Question

CASE STUDY An In-N-Out Pay Strategy: Costa Vida’s Decision to Boost Pay 2 For many businesses in today’s belt-tightening economy, decisions on pay need to be strategic to ensure that employees are treated fairly and to ensure that businesses can remain viable. This requires knowing what your competitors pay their employees and knowing your own salary budget. But knowing what your competitors are paying can be both valuable and painful. As a primary stakeholder and former CEO of Costa Vida, a fast-growing chain of fresh Mexican restaurants, Nathan Gardner knew he was competing against some restaurant chains with competitive compensation systems. Costa Vida is a fresh Mexican grill featuring Baja-inspired foods that are made from scratch daily. Following a trip to Cabo San Lucas on the Baja Coast in Mexico, Costa Vida founders JD and Sarah Gardner were inspired with a vision: Bring the freshly made local cuisine with the vibrant lifestyle to the United States. They started their first restaurant in 2001, and after just 13 years, Costa Vida has more than 50 franchises in Arizona, California, Colorado, Florida, Idaho, Illinois, Nevada, New Mexico, Missouri, Oklahoma, Oregon, Texas, Washington, Wyoming, and Utah, and as of 2017, 3 locations in . May not be copied, scanned, or duplicated, in whole or in part. One of the main challenges Costa Vida faces is the fierce competition for customers as well as employees. “You’d be surprised how much of a difference having good employees in all areas of the business makes,” commented Nathan. “For the fast-casual food industry,” remarked Nathan, “you are dependent upon your people. If you don’t treat your people well, they won’t treat your customers well. If your customers aren’t treated well, you have no business.” For months, Nathan agonized over how he could develop a competitive compensation plan that matched the objectives of the organization, but that fell in line with the tight budget of each individually owned franchise unit. He stated, “We, of course, leave the final compensation decision to the franchise owner, but we do all we can to educate and persuade our franchisees to be competitive and fair. In the long run, this is how they can maintain a superior level of customer satisfaction.” Nathan pointed out that a strong benchmark for them has been In-N-Out Burger. In-N-Out started in California and is known for its great compensation package. They start out all their new “associates” (aka employees) at a minimum of $10 an hour. They also offer flexible schedules to accommodate school and other activities, paid vacation, free meals, and a 401k retirement plan. For full-time associates they provide medical, dental, vision, life, and travel insurance coverage. Their reason for paying so high is based on a strategy that lower turnover and more committed workers will lead to better service. “What In-N-Out does for their employees is truly amazing,” commented Nathan. “We often see employees moving from one fast-food chain to another, but we rarely see employees coming from In-N-Out.” Nathan had a tough challenge ahead in trying to convince his franchise owners and managers to think more strategically about their pay systems. He needed to help them realize that paying wages and offering other compensation benefits that were better than their competitors may mean lower profit margins up front, but that the returns would be greater in the long run. He also needed to offer evidence to show that this was not just about being fair, but it was about being strategic. The restaurant business is a fast and fierce industry and companies come and go all the time. What was it going to take for Costa Vida to stay for the long haul?

Question

1. What should Costa Vida’s compensation strategy look like? Hint: What are the company objectives and how can employee pay help to achieve those objectives?

2.    What should the pay structure look like? What pay mix would you recommend?

Please make sure that your response is free of plagiarism. Thanks.

Answer 1

Answer 1=If we analyze the case, it is appropriate to have the compensation strategy in Costa Vida as In-N-Out. This is the compensation strategy in which the focus remains on facilitating good wages, flexible working hours, free food, paid leaves and the nice retirement plan so that the turnover ratio of the company can be kept to the minimum level and to induce the high motivation and morale of the individuals so that the employees can put their best and this will result in better customer satisfaction.

Answer 2=  In my opinion, the company must induce a new compensation strategy that can motivate the manpower to have greater involvement and motivation in order to execute their tasks and duties with greater efficiency and this will result in improved productivity. This type of strategy should be based on fair wages free food, work-life balance methods, nice retire plan, insurance for the employee and his family