Compensation Plan Proposal
Building a Lasting Compensation Plan
Building a Lasting Compensation Plan
Compensation plans are as varied as the companies that implement them. They reflect a company’s culture, financial strategy, organizational structure and goals. Compensation plans serve as the catalyst for employees to join a company and remain, which in turn enables the organization to fulfill its obligation to provide goods and services. Developing an effective compensation plan requires thorough preparation through several steps. These steps include: determining job value, determining overall pay, determining individual/Team pay, pay delivery, and managing pay (Milkovich, 2011). Also important is the order in which these steps are completed as each step provides the preparation and data for the next step. Completing these steps out of order may lead to discrepancies within the plan and not doing all the steps may results in inconsistencies and unfair pay practices. To illustrate the compensation plan steps we will use fictitious company Ben’s Bakery, a midsize company employing approximately 1,500 people. Ben’s Bakery has been in business for 15 years in Oxnard, California and was founded by CEO, Ben Bluebacher. Ben’s Bakery is headed by Ben and his board of Vice Presidents representing operations, sales, marketing, human resources, and finance divisions. The operations division, largest in the company, represents approximately 1,000 employees and is in the process of reassessing their compensation program. Operations consist mainly of non-union, non-exempt workers with an average seniority of 6 years. There is ten management staff representing 1% of the operations workforce. The Operations division compensation plan has not been updated in 5 years and is currently not on track with comparable industry or geographic organizations. The executive team has asked Human Resources to conduct a full audit using the standard five compensation plan development steps
Building a Lasting Compensation Plan
Compensation plans are as varied as the companies that implement them. They reflect a company’s culture, financial strategy, organizational structure and goals. Compensation plans serve as the catalyst for employees to join a company and remain, which in turn enables the organization to fulfill its obligation to provide goods and services. Developing an effective compensation plan requires thorough preparation through several steps. These steps include: determining job value, determining overall pay, determining individual/Team pay, pay delivery, and managing pay (Milkovich, 2011). Also important is the order in which these steps are completed as each step provides the preparation and data for the next step. Completing these steps out of order may lead to discrepancies within the plan and not doing all the steps may results in inconsistencies and unfair pay practices. To illustrate the compensation plan steps we will use fictitious company Ben’s Bakery, a midsize company employing approximately 1,500 people. Ben’s Bakery has been in business for 15 years in Oxnard, California and was founded by CEO, Ben Bluebacher. Ben’s Bakery is headed by Ben and his board of Vice Presidents representing operations, sales, marketing, human resources, and finance divisions. The operations division, largest in the company, represents approximately 1,000 employees and is in the process of reassessing their compensation program. Operations consist mainly of non-union, non-exempt workers with an average seniority of 6 years. There is ten management staff representing 1% of the operations workforce. The Operations division compensation plan has not been updated in 5 years and is currently not on track with comparable industry or geographic organizations. The executive team has asked Human Resources to conduct a full audit using the standard five compensation plan development steps
References: Communicating Compensation. [Class handout, HRCU 647, R. Agrela, Brandman University, 2011]. Retrieved from https://blackboard.brandman.edu/webapps/portal/frameset.jsp?tab_id=_2_1&url=%2fwebapps%2fblackboard%2fexecute%2flauncher%3ftype%3dCourse%26id%3d_59561_1%26url%3d Milkovich, G.T., Newman, J.M., & Gerhart, B. (2011). Compensation (10th ed.). New York, NY: McGraw-Hill/Irwin. WorldatWork. (2010). Compensation Program and Practices. Retrieved from http://www.worldatwork.org/waw/adimLink?id=42294&nonav=yes