Compensation Practice

Compensation Practice

Successful multinationals exercise best human resource practices to retain a talented workforce. In the technology sector, for example, competition levels are high. To survive the tumultuous market and mounting pressure from startups, companies need to invest on employee retention strategies (Stahl et al., 2012). Apple Incorporation is one of the few multinationals that have shown resilience through utilization of survivability tactics. Its secret lies in the proper treatment of employees to motivate and incubate innovation through appropriate compensation strategies.

Best Practices

Apple human resource management understands that a firm’s compensation systems should be linkable to its overall objectives and strategies. However, there is a need for a balance of employer's interests and goals with the employees' expectations. Apple company compensation program has four objectives. The first objective is the compliance to laws and business regulations. Secondly, the compensation program should be cost-effective to the firm in the long-run. Third, apple compensation program is aimed at ensuring equity among the employees. Lastly, the program should be designed to enhance the performance of the organization hence a return on investment.

The rewards for working at apple are both extrinsic and intrinsic. Intrinsically, the management praise employees that complete projects in time and meet the performance objectives. Extrinsic compensation at Apple includes monetary and non-monetary tangible rewards. The firm applies both variable pay and base pay as monetary rewards.

As a large multinational, Apple’s compensation costs forms a significant portion of the total annual expenditure. It is easy to calculate the compensation cost but it is difficult to identify and determine value extracted from the employees. For wise administration of expenditures, Apple HR specialists and managers from other department work closely. The role of HR specialists involves overseeing and guiding the development and administration of the compensation system through wage surveys and job evaluations.  There is a technical complexity in drafting a compensation strategy (Gupta & Shaw, 2014). Thus, human resource strategists develop Apple’s salary structures, base pay programs, and other policies.

Apple Strategic Compensation

Apple applies two main compensation philosophies as its strategies: Entitlement and performance-oriented philosophy. Some employees are entitled to the same percentage salary increment on an annual basis regardless of changing economic conditions. On the other hand, new recruits have no guarante of compensation until they prove their worth to organization. The performance oriented philosophy applies mostly to interns and volunteers at the organization. Mainly, the compensation is based on performance level so that employees can be motivated to work harder to earn more, hence boosting the firm's overall performance. This strategy meant to shake off poor performers and to keep the best talent at the organization. Of keen to note is the malleability of Apple’s compensation strategies (Björkman & Lervik, 2012). There is conduction of regular modifications to suit the market changes given that technology industry evolves rapidly.

Applications

Organizational Culture and Compensation

Apple has an organization culture aligned to its compensation practices. The alignment is mostly applicable during cultural modifications aimed at curbing competitive pressures. Alteration of the compensation system in line with changing organization culture are necessary to avert sending mixed or wrong signals to employees and other stakeholders.

Labor Market positioning and Cost Effectiveness

Apple is concerned about balancing the industrial competitive pressures, an average cost of retaining old workforce and attracting new skills. The move is particularly critical when the firm is sourcing for specified skills in a tight labor market. Apple Company has stated specific policies on how the firm wishes to gain a foothold in the labor market.  Its compensation programs are designed specifically to reward employees for responsibilities, tasks and duties performed. Usually, it is the already accomplished tasks that determine particular employees to have higher base rates as compared to the rest.

Competency Pay

Apple is currently shifting towards a compensation structure that rewards employees on their level of competency rather than specific tasks they perform. The emphasis paves the way for rewards to workers as per their versatility and the rate of growth in personal competency development.  Technology industry involves invention of new ways to ease day-to-day human lifestyle. Thus, the employees should be encouraged to gain new skills through compensation for their efforts to raise their value in the firm.

Career Development and Broad Banding

In the recent past, Apple has revised its hierarchical pay structure using competency-based compensation approach. Broad banding uses limited pay grades that have broader ranges in comparison to traditional systems of employee compensation. Its utilization is gaining traction in tech firms including Apple. The fact that apple is a multinational company has contributed to the global spread of broad banding. The benefits that the firm and employees accrue as a result of broad banding are numerous. First, it is consistent with the current flattening of business levels and the growing utilization of multidimensional jobs.  Broad ranges and few bands enable employees to shift responsibilities as Apple’s business needs and market conditions change. Most importantly, broad banding neutralizes traditional employee concerns about promotions, pay adjustments, and new job responsibilities.

In addition, Apple’s broad banding compensation practice enhances employee career development due to the removal of pay grade artificial barriers. Besides, Human resource control mechanisms are eliminated .The resulting decentralization accords an extensive authority to operating managers that includes enactment of compensation decisions. Apple employees are now encouraged to move across the organizational  departments and apply for fresh openings in other areas of the firm.

