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Explain how an effective compensation and benefit system contributes to organizational effectiveness

Attracting and retaining the most talented employees is essential for long-term organizational success. An important component to attracting and retaining such employees is the design and implementation of an effective compensation and benefit system.

Assume the role of a highly regarded human resource consultant hired to review, analyze, and revise the compensation and benefit system utilized by your city’s largest employer, Holland Enterprises. The firm employs 3,500 employees, but since 2007 has lost 25% of its staff. Exit interviews indicate the primary reason a majority of these employees have resigned is because of a compensation and benefit system that is perceived to be unfair and uncompetitive in the marketplace.

Present to the management a revised compensation and benefit strategy. Your proposal should include a discussion of:

 

  • How an effective compensation and benefit system contributes to organizational effectiveness.
  • The principle components of your revised compensation and benefit system for a large-scale organization as well as a recommendation for each component.
  • A convincing argument to the already skeptical top managers of this organization to increase their compensation and benefit expenses.

 

At a minimum, your compensation and benefit system would include the following components:

 

  • Compensation and benefit philosophy
  • Pay structure architecture (pay grades, pay ranges, and pay width)
  • Ratio of base pay to incentive (bonus) pay
  • Emphases on external equity or internal equity
  • Principle type of benefits to include (example: deferred compensation match, health insurance, vacation and sick leave, etc.)

 

Guidelines for Writing the Final Paper

 

  • Paper must be six to eight double-spaced pages in length, exclusive of Title Page, References Page, Appendix, References, Exhibits, etc.
  • Formatted according to APA style as outlined in the approved APA style guide (including title page and reference list).
  • Must address the topic of the paper with critical thought.
  • Must include an introductory paragraph with a succinct thesis statement.
  • Must conclude with a restatement of the thesis and a conclusion paragraph.
  • Must utilize a minimum of four scholarly references.

BUS 434 Weekly Course Guidance

Week #5

Introduction

We’ve covered significant territory in this course to this point delving into the nature of compensation as a strategic function of the business.  Our discussions have also been wide and varied—largely due to the nature and character of compensation and benefits management.  Through all of this I don’t want you to forget that compensation is an effective business tool used to attract and retain talent for the organization.  Organizations that miss this important fact are doomed to mediocrity.  I also want you to remember that management’s philosophy (and true values) drives the businesses strategy and ultimately its compensation policies.  Organizations with “low price competitor” philosophy and strategies often develop compensation strategy with the self-same approaches.  Of course, compensation and benefits programs must be designed specifically for the organization and those employed to meet the strategic goals established.  This is a comprehensive process subject to change over time to meet the emerging organizational needs.

This brings us to the final guidance for this course.  I want to discuss the future of the organization and what I predict nature of compensation in that future reality.

Organizations structures are becoming flatter.  This is a trend that began in the 1990s and I expect it to continue into the future.  This was initiated by expanding use of high technology and the application of the worldwide web and partially driven by corporate realization that mid-management was less important in driving profits than it once was.  This trend will accelerate over the next 20 years taking wide swaths of mid-management completely out of the organization.  My expectation is that much of the processes and decision-making once conducted by these managers will be automated.  This means more managers will be responsible for more workers.  To make this happen, managers will become more tech-savvy and workers will need to become more educated and self sufficient.

Compensation management in this environment will become more highly specialized and largely an outsourced function as time goes on.  We see this already across industrial groups.  Organizations will continue to have onsite management to address day-to-day activities but payroll and benefits will be contracted almost exclusively to service vendors.  We will also see these same vendors providing compensation architecture services, market surveys, and compliance support to management.  Most HR departments will be reduced by automation, in just a few years hence HR and compensation support to employees will become completely virtual or at least become completely automated with HR support transactions occurring at a kiosk—by the way we’re seeing some of this even now.

Worker relationships with the organization will change. As workers become more educated and self sufficient they will become more valuable. Instead of a commodity, as workers are considered now, and priced purely at the daily rate, they will be viewed as a capital asset.  This is very difficult for people in this current generation to understand and accept but we see evidence of the trend even now.  Good quality workers with a solid track record will be contracted (or even leased) for a fixed period (maybe 1 to 5 years) and employers will capitalize the cost.  These assets will be coveted like any other organizational asset but the contracts may be sold and traded in a market although I cannot yet see exactly how this will done.

Compensation management in this environment may become more akin to “contract” management.  Managers (including HR managers) will be responsible for creating and managing term contracts for service from workers except at the lowest level of the organization.  The terms of these contracts may vary somewhat from geographic location but as work becomes less geographically constrained “pay” may reflect a more global marketplace.  I should note here that knowledge work will soon be unshackled from location and knowledge workers will work from anywhere.  Some of this may come in the form of working at home but I don’t think this is the entire story.  I envision outsourced (leased) management centers where workers of every sort come to work in an office near where they live.  Management of these centers will be “sourced” in the same way as the buildings.  Knowledge workers will be pooled in this location with workers from other organizations “cubed” together as space allows.

