Developing Compensation Strategy

Topics: Employment, Executive compensation, Employment compensation Pages: 16 (5040 words) Published: September 26, 2011
Demetrius Williams


19616 Fairport St

Detroit, MI 48205

Cell (313) 282-5661

MS 637 Compensation Management

Assignment 7/ Stand-Alone Project


Part A

1. Inadequate communication, poor leadership, inappropriate corporate structures and misaligned internal pay system are a few things among factors that have affected the morale and high turnover at Lynchburg Symphony.

What the numbers don’t show

It is important to remember that the numbers shown do not always convey a complete compensation system. For example, a violin concertmaster may have had a large increase in salary due to leaving a position and per terms of the employment contract, may have received a sizeable severance or deferred compensation package. As such, the cumulative compensation may artificially inflate annual earnings.

Furthermore, these figures may not reflect bonuses or other incentive payments. Also missing from the figures are expense accounts and other perks; as such, the cumulative compensation for the musicians.

Developing Compensation Strategy
According to (Milkovich & Newman, 2004) the first step includes an understanding of the industry in which the organization operates and how it plans to compete. To cope with the turbulent competitive dynamics, focus on what factors in the business environment are important today. Reality is more complex and chaotic. Organizations are not necessarily innovators or cost cutters or customer-centered. Instead, they are some of each and more (p. 38).

A pay system reflects the values that guide an employer’s behaviors and underlie its treatment of its employees. A great pay system reflects the company’s image and reputation. A compensation strategy reflects the value by including work/life balance programs for security, incentitives, and stock options to share the company’s success.

Because governments are major stakeholders in determing compensation, lobbying to influence laws and regulations may also be part of a strategy. So, from a strategic perspective, managers of compensation may try to form the political environment as well as be shaped by it.

The simple fact that employees differ is overlooked in formulating a compensation strategy.
Lynchburg Symphony has created a person-based structure which focuses on the employee: skills, knowledge, or comprehension the employee presents whether or not they are used in the employee’s particular job. This type of structure has created internal problems for Lynchburg Symphony staffing. Factors that misshape pay structure

The basic opinion of a strategic perspective is that pay structures that are not aligned with the organization strategy may hinder progress to the organization’s success. A significance factor affecting the internal pay structure is its acceptability to the employees involved. Employees form an opinion about the honesty of their pay through comparing with the compensation paid for work related in some fashion to their own. Incorrectly aligned structures become obstacles, they may still be able to motivate employee behavior but it may be unwanted behavior.

According to (Milkovich & Newman, 2004) equal treatment can mean that the more knowledgeable employees the more they will feel underpaid if compensation is not met (p. 77). Milkovich & Newman also indicates several behaviors that could result to employee dissatisfaction. 1. They may quit or simply tune out and refuse to do anything that is not specifically required of them. Their change in behavior will lower overall performance (p. 77). 2. The challenge is to design the structures so that they engage employees to help achieve organizations objectives. An internally aligned pay structure is more likely to be judge fair if it is based on the work and the skills required to perform the work and if employees have an opportunity to be involved in some way in determining the pay structure (pp. 62-63)....
Continue Reading

Please join StudyMode to read the full document

You May Also Find These Documents Helpful

  • Compensation and other Retention Strategies Essay
  • Compensation Strategies Essay
  • Compensation Strategy Essay
  • Compensation And Benefits Strategies Recommendations Essay
  • Compensation and Benefits Strategies Recommendations Essay
  • Compensation and Benefits Strategies Essay
  • Compensation and Benefits Strategies Recommendations Essay
  • Total Compensation Essay

Become a StudyMode Member

Sign Up - It's Free