Appraising Performance at Precision
Question :
Precision Manufacturing produces machine parts and has nearly 200 production employees and 50 employees in its front office with responsibilities ranging from data entry to marketing. Jackson Smith is the new compensation manager at Precision, and his first task is to implement a merit pay program that would tie to the company’s performance appraisal process. For the last 10 years, all employees have received an annual pay increase, but it has been an across-the-board increase, with all employees receiving the same percentage increase in base pay. Jackson and the company president have agreed that implementing a merit pay program to provide pay increases based on performance would support the company’s competitive strategy by rewarding employee productivity.
Answer :
Introduction
Emerging Pharmaceutical company’s revenue increased drastically in just 3 years. It’s projected revenue for the current year is $5 billion. But, at the same time employees are not satisfied working here, they are leaving the job as the competitor of the Emerging pharmaceutical, Medtronic Pharma is providing much better employment perks. This report will analyze the compensation and appraisal system of the Emerging pharmaceutical, compare the same with the competitor’s system and provide solutions that Emerging pharmaceutical can implement to improve employee satisfaction thereby improving the attrition ratio.
Misalignment, differences, and gaps present in the current benefits and compensation system, based on the external benchmarking data
Flexible working along with WFH facility
At Emerging Pharma, remote work is not allowed or very few workers have access to that. So, around 3 precious hours of each worker are getting wasted to commute to and fro the factory. Additionally, no extra compensation is given to people working from home or any other place for internet usage. The cost associated with the people working from home is far less compared to the cost incurred in maintaining the office space, so the company should motivate the employees by providing some rewards (Cacioppe 2019).
The salaries to be at part with the industry and the competitors
The basic salary is the main issue employees are having as the basic salary is around 33% less than what is competitor’s paying to its employees. This dampens the enthusiasm of the workers as a person having the same qualification is earning very high comparatively. Another major factor is the variable pay, each employee is given the same percentage of hike regardless of their performance. So, employees are not encouraged to work harder to earn the extra penny.
Higher money for the college degree
If an employee wants to learn something that in turn going to help the betterment of the company, then fees and other charges required to feed the family should be paid by the company. But the company should evaluate the person’s ability before making the investment.
Higher number of leaves
Each year, the company should provide paid leaves to maintain work-life balance as it plays a very significant role in the productivity of the employee. Sadly, these leaves are very less in Emerging Pharma compared to the competitor. This impacts the most to workers of age group 31-40 as they have kids and family to look after.
Compensation Analysis: Targeted points
The basic issues are with the salary and additional perks offered to the employees. Employees working hard to improve the efficiency needs recognition and monitory benefits to continue giving their best. Also, Employees based on their age group looking forward to different benefits, like people with age less than 30 are more into learning and they want reimbursement for the educational cost, people with age group 31-50 have kids and family and they want more paid days off to spend more time with them. Apart from that employees are looking forward to having a flexible working space. No one wants to invest 4 hours in traffic. They can spend half of the time on themselves and half of the time for the company thus giving it a win-win proposition. In summation, this situation can be put under promotional opportunities (Andrew 2017).
What are the key areas of the current system that are misaligned with the competition?
What should be increased, reduced, or stay the same, and provide the rationale with them
I have identified a difference in a few areas related to employee satisfaction between Emerging Pharmaceutical and Medtronic Pharma. There are many other benefits apart from these that have been given by the Medtronic Pharma to encourage the employees.
Area of Improvement for Emerging Pharma:
1. It should implement the performance tracking system and include variables in the salary structure.
2. Paid off days to be increased to improve the work-life balance of the employee.
3. Encourage employee to do work from home by providing monetary benefits
4. Financing higher education or personality development courses
5. Annual vacation period to enjoy with family
Demographic characteristics of the employees and impact of proposed changes
The key demographics of the employees are as below:
As can be seen from the above table, most of the employees of Emerging pharma falls under 31-50 age bracket. Thus, proposed changes of the leaves and family holiday will have maximum impact on them. This is the demographics with the families. Similarly, changes such as flexible work from home will also allow them to spend more time with the family. The changes in allowance for education will impact both 30 and 30-50 alike. Female can be benefitted with healthcare plan changes where they can include their spouse in that.
There is a need for the Emerging Pharma to understand that it is operating in an environment where there are many companies looking for the employees. Thus, if it doesn’t benchmark itself to the nearest competitors and the industry then it is very likely that employees will go to a place where they feel valued more. The compensation should not only be in form of monetary values but also non-monetary such as recognition and appreciation. Many of the employees have reported that they feel that their efforts are not being recognized by their manager. These issues must also be addressed as part of larger exercise to imorve reward system (Leary 2014).
All the above-mentioned steps can help to improve the loyalty of the employees. Also, the productivity of the employees will be increased.
Conclusion
In conclusion, the Compensation system followed by the Emerging pharma is not catering to the wants and needs of the employees. Also, it is not aligned with the competitor’s reward system which is much more diverse and giving each employee an opportunity to grow and rewarded accordingly. Thus, as a Reward director, I would suggest that Emerging Pharma should introduce a variable compensation system, improve health benefits criteria, strengthen the pension plan, increase paid days off, set aside some amount for employee development and provide working remotely opportunities. Taking all these steps would improve employee satisfaction thereby productive will increase and in turn the revenue. At the same time cost wasted in maintaining the office space would be better utilized in the tuition fees.
References
Cacioppe, R. (2019), "Using team – individual reward and recognition strategies to drive organizational success", Leadership & Organization Development Journal, Vol. 20 No. 6, pp. 322-331. https://doi.org/10.1108/01437739910292634.
Leary, M. (2014), Introduction to Behavioral Research Method, USA: Pearson Education, Inc.
Andrew, D. (2017), The impact of perceived leadership behaviours on satisfaction, commitment, and motivation: An expansion of the multidimensional model of leadership, International Journal of Coaching Science, 1(1), 35-56.
