Business Research Report
Improving Productivity by Instituting a Compensation Plan
Presented to: ABC Manufacturing, Human Resource Department
Assessment Code: RWT1
Date: January 24, 2013
Table of Contents
ABC Manufacturing Co., Inc. is a small company with 120 full time employees. We produce aluminum doors and windows. Although we are highly successful, we find that it can be difficult to retain our valued employees. Human resources has decided to evaluate several compensation plans and see if any options exist that can help retain employment and improve productivity.
It seems that all successful compensation plans have four main qualities: 1)
Goals that are clear
Goals that are challenging and attainable
Regular feedback on job performance
Cooperation between employees and managers
When deciding on possible options for the company to consider, these four factors were taken in to account. After investigating numerous compensation plans, I narrowed it down to three possibilities: 1) Performance-based 2) Profit sharing and 3) Gainsharing. Performance based compensation plans are monetary rewards that are based on individual performance. The performance norms are based on general ideas of what is acceptable for each job position no matter if the goal is too high or too low for the employees in that position. Bonuses are paid out on a regular basis. Each job goal can be easily manipulated by employees by downplaying job responsibility. This plan has a tendency to encourage risk taking by employees. It can be seen as acceptable to cut corners to increase bonus size. In my opinion this is not the appropriate plan for ABC Manufacturing Co., Inc. Profit sharing is a plan that is based on the success of the company. The bonuses are funded through company profits and only when companies have profits. These bonuses are normally paid on an annual basis and the amount cannot be counted on from year to year. Employees have difficulty figuring out how to calculate their bonus and also how they can improve the possibility of company profits. It is found that this plan has little impact on employee behavior, which means that it would not affect productivity. Because of this I don’t believe that this is the appropriate choice for our company. Gainsharing is a plan that shares in company performance successes. It creates a partnership between the employees and the company and encourages an open communication between the two. The bonuses are paid monthly and calculated by using a specific formula that is created by management. Employees are educated on the formula and on the plan as a whole so that there are little to no questions about future pay and how to obtain it. This plan promotes employee involvement and because of this I believe that it is the plan for ABC Manufacturing Co., Inc. We are looking for a plan that will improve productivity and will improve employee retention. By improving employee involvement within the company, you will increase the likely hood of retaining that employee. Since the plan is based on improved productivity, then we are almost guaranteed a success in that area. To get this success I believe that we must start with three steps: 1)
With a little time, effort and company-wide help, I believe that we can create an environment of openness, creativity and productivity.
As a member of human resources in ABC Manufacturing Co., Inc., I have been asked to find a possible option for a company-wide compensation plan. I have also been asked to make a suggestion on which plan is most appropriate for our company and our company goals. At this time our...
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