Question

James Adam has been the CEO in the company for the past 12 years. Before that, Mr. Adam had worked for a large organization for 10 years. He has implemented a number of changes that have earned him a great deal of respect and admiration from both companies' employees and surrounding community Perhaps more than anything else, James is known for establishing progressive human resources practice. He strongly believes that the company's employees are its most important assets and continually searches for ways to increase both employee satisfaction and productivity. He thinks that all employees should try to continually improve their skills and abilities. Therefore, he trains employees and send many of them to courses and conferences. Regarding employee compensation, James firmly believes that employees should be paid according to their contribution to organizational success. Most important James previous experiences in company “XXX”, has guided him as a current CEO. James recall that in his previous company, he implemented a result-based pay system under which employees could earn a bonus from 0 to 10 percent each year, depending on their job performance. Bonuses are typically determined by the company's HR committee during November and are granted to employees on January first of each year. In addition to granting employees several rewards according a scheme that was designed recently in the company. Further the company also began giving cost of living raises. James was opposed to this idea originally but had to agree to it. As a result, few rumors started to appear in relation to the fairness of the performance-based raise. XXX company has always been proud of its performance management system. As a policy, at the begging of each year, every employee and his/her supervisor develop goals for the employee to achieve over the following 12 months, with a follow – up meeting after six months to assess progress and take remedial action. Rumors were suggesting that the policy is not being implemented fairly. Some supervisors agree with their subordinated on very simple goals which requires minimal efforts were as other supervisors formulated complicated goals. Some of the staff even said that they do not see the results of their evaluation before the following January. One December, another competitor company in town. An alarming observation was made by one of the supervisors; XXX lost four of its employees to the new company in the first four months of its operation. Further James started to hear for the first-time rumors about complains about employee's salaries. Several staff complained that other employees in similar positions in other companies in the market are receiving better compensation than their compensation. To his surprise, he started to hear complaints from all departments. An exception was the dealers group department. James has been always well respected. People admired him, many employees did not raise an official complains or made formal demands for raise but rumors about complaints were hard not to be noticed by an experienced boss who pays attention to human resources issues. James was determined to be proactive and to take measures before the company loses its competitive position. Upon enquiring from the HR committee, he was informed that everything is fine. Actually, one member of the committee said that that "our dealers are the happiest in the market, they are being paid an average of $ 200 a month more than dealers in the other companies". James was not comfortable to this idea. He also was curious of whether the new HR committee leader has influenced the committee to introduce changes in the company HR practices that were not in line with his vision. He was thinking of restructuring the committee and may be establishing a new HR structure. In the middle of his thinking another issue was brought to him. The HR committee of the company met to determine what should be done regarding the dealer’s bonuses. They knew that none of the dealers had been told how much their bonus would be but that they were all expecting both performance award and cost of living raise. They also realized that, if other employees learned that the dealers were being overpaid in relation to market, conflict could develop, and morale might suffer. They knew that it was costing the Company over $ 30,000 extra to pay the dealers. Finally, they knew that as a group the XXX’s dealers were highly competent, and they did not want to lose any of them.

1. How do think James and the HR committee solved the problem of discrepancy between salaries of dealers and salaries of other employees in other departments in XXX.

Answer 1

In my opinion James and the HR committee must have solved the problem of discrepancy between salaries of dealers and salaries of other employees in other departments in XXX by adopting and implementing performance management system. Under this system, supervisor and employee together will develop goals for the employee to achieve in 12 months. Supervisor will review the achievements in fixed intervals in order to assess progress and take remedial action.

Another important factor to address the problem of discrepancy between salaries of dealers and salaries of other employees in other departments in XXX is to implement result-based bonus system so that employees could earn a bonus as per their performance and contribution towards achievement of organizational goals.

Apart from introducing performance management system, James and the HR committee must also conduct pay audit and identify the pay gap between salaries of dealers and salaries of other employees in other departments. After analysing the gap in salaries relevant pay raise must be given to underpay employees. This will keep employees motivated and increase the level of job satisfaction.

James and the HR committee must try to create fair pay scales or pay grades for each role across the organization. This will help in reducing pay discrepancies in the company.