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2G Robotics Designing A Compensation Plan That Pays Off Case Solution
2G Robotics offered its employees a straight salary which was considered to be low compared to what was being offered by rivals in the market. Its direct compensation system did not include any bonus, commission. The type of work at the company required extra time and effort of employees on particular projects but the direct compensation system did not recognize remuneration for overtime work. Other than salary, 2G Robotics offers dental and health benefit plans to its employees. It also gives chance to its employees to travel to client’s facilities in other countries to work on their projects. The expense is covered by the company itself. There are no specific Pay for Performance policies at 2G Robotics. Instead, the president of the company, Gillham, reviewed the compensations of each employee case by case and if he feels that a particular employee has contributed more to the company, he would make subsequent raise in his pay.
Following questions are answered in this case study solution
Describe and assess the direct compensation/pay system at 2G Robotics. Discuss the advantages and disadvantages.
What are some of the non-financial rewards that are available to the employees who work at this company?
Should Gillham try to improve pay levels? Why or why not, and in what ways (e.g., indirect/non-financial components)?
What are the benefits and dangers of implementing a program like a stock option plan or an employee trust (i.e., something that gives employees a stake in the company)?
How should Gillham approach the meeting with Lin?
Reflecting on more than just the details of this case, and thinking more broadly, discuss the problems that can be caused by an ineffective compensation system.
Case Analysis for 2G Robotics Designing A Compensation Plan That Pays Off
The direct compensation system is monetary in nature and it includes money that is payed to employees to employees in terms of cash, hourly wages, salary, bonus and commissions (payscale, 2020). At 2G Robotics, direct compensation involves straight salary and fringe benefits which comes with its own advantages and disadvantages. Direct compensation is a predictor of compensation satisfaction, job performance and effort of employees (Taras, 2020). In this type of system, employees are paid a pre-determined salary each month and they are not offered any commission or bonus over it. This structure is best for companies where direct sales by employees is not involved. It is easy to attract new talent with this compensation strategy as it offers promise of consistent pay and health benefit plans and it is not dependent on performance. Employees tend to be motivated to work and their happiness in less likely to depend on income. They face less dissatisfaction if they tend to work less on a project.
Direct compensation comes with its drawback as well which may have an impact on culture and employee motivation at 2G Robotics. Straight salary is not tempting for employees who go an extra mile to work on a project and they tend to give more input in the company to be awarded with better compensation based on their performance. Direct compensation method can increase turnover 1`and reduce retention as employees may have no opportunity to increase their income in terms of overtime (Metler, 2020). With no monetary benefits other than salary at 2G Robotics, employees might not improve their performance and can become lazy overtime. As pay for performance policies does not exist, it can de motivate employees as they expect increase in their salaries on annual basis regardless of change in job role.
2. What are some of the non-financial rewards that are available to the employees who work at this company?
The work environment at 2G Robotics is attractive as employees work as team, projects are interesting and fun to work at and talented group of people get opportunities to work on various projects and develop new skills. Employees are encouraged to voice their opinion at the company and the open door policy allows employees to discuss their matters with the President of 2G Robotics who responds to issues in a reasonable manner. The regular town hall meetings and ‘Walk the Block’ program allows employees to engage with each other in a positive way and generate a friendly work environment at the company.
The line management at 2G Robotics is supportive and individual contributions and achievements are recognized by the head of the company himself (reward first, 2020). This creates an overall attractive culture for work and motivates employees to be productive in the company and not only rely on monetary benefits offered by the company.
3. Should Gillham try to improve pay levels? Why or why not, and in what ways (e.g., indirect/non-financial components)?
In order to motivate employees and to retain talent in the company, Gillham needs to improve pay levels and bring them close to what is being offered by rivals in the market. The company has been able to establish its name in the market, it is important to focus on employee satisfaction for long term productivity of the company.
Indirect financial compensation includes benefits such as part of salary that covers leaves of absence, employer contribution to employee’s retirement plans and stock options. Gillham can think of a compensation plan where it can contribute a portion to employee’s retirement plan, this way the company can increase its retention rate and motivate employees to stick with the company in the long run. In order to increase employee satisfaction and to make the company more attractive, Gillham can offer paid holidays and paid vacations to its employees. Paid vacations can be given to employees depending on the length of their service and policies for vacations may differ among category of employees (Ruby, 2012).
Non-financial compensation is becoming an important factor in attracting and retaining qualified employees and it is considered as supplementary compensation which is tied to employment and not on performance of employees (Soliman, 2009). Employees who work overtime for success of the projects, they can be given awards to acknowledge their efforts. Gillham can offer workplace upgradation to employees who show exemplary performance and contribute more to the company.
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