Preview

Compensation Strategy

Better Essays
Open Document
Open Document
1764 Words
Grammar
Grammar
Plagiarism
Plagiarism
Writing
Writing
Score
Score
Compensation Strategy
Pay is one of the most important elements of any organization. It is what compensates, drives, motivates, and rewards employees for the work they do. Or it does the opposite of these things. What is a strategic compensation strategy? Simply stated, it is the compensation of employees in ways that enhance motivation and growth, while at the same time aligning their efforts with the objectives, philosophies, and culture of the organization (Bohlander &Snell, 2010. Compensation includes all forms of pay and rewards received by employees for the performance of their job. Employees desire compensation systems that they perceive as being fair and commensurate with their skills and expectations. An effective compensation and benefit system will contribute to organizational effectiveness. Holland Enterprises is one of the city’s largest employers. Your firm currently employs 3,500 employees. However, since 2007 the firm has lost 25% of its staff. From the research that has been presented, it is because your firm lacks an effective compensation and benefit system. In order for Holland to remain an effective organization, your compensation and benefit system needs a long overdue makeover. The current compensation system is being perceived as unfair and uncompetitive in the marketplace. An effective compensation and benefit system will contribute to the effectiveness of your organization. To survive and be successful in a global economy, an organization must be competitive (Henderson, 2006). In order for any organization to be effective they must attract and hire people who have knowledge, skills, aptitudes, and attitudes. An organization designs and implements a reward system to focus worker attention on the specific behaviors the organization considers necessary to achieve its desired objectives and goals (Henderson, 2006). A successful strategic compensation plan allows your business to compete in the market for the best employees in your industry.

You May Also Find These Documents Helpful

  • Better Essays

    Compensation Philosophy

    • 853 Words
    • 4 Pages

    References: Martocchio, J.J. (2011) Strategic compensation: A human resource management approach (6th Edition). Upper Saddle River, NJ: Prentice Hall. ISBN: 9780136106401.…

    • 853 Words
    • 4 Pages
    Better Essays
  • Best Essays

    Gerhart, B., Minkoff, H.B. & Olsen, R.N. (1995). Employee Compensation: Theory, practice, and evidence (CAHRS Working paper #95-04). ). Ithaca, NY: Cornell University, School of Industrial and Labor Relations, Center for Advanced Human Resource Studies. http://digitalcommons.ilr.cornell.edu/cahrswp/194…

    • 1775 Words
    • 8 Pages
    Best Essays
  • Good Essays

    Bus 409

    • 877 Words
    • 4 Pages

    Analysis of how Compensation Practice can be Applied to Positively Impact an Organization and its Stakeholders…

    • 877 Words
    • 4 Pages
    Good Essays
  • Best Essays

    A company’s fundamental purpose and objective of compensation is to provide adequate and equitable rewards to employees at a level that matches theirs skills, abilities and contributions to the company (DeNisi, Angelo S., Griffin, Ricky W., 2008, p. 284. Para. 1). Compensation is the human resource management function that deals with every type of reward that individuals receive in return for performing work – including financial and nonfinancial rewards. Financial rewards include direct payments (e.g. salary) plus indirect payments in the form of employee benefits. Nonfinancial rewards include everything in a work environment that enhances a worker’s sense of self-respect and esteem by others (Cascio, 2006, p.418, Para. 1).…

    • 1391 Words
    • 6 Pages
    Best Essays
  • Good Essays

    The compensation structure should reflect the company business plan and goals by placing a priority on customer service, repeat business, new client referrals, and safety. What the company can afford to pay and implementing programs to reward performance that align employee compensation with the success of the company should be the basis of the compensation structure (Cascio, 2013, p. 419). The compensation structure should keep fixed labor costs low and place emphasis on benefits, incentives, and merit based-pay. The correlation between employee compensation and the…

    • 1028 Words
    • 5 Pages
    Good Essays
  • Best Essays

    The purpose of this report is to review 3 different analyzed employee compensation strategies that could potentially benefit your corporation if accurately executed. As a business you must remember that Employee Compensation is key to identifying as well as rewarding your employees, for their exceptional performance and contributions to the company’s success rate overall. Due to compensation being a significant factor, you must carefully evaluate the three strategies that will be presented in this report. Incorporating a bonus structure is a widely accepted compensation strategy. It provides for an employee who receive a set salary to capitalize their earnings by being rewarded for excellent job performance. Implementing a bonus structure could result in a stable compensation strategy that most employers and all employees are comfortable with. The downside of using this strategy would be having to minimize the ability for growth in annual salary increases, which could result in moral, motivation and productivity decreases. Offering a tuition reimbursement plan is also another popular and well accepted compensation strategy. With this strategy, employees feel as if the company that they invest a minimum of 2080 hours per year cares enough about them to help them pay for a higher education degree. There are many individuals who come to work and give their all with a desire to better themselves. However, due to financial restraints they are unable to. With the implementation of such strategy, you will begin to notice more and more employees pursuing higher education. This overall provides an…

    • 3603 Words
    • 11 Pages
    Best Essays
  • Good Essays

    Compensation Strategies are used by organizations to determine how rewards should be given out to employees. Since compensation is a good way to motivate employees to that are not performing well to do better and the ones that are working hard to work even harder, having a good strategy in place will help an employer to decide what is a fair reward to give to each employer. A compensation strategy must have a link between three things in order to be effective. The three things that a compensation strategy must have is detailed work that the employee is expected to perform, a detailed performance evaluation and pay that is provided to each employee.…

