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FASTCATS COMPENSATION Phase 1

MNGT 433- Compensation & Benefits Professor Lisa Howard

Team Members Aaron Cain Danielle Wicklin Elaine Estefan Erica Civis Katrina Turnage Monica Lim

EXECUTIVE SUMMARY We, the research team for FastCat, have been tasked with creating a compensation structure for the organization. We recommend a tight, hierarchical internal structure that will help improve the organizations overall performance. This structure is designed to help reduce the organizations costs while maintaining a high customer satisfaction rate. It will also make employees more aware of how their compensation is determined, which will increase commitment to the organization. Based on these goals we recommend a job-based structure that is grounded on compensable factors which are assigned weights based on importance. In order to achieve these objectives each position within FastCat has to be grouped into one of four categories: Administrative, Customer Relations, Technical, and Managerial. To implement the plan, we have provided a manual to help better understand what is to be applied, and the rationale for the structure recommended.

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RATIONALE FOR DECISIONS

INTRODUCTION FastCat is a company with great potential; however, with a decline in both revenue growth and productivity over the last year, a turnaround is severely needed to continue towards its success. With ideas to expand their company in a variety of ways, FastCat realizes their future success depends on the talents of their employees. That realization expresses how important it is to attract and retain valuable employees. In order to do so, a new compensation program is essential. The following information and data is the research teams recommendation for a new compensation program for FastCat that will enable them to grow and succeed.

OBJECTIVES FastCat needs a variety of changes throughout the company, and in order to implement those changes we have developed three SMART objectives. Each of these objectives revolves around the overall sense that FastCat is now striving for, better performance from their employees, a reduction in labor costs and better attitudes from the staff. With clear objectives everyone involved in the FastCat organization can realize why the new changes are being introduced and understand where the company is headed in trying to accomplish their overall goal of expansion. The following are the proposed objectives for FastCat: Performance: To increase FastCats percentage of revenue from new customers by 10% by expanding into new markets, while maintaining a customer satisfaction rate of 90% or higher. Costs: To decrease FastCats labor costs as a percentage of expenses by 10%. Currently 80% of FastCats expenses are due to labor costs. Attitudes & Awareness: To increase employee awareness in regards to how pay is determined and improve their sense of commitment to the company by becoming more transparent.

TIGHT VS LOOSE STRUCTURE We believe it necessary for the organization to hold a tight structure rather than a loose one. The jobs descriptions at FastCat have well detailed job responsibilities that allow us to easily classify the positions. Due to this, we are classifying the organization as job-based. With job-based organizations there is very small pay differences among jobs which is one of the characteristics of a tight structure. Choosing a tight structure is also beneficial to those organizations that are in the later stages of development, as FastCat is. They already have a solid foundation, but are wishing to expand, not only their client base but their number of employees, which in turn makes having a tight structure more appropriate. Based off one of the objectives to improve employee attitudes,
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a tight structure will also help improve any motivational issues the company is facing by creating a system that is easily explained and evaluated. The final characteristic of FastCat that ensures a tight structure is needed is the sense that there is a strong urgency to take action now. Without a need for action, FastCat could become lost at the wheel and lose their motivation and need to improve, causing the company harm. A major comparison is the concept that a loose structure requires constant innovation and flexibility and with FastCat trying to cut costs and expand there is not much room for those qualities. Rather they need to stay strict and focused on the end.

HIERARCHICAL VS. FLAT It is common practice that when an organization has a tight structure, it is accompanied with a hierarchical structure as well. Having a hierarchical structure sends a message to employees that the organization values the individual skills and contributions that they make to the overall organization. This is a great quality to express because it relates back to one of the objectives of having employees become committed to the organization by having their work realized and appreciated. Through detailed descriptions and outlined responsibilities for each job, a hierarchical structure shows the organizations willingness to pay based on the difficulty of the job. With the idea that pay is on a hierarchical structure is linked to the concept that high performers are less likely to quit as long as they see why they are getting paid differently for the job they do regardless of seniority. A hierarchical structure also makes it clear to employees why things are done a specific way and minimizes the opportunities for disagreements.

CATEGORIES Given the number and variety of jobs that FastCat has, we have divided the jobs into four groupings. We felt that for each category, the jobs are similar, based upon their responsibilities and competencies. By having similar jobs in the same category will allow for closeness in pay for those jobs. Our categories are Administrative, Customer Relations, Technical and Managerial. As you will notice, by having similar groupings, the point distribution is not farfetched from one another which will allow an employee to compare their pay to someone with similar tasks, and understand the differences.

JOB-BASED STRUCTURE One of FastCats objectives is to reduce labor costs, and one effective way to do so is to only pay for the skills that are needed to perform a specific job. While it can be beneficial to have employees that offer more than what is required of them, that can come with a price of having to pay them for those extra skills and abilities. With clear, detailed job descriptions FastCat only wants to pay people to perform those specific duties. If we were to evaluate the
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jobs on a skill-based FastCat would be paying more to those with more knowledge and skills regardless of the fact if they would actually use them during their daily duties. Using this jobbased structure will allow FastCat to cut their labor costs and better ensure the tight, hierarchical structure we are suggesting.

EVALUATING DECISIONS

SUPPORTING THE WORK FLOW Our compensation method supports the organizations work flow because the compensable factors relate directly to the organizations objectives. The compensable factors are directed toward FastCats objectives of high performance, lower costs, and improving employee attitudes and awareness. The employees are compensated according to their rating of the designated compensable factors as related to their job duties, and to the amount of importance those factors have towards adding value to FastCat.

