compensation comes in the form of salary but there are other considerations. Compensations come in different form example; direct compensation, this is the financial compensation that involves salary, bonus, wages and commissions. All these direct compensation is payments a subordinate will receive at regular intervals, example monthly. Direct compensation is another example that involves the financial rewards that are not part of the direct compensation. They include leaves, services to the employees like transport, retirement plans like pensions, benefits and education. Indirect compensation comes in the form of a contract. The last form of compensation is non-financial which does not involve any form of finance, but rather the opportunities the subordinates get in the process of performing their tasks. These opportunities involve ability to develop their career and that of recognition. When designing compensation strategy for rewarding employees, it is therefore important to consider the unique ability of each employee. This is because every employee has their own unique ability of performing tasks, they also have their own talents and therefore their ways of performing organization tasks are different, there are those who will work hard and are willing to cooperate while there are those who cooperate under pressure. A compensation strategy should be designed in a manner that will meet the needs of the employees because people work in order to fulfill different needs. If those needs are not fulfilled well, the employees will lose the morale of working in the organization and it will be a consequence of failure to achieve the desired objectives. The responsibility of a human resource manager is to design a good compensation strategy that strikes a balance between equality in the internal organization and the competition that is externally. This means that the employees should be satisfied with the compensation system such that they will not be pulled out by the competitors who are willing to compensate them more that what they get in their present organization. It is crystal clear that compensation goes hand in hand with productivity. Therefore, when the employees’ form of compensation is satisfactory, it will motivate them to work towards attaining the goals of the organization. This involves working together as a team and also exchanging ideas that will help the organization in achieving their goals. Human resource manager should therefore design a compensation strategy that creatively fulfills the needs of the employees and the employees are able to get knowledge on the benefits accrued in the compensation program. A Marshal global international firm that deals with public relations has expanded their services by including an executive position which requires the subordinates to work in teamwork. This is a difficult task for the human resource manager because she has to design a strategy that caters from the expanded services. They have also expanded their level of interactions with the clients. The aim of this is to do away with the old system of public relations. Therefore the firm has a lot of changes to make which include means of measuring performance of the employees, senior staff and the consultants. The human resource manager therefore had to design a compensation system that will cover all the personnel required in the expanded field. Marshal & Gordon being a large firm faces stiff competition with other growing and competitive firms. It therefore needs to change their systems of operations and therefore it involves changing the performance of the employees. Browne the human resource manager in this firm has a challenge concerning the plans being made to improve the efficiency of the firm’s services. The new strategies of improving the services of the firm involved hiring new staff that are competent and are able to interact with higher level corporate; in the process of interacting they also build a network that will facilitate exchange of ideas. These employees were also required to network and interact with chief executive officers of big firms and maintain the image of the firm through presenting themselves in a competent manner. They are also required to interact with the stakeholders, politicians and other subordinates of higher rank in the big firms. Brown knows that it is difficult to get those consultants to hire. This is because they come with the expectation of being highly compensated. However the compensation strategy has to consider the ability and the success of the employee. Brown therefore has to design a compensation strategy that would meet the requirements of the consultants who whose roles would be to maintain the image of the firm through networking in executive position. Designing the new employee compensation strategy involved salary, bonus and the opportunities that come along. This was a great challenge to the firm because they had to budget for the additional employees, therefore implying that changes were to be made to adapt to the new system without having to encounter losses in the firm. Karlson the head of the human resource department through the help of Browne decided to change the compensation strategy of the firm since they had to design a system that adapts to the changing environment and technology while keeping the pace with the competing firms externally. These changes will have to bring a positive impact to the firm by fulfilling the needs of the hired consultants. The firm has an objective of persuading more clients to engage in the business and these clients are from big firms. The persuading power of the consultants therefore should be creative and having the power to win the clients. The compensation strategy for these clients should also be creative. The process of changing the compensation strategy to fit the new required system demands that the human resource manager makes these changes which involve; Designing a performance parameter. This is a method that the firm will use to measure the efficiency of the newly employed and also the existing employees. The performance parameter indicates the ability of the employee. Compensation strategy will be based on the results from the performance parameter of a consultant. This will enable consultants to work towards keeping their performance parameters in a position to get the benefits that accrue direct financial compensation as explained. During the interview, consultants who accept to be placed under performance parameter should be considered, because they will be willing to work. The existing employees should also be notified of the changes of performance parameters so that they will work in accordance with the changes. Recognizing employee performance. The compensation strategy should be designed in a way that it considers those employees with unique job performance. Not all consultants will have good persuading power and therefore not all of them will be able to win the clients. It depends on how the consultants will apply their skills. Therefore, compensation for such consultants should be designed in a creative manner which will avoid the critic of biases among other employees. Cost cutting. Since designing compensation strategy required the deployment of huge amount of resources, especially when it comes to compensating directly to the consultants through salaries and bonuses. The human resource manager should make some changes that will lead to cost cutting by ensuring that the consultants employed are able to cover the required areas being assigned. Example assigning two consultants in each field. This will enable the firm to be able to compensate the consultants, according to their qualifications. It will thus reduce the cost of hiring many consultants who would want to be highly compensated and thus leading to a shortage of resources in the firm. Changing the terms and conditions of the compensation. The human resource manager should change the terms of compensating the consultants. It is obvious that many consultants want bonuses and non-financial opportunities aside from the direct compensation. The changes should involve that the consultants meet a required target in order to get their bonus. In this case, they will accept the conditions and use their competence and skills to attain the target. For those who will not attain the target, they will be compensated as usual without any benefits. These changes in the compensation strategy will ensure high performance. Upon introduction of changes in the compensation strategy, the human resource manager should put in place policies that will help support these changes, these policies involve; Legal compliance. The human resource manager must make changes to the compensation system by considering the compliance of that strategy with the legislation. This means that the compensation strategy should not go against the standards required during labor, employment policies, retirement plans, safety of the employee and insurance policies. Therefore, research on the required standards of compensation as per the legislation should be done so as to design a compensation strategy that complies with the legislation. Compensation philosophy. This is a tool used to guide the complexity of the compensation strategy. Compensation philosophy defines the objectives of the strategy. The most defined objective is that of attracting and retaining employees. In the Marshal & Gordon firm, the consultants needed should be compensated in a manner that they will want to remain with the firm. The changes made in the compensation strategy should therefore be guided by developing a philosophy which will enable the manager to make appropriate decisions. Ensuring equity. A compensation strategy should ensure there is fairness. The changes made in the compensation strategy of marshal & Gordon should apply the equity of its employees. This will be achieved through treating all employees fairly. Also the employees should feel that their system of compensation is fairer than those of other employees who perform the same tasks in other firms. They should also feel that they are being rewarded as per their ability and capability of performance. Human resource manager should consider all these issues on equality in order to come up with an appropriate compensation strategy. Designing a compensation strategy is a complex process that calls for critical analysis of the internal environment and comparing it with the external environment in relation to the employee level of satisfaction. 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