Evaluating Existing Compensation Plan: Ford Motors Company

Compensation Plan Outline
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Evaluating the existing compensation plan for Ford Motors Company
Ford Motors Company has a compensation plan that is an Incentive Bonus Plan, which offers cash awards to all employees and members on the achievement of a particular performance goal, in a particular year (Yang, 2014).Ford has a pay-for-performance culture that motivates and rewards employees for achieving the anticipated business result. The benefits program supports security income and protection from catastrophic loss (SEC, 2014). This motivates their employees and retains the workforce, hence, reducing turnover. Their competitive compensation attracts, motivates, and retains high performing workforce through targeting the average competitive level of automotive and leading companies within the national market. The company measures competitiveness based on program value for employees relative to the comparator group. When the incentive programs cannot provide competitive compensation due to business conditions, Ford uses their short term and long term retention programs that ensures they retain key employees that can respond to the operational and financial challenges (Yang, 2014; SEC, 2014).
The compensation plan for Ford is affordable to the company in mid-term and long-term, and the compensation plan is ensured not to fluctuate due to short term business conditions. The compensation plan also supports the company`s business performance objectives, and it promotes desired behaviours which is good for all companies in maintaining a competitive and high performance base. In addition, workforce diversity and individual choice is taken in to account in Ford`s compensation programme and this kind of flexibility is beneficial for the company`s performance (SEC, 2014). Ford Motors Company ensures that their compensation programs have a high degree of consistency among pay levels and employee groups, and a stable global program subject to any legal or competitive constrains which does not fluctuate with time. The compensation plan is delivered to employees in a way that it is tax effective and practicable to Ford, and the plan is easily administered while leveraging economies of technology and scale.
Ford has a clearly defined metrics for their compensation plan that is aligned with the business performance metrics which helps to measure and improve the results of the business. The total direct compensation for named executives are base salary, annual cash incentive, and long term equity incentive and they are all heavily weighted towards performance. The base salary for named executives is 25% of the target opportunity and the executive target compensation for executives is contingent on meeting incentive plan metrics (SEC, 2014). The company compensation plan is effective and strategic to increase employee morale and productivity through provisioning incentives and benefits, balancing its compensation cost and balancing the financial needs of the company with employee needs, and therefore, the Ford Motors Company`s compensation plan is appropriate due to the above stated reasons.
Ratio for internally consistent and market consistent compensation system for Ford
The most beneficial ratio for Ford`s internally consistent and market consistent is 1:1. Internal consistency is a concept of strategic management and it involves the ability of the strategy undertaken to be aligned with the general strategic company objectives. It is based on the extent of tests and procedures used in assessing the same characteristics, quality and skills for the employees thereby, creating the company`s structure. Internally consistent compensation system makes employees feel like they are fairly treated in their pay and other benefits. Ford gets most of its benefits from rations of internally consistent compensation system since it defines job evaluation and job analysis evaluation, that is the key variables for the creation of internally consistent job structures at Ford Motors Company. This compensation system at Ford provides the relative worth of the each business type with regards to other roles available at Ford (Martocchio, 2010).
On the other hand, Ford Motors Company is in an automotive industry and it is subjected to market comparisons with other companies like General Motors, AT &T and Coca-Cola based on them as being a representative of Ford market for talent. The market shares at Ford rank it higher in terms of compensation packages, benefits and salaries. This puts Ford in a position to provide rich rewards to its employees, and it can also provide compensation ahead of the market if and when possible. To create a balance between the compensation systems, the ratio should be 1:1, because both internal consistency and market consistency are subjected to certain frameworks that would define their needs in balancing in order to create a seamless balance and an efficient and flexible compensation system.
Creation of internally consistent compensation systems requires higher capabilities, greater responsibilities, and more intensive intricate job tasks that require more compensation than jobs which have fewer responsibilities, lower capabilities and less intricate tasks. A base pay is then set up upon these distinctions (Martocchio, 2010). Job analysis reveals skills and compensations factors like duties and efforts which a worker requires in order to complete a certain task. In return, job evaluation will determine the pay differentials for jobs in the same company and then the compensation committee quantifies the main similarities and differences between jobs. Hence, jobs will be categorized according to their relative worth to Ford, and this will govern the working factors and compensation programs which finally guarantee internal equity. A company`s internal consistent competitive system decreases its flexibility in reacting to changes in pay practice of competitors, since job analysis creates structures of job descriptions. Reaction to changes will ensure that employees react to tasks that are not in their job description when any competitive pressures arise. Equity appraisals become difficult due to the changeable job descriptions. This is where the market consistency compensation strategy falls in.
Ford recognizes the marketing and distribution of its products as a key element in their success and therefore, they would attract and retain the best talents in this area. Market consistent compensation system helps Ford determine their position in the local and industry employment markets, and it also helps Ford attract and retain employees with competitive compensation and benefits. It gives the company and idea and informed decisions about pay equity and practices and any changes to make in base pay. The company`s human resource assesses the outside competition in regards to the geographic location, member of fortune 100, similar business model or similar primary business to Ford, 20% peer group in the line of business, and participant in Tower Watson Survey Process, so that Ford can maintain a competitor advantage with similar companies over a fair evaluation (SEC, 2014). Evaluation of the market price is then used to retain an employee that is already on staff, and Ford ensures their best employees are not poached or raided, to attain and retain the best employee that would make the company grow.
Evaluation of traditional pay structure at Ford
Ford Motor Company compensates its employees on basis of an annual salary and a fixed hourly rate. Payments are according to seniority and performance or merit (Yang, 2014). Performance based pay is used in Ford Motors...