Compensation and Benefit Strategy of an Organization
Jane Q. Student
DeVry University
Professor Dibenedetto
June 23, 2013

Abstract:
The aim of this paper is to examine the compensation challenges within Owens & Minor and create a compensation strategy that will benefit not only the company, but the employee.
With the constant change in today’s business world, to have a competitive advantage makes it difficult for employers to attract and retain the most talented employees. Identifying the company’s compensation strategy ensures the organization offers the right pay and manages the pay increases to retain top talents. When we hear the word compensation we think about compensating an employee for their work performed, but there is much more to compensation and a company’s strategy than what a person is paid. Compensation and benefits, “includes not only salary, but also the direct and indirect rewards and benefits the employee is provided with in return for their contribution to the organization. To determine compensation, organizations should develop a compensation and rewards program that outlines an equitable process for compensating employees” (“Compensation and Benefits,” n.d.).
This plan is an extremely important piece of the overall HR approach to keep the company competitive and successful in the global market.
Throughout this paper we will discuss the compensation and benefits strategy of the organization and recommendations on how to create a well-structured program. As a result of this program; will ensure a good balance of wages, benefits, and rewards as it supports the organization to remain competitive in today's labor market and ensure sustainability in the future.

Introduction:

Owens & Minor, Inc. a FORTUNE 500 company headquartered in Richmond, Virginia, was founded in 1882 and is the leading distributor of medical and surgical supplies to the acute-care market and a leading provider of healthcare supply-chain management solutions.
In today’s economy companies seek to maintain profitability, attract and retain talented employees, and stay ahead of its competition. These goals require strategic planning to effectively deploy specific purposes to produce results such as, creating compensation and benefit plans for its employees. Owens & Minor realizes that compensation and benefits is an integral part of human resources management, which in turn is a vital component of the management within the organization. It has been their philosophy to invest in their teammates that support the basic strategic strategy, goals, and values of the organization. But Owens & Minor lacks the capability to provide an incentive that will continue to motivate its teammates to achieve its purpose.
Furthermore, this paper will draw on research, which has been compiled to review strategies other organizations have utilized related to the challenge of creating an incentive program where teammates reach their objectives and discuss possible solutions to this problem. Recommend strategy proposals the organization should follow to address its compensation and benefit challenge, and impediments to this strategy, including any contingency plans that should be considered.

