Pay Plan

BACKGROUND:-

-Top Chem is a 2 billion dollar Company headed by Sam Verde, CEO, where-in Gilbert Porterfield is the Vice President for Compensation.

-A Special Committee for Compensation redesign is discussing a new pay-plan for the employees of the Company, with the representatives from throughout the Company from top management, middle management as well as peer group representatives.

-Three years ago, they have launched Quality For All (QFA) programme, to speed up products to market, improving product quality and routing out inefficiencies. Though the programme has been demanding for the employees, they have started to cope up with that.

-To align with the QFA programme, they have reorganized employees to product oriented teams, to allow and encourage employees at all levels to develop products quicker (efficiency), better (quality) and cheaper (cost effective).

-But the prevailing pay compensation system is based on hierarchy, rank, seniority, hours worked, etc.

-The proposed pay compensation plan is as below:-

-Sid Noble, head of R&D has reservation against the above proposal, as his team works for the product innovation and new chemical formulation and does not want their pay be based on such factors those are dependent on the performance of the other teams.

-Whereas, Ruth Gibson, a Chemical Mixer of Packaging Team, argues that their industrial package team has been working hard in week-ends as well to cut down the time taken for shipping, defects, and developing innovations. But, under the proposed pay plan their hard work may be punished due to failure of others instead of rewarding them.

- Miles Haddock, CFO of Top Chem supports the tying up the pay with the Company’s overall performance in financial terms, which is also seconded by Gus Teller, Corporate Head of Training with the logic that it encourages everybody to excel and ensures excellence through conflict.

WHAT KIND OF PAY PLAN SHOULD VERDE ROLL OUT?

“Just and attractive pay compensation/package attracts best talent of the industry. Whereas improper one drives the incumbent talent out, leave apart attracting the best.”

Now, before going for any alternative solution or pay plan, we should first analyse the Strengths & Weaknesses of the proposed QFA Pay Plan 92 through SWOT Analysis.

SWOT ANALYSIS

STRENGTHS:-

1. Base pay 75% of the former pay itself is equivalent to the market pay for the similar job.

2. Flexible pay of 75% of 25% of former pay determined by team performances in areas of Quality, Unit Cost to market and speed to market is in congruent with the QFA drivers like quality, cost