Setting the Stage for Strategic Compensation
Student’s name
Professor’s name
Compensation Management BUS 409
University name
April 1, 2012
Abstract
In this term paper I will answer the following questions, describe the three main goals of compensation departments, describe the contextual influence that I believe will pose the greatest challenge and the contextual influence that will pose the least challenge to companies’ competitiveness and explain why, describe when subjective performance evaluations might be better (or more feasible) than objective ratings, also describe under what conditions profit sharing plans are not likely to motivate employees and based on my knowledge of pay-for-knowledge pay concepts, describe three jobs for which this basis for pay is inappropriate and explain why.
Keywords: describe, goals, challenges, performance, employee, pay
Setting the Stage for Strategic Compensation
1. Describe the three main goals of compensation departments.
Compensation departments responsibilities focus towards three main functions or goals that have to be met in a company or organization, this are to attract, motivate and retain employees. These three key elements are the main parts for continuous functioning of any organization. The employees or workers are a very important part that holds an organization, without them the organization simply falls apart or have no competitive edge over competitors.
Any organization faces the task to aligning these goals with the employee’s personal goals, by doing this; personal goals can be used as a strategic tool since they are similar in their intellect. The effectiveness in accomplishing this lies on connecting competitive pay, benefits and job security of an employee to the success of a company or organization, which motivates employees to stay with the organization. Tying personal goals and strategic objectives will influence expectations of employees, their performance has to be link to compensation, achievement of personal goals when tied with organizational goals create incentive compensation and bonus plans, the proper development and alignment is critical to drive desired behavior.
2. Describe the contextual influence that you believe will pose the greatest challenge and the contextual influence that will pose the least challenge to companies’ competitiveness and explain why.
For a company, there is a series of contextual influences that will challenge competitiveness in the business world; these can include lack of marketing, lack of quality in products or services, poor management, a large market of competitors and labor unions. All this influences will have effects on the kind of competitiveness a company may have in the market they belong, one of the greatest challenges depends on how much resources a company may possess, and a company without resources may face extinction and fall. Is very important for companies to understand that a lack of resources will have a major negative effect in their ability to be able to compete, understanding competitors, having the right personnel in key positions with the right education, to include very competitive wages and deploying tools of marketing and having a union not as an enemy, but as partner with great relations if that is the case will set the company apart from competitors will have very positive outcome for the future of their business. Another contextual influence I will add is financing, this will influence all the issues that I have mention before, ether positive or negative, financing plays a major role in marketing, production and the acquisition of employees. If all this strategic resources are put into place, this contextual influences will pose the least of challenge to a company’s competitiveness, this will translate to high quality products and services, boosting standing and gaining the upper hand over competitors.
3. Describe when subjective performance evaluations might be better (or more feasible) than objective ratings.
There are two different approaches to evaluate employees ‘effectiveness in a company or organization, this are subjective and objective methods. The subjective method is used for performance evaluations such as trait systems, the raters evaluate each employee’s traits or characteristics in the form of quality of work, quantity of work, appearance, dependability, cooperation, initiative, judgment, leadership responsibility, decision-making ability, or creativity. Base on this information, variables cannot be quantified such as how nicely an employee relates to a client. This way of performance evaluation is easy to use to quantify for merit pay purposes, which is commonly used in many companies or organizations. Comparison systems is another subjective method in which a rater evaluates any given employee performance against that of another employees. In this case employees are ranked from best performer to the poorest performer.
Objective ratings are commonly used in behavioral systems which have three types of measurement, this are; critical incident technique (CIT), behaviorally anchored rating scales (BARS), and behavioral observation scales (BOS). In this case employees will be rated on the extent in which they display successful job performance behaviors, in contrast to trait and comparison methods, when correctly developed and applied, behavioral models provide results that are relatively free of rater errors and biases (Martocchio, J. J., page 67, 2011). Organizations may choose any of this performance evaluation; one fact is that the most used is the trait systems evaluation method.
4. Describe under what conditions profit sharing plans are not likely to motivate employees.
The use of a profit sharing plan has two main advantages, one for employees and the other for companies. When properly designed, profit sharing plans enable employees to share in companies’ fortunes. Profit sharing plans may undermine the economic security of employees, particularly if profit sharing represents a sizable portion of direct compensation. If there is significant variability in earnings, a company’s excellent performers are likely to leave for employment with competitors. The turnover of excellent performers certainly represents a significant disadvantage to companies (Martocchio, J. J., page 97, 2011).
Some examples of conditions under which profit sharing plans are not likely to motivate the employees are circumstances where the dividends per share are very low, in this case the difficulty to motivate an employee through profit sharing becomes very hard, general feeling of lost in the lower return of possible monetary compensation will heddle productive, leading to employees living employment and joining other competitors.
5. Based on your knowledge of pay-for-knowledge pay concepts, describe three jobs for which this basis for pay is inappropriate and explain why.
Pay for knowledge concepts are designed to encourage employees to pay importance to their education and academic credentials, in order to obtain benefits that include increase in pay, possible bonuses and future promotions. This structure of thinking poses challenges and cannot be applied in all job fields, one reason an organization or company would not use this method is for possible high cost or expenses in training employees, another reason may be that the increased knowledge may be hard to determine and may strain organization resources.
A good example for this can be found in the field of teaching, knowledge plays a part in monetary compensation, but the main factor that determines the pay scale in this field is experience in the area been taught, the more experience, the more the pay scale goes up. A second example of this can be found on the military, there is two sides when becoming a soldier, ether you are enlisted soldier or an commissioned officer, having a bachelor’s degree plays a major part in been able to be an officer, but at the end of the day, rank and pay rise is obtained by time in service and the ability to pass military evaluations under pressure. The last example that I will use is the field of insurance sales person, knowledge plays not part in how much your paycheck is going to be, the ability to sale insurances to people will determine the future of your gob and pay scale.

References
Martocchio, J. J. (2011). Strategic Compensation: A Human Resources Management Approach 2011 Custom Edition (6th ed.). One Lake Street, Upper Saddle River, NJ: Prentice Hall.
Nova Southeastern University. (2011). Compensation. One Lake Street, Upper Saddle River, NJ: Prentice Hall. Retrieved from http://www.nova.edu/cwis/hrd/compensation/