Recent economic decline and financial problems faced by giant motor companies require unpopular strategies to save money. Ford motor company introduces such strategies as layoff and decreased compensation rates in order to save jobs for other workers. Depending on the business structure, the costs of compensation represent a large proportion of the total cost of running the company. Given compensation’s pervasive impact on HR, Ford lawfully asks what kind of return–in performance, loyalty and retention, employee satisfaction, and the like–they are obtaining from this investment. “This jobcut will help keep our costs in line with the level of receivables we have,” both reports of Automotive News and Bloomberg News quoted Ford spokeswoman Margaret Mellott as saying” (Ford Layoff 2009). For Ford, compensation focuses on one of three distinct goals: attracting and retaining qualified employees. Thus, current economic situation requires new strategies to save the business and remain profitable for several years (Ford Home Page 2009). Current strategies based on reduced working hours and schedules allow Ford to set low wage rates and salaries at or above the market average. Today, high base salaries violate the cost control issues. In addition, several of the proposed strategies put Ford in the position of designing compensation and benefits strategies to meet the specific economic requirements of the organizations. For many motor companies, it is relatively easy to find salary surveys that identify the prevailing wage rates found in a labor market. “In November, Ford said it planned to improve automotive cash by $14 billion to $17 billion through 2010 through many cost cuts, including reducing expenses for salaried workers by 10 percent by the end of January in North America” (Ford Layoff 2009).
The current situation suggests that with the possible exception of layoffs and terminations, compensation and benefit rates proposed by Ford are the most high-profile HR management activity performed. There are several factors for the central role played by Ford’s administration. First, compensation and benefits are important expenses associated with running the company. Second, without layoff, high compensation will hurt the motor industry. Third, compensation rates will lead to great pull and push on employment practices and will play an instrumental role in shaping and redefining the culture of the company (Robbins 43).
The case of Ford company suggests that low compensation is sensitive to the competitive labor market and economic conditions. For this reason, using salary decrease skillfully becomes very important. Beyond current pay rates in competitive market conditions, compensation proposals should be correctly structured and designed to support organizational strategies and business aims. Such issues as how much money it takes to serve as a driver to effective performance, ethical concerns in using incentive strategies, and fully aligning incentive programs with organizational requirements are all fundamental ingredients to effective plan design.
In sum, Ford is faced with a difficult problem that required careful analysis and evaluation. In the current economic environment, layoffs and low compensation rates are the only possible strategies to save the business and remain competitive. Benefits plans and designs are vital in their way, but such compensation requires a sizable portion of dollars. For that expense, Ford motor company would like to receive–but has trouble obtaining–returns in employee goodwill and performance. For this reason, effective compensation strategy is a silent but important issue of organizational behavior.
Works Cited
Ford Layoff. January 2009. Web.
Ford Home Page. 2009. Web.