The new compensation plan will have a performance pay mix. Under the mix, the employees will be compensated based on their level of performance such that those workers who will underperform will be given less pay in comparison with those who will perform well (Shields et al., 2015). Based on the new compensation plans, the jobs will have a different mix and this is especially for the top level management who are in charge of making most of the decisions of the organization. Such a difference in the mix will because of the differences in the various levels of management. Since the employees all have different roles and positions in the organization, it is expected that they will perform differently and this will, therefore, necessitate for a different mix.
The accountant, for example, will be paid based on his or her performance on administration and support of the responsibilities relating to capital equipment accounts and operation of the accounts. The advertising and product promotion specialist, on the other hand, will be paid according to his or her performance on the development and providing recommendations on better promotional and advertising policies to attain profitable sales (Stanowski, Simpson & White, 2015). Further, the branch inventory clerk will be compensated based on his or her performance relating to the management of the inventory at the branch of the particular organization. For the branch sales manager, under the compensation strategy which is based on performance, he or she will be compensated according to the performance in respect to selling and management of technical services meeting the various requirements of different customers and hence enhance the financial performance of the organization.
The compensation strategy relative to the market selected will be the lead compensation strategy and this is because of the high competitive labor markets. The newly recruited employees will be paid wages compared to those of the existing market wages for particular jobs. Such a move will aim at getting more labor from many individuals due to the competition for labor in the market (Zhu & Zhang, 2016). There are also certain benefits which will be obtained from the lead compensation strategy. Such benefits may include, an increased productivity and morale among the employees, decreased employee turnover, reduction in the unionization implications and a rise in the supply of candidates who will apply for various job positions in the organization. Prior to the execution of the above mentioned compensation strategy, it will be vital to comprehend the benefits and costs related to it. In essential cost will be an increase in the labor costs due to high wages which will be awarded to the new employees (Shi et al.,2015). Such a strategy will also be reviewed to ensure that it generates various benefits to the particular organization.
The base pay will be ascertained based on the market pricing. The above mentioned technique will be used since the market is competitive in regards to available labor and thus it will be prudent to pay the employees based on the wage prices in the market. The method of market pricing will be used for all the jobs in the organization (Connelly, Haynes, Tihanyi, Gamache & Devers, 2016). As indicated earlier, the market has become competitive in terms of labor and hence the base pay will be based on market pricing technique as the base to compensate the workers.
In the implementation of the above mentioned base pay which is the market pricing, the key steps will entail first the identification of the market comparator firms. The selection of the comparator firms will a big challenge and this because some of the companies are privately owned and also are of bigger corporations. Further, some of the roles played by the executive members of the company are many because of the diverse business units and hence it will a challenge when it comes to the matching of the market. The selection of the comparator companies will also be based on certain aspects such as global manufacturing operations, global presence and the level of complexity of the multiples. The critical market comparator firms of the organization will include, Dollar General and Dollar Tree.
The above two firms have been selected based on certain factors as indicated below;
The two companies typically get a huge proportion of set target compensation and this does not include, the benefits in regards to performance-based compensation. The factor above has been chosen to align the principle of pay of the organizations with the interests of both the shareholders and management.
In the setting of compensation, the two firms take into account the information availed to them in regards to the market and this is usually done when ascertaining both the short and long term incentives and also the base salary for the different employees of the organization (Shi et al., 2015). The long and short term incentive plans are used by the companies since they both offer strong incentives to enable better performance within the organization.
Generally, the two firms have in the past been having performance records and this, therefore, makes it easy and simple to compare them with the organization. The firms selected in terms of their strong performance will typically motivate the particular firm to increase its performance level beyond that of the two firms.
The information needed for a comparison of the two companies will be obtained from the annual financial reports of the two companies. It will entail looking into the various aspects which determine the level of performance of the two firms. Such aspects include the statement of financial position, income statement, comprehensive income statement, and auditors report among others. The other sources of information could also be from sources such as custom surveys, traditional surveys and online data and software (Shin, Kang, Hyun & Kim, 2015). The data obtained from the annual financial reports of the firms will be evaluated using a variety of techniques. Such methods will entail finding the mean, median and the weighted average. The mean for annual revenues of each of the companies will be calculated to determine their financial position. Further, the median and weighted averages for each particular firm will also be obtained to assist in knowing the level of performance of the two organizations selected and this will be in relation to their financial level.
The key steps of market pricing in determining the compensation base would entail the following steps as indicated below;
Determination of the Overall Compensation Strategy
The above step entails ascertaining the right compensation mix for the particular organization (Piercy, 2016). Also, in the step, it is important to understand the reasons for wanting to become more competitive and rewarding of the employees who perform better.
Obtaining Information on the Vital Compensable Factors
According to Nagle & Müller (2017), it involves the gathering of compensable factors of various jobs in the firm. Such factors may include, sales territory, education levels, years of experience, certification, set skills, responsibilities related to supervision and management of budgets.
The step involves selecting particular job positions which are common in the market. It is always important to benchmark over 50 percent of an organization’s job positions in the market to help determine the prices of every particular job (He, Chen, Kang, Pinson & Xia, 2016).
The various sources of information are identified and selected to gather information on the various market prices of jobs for different companies (Peng, Sun & Markóczy, 2015). Some of the sources of data may include, online data and software, custom surveys and traditional surveys among others.
Matching of the Jobs with the Data
The matching of jobs to the data gathered entails a variety of activities such as matching the various job positions, tasks and the levels of various positions in the particular organization which will be used to determine the pay base for different employees (He et al., 2016).
After the above mentioned steps have been carried out such that the market prices have also been developed, a market pay line will then be developed to help compensate the employees of the organization.
References
Connelly, B. L., Haynes, K. T., Tihanyi, L., Gamache, D. L., & Devers, C. E. (2016). Minding the gap: Antecedents and consequences of top management-to-worker pay dispersion. Journal of Management, 42(4), 862-885.
He, G., Chen, Q., Kang, C., Pinson, P., & Xia, Q. (2016). Optimal bidding strategy of battery storage in power markets considering performance-based regulation and battery cycle life. IEEE Transactions on Smart Grid, 7(5), 2359-2367.
Nagle, T. T., & Müller, G. (2017). The strategy and tactics of pricing: A guide to growing more profitably. Routledge.
Peng, M. W., Sun, S. L., & Markóczy, L. (2015). Human capital and CEO compensation during institutional transitions. Journal of Management Studies, 52(1), 117-147.
Piercy, N. F. (2016). Market-led strategic change: Transforming the process of going to market. Routledge.
Shi, H., Zhuo, F., Yi, H., Wang, F., Zhang, D., & Geng, Z. (2015). A novel real-time voltage and frequency compensation strategy for photovoltaic-based microgrid. IEEE Transactions on Industrial Electronics, 62(6), 3545-3556.
Shields, J., Brown, M., Kaine, S., Dolle-Samuel, C., North-Samardzic, A., McLean, P., … & Plimmer, G. (2015). Managing employee performance & reward: Concepts, practices, strategies. Cambridge University Press.
Shin, J. Y., Kang, S. C., Hyun, J. H., & Kim, B. J. (2015). Determinants and performance effects of executive pay multiples: Evidence from Korea. ILR Review, 68(1), 53-78.
Stanowski, A. C., Simpson, K., & White, A. (2015). Pay for performance: are hospitals becoming more efficient in improving their patient experience?. Journal of Healthcare Management, 60(4), 268-284.
Zhu, W. X., & Zhang, L. D. (2016). Analysis of car-following model with cascade compensation strategy. Physica A: Statistical Mechanics and Its Applications, 449, 265-274.
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