BSMH 5143Compensation and Benefits ManagementCase StudyNutriment’s New HireBy814284 - PRIDHIVRAJ NAIDU01stApril 2013
1. IntroductionWhen properly designed, compensation systems promote desirable employee behaviors, which are instrumentalto the successful implementation of business strategies (Gerhart and Rynes, 2003). As for the Nutrimentscompany case, the manager would have to improvise and prepare a complete pay structure that varies to theneeds of each job description provided. The management also has to look into the demand of the specificposition. As a result, good fit, or alignment, between an organizations business strategy and its compensationsystems should lead to improved organizational effectiveness (Gerhart, 2000).2. Strategic Considerations in establishing a pay structure at Nutriments2.1 Strategic AnalysisTo establish a complete compensation package Mr.Sewart needs to start off with the strategic analysis, Balkinand Gomez-Mejia (1992a) conducted a stream of studies that suggested business strategies influenced firm-level compensation systems. This shows that the organizations strategic plan towards its vision and missionallows the organization to set the path for its compensation strategy.Compensation systems in firms in the high-technology industry are distinct from those in the other industries(Balkin and Gomez-Mejia, 1987) and that the differences are related to differences in the degree to which firmsare research intensive.In the high-technology industry, being technologically innovative increases an organizations potential todevelop a source of sustained competitive advantage (Arora, Fosfuri, and Gambardella, 2001). Consequently, anemphasis on innovation is a legitimate strategic direction for firms in this industry (Hill and Snell, 1988).The most straightforward action for a firm that pursues innovation is to increase its resource allocation to R&Dinvestments to enhance the firms techno logical advantage. R&D investments also help the firm developabsorptive capacity, which enables the firm to generate new knowledge through the knowledge gained fromexternal resources (Cohen and Levinthal, 1990; Tsai, 2001).
In panning out the strategic compensation plan or strategy for the organization, the company has to look intotwo individual-level consequences of pay structure decisions, as internal pay standing (employee pay relative tointernal referents) and external pay standing (employee pay relative to external referents) are frequently studiedsocial comparisons that employees make regarding pay (Ambrose &Kulik, 1999)To implement this in the organization – The Company can use detailing of the Job description and Job Analysisto maintain a up to date record of the suitable compensation plan for its employees based on various factorssuch as the seniority, job pressure, decision making needs and also the demand of work they comply to.2.2 Compensation SurveyData about competing companies’ compensation practices. This allows the company to put a mark on the levelof compensation pay are practiced for the same position in competitor organizations. The organization also canput a level mark on the preference for alternative forms of compensation.Custom development versus existing compensation survey, for industries with special positions as for examplein the R & D field biotechnology is a position existing in the competing organizations, which provides theorganization with previous surveys done, but in the case the survey is made not available outside the surveyingorganization the company have to put in the effort of time and cost to prepare the detailed survey. Only withthis survey the organization will be able to produce a complete compensation package.To perform this survey, the organization also have to do a Strategic consideration, Choosing benchmark job inthe organization that could help set the guideline and the point of reference for the other jobs. Fourcharacteristics of this job would be; contents, common, represent the entire range of jobs and accepted in thelabor market2.3 Integrate internal and external pay rateBased on the survey done the organization would be able to form a regression table, consisting of the datacollected. As per the image below,
2.4 determine compensation policyBased on the regression graph the organization may choose to lead, lag or match the pay for the particularposition. The diagram simplifies the process of choosing the suitable pay structure for the individual.3. Suggest a pay policy to lead, lag or match the market? Explain your recommendationStrategically, if some employee groups are more important than others, then organizations may choose todevelop compensation systems that consider these differing strategic contributions(Yanadori, Marler, Yanadori,& Marler, 2006)Based on the case, the organization is opening position for 10 scientist and 5 administrative staffs. This woulddefinitely mean a different pay structure for both positions.Strategically, if some employee groups are more important than others, then organizations may choose todevelop compensation systems that consider these differing strategic contributions. For example, R&Demployees in high-technology firms pursuing innovation are often regarded as strategic employee groupsbecause their efforts directly influence the organizations innovation capabilities (Gomez-Mejia and Balkin,1992a)
Based on that argument, the scientist would hold a very strategic position in the organization. The organizationto attract, satisfy, motivate and retain them in the organization would have to choose a lead pay structure forthese staffs. The lead pay structure would mean a higher pay compared to other competitor organizations.Where else, for the administrative staffs position does not give a significant impact on the organizationsstrategic objectives, but they play an important role in maintaining the administration and support processes ofthe organization. I would recommend a match pay structure approach as this would satisfy the employee tocontinue serving the organization.4. ConclusionAs a conclusion, the nature of the organization show that a firms strategic intention to pursue innovation, whichwe call innovation strategy, influences compensation systems below the executive level in the high-technologyindustry, and, in particular, strategic employee groups (Gomez-Mejia and Balkin, 1992).Based on that the organization basically has to determine the objectives and motivations set for the future of theorganization. In the case of Nutriment, the welfare and continues service of the best minds from the scientificfiled is extremely important for a continues survival of the organization.
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