1. George and Russo 1
TO: Mr. Robert Devine, Division Manager
FROM: Cassidy Russo and Caitlin George, Human Resource Directors
DATE: March 21, 2016
SUBJECT: Compensation Planning
Mr. Devine,
The George and Russo Co. have seen a 2.3 percent decrease in turnover over the
past two quarters, but it is still high. This problem needs to be addressed. An underlying
issue of the high turnover rate is not enough compensation. The company has
implemented several benefit decisions such as Dental and Eye Care and Term Life and
Legal Services. There needs to be a compensation plan to be implemented in order to
attract, retain, and motivate employees that will decrease turnover.
There are nine paths the company can follow for the rest of the year that we can
study; each study costs $3,000. The first study option is Job Evaluation. With this option,
there would be no discrimination between wages for same level positions, but since
everyone would be paid the same it can cause demotivation. Harder working people are
not being rewarded for their efforts, where employees can get away with doing less than
is required of them and still get the same pay. With the second option of Performance
Based Pay, employees’ performance will be motivated by bonuses for exceeding
productivity and would also have a base hourly wage. But, if employees do not exceed
productivity, they could be discouraged and lose motivation. Then, the Team Incentive
study would promote teamwork and employees would have a sense of belonging.
Employees would also have the motivation to exceed other teams. This option also would
create teams with a variety of people that could offer different skill sets that would
benefit each team. Unfortunately, working in a group could have employees depend upon
other people. There could be some would not contribute as much as others. The fourth
study option is a Piece Rate System. This would motivate employees to maximize
production because they would be compensated for the amount of units produce, but
because employees what to maximize their potential employees’ may start to make errors
because they are trying to make as many products as possible. Also, they could overexert
themselves. The fifth option would to invest in the Profit/Gain Sharing. Since profits are
shared, employees would be motivated to work together and reach the established goals.
A set back to this option is that some employees could benefit from the work of others
and did not contribute to the level of other employees, just like Team Incentive. Also, the
profits would be shared among all employees and could not be enough compensation to
motivate them. The next option of Employee Stock Ownership would allow employees to
have a claim in the company and would feel more motivated to help increase the net
worth of the company. But, since stocks vary the employees could potentially lose money
if the company is not doing well. The seventh option is Guaranteed Cost of Living
Adjustment. The pros of this option are that employees are guaranteed to make enough
money to comfortably live in the local area because of the wage adjustment. But, there
could be little to no increase in the cost of living throughout the years. Employees may
like this system at first but may lose motivation if lack of wage increases. The last study

2. George and Russo 2
we could follow through with is Merit Increase offers a well deserved merit increase to
hardworking employees in addition to a performance appraisal that could help them grow
in the future. A set back to the Merit Increase is that it’s only done annually and the
incentive and performance appraisal may be too long of a wait to motivate employees.
The HR department has decided to invest in the Merit Increase Study. Merit
Increase will motivate all employees for their exceptional performance with the merit
increase incentive. In addition, it will result in high productivity, retain employees, and
will benefit the company. If employees have the monetary incentive, their commitment
and interest towards the company will rise. They will be more committed and
hardworking because competition between employees will begin in order to get to their
reward. By investing in merit increases, the annual performance appraisal to each
employee allows feedback on what they can do better. There would also be feedback on
the positives they have done, giving them confidence and motivation for their
accomplishments. Merit increase will be the best option to decrease our turnover.
Cassidy Russo
Caitlin George
Human Resource Directors