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Oakwood Lawns has difficulties with the development and adoption of effective policies for labor remuneration. The annual salary of Oakwood’s CEO is close to $1 million while an average worker in the enterprise is paid merely $28.000. Currently, the organization faces the threat of employees’ demotivation and dissatisfaction due to the public disclosure of these numbers, and disagreement with the excess CEO’s pay. Previously, the employees were told that the company comes through financial difficulties, and the annual payment increase will not be offered. Thus, the problem’s publicity jeopardizes internal sustainability and organizational reputation.
The effective labor remuneration strategies include methods for material and non-material stimulation of employees for the achievement of organizational goals (Yermoshenko & Goryacheva, 2014). Payment is the major element of the organizational motivation model, and it is observed that monetary stimulation can significantly increase working performance and work value that would lead to the improvement of organizational productivity and profitability.
In the development of payment strategies, Oakwood Lawn did not comply with the transparency principles and the sudden leak of information provoked the turmoil among the employees and other stakeholders. As a result, the serious damage to the organizational culture and reputation is made. Employees are the major organizational stakeholders, and it is observed that the consideration of stakeholders’ interests positively affects organizational performance (Kakabadse, Kakabadse, & Kouzmin, 2004). Therefore, it is important to take measures for the improvement of the situation.
The payment policy is used to regulate the financial relationships between employers and subordinates. In case the Oakwood‘s management prefers to do nothing, the company will likely encounter significant challenges in the recruitment of new employees. Moreover, there will be a decrease in working motivation and productivity. The leaders may undertake measures for the change of payment strategy – evaluate current levels of pay, adopt transparency policies, and integrate values into the corporate culture.
In this way, it will be possible to develop employees’ trust and minimize the potential risk of organizational culture deterioration. And the third alternative is the implementation of leadership strategies that would ensure the executives’ compliance with the ethical principles and consideration of stakeholders’ interests. The effective leadership strategy includes the appropriate and fair remuneration of directors, and it helps to improve corporate social performance (Kakabadse et al., 2004).
The target audience includes the members of the executive offices and the director of the HR department who will be responsible for the adoption of new modes of internal conduct and implementation of new strategies in practice. The case demonstrates that Oakwood‘s CEO doesn’t pay significant attention to the maintenance of a positive environment within the company. He violates the standards of equity and doesn’t consider the interests of his subordinates. Therefore, it is important to implement an effective leadership strategy because it will help to improve the internal organizational culture and public image.
Efficient leadership strategy is concerned with the processes of decision-making in different operational domains and the consequences of business actions. Moreover, according to the principles of ethical leadership, the executive group should make decisions based on the ideas of fairness, responsibility, and respect (Mihelic, Lipicnik, & Tekavcic, 2010). In this way, it is important to comply with the principles of equity in CEO remuneration because it will help to increase organizational attractiveness and social responsibility.
The leaders play the main role in the dissemination and incorporation of values into the organizational culture. And an open mode of communication and realization of transparency policy may be regarded as the basic instruments of efficient leadership strategy. The establishment of positive relationships between employer and employees increases organizational morale and consolidates team cohesion while the consideration of ethical principles, needs, and interests of stakeholder groups helps to represent the organization as a good corporate citizen and improve its reputation.
Kakabadse, K., Kakabadse, A., & Kouzmin, A. (2004). Directors’ remuneration. Personnel Review, 33(5), 561-582.
Mihelic, K. K., Lipicnik, B., & Tekavcic, M. (2010). Ethical leadership. International Journal of Management and Information Systems, 14(5), 31-41.
Yermoshenko, A. M., & Goryacheva, K. S. (2014). Peculiarities of remuneration and motivation system formation at financial institutions. Actual Problems in Economics, (158), 284-289.