Formulating A Compensation Strategy For Fit Shop

Contextual Variables

Discuss about the International development in executive compensation.

Compensation strategy refers to the strategies which are formulated by the management to ensure that the company is able to remain competitive and retain the employees of the company. Basically, compensation strategy is used to place the management in the job market and also make the organization competitive in nature (Schmitt, Zacher & Frese, 2012). The compensation strategy of the company is closely related to the Human resource strategy of the company.

In this case study, compensation strategy is to be formulated for Fit Shop which provides fitness services to the customers (Obasan, 2012). There are five types of contextual variables which are environment, business strategy, technology, organization size and workforce. The five types of contextual variables are discussed below in brief:

1. Environmental context: This context is concerned with the surroundings in which the business operates. In the case of Fit shop, the environmental context comprises of the shop locations, facilities which are provided by the shop, environmental and culture of the shop.
2. Business strategy: The business strategy of Fit shop will be serving as many customers as possible and customer satisfaction. As the shop is to set up the shop has settle down before it starts aiming for profit maximization strategies (Chen & Jermias, 2014).
3. Technology: The technological context refers to the modern equipment and tools which are used by the shop for providing services to the customers. The equipment which have had some changes are treadmill with music facilities, Monkey bars and other new set of equipment.
4. Organization size: The plan of the management is to open a number of shops which can provide the same facilities to its customers. Therefore, it is clear as per the plans of the management the size of the organization will be large.
5. Workforce: The workforce of the shops refers to the number of employees which the management of the company is planning to recruit for day to day operations of the business. The management plans to recruit 8 to 12 people for each shop which it establishes for the purpose of sales.

Contextual Variable	Classical Save Time On Research and Writing Hire a Pro to Write You a 100% Plagiarism-Free Paper. Get My Paper	Human Relations	High-Involvement
	Environment ·         Stability ·         Complexity	Stable Simple	Stable Simple	Dynamic Simple or Complex
Business Strategies ·         Porter’s typology ·         Growth strategy	Lower cost Maximization of Services and Customer Satisfaction	Focused Differentiation Service Maximization	Differentiator Prospector
Technology ·         Thompson’s typology ·         Woodward’s typology	Long linked Mass	Mediating Process	Intensive Process or unit
Organization Size	Medium	Medium	Medium
Workforce ·         Skills	Moderate	Moderate	High

The managerial strategies which the shop will be following for the overall development of the business is growth strategies. The main strategy of the shop is to serve as many customers as possible and the goal of the business is customer satisfaction.

The management of the company will be appointing three level of employees which will be working a store which are store manager, professional staff and sales staff. The behavior of the staff will depend on the designation of the employees. The store managers need to be a strict as they will be supervising over the activities of the store and also collect feedbacks from the customers about the services which they are and whether they are satisfied with the same or not. The management of the store is directly under the control of the store manager and he needs to be strict and disciplined in order to effectively control the activities of the other staffs working in the store. The professional staff of the store are must be cheery and helpful in their behavior and at the same time they must be professional as they will be performing or giving advices on physiotherapy as well as kinesiology. The sales team members will have to put up their best friendly behaviors and smiles while attending customers as the sole objective of such sales staff is to sell the fitness equipment which the store has to offer. The sales staff needs to be polite, friendly and always have an attitude of serving the customers to their best interest.

Job Family: Store Manager

Total Compensation Level: Lead

Particulars	Proportion of Pay
Basic Pay ·         Job Evaluation ·         Market Pricing ·         Knowledge of Business
Performance Pay Individual Performance Pay ·         Piece Rate ·         Commissions ·         Merit Bonus ·         Special Incentives Group Performance Pay ·         Gain Sharing ·         Goal Sharing ·         Group Bonuses Organization Performance Pay ·         Profit Sharing ·         Stock Plan ·         Other Pay
Indirect Pay ·         Mandatory Benefits ·         Pension Plans ·         Health and Life Insurance ·         Other Benefits

Job Family: Store Manager

The managers are the persons who will be supervising and reporting back to the owner of the shop therefore they are in top position and also has a critical role to play in the overall development of the business therefore it is natural the company will want to retain such employees on a permanent basis. The management of the company plans to compensate the store managers following the market lead strategy, in which the employee are paid in excess of average market rate for same position in different shop. The goal of the management is to retain such store managers and therefore compensate them well so that such employees are motivated towards the overall development of the business. The store managers will be getting basic pay which will be higher than professional staff as well as sale staff due to their functions and qualifications. Moreover, they will be getting incentives of special nature for meeting the target of the business along with normal bonus in performance-based pay (Blazovich, 2013). In other indirect pay they will be getting pensions schemes, insurance schemes, free fitness equipment use and services.

Job Family: Professional Staff

Total Compensation Level: Lead

Particulars	Proportion of Pay
Basic Pay ·         Job Evaluation ·         Market Pricing ·         Knowledge of Business
Performance Pay Individual Performance Pay ·         Piece Rate ·         Commissions ·         Merit Bonus ·         Special Incentives Group Performance Pay ·         Gain Sharing ·         Goal Sharing ·         Group Bonuses Organization Performance Pay ·         Profit Sharing ·         Stock Plan ·         Other Pay
Indirect Pay ·         Mandatory Benefits ·         Pension Plans ·         Health and Life Insurance ·         Other Benefits

The professional staff of the business are the key experts on the basis of which the business will be operating as they are the ones who will be training sales staff how to handle equipment and also give advices to customers about fitness, physiotherapy, kinesiology and other similar services relating to sports and physical activities. The management cannot afford to lose such experts so they will be compensating such employees following the lead principles. The goal is to keep such experts motivated and happy with the organization. Such employee will be getting higher basic pay compared to sales staff but not higher than store managers. The employees will be entitled to group bonuses, normal bonuses, incentives on the number of customers they serve above their normal targets, special incentives (Gomez-Mejia, Berrone & Franco-Santos, 2014). In addition to this, they will be covered in the pension schemes as well as life insurance scheme as per policy of the company.

