Cyrus; It goes without saying that Jack and I have the utmost respect for you, and as I reminisce on the past ten (10) years, I recall that we were just interns, making a stop on our path to our intended careers. Consequently Waterway Industries became that path and has afforded us wonderful careers.
Our enormous contributions to the growth and subsequent market share of Waterway have, much like you, caused us to become key players within the company.In keeping with the respect mentioned above, and so as not have you blind sighted, Jack and I hereby inform you that we are currently entertaining a very lucrative offer from a rival company. This should come as no surprise, relevant to previous futile dialogue concerning our request for a share of company profits. We ask that you consider the following before rendering your final decision. We are of the belief that Waterways' compensation system is not in tandem with the strategic objective set forth.
Managers and Shopfloor associates alike, placed a great value on their once possessed ability to complete work ahead of schedule, so as to occasionally enjoy the very products they make. However with the company's adoption of a more aggressive growth strategy combine with the initiative for continued product innovation, that value has been replaced by increased workloads and a faster paced environment. Compensation affects employees' attitudes and work behaviors and subsequently the success of the organization.Internal consistency or Internal equity which refers to the relationship between the pay structure and the design of the organization and the work, needs to be adjusted so that it focuses attention on the importance of designing a pay structure that supports the workflow, is fair to employees, and directs their behaviors toward organization objects.
If this were true, we would not have lost three of our best workers to the new automotive parts plan.To reiterate, modify Waterways' payment system such that it is Internally Consistent, that is, it embodies support for workflow, supports fairness and directs behavior toward company clear-cut objectives. To validate your decision to deny additional wage increases for top hourly performers, you sited that Waterways' wages were in keeping with manufacturing peers in rural New York. However, the data that I have gather, via directly calling those peers, and by using Salary Wizard Professional (for small businesses) and CompAnalyst (for large businesses), great places to get data that epresents organizations of similar size, industry, and location, has uncovered that the two leading types of pay structures are the internal equity method, mentioned earlier, and market pricing.
The internal equity method uses a tightly constructed grid to ensure that each job is compensated according to the jobs above and below it in a hierarchy, and market pricing is where each job in an organization is tied to the prevailing market rate.With that premise, hourly workers should fall under the internal equity method, while managers would fall under market pricing. By implementing such a compensation system design, managers can be benchmarked (matching an internal job to an external job of similar content) and paid accordingly while hourly workers will receive Performance Related Pay (PRP) that is, using reasonably objective measures of performance, which can stand the strain of change, sustains the object of the system, is not too large a portion of the pay packet and is not too costly to administer.The net effect for ShopFloor associates is that a more hierarchical structure (PRP) relates to greater performance when the work flow depends on individual contributors and high performers quit less under a more hierarchical system when pay is based on performance rather than seniority. When close collaboration and knowledge sharing are required, as is the case for managers, a more egalitarian structure relates to greater performance. This is reflected within market pricing, but a path to profit sharing should also be implemented.
The fact that profit sharing allows sharing of wealth during good times without obligation during lean years makes it a win-win situation. Waterway may determine the amount of their profit-sharing contributions in one of two ways. One is by a set formula that is written into the plan document. Such formulas are typically based on the company's pre-tax net profits, earnings growth, or some other measure of profitability. Waterway can then plug the appropriate numbers into the formula and arrive at the amount of their contribution to the profit-sharing pool.
Rather than using a set formula, Waterway may decide to contribute a discretionary amount each year. That is, the company's owners or directors-at their discretion-decide what an appropriate amount would be. The latter would be my recommendation, because as in our case, enormous contributions to company growth can be "discretionarily" rewarded. Empirical research has consistently shown that employees are not motivated by money alone. However, this is very different from the view that money is "way down on the list of employees' goals".In fact, it ranks very highly.
But it's the intrinsic rewards - such as varied and interesting work, challenging situations and creativity - that are often the true motivators. Although pay, bonus and incentive arrangements are required to satisfy basic employee needs, they are potentially short-term motivators and often do not lead to long lasting changes in employee behavior That said, financial incentives should not be completely discounted.Research suggests that pay for performance can (when implemented properly) be positive and deliver performance improvement, especially when it: Gives financial reward to employees for reasons of both equity and recognition. Gives direction to employees by aligning rewards with the organization's goals and objectives. (Pay is probably the most salient communicator of organizational goals. ) Is based on the performance of groups, individual performance and rewarded by honors.
In short, total reward programs, which integrate both financial and non-financial incentives to reward associates, can offer Waterway the building blocks to help incentivize, recognize and motivate employees to deliver improved levels of performance. Cyrus, your natural method of dealing with compensation issues affords you that additional bargaining chip. The case-by-case approach allows you to offer nonfinancial incentives to all associates tailored to their individual interests.
