Rwt1 Compensation Strategy

Topics: Human resource management, Human resources, Incentive Pages: 10 (2768 words) Published: May 6, 2013
Business Research Report

Compensation Strategies

ABC Manufacturing

Presented to:Western Governors University Assessment Code: RWT1

Table of Contents
Executive Summary3


Research Findings5

Market Based Pay Structure5

Traditional vs. Broadband Strategies6

Total Rewards Strategy7




References (continued)11

Executive Summary

There are three compensation strategies that we looked at in depth within this paper.

1) Market Based

2) Traditional vs. Broadband

3) Total Rewards

Total Rewards we found could be costly and extremely difficult to implement. This could create problems within the company should employees view certain bonus’ or incentives given out as unfair. I recommend against this strategy for this company.

Market Based is a strategy that uses current survey numbers from industry organizations such as the National Association of Manufacturing (NAM). This is a transparent strategy that is easy to defend as it is coming from a respected source.

Traditional is a strategy that has been used for a very long time and has been proven to work. It is easy to implement and is typically viewed by employees as fair.

In doing this research I believe that we should us a combination of Market Based and Traditional. We can use the ‘step’ structure of the traditional pay scale and base the numbers off of the market based survey from NAM. We would create grades with 5% between each pay grade and 5 steps within each pay grade that would have a 2 ½% increase with each step. Employees would get a 2 ½% pay increase for their first 5 years (unless they come to the company with experience and are started at a higher step). After 5 years we would hope that that person is growing in their position and would be stepping up into more responsibility and into a higher pay grade and title. However, should they decide that they are happy with the position that they are in or management decides that they are not ready, after doing a market analysis they would receive a 2 ½% bonus each year. The cap will make it so that we do not outpace inflation and end up with a person in the same position for many years being paid a higher rate of pay then people in higher responsibility positions.


The purpose of this document is to analyze and differentiate the options available to the ABC Manufacturing plant to decide on a compensation strategy that best fits our goals. As the Human Resource Director for ABC Manufacturing I have been tasked with suggesting several compensation strategies and to make a recommendation to the CEO as to what compensation strategy would be appropriate for this organization.

In creating a business strategy we need to answer the question put forth by Milkovich, G. T., & Broderick, R. F. (1989) stating “How should we compete in this particular product or service market?."

As we look at different strategies, our main objective is to keep our workforce motivated for optimal performance, retain the ability to attract new talent, control the costs of our products and enhance our flexibility to be able to change as the needs of the company change. We will need to define our goals to make sure we are in line with our business strategy.

We will define and look at three possible strategies for ABC Manufacturing and choose the one that will best reflect our company culture and goals.

1. Market based pay structure – The Market based pay structure is a newer strategy that is currently being implemented by many firms, across many different fields. It is currently the most popular compensation strategy in the manufacturing industry.

2. Traditional vs. Broadband Strategies – The Traditional Strategy is a...

References: (continued)
Stephen Miller, CEBS (6/27/2011). Align Pay with Business Priorities to Reap Rewards.
Lea Stone, Jeremy Greenup and Leigh Culpepper, Culpepper & Associates ( 10/20/2008). Salary
Range Structures and Budgets: 2008 vs 2009.
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