Pay for Performance

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Riordan’s workforce is dissatisfied with the current remuneration system. Riordan’s management is asking the CEO for a restructure or change in the system. The first approach to make changes is design of a pay-for-performance plan. Pay-for-performance plans (PfPP) are those that introduce variability into the level of pay received and seem to have a positive impact on performance if designed well (Milkovich & Newman, 2004, ch. 9). Nestlé Corporation focuses on its employee benefits in hopes to improve employee satisfaction. In particular the work /life benefits which “increase employee perceptions of the company’s caring attitude” (Milkovich & Newman). The company believes that the employee’s private and professional life should have a good balances and therefore is willing to support employees who wish to take an active part in the life of the community or by assuming responsibilities in professional or voluntary organizations during working hours (Nestlé, ). Nestlé also establishes a compensation practice taking into account relative external compensation levels as well as the requirement of internal fairness or distributive justice in which the employee perceives the amount of compensation as fair (Milkovich & Newman,). In addition, Nestlé leads the market trend in order to “maintain in its absolute level of benefits relative to the competition” (Milkovich & Newman, 2004). Although it may be initially costly, leading the market may be a necessary option for Riordan Manufacturing to become profitable again. References

Milkovich, G., & Newman, J. (2004). Compensation (8th ed.). New York: The McGraw-Hill Co. Pederson, M., & Lidgerding, G. A. (1995, November). Pay-for-performance in a service firm: how management accountants created an objective financial measure for compensation. The Times 100 (2007). LandSecurities. Using strategy and planning to measure, monitor and report
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