Month: January 2022

Week 4 – Compensation Systems

When considering the complexity of developing a compensation systems that is both internally consistent and market competitive it it is very complex. However, it can be done with strategic planning to be implemented correctly and efficiently. 

A challenge of this can come from the internal consistent compensation system which “defines the relative values of each job among all jobs within a company” (Martocchio, 2017). The challenge with this comes from having a clear job structure that is based on complexity, responsibilities, and qualifications of jobs in which they are paid higher than position with less responsibilities and qualifications. Therefore, it can be difficult to match and or remain competitive with other competitors because it means raising wages for positions to retain and attract employees in which organizations may not have the capacity to do so. 

Another challenge can be when creating a market – competitive pay system that is also internally consistent it requires extensive time and effort. Reasoning being creating a competitive pay system is based on four comprehensive activities which include conducting a strategic analysis, assessing competitors pay practices through compensation surveys, integrating internal job structure with external market, pay rate, and determining compensation policies (Martocchio, 2017). These are not activities that can be completed quickly and it does not mean implementation will run smoothly. Evaluation, analysis, and adjustments will need to be made to ensure that implementation is correct and measures align with the organizations goals and values to be able to best attract and retain employees in a competitive job market.

References:

Martocchio, J. J. (2017). Strategic compensation: a human resource management approach. Pearson.

Swift, M. (2021). Introduction to Compensation [Lecture recording]. Canvas@Oregon State University. http://canvas.oregonstate.edu/courses/1842591/pages/week-4-learning-materials

Week 2 – Compensation Management

The company I further explored was Ikea and it was clear that they are a company that values its employees. Ikea operates on a low-cost structure by providing home furnishing products at the most affordable (lowest) price possible for consumers. Compared to other competitors such as Crate and Barrel, Restoration Hardware product prices are significantly cheaper.

Not only, Ikea thrives because of the lower costs in combination to providing quality, sustainable, diverse products that hold onto the traditional Swedish furniture style which helps set them apart from competitors.

To keep costs down Ikea chooses a set price they want to sell a product at, and designers and suppliers work together to see it through with a minimalistic design (Tyler, 2018). By doing this, it helps reduce the chance of extra expenses in the design and manufacturing process which would raise product prices.

To add, a large cost break comes to their “flat packing” in which all their products are in flat boxes while being transported and stored (Tyler, 2018). This method of packaging is less expensive because it requires customers to manually assemble their products on their own and storing of products takes less room.

Ikea’s compensation can include maternity/parental leave, discounts on merchandise, health insurance, pet insurance, in-store meal discounts, paid time off, retirement funds. As well, a loyalty program that gives extra contributions to employee pension funds regardless of salary and position when company goals are reached (Samuel, 2021).

As a whole, I would say that Ikea’s approach to compensation does support their competitive strategy because they want to be inclusive to all. Similar, to producing products that are affordable to all people. To add, a large reason why they can provide extensive compensation to their workers is due to keeping their company costs down. Which better, allows them to invest in their workers who bring value to their company and keep them leading in the industry.

Furthermore, Ikea’s product market and labor practice changes in supply and demand which can influence the availability of products and costs compensation remains the same within the company. A large reason for this can stem from the companies’ values of togetherness, caring for people and the planet, cost – consciousness, simplicity, renewal, and improvement, different with meaning, giving and taking responsibility, and leading by example (Ikea, 2022).

Ikea focuses on retaining their employees by keeping them happy and wanting to be a part of the positive company culture through their values. Along with, recognizing workers’ hard work and dedication in the company. Despite facing adversity within their supply chain and the influx of products in the market they take an emphasis on caring for their workers as they are key players in keeping the company successful.

References

IKEA business strategy and competitive advantage: Capitalising on IKEA concept. (2019, November 2). Research-Methodology. https://research-methodology.net/ikea-business-strategy-competitive-advantage-capitalising-ikea-concept/

IKEA culture and values. (2022). Ikea.Com. https://about.ikea.com/en/about-us/ikea-culture-and-values

Samuel. (2021, October 14). IKEA Employee Benefits- IKEA overview. How I Got The Job. https://howigotjob.com/employee-benefits/ikea-employee-benefits-ikea-overview/

Tyler, J. (2018, October 12). Here are IKEA’s secrets to keeping its prices so low. Insider. https://www.businessinsider.com/why-ikea-is-so-cheap-2018-10

Week 1 – Compensation Management

A situation that comes to mind of someone that engaged in a set of behaviors and compensation was a motivating factor is through my Mom and a decline of a job offer. My mom declined a job as an Executive Assistant within a fortune 500 company to be able to continue as an Operation Manager for a DEI organization composed of less than 50 workers. 

 One reasoning for the decline of the job was based on the motivation of intrinsic compensation which is the psychological mindset those results from performing a job (Swift, 2021). She felt the work that she was already doing mattered more and it was more rewarding than accepting the other job offer. She felt more connected to her colleagues, the work that she produces is valued and highly recognized when working in a smaller organization. In combination, factors such as her prior work experience, skills, and demands of the job offer were not worth her time as she felt that she was overqualified for the position. 

To add on, another reason for the decline in the job can be the extrinsic compensation for the new job offer which had less monetary and nonmonetary rewards (Martocchio, 2017). In comparison, the compensation that her current job was more appealing and comprehensive based on the core compensation elements (Martocchio, 2017). Her decision to turn down the job offer was further analyzed as she weighed out the pros and cons of the compensation packages the organization offered her which ultimately lead her to decline the new job offer. 

References

Martocchio, J. J. (2017). Strategic compensation: a human resource management approach. Pearson.

Swift, M. (2021). Introduction to Compensation [Lecture recording]. Canvas@Oregon State University. https://canvas.oregonstate.edu/courses/1842591/pages/week-1-learning-materials?module_item_id=21647282