Business Research Report
Assessment Code: RWT1
Table of Contents
As manufacturers of high precision electronic test equipment, ABC Electronic Test Equipment is in a highly competitive industry that is always looking for the most highly qualified and skilled employees. Edward Lawler of the Center for Effective Organizations at the University of Southern California, the author of many books on compensation, believes that “employees value themselves in relation to the market place and if a competitor were to offer higher pay it is likely that employee will change companies” (Wilson, 2003). As we look towards the future this has become a growing concern for us at ABC Electronic Test Equipment. Millions of skilled workers from the baby boomer generation continue to retire which is leading to a large number of available positions and fewer skilled employees to fill those positions (MacLean, 2007). The goal of any compensation strategy is to recruit and retain the highest quality employees. To do this we must have a competitive pay structure that also fits the needs and goals of our company. With that in mind, I have prepared this report for executive review of compensation methods currently being used in the market with a specific focus on employee compensation and what it is based on.
During my research I found that there are many different strategies regarding compensation. Some strategies focus on base pay, some on bonuses and /or variable pay, and others on benefits. I have focused on 3 methods that are being used today – the skill/competency based method, the pay for performance method, and strategic compensation method. Skill/Competency Based Strategy
A skill/competency based strategy is a method where employees are compensated based on their ability to demonstrate the skills and/ or competency needed to perform certain duties. In the manufacturing environment we have many positions that are dependent on the demonstration of tangible skills, for example the ability to operate a forklift or to be able to repair specific machinery. These are primarily non-exempt positions such as laborers, mechanics, and electricians (Wilson, 2003). Other positions, such as management or customer service, depend on more abstract competencies such as analytical thinking and leadership ability. Some positions may require demonstration of both skills and competencies such as a shift supervisor or a floor lead. Implementing this strategy requires a skills and competency inventory for all positions in the company. This can be a very exhausting task and take several months to complete. Once the skills and competency requirements have been defined, a development plan for skilled employees would need to be designed as well as a method for evaluating and recording employees acquired skills. When employees can demonstrate that they have learned required skills they are then eligible for a pay increase. Competency requirements are not as straight forward as skill requirements and the most common way to develop these requirements is to observe the qualities demonstrated by those that are regarded as top performers as compared to those deemed as average and collect data via surveys, interviews, observations, and tests and use that data to identify the core competencies needed to be successful (Heneman, 2002). Employees who demonstrate high levels of competency are compensated more than those that do not. Analysis: This strategy does require a lot of upfront investment in time and development and it takes time for the ROI to be realized. However, once it is instituted it is easily maintained and employees have clear and concise requirements needed to increase their pay. Also, it has shown success in other manufacturing environments. On the downside, it is focused primarily on base pay as a compensation method...
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