Pay Structures and Internal Alignment Essay
Pay Structures and Internal Alignment
Martin Straight Compressors employ 4600 people worldwide. MCS’s Chatham location is a small Canadian company that focuses on manufacturing compressors for heavy industries. Chatham employees approximately 70 salaried and 50 hourly employees. Beginning in 1999, Martin Straight Compressors Chatham had begun facing numerous compensation issues and conflicts. Some of the issues included: Having 7 authorized but unfilled middle-level management positions Manager-employee relationships broken Documentation not up-to-date with objectives, processes, progress, performance plans Hourly staff don’t respect the owners
Increased workload with no compensation Loss of commitment, motivation, and job security among employees New management brought it while problems are still effecting the day-to-day functions of the organization Merit process isn’t liked Restrictions on merit raises by head office Union involvement Flawed gain-share plan Merit raises go to salaried, non-union staff Merit raises for one employee depend on other employees Executive incentive plan uses different formulas for different employees This consultation report will begin with identifying the two main problems MSC faces and how to resolve them.
Next we will apply the Equity Theory and investigate why certain employees are unhappy about the current compensation system. We will look at the company’s standpoint from a competitor’s point of view, and what methods to use to ensure fast, accurate, and acceptable results to ensure MSC continues to grow and be profitable. The 2 Main Problems After analyzing the process and theories used by Martin Straight Compressors, two main issues become precedent: 1. MSC doesn’t have a fair or efficient compensation method. The processes and ideologies used in making decisions in regards to pay are flawed.
There is a gap between pay levels due to different formulas that are used for different employees. Merit increases given to employees depend on other staff members within the organization. When companies adopt processes that are unfair, employees lose motivation. As well, inefficient practices puts production at a standstill and costs the organization a great deal of time and money. 2. Employees are not a part of the decision making process. They become uninterested in the events going on within the organization because dedication and commitment are lost.
These employees may not fully understand the whole picture, like restrictions coming from head office. When employees feel they are not an important part of the organizations decision-making, they become alienated and their involvement decreases. They become unwilling to develop solutions to problems. Resolution of Problems Encourage employee involvement as much as possible. It is important for employees to have a passion for the work that they do and the organization they belong to. Encourage feedback by holding monthly meetings where everyone is invited to express any questions or concerns they have.
Develop a team of cross-functional representatives that meet on a regular basis to discuss issues that are important to the staff. If the high-level managers empower employees to be involvement and provide feedback, the organization will be “more likely to achieve commitment, trust, and acceptance” (Milkovich, Newman, Gerhart, Cole & Yap , 2013) of a revised compensation structure. Developing a new compensation method is costly and timely. However it is essential to the functioning of an organization. MSC needs to begin with reviewing the compensation budget (Heathfield, 2001).
This way management understands how much they are allowed to spend without putting the organization in debt. Analyzing the current job structure should be done on a regular basis to ensure the organization is able to adapt to internal churn, internal succession planning, and external market factors. When looking at a job structure, a few things should be in mind: reliability, validity, acceptability, currency, and usefulness (Milkovich, Newman, Gerhart, Cole & Yap , 2013). This will help the final structure satisfy both the employees and the employer. Equity Theory
The Equity Theory explains that employees compare their job and pay to other positions within their internal environment, as well as jobs in their external environment. The more knowledgeable the employee is about their responsibilities, there position and pay, and the organizations structure, the more satisfied they will be. Martin Straight Compressors needs to establish this equity theory throughout the company because right now there is no equality felt among employees. My advice to MSC is to develop a Team Site where important information can be displayed for internal eyes only.
Display organization charts to show the levels of progress within the company – and the corresponding pay levels – so employees feel motivated to move up the chain of command. Establishing these reporting relationships would benefit MSC because a positive communication flow would evolve. Keeping Employees Onside Martin Straight Compressors needs to focus on building employee-management relationships. Currently there is a lot of conflict occurring in the workplace and, according to employees, this has resulted form management breaking promises to their employees.
