Human Resources Management
1. Chapter 4 discusses three broad types of incentive pay plans: Individual, group, and companywide. From your own observation and experience, and incorporating ideas from the text, discuss the strengths and weaknesses of each type of incentive pay. Then, identify one job for which individual incentive pay would be appropriate and another job for which either a group or companywide incentive plan would be most suitable. Please explain your answers and provide your rationale.
The innovation of new compensation systems to meet individual, group and companywide requirements is fast becoming a central part of human resource management strategy. Since the global expansion of the market to include new and more flexible labor segments in the 1980s, companies have been pressed to find better and more competent measures of compensating employees. The transition from traditional models of compensation to plans tied to performance is but one example of how companies have sought to improve profitability and retention (Twomey, 2010).
Individual or skill-based compensation structures are increasingly channeling resources to employees exhibiting some mastery in an important area of knowledge. Incentives are merited for individual performance in this case. Team-based compensation attributes compensation to recognized performance by work groups. This encourages employees to work together toward organizational goals. New company-wide compensation structures offer universal benefits to employees based on overall productivity and profits (Twomey, 2010). Performance-based compensation increases organizational capacity by offering incentives to employees in exchange for cooperation and results.
2. Chapter 5 focuses on person-based pay. Compare and contrast the different types of pay-for-knowledge. Please share your observations or personal experience with this type of pay strategy. Does your organization (or an organization that you have worked for in the past) use a pay-for-knowledge approach? Under what conditions and for what positions would pay-for-knowledge be most appropriate and why?
Person-based-pay structures may include other benefits not traditionally defined as “compensation” (Twomey, 2010). A key benefit of person-based-pay is employee professional development. Learning organizations invest in their talent by way of training and other skill advancing activities. As knowledge sharing become more important as an organizational value, and important element within the extended professional network of specialists, the advancement of an employee’s personal professional goals may increase probability of retention. If an employee is high skill, compensation may include other resources such as education or even housing in exchange for long-term commitment to contract.
3. Imagine that, as an employee, you had the choice between being subject to person-focused pay (skills or knowledge) or job-focused pay (either merit or incentive--based on performance). Which would you choose and why?
If the future of global companies forging alignment in economies of scale is dependent upon the retention of individual talent, as well as the translatability of corporate strategy, the emergence of Economic Value Added (EVA) compensation strategies in human resource management perspectives in the global business environment marked an new era in employee ‘ownership’ (Schönburg and Stern, 1999). Measure of a sliding scale of compensation based on company reporting of performance during a fiscal cycle aligns organizational profit with professional activity (Stewart 2002).
Distribution of performance in profit to employees also establishes a sense of employee equity. According to Pettit and Ahmad, what gets measured gets managed. Retention of employees through measured compensation is nothing short of innovative. Application of EVA employee compensation structure creates universal value; allowing for performance incentives to overrule other factors in distribution of profits.
Twomey, R. F. (2010). Employment Law: Going Beyond Compliance to Engagement and Empowerment. Columbus, OH: McGraw Hill.
Schönburg, J. & Stern, E. (1999).The Capitalist Manifesto: The Transformation of Employee Capitalism. EVAluation 4(1). New York, NY: Stewart Stern & Co.
Stewart, G.B. (2002). Accounting is Broken: Here’s How to Fix it: A Radical Manifesto. EVAluation 5(1) New York, NY: Stewart Stern & Co.