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Executive Pay

Executive pay has become a controversial conversation in business over the years. The stand for executive pay is that it attracts and helps retain CEOs and other executives in the company. However, the stand against Executive pay is that is breeds inequity in the compensation systems.

In my opinion executive pay should not be as high as it is in the United States. Between 1978 and 2018 executive pay has increased by 940% and yet normal compensation has only increase 12% in this same time period (Lecture: Executive Pay). I understand that CEO positions are complex and unpredictable which is why placing them in a company’s standard pay ranges and pay grades don’t work. Along with this CEO’s and top core employees take on more responsibilities and risk in their positions which makes some level of executive pay necessary. Without this higher compensation it would be difficult to fill open positions, retain current CEOs and encourage lower level employees to work up to top management positions.

That being said the current difference in compensation between the majority of the work force and CEO’s seems highly excessive to me. While it may be seen that this difference is intended to motivate people to work up to high paying positions, it seems to rather just increase inequity and continue to grow the pay gap. One of the hardest parts of executive pay for me to rap my head around is that while many people are putting in their best work to barely earn a living wage, CEOs can perform their jobs poorly and be paid more money than the average person will see during their working years to step down from the position. Overall, it seems that executive pay feeds continues to feed the wealthy while much of the workforce is stuck in middle or low class.

In my opinion CEOs and top management should receive higher compensation than the positions that fall in below them in the hierarchy of the company. However, this difference should not be millions of dollars. In terms of benefits I feel that the most important ones are the services such as life insurance and retirement plans as these provide security for the CEO and their families. I also believe that using stock options for part of the CEO’s compensation is useful to both provide incentives to retain employment as well as align the goals of the CEO with investors and board members. These options are also appealing to CEOs as in some cases there are tax advantages and opportunities to earn gains on these investments.

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Discretionary Benefits

While all companies have legally required benefits, companies can choose which discretionary benefits that they would like to offer. The additional benefits that companies offer can affect employee retention, the candidates the company receives for open positions, and productivity. As noted in the HBR article “The Most Desirable Employee Benefits”, discretionary benefits can sometimes even be enough for a candidate to take a lower paying job over a higher paying job.

Discretionary benefits can be put into three categories: Protection Programs, Paid Time Off, and Services (Lecture: Discretionary Benefits). Below are the discreationary benefits lists from most important to least important in my opinion for most businesses:

  • Retirement (Protection program)
  • Disability & Life Insurance (Protection program)
  • Paid Time Off
  • Family Assistance (Services)
  • Employee Assistance Programs (Services)
  • Tuition Reimbursement (Services)
  • Transportation Services (Services)
  • Outplacement Counseling (Services)

When composing this list I considered two major influences, the amount of staff the benefit affects and how the benefit affects the company. While the protection program benefits are the most costly to the company they affect most, if not all of, the employees within the company. Employees with these benefits can feel that both themselves and their families are protected if something unexpected happened and secure when they decide to retire. This can be a large factor in employee retention, loyalty, and securing strong candidates when hiring.

Below the protection program benefits was paid time off. While all employers are required to provide time off it does not have to be paid in all instances. By allowing employees to have paid time off the company allows the employees to have a better work life balance without worrying about finances. This will attract more applicants and help increase employee morale. Often when employee morale is increased productivity also increases. This is also a benefit that affects all employees in the company. For many of the same reasons family assistance services are just below paid time off. A large portion of the work forces are parents or are helping to support an elderly relative meaning a large percentage of employees could take advantage of this benefit. Family assistance services also helps to create work life balance allowing employees to focus more on their duties while at work.

Finally the last services are ordered based on the value I feel that employees would put on each. With outplacement counseling at the bottom because while it helps build your reputation the employee is leaving the company so there isn’t a direct benefit for the company in terms of increases performance, productivity, or loyalty.

The order of importance of the discretionary benefits may change as a result in the demographics of the companies employees. Younger employees may not be thinking as far ahead as retirement yet and may value paid time off more. Employees who are parents may place family assistance higher than paid time off. Companies where employees have to commute in during high traffic hours may value transportation services more than other services. You should have a good understanding of your employees needs and what they value as well as the financial impact it has on your company when deciding on discretionary benefits.

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Job-Based or Person-Based Pay

For a company such as SafeHaven Humane Society a Person-Based pay structure would be most beneficial. SafeHaven is a small company that has grown a lot in the last 20 years, but maintains a resource for the community. Each position in the company is interlinked to work towards a common goal. Each position is able to build off of another, such the skills and trainings learned.

Being a nonprofit SafeHaven is most likely to follow a market matching or market lagging pay structure. As a result of having very limited funds it is very unlikely that they would be able to engage in a market leading pay structure. A key reason Person- Based pay structures seem to benefit a company like SafeHaven is that each position acts as a stepping stone and through skill development and training an employee is able to apply for the next position. Nearly all employees entering SafeHaven with no prior training or experience start in either Animal Care or Customer Care. These are the foundational positions that allow new employees to develop skills to work with animals and learn the customer service side of the business. From there employees can earn certifications and engage in trainings to learn skills to enter into a new position or prompt a conversation about a pay raise. As the lecture video talked about this focus on skill development would allow the employee to gain promotions or pay increases through developing new skills (Lecture: Contrasting Person-Focused Pay with Job-Based Pay). On an employee standpoint their main focus is on acquiring skills rather than the pay they receive. For most people working in a shelter is a place to gain work experience but not a life long career. This means that they are trying to gain skills that will benefit their future career goals.

Some of the common certifications that employees can get include animal training certifications, freight free fido certification, or certifications for certain procedures and working with certain drugs in the intake and medical clinic. Some trainings that are done mostly in-house at SafeHaven include how to preform a SAFER, how to recognize and test illnesses, or attending events such as the Animal Care Expo.

While the Person-Based pay structure is the most beneficial to the company, there are aspects of the Job- Based pay structure that would fit well. One being the pay increases and promotions based on performance. Skill development is important but if you know an employee is not very reliable performer at their position it could cause more issues to increase pay or give a promotion simply because they gained a new skill.

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Behaviors & Compensation

In one of my mom’s first jobs she was having a bad day, however she always tried to provide great customer service as it was a condition of the job. Despite having personal issues going on, she maintained a professional attitude and provided a customer with exceptional customer service. The customer ended up giving her a fifty dollar tip for the wonderful customer service she received. After this experience she realized the importance of customer service and the impact it can have on both the business she works for and herself. While she knew that not every customer would provide the same compensation, she wasn’t able to tell the people that would and wouldn’t provide a tip therefore treating everyone with the same exceptional standard made the chance of receiving a tip more likely. As she has moved through jobs and started her career she has carried this lesson with her and passed the advise on to employees that have worked for her.

Initially her compensation was non-monetary and more focused on personal values and earning respect and mentorship from her supervisor. While she followed the standard that was set forth by the supervisor the tip enhanced her behavior and helped her find more motivation to continue the behavior throughout her time with the company and continue to provide exceptional customer service throughout her career. She was motivated by the compensation because is showed that her hard work was being noticed and appreciated by the people she was servicing. That personal recognition also enticed her to continue the behavior after that one time where she was compensated for her behavior.

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