FAIRNESS TO EMPLOYEES The compensation method for FastCat is job-based which helps employees understand what they are being paid for. We were able to give a company-wide survey to the employees and executives for ranking the compensable factors from most important to least important. The compensation plan will be fair for everyone because everyone was able to contribute their thoughts. The compensable factors carry the same weight throughout all four job groupings because it makes it fair to the employees that add different amounts of value and technical expertise to the company. For example, the average number of points for the Administrative group is 156.4, Customer Relations is 232, Technical is 275.3, and Managerial is 371.3. The differences are enough to justify why a supervisor, who is held accountable for company operations as well as employees actions, is paid more than an assistant who has minimal duties.

DIRECTING EMPLOYEES TOWARD OBJECTIVES The three most important compensable factors are 1) supervisory, training, and advisory responsibilities 2) job complexity and decision making, and 3) technical skills. These compensable factors show the importance of delivering high performance to meet organizational objectives and executing strategy as an employee and leader. FastCat believes that it is not just about coming from an impressive educational background but values employees who take initiative and help the organization expand. By being transparent with the organizations objectives and pay structure, the employees are able to see what the organization values, where their performance ranks, where they want to end up in FastCat, and how to get there. The use of a single plan really helps employees that want to move up in the company because they see exactly what is expected of certain positions and are able to work on the compensable factors
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that the organization values as a whole. Also, these compensable factors are all skills and assets that people can learn and develop over time which lets employees see a future with FastCat.

ALIGNING STRATEGIES AND OBJECTIVES


FastCat's leaders are pursuing a three-pronged strategy. One part is to drill deeper into its current client base with new products. Another is to expand the base to new categories of participants in health care. The third is to expand into new geographic markets. In order to expand on the three strategies, we have come up with three objectives that will align with the strategies and improve FastCats operations and company image as a whole.

OBJECTIVE 1 Our first objective is to increase FastCats percentage of revenue from new customers by 10% by expanding into new markets while maintaining a customer satisfaction rate of 90% or higher. In order to generate 10% percent of revenue from new customers, FastCat must expand into new markets. For example, FastCat is introducing software called Your Doctor Makes House Calls, which will automatically call elder infirm patients every day to ask them a series of questions in order to assess their health. This software can be attractive to Doctors and family members of the elder person who will request this service, which in turn, will contribute to the 10% growth in revenue from new customers. By making one of our compensable factors Job Complexity & Decision Making, we are supporting efforts to create new technology that will allow the organization to expand into new markets.

OBJECTIVE 2 The second objective is to decrease FastCats labor costs as a percentage of expenses by 10%. Currently 80% of FastCats expenses are due to labor costs. To better understand this, we looked at the ratio of revenue to labor costs, which measures revenue growth and productivity. In this case, we found that two years ago FastCat received $4 in revenue for every $1 in labor costs. However, in todays calculations FastCat received $2 in revenue for every $1 in labor costs. Since FastCat depends on the talent of its people, its recent expansion of its work force has translated into people costs becoming a larger percentage of total expenses, as mentioned before, as big as 80% of expenses. Our primary focus will be to reduce that expense. By creating a tight, hierarchical structure we will reduce the labor costs, which will allow the organization to allocate more to technological related expenses.

OBJECTIVE 3 The third objective is to increase employee awareness in regards to how pay is determined and improve their sense of commitment to the company by becoming more transparent. A strong sense of commitment to the company is what keeps an employee around.
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Only 70% of employees felt the strong sense of commitment. In this objective, we will raise employee awareness by categorizing all of the jobs and include an individual job rating. This will allow the employees to see where they fit into the company and how their role is important.

MAINTAINING THE STRUCTURE

GENERAL MAINTANENCE To help maintain our compensation structure in the long run we will communicate the plan effectively and consistently throughout the year. Compensable factors are those characteristics in the work that the organization values and that help with the strategy and the achievement of organizational objectives. These factors reinforce the organizations culture, values, business and nature of work. Compensable factors can be eliminated if they no longer support the business strategy, or the strategy changes. Factors can also be added to account for the changing environment. FastCat will articulate our compensable factors to each and every employee to ensure organizational commitment. Also, to help with the longevity of the company, we will train users to harmonize their objectives and goals with the organization. Last but not least, we have prepared a compensation manual. This well-developed manual will help to maintain the organizational structure overtime. This manual effectively describes job evaluation methods, defines compensable factors, the degrees associated with each factor, and the weight for each factor. This manual should be kept readily available for any employee who wishes to examine the compensation structure of FastCat.

JOB EXPANSION OR ELIMINATION With the proposed compensation structure, FastCat would not have to adjust much to expand or eliminate jobs. This will decrease expenses related to increasing or reducing the number of employees within the organization. If the organization decides to create additional positions, a job evaluation would be conducted. The job description would be used to determine the pay grade based on the 6 compensable factors. If jobs are eliminated, that would mean the survivors will have added responsibilities. These added responsibilities would increase the ratings on compensable factors, resulting in higher pay for the position. With the elimination of jobs we have to make sure to instill a message to the surviving employees that we are still committed to the same mission and objectives. A pay raise would act as an incentive for those employees; therefore reducing resentment towards the organization.

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