Job Family: Sales Staffs

Total Compensation Level: Lead

Particulars	Proportion of Pay
Basic Pay ·         Job Evaluation ·         Market Pricing ·         Knowledge of Business
Performance Pay Individual Performance Pay ·         Piece Rate ·         Commissions ·         Merit Bonus ·         Special Incentives Group Performance Pay ·         Gain Sharing ·         Goal Sharing ·         Group Bonuses Organization Performance Pay ·         Profit Sharing ·         Stock Plan ·         Other Pay
Indirect Pay ·         Mandatory Benefits ·         Pension Plans ·         Health and Life Insurance ·         Other Benefits

The sales staffs will be responsible for looking after the clients as well as selling of equipment and also maintaining the store. For the sales staff the management is planning to follow match strategies and provide them with the average salary which is offered for the same position in competitor’s business, however the company plans to provide them with incentive scheme which will keep them happy and reduce employee turnover. The sales staff will be getting basic pay which is lower than professional staffs and store manager but they will be getting more incentives based on their performances, bonuses, target incentives, loyalty incentives, allowances (Chung, Steenburgh & Sudhir, 2013). They will also be getting coverage in pension plans and insurance schemes and also other benefits.

Total Compensation Level: Lead

As per Susan Superfit who is the founder of the company the business is not looking to earn profits for the next one or two years down the line. The main strategy of the business is to expand and grow by opening new shops in different areas and also increase the number of employees which the company is recruiting and increase the overall size of operations of the business. As per the founder the sales staff will not be responsible for the sales activities of the business but also will have to learn from the professional staff how to handle different equipment which the business is using which shows that the business has the urges to expand.

The structural variables of the business are discussed below:

1. Performance appraisal system: It is the system by which an employees performance is appraised and the employee is then eligible for promotion.
2. Reward allocation systems: Theses refers to the rewarding system which is adopted by the company for the employees of the company (Duchesne & Morin, 2013).
3. Behaviors: These refers to the overall attitude of the employees and managers towards the day to day operations of the business and ultimately the final goal of the company.
4. Organization’s Culture: This refers to the culture of the organization and the values which are associated with the organization.
5. Intensity of Ethical Issues: The refers to the ethical norms and regulations which are followed by the company
6. Team Motivation: This reflects the level of motivation which is shown in the work of the employees for achieving the organizational goals.

The managers are the persons who will be supervising and reporting back to the owner of the shop therefore they are in top position and also has a critical role to play in the overall development of the business. On the other hand, professional staffs are the key experts on the basis of which the business will be operating as they are the ones who will be training sales staff how to handle equipment and also give advices to customers about fitness, physiotherapy, kinesiology and other similar services relating to sports and physical activities (Boyd, Franco Santos & Shen, 2012). While the sales staffs are responsible for looking after the clients as well as selling of equipment and also maintaining the store.

The rewards which are being offered by the company is appropriate and will be enough to motivate and retain the employees of the organization. The management is either paying lead compensations or match compensation to its employees which is fairly good along with other indirect pay and perquisites. There is sufficient scope for growth as the sales staffs are to be trained in handling the equipment which means in few years they can be promoted to professional staff with the experience they will be getting. The chosen strategy of the business which is growth strategy will give rise to development of the business as a whole and also impact the behaviors of the employees in a positive way.

Reference

Blazovich, J. L. (2013). Team identity and performance-based compensation effects on performance. Team Performance Management: An International Journal, 19(3/4), 153-184.

Boyd, B. K., Franco Santos, M., & Shen, W. (2012). International developments in executive compensation. Corporate Governance: An International Review, 20(6), 511-518.

Chen, Y., & Jermias, J. (2014). Business strategy, executive compensation and firm performance. Accounting & Finance, 54(1), 113-134.

Chung, D. J., Steenburgh, T., & Sudhir, K. (2013). Do bonuses enhance sales productivity? A dynamic structural analysis of bonus-based compensation plans. Marketing Science, 33(2), 165-187.

Duchesne, É., & Morin, J. F. (2013). Revisiting structural variables of trade negotiations: The case of the Canada-EU agreement. International negotiation, 18(1), 5-24.

Gomez-Mejia, L. R., Berrone, P., & Franco-Santos, M. (2014). Compensation and organizational performance: Theory, research, and practice. Routledge.

Obasan, K. A. (2012). Effect of compensation strategy on corporate performance: Evidence from Nigerian firms. Research Journal of Finance and Accounting, 3(7), 37-44.

Schmitt, A., Zacher, H., & Frese, M. (2012). The buffering effect of selection, optimization, and compensation strategy use on the relationship between problem solving demands and occupational well-being: A daily diary study. Journal of Occupational Health Psychology, 17(2), 139.