DB 5 HR

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Thread 1

The integration of pay for performance method has increased motivation among employees across many corporations and businesses across the globe. Whether the performance method was presented as individual, group or organizational performance, it has been proven to bring further success to the business world and in creating the atmosphere of growth within an individual and his or her self-worth and sense of value in the workplace. The harder an individual works towards his or her goals can clearly be rewarded through this strategic business approach.

In the HRMNOW!, we see how the organization of IKEA has the added benefit of overall organizational performance method as it states, “IKEA’s basic compensation program has wages that are above the jurisdiction’s minimum wage --- they provide benefits and now, with the expansion of the Tack! Program, all full time and part time employees with over 5 years’ service will get an annual bonus based on IKEA’s performance in that country of operations” (HRMNOW!). With the pay for performance method in place, a value is placed on longevity and commitment from the employee over the course of five years. The Human Resource Director relays the emphasis of employer-employee relationship through long-term commitment and adds the presence of a standard of valued perspective in company standards from the employee and a company who appreciates its’ employee’s commitments, reducing human resource costs in the area of hiring new employees (Taylor, 2014).

The Human Resource Management text tells us the responsibility companies carry in career planning stating, “…companies need to take some responsibility in the career planning process by helping employees make good decisions and by providing positive work opportunities” (Jackson, Mathis, Meglich & Valentine, 2019). The Huffpost states IKEA’s organizational pay for performance method of annual bonuses was recently added after the spike in success in raising their minimum wages repeatedly in 2015 (Jamieson, 2015). The continuous drivers for implementing these changes within IKEA were the repeated spikes in business success across the board which reflected unprecedented results. After continuous increases in wages, the annual bonus incentives were implemented based within the country of operation and it’s performance allowing employees to work as a team within their specific region focusing on their specific goals.

The ability for an organization to utilize pay for performance method through the organization can reap rewards as it places emphasis in the area of working as a team. In Ecclesiastes it states, “Two are better than one; because they have a good reward for their labor” (4:9, NIV). Paul also reminds us in 1 Corinthians that humanity is to work together as parts of the body, emphasizing the concept of teamwork in the Christian faith (12:14). IKEA has carried this concept of working together through the systematic approach of their pay for performance method as an organizational whole.

Sophia~

References

IKEA employees Posts: Tack You – You’re Welcome. (2018). Retrieved from https://hrmnow.nelson.com/long/tag/ikea-employees/ .

Jackson, J., Mathis, R., Meglich, P., Valentine, S. (2019). Human Resource Management (16th ed.). Boston, MA: Cengage Learning

Jamieson, D. (2015). Ikea’s Minimum Wage Hike Was So Successful, It’s Raising Wages Again. Huffpost. Retrieved from https://www.huffingtonpost.ca/entry/ikea-minimum-wage_n_7648804 .

Taylor, C. (2014). The IKEA Effect: Why employers should say “tack” to their workers. Human Resource Director. Retrieved from https://www.hcamag.com/au/news/general/the-ikea-effect-why-employers-should-say-tack-to-their-workers/141483

Thread 2

The Tesla Corporation is a company that has adopted a pay for performance-based model for its CEO, Elon Musk. Mr. Musk will not receive any “guaranteed compensation” from Tesla, but comes as an award in the form of increased stock in the company if the business reaches certain market milestones, (Mitchell, 2018.) According to Tesla’s website, “Elon's only compensation will be a 100% at-risk performance award, which ensures that he will be compensated only if Tesla and all of its shareholders do extraordinarily well,” (Tesla, 2018). The stock of Tesla will have to increase exponentially over the next ten years, measured by twelve pre-determined “tranches,” or goals that are a combination of market cap and operational milestones for the company, (Tesla, 2018). For example, the first of these tranches stipulates that Tesla must reach a market cap of $100 billion, as well as meeting Revenue and EBITDA (earnings before interest, tax, depreciation, and amortization) targets, and these tranches escalate from this point in set increments (Tesla, 2018).

This pay for performance method is apparently, “modeled after Elon's 2012 performance award, which helped bring about a more than 17-fold increase in Tesla's market cap in the five years after it was put in place,” (Tesla, 2018). Tesla became invested in Tesla Motors in 2004, and due largely to his influence, “In 2010 the company’s initial public offering raised about $226 million,” (Gregersen, 2019). The decision on how to base Mr. Musk’s potential award in this plan was not only from his success in raising the stock of the business, however; his outspoken words and actions directly caused the stock to decrease severely in 2018 after Tesla faced a lawsuit from the SEC after a series of tweets from his personal twitter (Gregersen, 2019).

As for how this award system was devised and implemented, Tesla’s news announcement on the pay plan from January 2018 states, “The new performance award was created by Tesla's Board of Directors (with Elon and Kimbal Musk having recused themselves) after more than six months of careful discussion and analysis and in consultation with Compensia, Inc., a third-party compensation consultant,” (Tesla, 2018). Mr. Musk seems to be an exceedingly eccentric CEO, and a prime example of a ‘high-risk, high-reward’ asset for a company; his proven track record of remarkably unique business decisions have paid off for Tesla in the past, but his personal mistakes have the power to affect the stock of the entire company. Part of this decision enables flexibility for the company in terms of the CEO position, which will, according to Tesla, “allow Elon to focus more of his attention on the kinds of key product and strategic matters that most impact Tesla's long-term growth and profitability,” (Tesla, 2018). This is consistent with a teaching from the Human Resources Management textbook, which states, “An individual might demonstrate better performance on some duties than others, and some duties might be more important than others to the organization,” (Mathis, Jackson, Valentine, & Meglich, 2017).

It is comforting to know that a major factor in this performance pay system was the well-being of all Tesla employees, as the website states, “Because all Tesla employees are provided equity, this also means that Elon's compensation is tied to the success of everyone at Tesla,” (Tesla, 2018). Although the performance payment plan was developed for and around Elon musk, it takes into account the organization as a whole, since the employees at every level will be impacted by the CEO.

References

Gregersen, Erik. (2019) In Enclyclopædia Britannica online. “Elon Musk: American Entrepreneur.” Retrieved from: https://www.britannica.com/biography/Elon-Musk

Tesla, Inc. (2018, January 23). Tesla Announces New Long-Term Performance Award for Elon Musk. Retrieved from: https://ir.tesla.com/news-releases/news-release-details/tesla-announces-new-long-term-performance-award-elon-musk?ReleaseID=1054948