Building a Lasting Compensation Plan
Building a Lasting Compensation Plan
Compensation plans are as varied as the companies that implement them. They reflect a company’s culture, financial strategy, organizational structure and goals. Compensation plans serve as the catalyst for employees to join a company and remain, which in turn enables the organization to fulfill its obligation to provide goods and services. Developing an effective compensation plan requires thorough preparation through several steps. These steps include: determining job value, determining overall pay, determining individual/Team pay, pay delivery, and managing pay (Milkovich, 2011). Also important is the order in which these steps are completed as each step provides the preparation and data for the next step. Completing these steps out of order may lead to discrepancies within the plan and not doing all the steps may results in inconsistencies and unfair pay practices. To illustrate the compensation plan steps we will use fictitious company Ben’s Bakery, a midsize company employing approximately 1,500 people. Ben’s Bakery has been in business for 15 years in Oxnard, California and was founded by CEO, Ben Bluebacher. Ben’s Bakery is headed by Ben and his board of Vice Presidents representing operations, sales, marketing, human resources, and finance divisions. The operations division, largest in the company, represents approximately 1,000 employees and is in the process of reassessing their compensation program. Operations consist mainly of non-union, non-exempt workers with an average seniority of 6 years. There is ten management staff representing 1% of the operations workforce. The Operations division compensation plan has not been updated in 5 years and is currently not on track with comparable industry or geographic organizations. The executive team has asked Human Resources to conduct a full audit using the standard five compensation plan development steps and to provide a recommendation for changes within 60 days. Determining Job Value
The most critical step in starting a well thought out compensation plan is understanding all the positions in a company. Conducting a job analysis is the foundation for each subsequent step of plan development. During analysis, data is collected on all aspects of a job or series of jobs. It begins with general information such as job titles, department, and how many people hold that job. This is called job identification. The purpose of job identification is to bucket jobs into job families such as marketing, office support, or operations. Once the job families are identified, each job is then broken down to determine its content. Tasks, skills, and competencies make up the content. A job based analysis looks at tasks a person completes and a person based analysis looks at skills and competencies required to perform that role. In conducting an analysis of Ben’s Bakery, a job based analysis will provide the best results as the targeted positions are task oriented versus behavior oriented. There five jobs being analyzed are delivery driver, baker helper, shipper/receiver/packer, quality control technician, and maintenance mechanic. During analysis, key tasks are identified which will become the essential elements of that job. These elements are those tasks that cannot be reassigned to other workers. For example, the quality control job requires employees have 1-3 years experience or recent college graduate work, and be proficient in the application of tools, resources and methodologies in all quality assurance related areas. Once the analysis is complete, job descriptions are crafted from the data to organize each job’s profile. This profile tells the employee what the job entails and what they will be evaluated against during the performance review period. The job description aids the recruitment staff in attracting qualified employees and provides the basis for...
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