HR Compensation Strategy and Reward System

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Chapters 1-3
Question 1
As a new HR specialist, Kelly must develop a compensation strategy that serves the needs of the small family business. Adopting the system she knew from her old job to the new business is a bad idea because of different contextual factors. The two firms differ significantly in size, environment, technology, and people. While her old firm was a large, stable, and established manufacturing company, the new business is smaller, has different technology, and operates in a different environment. In essence, adopting the system from her old firm is bound to fail, given the difference in contextual factors. As informed by Singh and Long (2022), the success of a reward system depends on how well it fits the context and system of the organization. Given the differences in contextual factors, Kelly should develop a new reward strategy that aligns with the family business.
As a business that has created an integrated business platform and is operating in an evolving and competitive business environment, a high-involvement managerial strategy is appropriate. In this case, both intrinsic and extrinsic rewards should be incorporated into the reward strategy (Singh & Long, 2022). The employees of the family business are bound to receive intrinsic rewards from their jobs. Regarding extrinsic rewards, she should consider a base salary that will be augmented by a profit-sharing plan because of the growing nature of the business. Furthermore, for the IT technicians, Kelly should employ pay for knowledge to enhance skills acquisition and flexibility, which will support the growth of the organization.
It is essential that organizational structural dimensions align with the high-involvement managerial strategy. The decision-making and leadership structure in the organization should seek to remove barriers to effective performance. In essence, the leadership of the company should ensure full disclosure of information since key organizational decisions are made at all organizational levels. Rules and regulations should be minimized since employees have internalized commitment.
Chapters 4-6
Question 1
While gain-sharing and goal-sharing plans are pay plans geared to group performance, profit-sharing plans are geared to the performance of the organization. In gain-sharing plans, employees in a group are compensated when they reduce costs or improve productivity (Singh & Long, 2022). The savings are split between the group and the organization, and the portion of the group is shared among the group members. On the other hand, goal-sharing plans are characterized by the management setting goals for a workgroup to be attained within a specified time, upon which group members are paid a bonus. Unlike in gain-sharing, specific goals must be met for the group to be rewarded. While there is a quantification of cost savings to inform the reward in gain-sharing, the group receives nothing in goal-sharing if they do not accomplish a goal. Therefore, while the group on goal sharing may have made a significant step towards the attainment of the goal, they receive nothing if they do not accomplish it. In profit-sharing plans, a formal program exists that allows payment to be made to employees based on the profitability of the business. Unlike goal-sharing and gain-sharing plans, a profit-sharing plan is larger in scope as it focuses on all employees and relies on the profitability of the organization.
Each of the three pay plans has advantages and disadvantages that may influence their adoption by organizations. A major advantage of gain-sharing plans is that they are self-funding, given the improved productivity or reduced cost. Gain-sharing can also generate positive work group norms that enhance cooperation and minimize resistance to change. Gain-sharing is also associated with internalized employee commitment, reducing the need for and costs of supervision. On the flip side, gain-sharing is associated with significant costs such as establishment, administration, and training costs. It is also not very applicable to rapidly changing situations and is also open to free-riding. These disadvantages can discourage organizations from implementing gain-sharing plans.
A major advantage associated with goal-sharing is flexibility and simplicity in setting up. Unlike gain-sharing, which tends to be more complex, goal-sharing plans are less costly to operate, and bonuses can be adjusted according to the circumstances at hand. Furthermore, it can act as a powerful motivational tool for both the group and individuals. A major disadvantage of goal-sharing is its arbitrary nature, unlike gain-sharing, where savings can be quantified. This can affect employee motivation, particularly where the goals set are perceived to be unrealistic. With no formula for apportioning gains like in gain-sharing, employees may develop doubt about whether they are being fairly compensated for attaining the set goals. Goal–sharing can also result in conflicts in situations where a member or members of the group feel others are not doing enough to attain the set goals.
Profit-sharing plans are advantageous in the sense that an alignment of employee goals with that of the organization can provide motivation to improve organizational performance. Profit sharing is also associated with positive group norms and cooperation among group members, reducing supervision costs. On the flip side, profit sharing may not pay off for the organization due to the costs of the associated bonuses and its administration. It can also cause free-riding, resulting in reduced employee performance.
Question 2
Turning the positions of janitors, IT service technicians, and call center operators into independent contractor positions is a major organizational decision. If the organization is seeking to free itself from legal constraints associated with having permanent employees, outsourcing the positions is an appropriate step to take. Unlike permanent employees, contract employees are exempt from the provisions of the employment standards as well as mandatory benefits. Furthermore, the organization is not obliged to provide severance pay to contract workers. Moreover, the organization does not need a reason to fire a contingent worker, which makes it easy to make changes if errors are made during the selection process. As such, contract workers provide a viable option when there is a need to reduce labor costs, especially in positions that are not core to the organization's operations.
Therefore, for a firm selling home products and services, the positions do not constitute its core operations. The outsourcing move by the organization is thus advisable in the sense that it does not interfere with its core operations and can lead to a significant reduction in labor costs. Furthermore, it can relieve the organization of legal constraints associated with hiring permanent employees.
Question 3
A skill-based pay (SBP) system involves paying employees based on their knowledge, skills, and competencies as opposed to the characteristics of the job. In essence, with the organization paying employees based on their capabilities, there is an incentive for employees to learn new skills and advance their capabilities. Employees with a variety of skills and knowledge have the impetus to drive the organization to become a high-involvement one. Such employees tend to demand more training and information, which can drive the organization toward greater heights. In essence, som...