Pay Structures

Justify how you would organize a pay structure for top executives and how it might differ from a pay structure for human resource professionals or sales professionals within the same company. Debate the equity of offering executives more lucrative pay structures and how that affects the motivation of the lesser-paid professionals.

I believe that top-level managers generally are compensated based on the size of the firm because of the risk, education, stress, hard work, and expected level of achievement that their job duties require. The top-level managers are expected to take a risk at making decisions that could lead to the firm’s success or failure. Often top-level managers have obtained four to six years of the appropriate hard university work that makes them better qualified to perform their job duties. Most levels of management are accompanied by a certain level of stress, knowing that their actions will have a direct impact on the firm’s performance. Most top-level managers put a lot of work hours, at home and within the firm, trying to successfully run the firm. The top-level managers of a firm are expected to achieve organizational goals and objectives by planning, organizing, implementing strategies, and overseeing the budgets and other aspects of the firm. The top-level managers set the goals for the organization and direct the company to achieve them. Therefore, the size of the firm should influence the compensation for such job requirements.

Imagine your organization is in survival mode as it tries to ride out the economic downfall. The organization has adopted a strategy of 20% reduction in staff compensation in order to prevent layoffs. It’s not plausible this strategy will retain top talent if it continues to be the company’s strategy. As an HR executive at the company, you have been asked to develop a pay-for-performance strategy. Address how you would approach this task and what you would propose.

Despite its familiarity in the workplace, the phrase “pay for performance” likely means different things to different people. This lack of clarity and understanding can keep employers from meeting short- and long-term goals and employees from deriving satisfaction in their roles and careers. For top management, performance has most often been defined by metrics commonly reported to public-company shareholders or otherwise easily calculated, such as earnings per share or total shareholder return. This has afforded top management and shareholders a clear view of the linkage between pay and the final measure of performance. But unfortunately, the means to achieving that end measure of performance were not typically included as performance measures. As for other employees, the metrics used for linking pay to performance were not always considered from a business-performance perspective. In some companies, middle management and lower-level employees might have been incentivized based on overall company goals, without knowledge of how their role impacted the company as a whole.

In other cases, they were incentivized based on individual-performance measures that had no direct linkage to company performance, and during years of poor company performance, incentive pay was reduced or eliminated — even for high performers. Balancing your organization’s use of pay and other rewards with meaningful measures of individual performance

helps create a talented, engaged workforce and an organization capable of creating long-term value. This applies to the entire organization, including top management.

A properly managed pay-for-performance program should reflect:

* What fuels individual performance;

* What links individual performance and organizational performance; and

* How to effectively use performance goals to achieve short-term successes and long-term objectives while managing risk.

Regardless of the diverse composition of your workforce today, a solid understanding of what triggers top-flight individual contributions is essential to developing an effective pay-for-performance strategy.