Question

The purpose of this assignment is to choose a compensation philosophy that is appropriate for a life coaching firm and articulate a rationale for this selection. There are two aspects to this assignment. First, describe the risks and benefits of leading, meeting, and lagging the market in overall compensation and benefits. Next, choose the appropriate strategy (lead, meet, or lag) for your firm, and provide rationale about why this is appropriate. There is a minimum requirement of 500 words for the compensation purpose and strategy document. Consider some of the following factors in your assignment: 1. Payroll expenses are usually the highest expense at most firms. If you lead the market, this expense can be taxing. 2. If you are pursuing top talent in human capital rich industries (e.g., software engineering), lagging the market may keep you from competing for market share against your competitors. 3. If you meet the market, paying average will generally not attract top talent, and in addition, you will not have the labor-cost savings of a lag-the-market strategy.

Answer 1

Part I - Leading the market is the best policy when the company can afford to bring the top talent on board. This will enable the organisation to be driven by the best in the business, can attract the best customers ( those wih the highest paying capacity), adopt best in class practices and help the organisation to achieve the market leadership. On the downside, it runs a risk of adversely affecting the finances of the company if the business fails to pick up.

Meeting the demand is a moderate risk moderate return proposition where the firm may compromise on the quality of its human resources and work to attract the middle class who might be looking for good products at reasonable price.

Lagging the demand is advisable only when the company wishes to attract the masses through its low cost offerings rendered by the low paid low quality resources. This strategy will not make the firm competitive which will have to settle for a position on the bottom of the market because of the low product quality and poor brand value.

In the selected category ( Life coaching), the first approach ( leading the market) is the most appropriate, given the nature of the target market and the value of human factors in the rendering of the service. Customers of life coaching are usually top executives, business persons, career oriented professionals and others, usually belonging to the upper layer of the society, looking for value in the services and less sensitive towards the price. In this scenario, hiring the best talent will enable the firm to render top class services and achieve market leadership.