    • 654 Words
    • 3 Pages
    Good Essays
  • Good Essays

    Pay for Performance

    • 1107 Words
    • 5 Pages

    Traditionally, all incentive plans are “pay-for-performance” plans. They pay all employees based on the employee’s performance (Dessler). Compensation is a primary motivator for employees. People look for jobs that not only suit their creativity and talents, but compensate them both in terms of salary and other benefits accordingly. Compensation is also one of the fastest changing fields in Human Resources, as companies continue to investigate various ways of rewarding employees for performance. It is very important for organizations to make sure that the incentive plans are well structured to need the needs of the employee and in return make the organization profitable. Giving incentive pay to employees that has not earned them destroys the motivation and moral of employees which leads to less productivity. Thanks to public outcry, shareholder outrage, and increased government scrutiny, companies are making some adjustments to their executive incentive programs. At the very least, it gives the appearance of linking pay to performance.…

    • 1107 Words
    • 5 Pages
    Good Essays
  • Good Essays

    This paper will examine setting the stage for strategic compensation and bases for pay. There are three main goals of compensation departments: internal consistency, market competitiveness, and recognition of individual contributions. Internally consistent compensation systems define the relative value of each job among all jobs within a company. (Martocchio, pg. 22, 2011) With this system companies want employees to be paid more based on their qualifications and responsibilities. They believe someone with less experience should be paid differently. To determine such evaluation companies use job analysis in order to provide job descriptions. The job evaluation is to determine pay according to a particular position. Market-competitive pay systems attract and retain the most qualified employees. (Martocchio, pg. 22, 2011) By obtaining a strategic analysis and compensation surveys companies can determine who is most beneficial to the company based on the results. Strategic analysis examines long term growth and outlines the company’s profile to keep them in the market. Compensation surveys are collected and reviewed to determine different pay and which benefit packages are best needed. Compensation surveys are important because they enable compensation professionals to obtain realistic views of competitors’ pay practices. (Martocchio, pg. 22, 2011) Finally, recognizing individual contributions determines pay structures, pay grades, and pay ranges. The pay structures focuses on the difference in an employees’ contribution to company. With this structure it helps the company determine which employee has greater knowledge of the job their performing which leads to better pay. Companies with similar job groups use pay grades to determine compensation. Pay ranges start at the bottom and reach the maximum allowed depending on the job.…

    • 948 Words
    • 4 Pages
    Good Essays
  • Powerful Essays

    Ridoran Manufactoring

    • 1377 Words
    • 6 Pages

    Milkovich, G. T., & Newman, J. M. (2008). Compensation (9th ed.). New York, NY: McGraw-Hill.…

    • 1377 Words
    • 6 Pages
    Powerful Essays
  • Better Essays

    Martocchio, Joseph. Strategic Compensation: A Human Resource Management Approch. 5th ed. Upper Saddle River: Pearson, 2009. Print.…

    • 966 Words
    • 4 Pages
    Better Essays
  • Powerful Essays

    Market Competitiveness – Market-competitive pay systems play a significant role in attracting and retaining the most qualified employees. Compensation professionals build market competitive compensation systems based on the results of market surveys and compensation surveys.…

    • 1227 Words
    • 5 Pages
    Powerful Essays
  • Satisfactory Essays

    HRM 598 Final Exam

    • 923 Words
    • 3 Pages

    1.(TCO A) The new CEO of your company, who just came from a competitor, has just asked you to discuss the organization’s compensation system. As the compensation manager, you tell him about the organization’s nearly 500 employees in about 70 different job titles who are located in three locations in L.A. He asks you to describe the strategy used to guide compensation system decisions. You explain that ordinarily, pay models are guided by several strategic policies. Describe what goals a compensation system should have and how four strategic pay policies apply to the organization. (Points : 30)…

    • 923 Words
    • 3 Pages
    Satisfactory Essays
  • Good Essays

    A compensation strategy is one of the many human resources (HR) tools that organizations use to manage their employees. For an organization to receive its money’s worth and motivate and retain their skilled employees, it needs to ensure that their compensation system is not an island by itself. Not only is it important for an organization to link compensation to its overall goals and strategies, it is important that its compensation system aligns with its HR strategy. Let’s face it, if an organization is not paying its skilled employees what they are worth or at least the industry average, the chances are they will find an organization that will pay them for their talents.…

    • 342 Words
    • 2 Pages
    Good Essays
  • Better Essays

    Organizations that has the drive to flourish in a market that is very competitive must have a compensation plan that is well designed and inspires its employees, has benefit programs, guarantees equity, and handles compensation costs. These plans should mirror the culture of its employees. Organizations have numerous of options when designing a compensation plan comes into play, and must consider how the options they have chosen will be suitable for their strategy for engaging and keeping their employees. This paper will identify a total compensation plan for an organization, identify the internal and external equity advantages and disadvantages, and provide and explanation on how each plan supports the total compensation objective and the relationship to its financial situation.…

    • 1068 Words
    • 4 Pages
    Better Essays