An In-N-Out Pay Strategy: Cost Vida’s Decision to Boost Pay

An In-N-Out Pay Strategy: Cost Vida’s Decision to Boost Pay

Katie Perkin had a clear vision of starting her own business after attending college. As a passionate entrepreneur, she was convinced that borrowing a loan will enable her to meet her goal. Perkin’s effective strategic business skills and self-drive allowed her to start Performance sports, a start-up firm whose mission was enshrined in precise customer service, fast delivery, and provision of discounted goods. Following up on these strategies led to the growth of the organization over time. In fact, the organization has a workforce of 16 talented professional specialists remunerated according to their rank, roles, and responsibilities.

Given the growth of Perkin’s organization, she plans to create a new position of purchasing agent to improve efficiency in operations. However, this move implies that Perkins has to determine the salary for the position holder. Therefore, she considers the adoption of a pay-for-performance compensation philosophy already applied by East Valley Sports (competitor). If successful, the philosophy will be expanded to remunerate the rest of the workforce, especially considering the expression of dissatisfaction among customer service representatives.

Question 1: Factors to Consider When Setting Wages For New Positions

Setting the appropriate salaries for the new purchasing agent position can be tricky for Balkin and Perkins. If the pay is too little, chances are that the organization may not attract the right talent. Similarly, if the salary is higher, the operation cost will be higher, thus weighing down on the revenue and profitability (Akerlof et al., 2014). To find a middle ground, Balkin and Perkins examine factors such as skills profile and importance of the new position.

In essence, the management needs to be specific about the set of skills and the roles of the new employee. Investing in talented people stretches the firm’s ability to generate additional revenue hence a return in investment. Additionally, structuring of a new position and staff calls for the organization to consider where most critical roles lie. Considering this, there is a need for the management to source for ways to mitigate potential damages like the anomalous division of responsibilities. The more critical the responsibility is to an organization, the higher the probability of more pay to the employee.

            The factor of demand and supply should also be considered. If the economic prospects are excellent, the firm will incur additional compensation expenses to attract talent. Contrastingly, a tight job market accords the organization with a greater pool of talent to select the best without paying premiums. Lastly, Perkins and Balkin should get insight and information on setting wages from different sources to understand the average compensation rates of competing firms and successful multinationals. Some of the resources available for consultation when establishing wages include professional associations, trade groups, websites, and professional business advisors.

Question 2: Advantages and Disadvantages of Pay-for-Performance Policy

            The pay-for-performance policy is one of the best to improve production and boost performance in an organization. Particularly, this policy is recommendable, especially if the output and motivation level of employees have drastically dropped recently. In most cases, a decreased productivity means that the employees are bored with their jobs or are dissatisfied with the current wage rates. Therefore, the workers will be reinvigorated if the management offers to pay more for attaining the performance targets (Gillam et al., 2012). Eventually, the employees will have a tangible goal to focus on and work toward.

On the other hand, the pay-for-performance policy is detrimental to the corporation, especially if the implementation process is sluggish and slow. For instance, if the philosophy is introduced on a group basis, some workers may be forced to pick up the slack of those employees whose contributions are dismal. Further, immeasurable parts of the job suffer due to the lack of incentive to improve performance in those areas. Besides, pay-per-performance philosophy can increase jealousy among workers within the internal environment if it is observed that hardworking employees are not remunerated fairly for their efforts.

Question 3: A New Payment Plan for Customer Service Representatives

One of the firm’s goals is to provide error-free customer service. Therefore, the employees holding these positions must work harder to meet their objectives. The organization, on the other hand, must fully compensate these employees to avoid instances of dissatisfaction that can affect service delivery in the long run. In light of this, the complaints raised regarding underpayment in relation to the overall revenue generated should be addressed accordingly and promptly. Therefore, the management can propose a basic salary plan and additional pay relative to the contributions of each of the customer service worker. The pay increment should be reviewed periodically (for example once a month) to reflect the efforts of each employee.

If this suggested plan is implemented, the levels of motivation will be restored and a culture of competition among the workers will be introduced. A gradual overhaul of hourly pay and introduction of pay-per-performance philosophy for Performance Sport guarantees the organization’s survival in the marketplace because of the policy’s relativity to service delivery (Barnett & Salomon, 2012).

References

Akerlof, G. A., Dickens, W. T., Perry, G. L., Bewley, T. F., & Blinder, A. S. (2013). Near-Rational Wage and Price Setting and the Long-Run Phillips Curve.Brookings Papers on Economic Activity, 2013(1), 1-60.

Barnett, M. L., & Salomon, R. M. (2012). Does It Pay To Be Really Good? Addressing the Shape of the Relationship between Social and Financial Performance. Strategic Management Journal, 33(11), 1304-1320.

Gillam, S. J., Siriwardena, A. N., & Steel, N. (2012). Pay-For-Performance in the United Kingdom: Impact of the Quality and Outcomes Framework—A Systematic Review. The Annals of Family Medicine, 10(5), 461-468.