Variable Pay

Apple HR department is in the process of implementing variable pay programs as an approach to compensation. It involves team bonuses, incentive plans, and organization gain-sharing programs. Implementation of variable pay programs provides a link between compensation and results.  Team compensation aims at encouraging teamwork and efficiency hence the accomplishment of complicated tasks that are impossible when employees work as individuals.  This compensation approach is particularly useful in rewarding a team performance beyond the level of satisfactory.

Factors affecting Apple’s Compensation Practices

Laws and Regulation

Laws and business regulations impact employee remunerations at Apple Company. For instance, employees on contract basis are not compensated for compulsory time-offs. Besides, US laws have laid down minimum wage levels that firms have to comply. In addition, there are rules regarding overtime compensation to avoid cases of mistreatment and exploitation of workforce. Other laws that regulate Apple compensation practices cover areas of Employment at will and compulsory bonuses.

The Labor Union

In the United States, companies are required to compensate employees in time. Wage payment delays results in protests and a mass exit of the labor market from the organization. Additionally, the firm is obliged to raise the standard of living of employees and improve working conditions. Apple strives to fulfill these market needs in time to avoid a clash with authorities.

Labor unions protect rights of employees at a work environment. They set rules that must be followed by employers to prevent employee exploitation practices. For instance, the labor union that oversees Apple compensation practices demands that the firm's average employees should receive wages at par to similar work's labor market. 

Market

Fluctuation in market demands affects Apple’s sales revenues hence influencing the compensation practices. During 2008 economic crash, Apple sales revenue hit a new low. As such, the firm was forced to lay off a remarkable number of employees. The retained workforce was entitled to limited compensation, but as the economy recovers, consumers spend more on the firm’s products hence the restoration of initial compensation plans. In the emerging markets like China, Apple posts super profits part of which the management redirects to employee compensation. 

Effectiveness of traditional Base for Pay at Apple

Seniority-Based Pay System

Pay systems that are based on seniority are still common in modern times. Apple's seniority-based pay system factors into account the employee performance even though the main factor is tenure. For instance, long-serving employees are compensated because of their loyalty to the organization. The performance of senior employees is not quantified considering their years of service. Most scholars view seniority-based compensation structure in modern times as symbolic and an encouragement to junior staff.  Further, seniority-based pay is intended to ensure the financial stability of all employees irrespective of their levels of performance.

A close analysis reveals that Apple declines to phase out traditional bases for pay due to fear of employee dissatisfaction hence poor performance. Despite soaring operation costs, the top-level management believes that investment in employee welfare is a viable and vital to the organization’s future. Thus, there is a need to quell uproar amongst the staff by ensuring their loyalty and dedication to service via adequate remuneration albeit based on traditional compensation practices.

Performance-Based Pay System

In Apple's performance-based pay system, employee performance is fundamental in the determination of remuneration. Factors affecting seniority-based pay such as tenure influences compensation.  This pay system that is mostly applicable to Apple’s junior staff has created a climate of hard working employees to achieve maximum performance.  This might sound like an ideal option, but a close scrutiny reveals that there are numerous downfalls.

One of the demerits Apple has to face is the heightened potential for skyrocketing turnover rates. This results from the discouragement of low performers as they struggle to earn merit increases.  This traditional system can be conceptualized in the analogy that the actual winners are high performers whereas the losers are the lowly ranked workforce. In the end, employees that rank low more often will quit.

            The threat that these traditional compensation structures face is the changing business environment. Technology is rapidly transforming the global business environment. For instance, Apple is seeking ideas from young and fresh minds with modernized education qualifications. Therefore, maintenance of old workforce is increasingly becoming a liability rather than an asset.  Today, technology enables quantification of labor productivity  allowing for performance as an indicator for the value of employees (Kehoe & Wright, 2013).

            In summary, the discussion reveals that Apple is aiming at maintaining its competitive nature through due considerations of employee welfare. This is achieved via a viable compensation strategy that is modified to accommodate changes in the labor market and to meet government regulations. For Apple, the road to success has not been easy, but years of looking for solutions to employee problems have yielded satisfaction that spurs innovation.

Works Cited

Björkman, I., & Lervik, J. E. (2012). Transferring HR practices within multinational corporations. Human Resource Management Journal, 17(4), 320-335.

Gupta, N., & Shaw, J. D. (2014). Employee compensation: The neglected area of HRM research. Human Resource Management Review, 24(1), 1-4.

Kehoe, R. R., & Wright, P. M. (2013). The impact of high-performance human resource practices on employees’ attitudes and behaviors. Journal of Management, 39(2), 366-391.

Stahl, G., Björkman, I., Farndale, E., Morris, S. S., Paauwe, J., Stiles, P., ... & Wright, P. (2012). Six principles of effective global talent management. Sloan Management Review, 53(2), 25-42.