Introduction
Compensation presents one of the most preferable ways through which employee contributions are recognized. Compensation program s is evaluated based on various job responsibilities which are assigned specified monetary value. However, various forms of compensation are undertaken based on federal laws of which organization managers are expected to be familiar with.
Payment for individuals, groups or excellent performances are done in form of executive pay, incentive pay as well as balanced scorecard. Organizations compensate their workers through various incentives supported by their company objectives.
However, incentive pay for executives within an organization is usually different from that of other employees hence requires special attention. Such incentives either long-term or short-term are necessary for the purposes of developing some sense of commitment within organization’s leadership and workforce (Noe et al., 2009).
Review of the case
Considering that Xcel is a company dealing with environmental issues, Merit pay may not work well with its strategy on improving operations at the lowest cost. According to the case study, merit raise, works best during hard economic times since it caters for high cost of living. At the same time there are always high possibilities of prevailing conditions to shrink available range of increases.
Additionally, merit pay spread pay increment evenly across all employees hence rewarding poor performance on the same level as good performance. Such method may ultimately not concur with the company’s strategy on lowering costs since it is expensive (Fossum, 2002).
Spreading the merit pay evenly across all employees may benefit those who lazy around and cause frustration to hardworking employees. Suggestions might at times look appropriate but might not work well in line with the company’s business objectives (Gerhart and Milkovich, 1990).
To ensure that incentives work for the benefit of the company, they will require improvement within communication channel and at the same time increase level of employee participation. Xcel should incorporate employees in pay-related decision since there contributions at times reflect hands-on knowledge on kinds of behavior essential for organization improvement (Gowen, and Jennings, 1991).
Since Xcel focuses on being one of the most celebrated top utility facilities offering efficient services at low cost, there goals and performances should be based on cooperation. Applying such principles would make employees feel more concerned about changes and goals of the company. They will always be eager to put across their contributions. Improvement on merit pay system
For improvement purposes the company can include profit-sharing plan within the pay system. This is because merit pay is more directly linked to individual behavior compared to profit sharing plan. This is capable of linking to the strategy since it assists in increasing employees’ commitment towards organizational goals.
Additionally, Xcel can utilize the use of balanced scorecard which enables combination of performance measures towards organizational goals. This enables easy utilization of employees’ potential through customization of balanced scorecards which would clearly distinguish Xcel’s operations based on strategy (Gerhart and Milkovich, 1990).
Extension of the stock plan to other low-level employees might also be good idea for progress. This is since stock ownership plan contributes towards creation of some sense of ownership within employees. It makes them feel part owners of the organization hence making them to focus more on ideas contributing towards success of the company (Gerhart and Milkovich, 1990).
Conclusion
Organizations use various ways to reward employee performances and at the same time measure such performances in terms of profits and stock prices. Incentive pay presents one of the most notable ways of organizations use for the purposes of ensuring that employees focus on company’s success goals. Such incentives ensure that employees realign their activities towards organization’s goals.
References
Fossum, J. (2002). Labor Relation. New York: McGraw-Hill
Gerhart, B, & Milkovich, G. (1990). Organizational Differences in Managerial Compensation and Financial Performance. Academy of Management Journal 33 (1), 663–91.
Gowen, C, & Jennings, S.(1991). The Effects of Changes in Participation and Group Size on Gainsharing Success: A Case Study. Journal of Organizational Behavior Management 11 (1), 147–69.
Noe, R., Hollenbeck, J., Gerhart, B., & Wright, P. (2009). Fundamentals of human Resource management, 3rd edition. New York, NY: McGraw-Hill/Irwin.