The Compensation Challenge and the Review of its Success:
Challenges faced within the organization are compensating teammates with the adequate amount to provide incentive to retain qualified talents and to provide employee morale within the workforce. With the present program it reveals inadequate benefits for the employee and an absence of reward for their progress and results.
Owens & Minor has always invested in the well-being of its teammates and the culture of this company is reflective of its mission, vision, and values. The organization believes that “teammates are the company’s greatest asset and the culture focuses on these things. First is letting teammates know that we care very much about them. When people know you care, they will move mountains for you. They will almost always strive to exceed your expectations. Second is letting teammates know they make a difference regardless of the position they hold in the company. If a teammate feels that what they do contribute to the success of the company, they are extremely happy and productive” (“Our Culture,” 2012).
Many companies are cutting back to survive the constant changes of this economy and because of that employee compensation is challenging to provide an adequate amount that gives an incentive to the top talents. Within Owens & Minor incentives such as, a merit increase is one of the compensation programs designed to reward its employees for their performance, but there is an absence of reward for their progress because teammates are only awarded yearly on their anniversary date depending on the grade they receive. A teammate must receive a satisfactory or higher to receive a raise from the company during their appraisal as they reflect on their past achievements and weaknesses throughout the year. The lack of a compensating program that rewards you for progress throughout the year and not only performance offers no motivation to go above and beyond for the company and teammates that are over achievers see no benefit in striving for excellence. Last year, as a teammate myself of the company the increases provided were 2.5% across the board and no higher for the top talents. This year the raises have decreased and are 2% for all teammates regardless, of how well the individual performs on the job the rewards for all are the same which, is not a program designed to allow teammates to reach their objectives. Consequently, it is apparent that these challenges are not solely this company, but many other big corporations that depend on the efforts of their employees such as Microsoft have also encountered the same problem of compensating employees and keeping top talents. According to the article organizational excellence, “when the stock market began to fall in 2000, the linchpin of Microsoft’s total rewards program began to lose its attractiveness” (Slade, 2002, p. 43). The company became vulnerable and lacked the capability of creating an incentive program where teammates reached their objectives thus; key talents either left or were not reaching their full potential. Though, the problem of keeping great people has become even more complicated the challenge for Microsoft has taken on increased urgency for managers and the HR group, to take action and create a well-structured compensation program. Due to the growing concern about the organization’s ability to compensate adequately and to help assist them achieve their goals as quoted by the article organizational excellence, “the company’s financial research proved convincing numbers that showed the value produced by knowledge, skills, and talents of employees displays that effective management of human capital significantly improves a company’s market capitalization” (Slade, 2002, p. 44).
The strategies Microsoft has followed to implement success started by considering the merits of comprehensive total rewards response to the challenge of compensating the top talents adequately and assisting them to reach their objectives. HR decided that for such a strategy to be created and benefit the employees as well as the company they would need to according to the article organizational excellence, “accommodate individual needs and personal values, but remain administratively practical, ensure that the organization invested its reward dollars where they would produce the greatest benefit – that is, yield the highest possible employee commitment to the company and engagement in work. Invest in their top talents by sufficiently compensating them for their performance and results that would forge a clear link between rewards received and contribution made, while at the same time supporting the organization’s evolving business strategy, which would focus on Internet delivery and personalization” (Slade, 2002, p. 44). But in order to effectively achieve these goals, Microsoft would need a tool that would allow HR to do three things: determine the value employees attribute to various financial and non-financial rewards; understand how those principles varied across employee groups; and anticipate how employees would act given the availability of various reward contributions. Most importantly Microsoft wanted a way to calculate the return on investment by implementing this new strategy that would effectively compensate the top talents and compete against its competitors by attracting and retaining the most qualified employees.
In addition, Walmart has also been another company that has also stumbled in compensating employees and providing an incentive for its top talents while creating an opportunity for its employees to achieve its objectives. Their lack of ability to fund rewards to acknowledge their employees that perform to their full potential affects morale within the workforce and their strategy becomes inefficient thus; loses all credibility if high performance goes unrewarded. In order for Walmart to attract and retain talented people they need to offer a competitive compensation and benefit strategy for its employees. Being the largest private employer in the world it will not be an easy task, but according to the Huffington Post, “Walmart has largely set standards for similar companies by compensating employees for high performance” (“Walmart’s Internal Compensation,” 2012). However, additional training and employee relations have been implemented amongst its supervisors to ensure that employees are being fairly assessed and that employees know what is required to be able to perform to their full potential. While creating opportunities for the motivated and hard working to achieve their goals within the company as they contribute to the success of the organization.

Recommended Strategy the Company Should Follow:
Providing a compensation plan that offers an adequate amount and rewards its top talents for their progress and results motivates employees to perform at their full potential, as the company assist in helping them achieve their goals is no easy tasks. Implementing a compensation and benefits strategy that is aligned with the organizations objectives by identifying desired outcomes and goals for the organization is a start to the design process of creating a well-structured plan for its employees. Designing a plan that is also aligned with its HR strategy is critical to organizational success. In order to make this system successful supervisors will need training in designing performance measures and providing feedback; an evaluation system that enables them to accurately distinguish among its top talents as well as, guidelines for determining pay increases or performance bonuses to those that execute above the rest. Thus, rewarding them for their progress and results as the company strives to assist its employees in reaching their objectives. Adequate pay for top talents shows commitment from the organization to recognize and reward excellence. Therefore, this compensation strategy will need ongoing attention to keep it functioning properly as organizational goals will change. The organization will need to monitor the operation and effectiveness of their employee’s performance and abilities, and making sure the business is creating an opportunity for its achievers to meet and exceed objectives and that adequate funds are earmarked for awards. I believe this strategy is critical to the success of implementing adequate compensation and offering incentive for its high performers that is effective as quoted by a report by the U.S. Merit Systems Protection Board, “an organization designing a strategy that rewards its employees must think carefully about its goals and how they are to be achieved to create measures and incentives that can orient its workforce toward meeting those goals” (“Designing an Effective Pay,” 2006).

