Question

Managing compensation costs, headcount, and participation/communication issues

Cisco systems, Hewlett-Packard, American Airlines, and General Motors are examples of companies that have cut employment or cut wages and/or benefits to reduce labor costs in hope of becoming more competitive and more profitable. Indeed, American and GM went through bankruptcy in part to gain control over labor costs. In contrast, some companies- Southwest Airlines, Nucor, and Lincoln Electric- have a no-layoff practice and do not appear to have cut wages or benefits even in years when sales have declined significantly (They have also not gone through bankruptcy).

To what degree would you have others at the company participate in the design of the new compensation system? Who would participate? Would you follow a policy of pay openness in communicating your compensation system? Provide a rationale for your decision.

Answer 1

Few companies decrease the employee's wages in order to have an edge against their competitors by providing the product at a lower price. Whereas, few companies think about their employees and do not decline their wages even when the sales decreases.

The difference between the two types of companies is that one increases the moral and motivation of employees whereas the other decreases the motivation of the employees by cutting of their salaries/wages.

The new compensation system should be such, that neither the moral or motivation of employees is declined nor profits of the company are reduced. Following steps could be taken in order to ensure the same.
1. The correct number of workforce should be hired.

2. The new innovations should be made by the employer in order to attract employees who are good and active with their work.

3. In the cases of high demand, employer should outsource few of its functions for smooth flow of activities.

In the case when i would be the responsible person of managing the employees, i would have first conducted a survey in order to understand the expectations of employees from the organisation. Regular activities, incentive based work would motivate the employees to do better.

The system of compensation should be effectively communicated to employees in order to avoid any confusion. Following things should be kept in mind:

1. The objectives should be defined clearly.

2. The required information should be collected and communicated through the correct media.

3. Effective communication of the plan to the employees.

4. Proper evaluation of the results

The company should always be open to listen to their employees and should regularly initiate activities in order to motivate the employees. The correct and happy environment also encourage the employee to perform better. Satisfied employees is one of the key behind the success of the organisation.