Quality of Work Life Movement.  Although QWL has a long history, it is increasing in its relevance in the work place.  As organizational workers become more organizational dispersed and as workers have a more term-based contract relationship, connections to the organizational core will loosen and other stressors will increase.  QWL will become a larger component in work life. Matching contract elements to meet worker needs and organizational demands will become a valuable skill set.

Worker benefits will likely shift from employer to the state and other outside systems.  Healthcare will likely be socialized in the near future but this won’t relieve cost or administrative responsibilities from the organization.  The shift to a socialized healthcare system will dramatically increase tax burdens and may require employers to continue some administrative responsibilities while reducing both the national cost and the individual cost.  This cost will reduce our standard of living while not adding any material benefits.  Retirement systems, especially defined benefit and government provided systems like US Social Security, may collapse in 20 years due to an increasing number of retirees (more of them and most living longer) and due to lower investment returns.  Organizations and government may require more and more workers to fund an increasing amount of individual retirement through 401k like systems.  This will likely increase worker costs with lower benefit potential.  Although somewhat far fetched, it is also likely that employers could eliminate all retirement planning and systems support altogether due to ever increasing risks.  One thing is for sure:  You will continue to bear more responsibility for funding your retirement in the future without a fallback system to rely on and will experience an ever increasing cost of healthcare.  I doubt your employment contract will incorporate a retirement package but fee based retirement planning will more likely be used as a supplemental offering.  You will need to save through a plan (401k?) on your own.

Executive Pay. Management will remain a valuable commodity into the future and executive managers will continue to demand and receive a premium depending on past successes.  Current events seem to suggest executive pay may be somehow contained. I think this is a short-term phenomenon.  What more likely will happen is that corporate tax laws will create an environment wherein C-Suite pay becomes not just non-deductable but taxed a significant rate so as to cause the corporation to reposition the characteristics of pay plans.  This may result in a significant portion of the executive’s pay to be deferred or to be paid in financial instruments (e.g. stocks, options, etc.) to minimize the tax burden.

Even though much of the above is not that exciting to look forward to, I think the workplace of the future will become less like the office or retail/wholesale environment we now endure and more like the place we live.  I say that because I believe the two environments will begin to merge due to technological innovation.  Workers will do work that is more and more creative and less bounded by geography or time.  Work will be conducted in our minds, wherever that may be.  Compensation and benefits will likely adapt to the needs of the new worker.  And, as you would expect, compensation and benefits administration will require ever more sophisticated people to manage the details.

A short note about your final assignment: Remember that this final paper must reflect not just what you learned about compensation and benefits management in this course but how you have synthesized that learning with existing knowledge.  This sounds a bit tricky but I know as you begin to think about yourself as a compensation consultant to the organization and apply what you have learned, your strategic plan will begin to become more clear to you.

Week 5 Deliverables:

Avoiding Plagiarism

Please take note that in this class Originality matters and plagiarism will be reported.

Address any questions regarding plagiarism to the course instructor. Students should be aware that Ashford University instructors utilize Turnitin to determine the originality of submitted written work. These tools compare students’ work with texts available in internal databases and through Internet searches.

Check out  Turnitin Instructions and FAQs for more information on Turnitin and how you can use it to avoid plagiarism in your own paper.

Here are some general rules to follow:

    1. When in doubt, cite your sources
    2. Refer to the following resources in the AWC when you write your paper: Guidelines for Quoting a SourceGuidelines for Summarizing a Source, and Guidelines for Paraphrasing a Source.
    3. MAKE TIME for your paper. Last–minute work makes plagiarism too tempting.
    4. TAKE NOTES as you read and note the sources. This will make the final construction of your paper that much easier.
    5. Do not be afraid to take risks in your work, for fear and lack of self–confidence often leads to students taking the “easy road” of resorting to plagiarism. As Nietzsche said, “think dangerously” (but support your arguments).
    6. Most instructors deliberately choose narrow/highly-specified topics and phrase questions in such a way as to(hopefully) avoid fostering plagiaristic tendencies—but work to narrow or define your topic in such a way that plagiarism becomes difficult.
    7. As you construct your work, remember that instructors never fail to check for plagiarism when they read something suspicious.

Finally, and most important:

  1. This is YOUR education. To plagiarize denies one of the powerful opportunity to develop as an ethical and conscientious human being. Herein rests the greatest reason not to plagiarize.
Pay Range Calculator Teddi Reilly 8/13/2015 12:00 AM
Here is a great link that provides an overview of calculating pay ranges.  Click on the tabs to get the best overview.

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