Impediments of the Strategy and Contingency Plans to Be Considered:
A well-structured compensation plan does not mean that there will be no obstacles as compensating top talent would involve performance goals and measures that are fair and reasonable. The organization needs to customize their compensation strategy to address their unique circumstances as it will present unique opportunities and challenges that will be no easy task. Owens & Minor will have to determine the pay for rewarding top performers, the types of performance that will be rewarded to its top talents, and how it will be measured. A choice that is appropriate in one organization may be ineffective or counterproductive in another however, because the organization is very productive oriented rewarding individuals who generate the greatest amount of output is critical to attracting and retaining the most talented employees to ensure the company’s continued growth and success. The introduction of this strategy will identify the weaknesses in other areas such as training, communications, employee relations that should be address to help its top performers reach their full potential within the company. Therefore, Owens & Minor needs to make sure employees understand and participate in the strategy to achieve the company’s strategic goals and are aware of the skills, knowledge, and abilities required to performing the job. Contingency plans that may be considered are providing opportunities to advance within the organization to reward them for their achievements and offering yearly training sessions to expand their knowledge, abilities, and skills to ensure rewards are compensated reasonably for their success. Checks and balances are also necessary in rewarding its top talents for the compensation strategy to have any credibility or motivating power. Thus, monitoring its effectiveness accordingly and making any adjustments to the plan will warrant optimal results.

Detailed Proposal on the Strategy That Will Address the Organization’s Challenge:
The compensation strategy can have a positive impact on Owens & Minor if they address the challenge of: compensating teammates with the adequate amount to provide incentive to retain qualified talents and to provide employee morale within the workforce thus, rewarding them for their progress and results will help attract and retain the talented employees to allow the organization to compete amongst its competitors. Be prepared for the global market that is constantly changing within the economy and offer sustainability for future growth and success. When an organization invests in its employees they are more than likely to go above and beyond when they feel their efforts are being recognized.
Specific items that should be included in the action plan are: how will performance be evaluated, what types of performance will be evaluated, and what sort of rewards will be compensated to top talents? Will top talents be required to learn new skills, and abilities to continue to be compensated for their achievements? How will Owens & Minor provide opportunities for advancement within the organization that require a higher level of knowledge, abilities, and skills that will continue to motivate its high achievers? These questions will need to be address in order to ensure the compensation strategy is successfully utilized within the organization as it meets and exceeds employee needs and ultimately enables the organization to retain the most talented and qualified employees.

Conclusion: “Compensation is one of many human resource (HR) tools that organizations use to manage their employees. For an organization to receive its money’s worth and motivate and retain skilled employees, it needs to ensure that its compensation system is not an island by itself. Not only is it important for an organization to link compensation to its overall goals and strategies, it is important that its compensation system aligns with its HR strategy” (Compensation’s Role,” n.d.). By compensating top talents provides incentive and motivation for employees to strive for excellence and helps to retain the most qualified employees within Owens & Minor. Offering morale within the workforce and opportunities for advancement so that they can achieve their objectives is a key factor in keeping top talents motivated to continue to go above and beyond. It is the talents of employees that ensure the success and growth of an organization and employers need to reward those that work hard to achieve the strategic goals of the company.

References
HRCouncil.Ca. (n.d.). Overview: Compensation and benefits. Retrieved June 23, 2013, from http://hrcouncil.ca/hr-toolkit/compensation-overview.cfm
McPhie, N. A.G. (2006). Designing an effective pay for performance compensation system. U.S. Merit Systems Protection Board. Retrieved June 23, 2013, from http://www.mspb.gov/netsearch/viewdocs.aspx?docnumber=224104&version=224323&application=ACROBAT
Owens & Minor. (2012). Our culture. Who is O&M: Company Information. Retrieved June 23, 2013, from http://www.owens-minor.com/companyinfo/whoisom/culture/Pages/default.aspx
SHRM.org. (n.d.). Compensation’s role in human resource strategy. Chapter 3. Retrieved June 23, 2013, from www.shrm.org/Publications/Books/Documents/5_chapter3.pdf‎
Slade.L. (2002). How microsoft optimized its investment in people after the dot-com era. Journal of Organizational Excellence, 22(1), 43-52.
The Huffington Post. (2012). Walmart’s internal compensation documents reveal systematic limit on advancement. Huff Post Business. Retrieved June 23, 2013, from http://www.huffingtonpost.com/2012/11/16/walmarts-internal-compensation-plan_n_2145086.html