This results in a loss of mutual respect. Below are 3 ways to mend professional relationships: Keep everyone informed and involved Develop 2-way communication Instill a sense of decentralization Change is a scary reality for employees because it makes them feel vulnerable and they lose their feeling of job security. While MSC slowly makes changes to their compensation system, the above 3 points will ensure employees adapt with the company. If employees continue to voluntarily resign, MSC will lose a great deal of knowledge and assets, which will make the change even more difficult.
It’s important to keep valued employees so they are able to pass on their knowledge to new employees along the way. Competitive Advantage Martin Straight Compressors currently does not have a competitive advantage within the marketplace. Although salaries and wages are at par with external competitors, other factors hinder MSC: employees are expected to increase their responsibilities and workload due to the number of unfilled positions, without getting extrinsic compensation for it. Also, merit raises are mostly given to salaried, non-union staff.
This discourages front-line workers because there is no incentive. Performance evaluations should be taken place on an annual basis to ensure employees are aware of their objectives and areas for improvement. A major problem I see with MSC is that employees either get merit raises, or they don’t. Every company should want their employees to succeed, so, in turn, the organization succeeds. I advise MSC to instill a mentoring/coaching program to guide their employees to achieve the best they can. By telling, teaching, and showing employees how to perform functions and tasks, the employee will become empowered.
It will become easier to link performance and pay because benchmarks will be set and every employee will know what is expected of them, and how to achieve those expectations. Becoming Internally Aligned In 1999, performance management records did not identify key objectives for employees. Merit raises focused solely on the results from the employee, department, and company. Rather, MSC should be looking at the individuals’ skills and competencies, and how they are applying them to accomplish their tasks.
Ensuring every employee understands what is expected of them is extremely important; it ensures that they are proactive within the company so they’re not just going through the daily motions. Annual performance evaluations and proper documentation is essential to becoming internally aligned because it ensures everyone is on the same page and employees know what is expected from them. It also allows the company to look back on the trend of the employees to see if improvements are being made, and if they aren’t, why. Recommendation Evidently, MSC is in need of a change.
My recommendation is to have a short-term goal and a long-term goal. 1. Job Evaluation: Ranking Method (used during first 3 years) This will provide fast and accurate results. Using the paired comparison method would allow MSC to use a matrix to “compare two jobs in each cell and indicating which is of great value, then ranking jobs on the basis of the total number of times each is ranked as being of greater value (pg 87)”. The reason this is the first step is because MSC is in need of a quick fix to ensure no more positions are left voluntarily and that production continues.
This method will serve as a “band-aid” until further down the road a permanent solution can be decided upon. 2. Job Evaluation: Point Method (developed by the end of third year) This method requires a lot of time and costs because it goes into the breadth and depth of each job. This is what MSC’s end goal should be. The point method provides accurate and acceptable results just like the ranking method but it takes a lot more time to investigate. The point method should be set as a long-term goal and would be beneficial for MSC to invest in.
Once all positions are individually broken down to determine their compensable factors, they can be scaled and then weighted so points can be assigned and a plan can be made. This will become the foundation for MSC’s compensation structure for years to come; only reviews and evaluations would be needed after this to ensure employees are satisfied and methods are efficient. References (APA Format) Gondzio, J. , & Grothey, A. (2009, May). Exploiting structure in parallelimplementation of interior point methods for optimization.
Retrievedrom http://link. springer. com/article/10. 1007/s10287-008-0090-3. Retrieved on October 6, 2013. Heathfield, S. (2001, June 05). Compensation strategies and structure. Retrieved from http://humanresources. about. com/od/compensationstructure/compensation-structure. htm. Retrieved on October 6, 2013. Milkovich, G. , Newman, J. , Gerhart, B. , Cole, N. , & Yap , M. (2013). Compensation. (4th ed. , p. 01). McGraw-Hill Ryerson Limited. Retrievedon October 6, 2013.