Caterpillar's Plan Illustrates the Risk of Variable Pay Plans by Harrer - Essay Example

The variable pay schemes are largely in use in different sectors and different enterprises. To one estimate over 90 percent and above enterprises and business organizations have resorted to variable pay schemes to minimize the chances of further damages and losses that may be incurred in the longer run.

The case and practical example presented relate to PowerPoint slide number 8 in such a way that it is a practical demonstration of the managerial terms and concepts that are often used in management courses and programs. The variable pay scheme may also be taken into account keeping in view the HR functions such as client satisfaction, the overall level of interaction between the top management, middle, and lower administration along with the interaction between the inside of the organization and the supply chain outside.

The variable pay method is subject to various factors considered. These factors pertain to the past history of the organization, the cultural trend, and the clients’ adaption to the new concept as well as the legal aspects of fulfillment in this regard. The business cycle must also be taken into account as the overall forecast considerations in terms of the small-level forecast to medium and long-term forecast procedures undertaken.

In these slides, questions are asked which are associated with the actual condition and situation under which these factors are taken into account. These questions include the following:

Is the variable pay program taken up in the proper manner?  Does it take into account the cultural context?

Are the employees provided with the promised incentives in case of the accomplished goals and targets set forth against it?

 All these factors are to be taken into account and addressed in order to make sure that the variable pay method is executed properly.

Practical example:

Caterpillar Inc 2013 took up the variable pay scheme in light of prevailing circumstances and the global recession (Harrer). The variable pay scheme was introduced in the wake of the overall low profits and low investor responses recorded in recent years. The responses so incurred and recorded were as low as 40 percent compared to the previous year's performances and the subsequent gains and benefits from it. Caterpillar Inc found relative stability in its ranks after undertaking the variable pay scheme for the purpose of handling the employee's concerns and overcoming the risks of global recession and low sales in recent years and recent seasons.