Types of Compensation Strategies: Review and Analysis
Jason Hagelstrom
66786
RWT1
Jeff Willard
The goal of this report is to look at three different types of compensations strategies that the company could adopt. The three I will be reviewing is broad banding, stock options, team-oriented compensation. I will give a review of all three, my analysis, and then finally recommendation for the company.
Three different types of compensation strategies: ◦ Broad banding
◦ Stock options
◦ Team-based oriented
Review the strategies
Analysis the strategies
Recommend which type or types company should use.
Is taking the many salary ranges and condensing them down.
This is a great way of promoting lateral moves.
◦ People are not staying with companies for the long term, so this will help eliminate the turn over.
◦ Employees will become more diverse and possible find a position with the company they enjoy.
◦ “Compensation programs were designed in the ‘50s and
‘60s for hierarchical organizations. We don’t have hierarchical organizations anymore. Organizations need to be fluid to move as the markets move.” (Tyler, 64)
Analysis:
◦ Broad banding is a great way to narrow down from many salary levels to only 5 to 10. This is a great way to promote lateral moves.
In this day its really hard to move up in a company so employees are not staying their whole life.
◦ Some drawbacks:
Many moves need to be put into place to make sure transition is smooth.
Organization that do not take the time to do this will struggle.
Two types of stock based incentives:
◦ Stock equity and synthetic stock
◦ Stock equity is the form of physical stock
◦ Synthetic stock is phantom stock
Stock equity is when company gives the employees an option to buy stock at market price or below.
“For most forms of stock equity, the increase in stock value is not recorded as an expense on the company’s income statement.” (Watson and Blanchard, pg. 36)
Synthetic stock is when company wants to put phantom stock up for employees but not
66786
RWT1
Jeff Willard
The goal of this report is to look at three different types of compensations strategies that the company could adopt. The three I will be reviewing is broad banding, stock options, team-oriented compensation. I will give a review of all three, my analysis, and then finally recommendation for the company.
Three different types of compensation strategies: ◦ Broad banding
◦ Stock options
◦ Team-based oriented
Review the strategies
Analysis the strategies
Recommend which type or types company should use.
Is taking the many salary ranges and condensing them down.
This is a great way of promoting lateral moves.
◦ People are not staying with companies for the long term, so this will help eliminate the turn over.
◦ Employees will become more diverse and possible find a position with the company they enjoy.
◦ “Compensation programs were designed in the ‘50s and
‘60s for hierarchical organizations. We don’t have hierarchical organizations anymore. Organizations need to be fluid to move as the markets move.” (Tyler, 64)
Analysis:
◦ Broad banding is a great way to narrow down from many salary levels to only 5 to 10. This is a great way to promote lateral moves.
In this day its really hard to move up in a company so employees are not staying their whole life.
◦ Some drawbacks:
Many moves need to be put into place to make sure transition is smooth.
Organization that do not take the time to do this will struggle.
Two types of stock based incentives:
◦ Stock equity and synthetic stock
◦ Stock equity is the form of physical stock
◦ Synthetic stock is phantom stock
Stock equity is when company gives the employees an option to buy stock at market price or below.
“For most forms of stock equity, the increase in stock value is not recorded as an expense on the company’s income statement.” (Watson and Blanchard, pg. 36)
Synthetic stock is when company wants to put phantom stock up for employees but not