Assignment 2: Compensation Plan Outline

Running Head: COMPENSATION PRACTICE 1

COMPENSATION PRACTICE 2

Briefly describe the company you researched, its compensation strategy, best practices they are applying, and compensation-related challenges they are facing.

Employee compensation is very important in any organization since it helps to mark the established relationship between the employer and employee. Compensation usually encompasses many motivating factors that act as a catalyst to an employee in the cause of work. It has been discovered that organizations with good compensation practices are able to maintain their skillful and experienced workers. This then leads to a company gaining a competitive advantage in the market since customer value is greatly delivered (Milkovich et al, 2011).

McDonalds is a global company which has widely use franchisers in order to expand its business globally. The company is well known for its unique techniques in preparing customers differently from other competing firms within the food industry. Geographically, McDonalds has several branches and regional centers that help ensuring that customer needs are timely attended. In addition, the company is also known to have a large workforce who manages its daily operations.

It is believed that McDonalds is an equal employer since it doesn’t discriminate recruiting potential employees on race, gender, country of origin and gender. But, however, there is a variance of salaries which are brought about by the nature of work, duties and responsibilities one holds and also, as a result, of geographical location among other factors. Majority of employee have their salaries and wages administered on an hourly basis. Such employees are mainly the crew members who are responsible for maintaining cleanliness and determining the customer needs. This is a vital compensation strategy which has helped McDonald to have continuous delivery of services to customers. The strategy is further boosted by the fact that majority of the crew staff are young people who are in school and, therefore, after classes they do have to attend to customers so that they can earn a living.

There are salaried managers as well within the company here the salaries are determined according to the responsibilities that a manager handles. McDonalds have engaged managers who are responsible for overseeing that the daily routines procedures are well implemented. They are also responsible for ensuring that the hourly employees get their pay. Usually there are two managers who alternate in shifts due to the numerous work that the company expects them to handle.

In order to ensure that the performance is achieved, McDonalds has established a performance pay system. This requires that employees give their best in term of delivering quality products according to customer preference. The company, therefore, takes advantage and introduces other benefits with the aim of retaining such skilled employees. McDonalds further maintains the pay base system by reviewing annually the external market data and internal peer data. The company also has established a broad banding compensation which allows for flexibility in payment, growth and movement.

Depending with the level of employment, the company also has monetary incentives such as car for use. Here the company offers it personnel in high ranks with a vehicle and it acts as a guarantor of insurances, repair and maintenance. McDonalds also employee benefits which are aimed at management of employee’s talent with the aim of steering the company objectives and eventually achieve the intended goals. For instance, the company offers health benefit which includes medical cover and annual examination, for employees within the managerial ranks and their relatives. Other benefits offered include life insurance cover, travel insurance to guarantee an employee of his safety when traveling during work and injury or death insurance.

Despite the company offering such compensation benefits, it has a major challenge like high turnover rate of its crew members. McDonald’s often keeps on recruiting new staff member since the management is not sure whether the existing workers today will avail themselves for work in the future. This is characterized by the minimized fringe benefits which the crew staffs receive yet they are the greatest contributor of the overall company performance. Recently, the company suffered a bad reputation when its lower level employee engaged in a strike and argued that despite working hard to ensure that the company remains profitable they are given less pay yet majority of the profit share is enjoyed by the top managers.

McDonalds also has grown into a global company and still has the intention to widen its operational basis within various countries. The cost of living and labor laws vary with individual countries. Therefore, McDonalds has to ensure that it compensation practices comply with the ever changing government policies of various countries. The company also has numerous staff within the different regions of the world, and, therefore it may incur different cost when offering some of the employee benefits such as health examination. Under such circumstances, the company is forced to determine a uniform policy that guide the way benefits are to be enjoyed by various employees within the different operational environments.

Analyze how your company applies compensation practice to determine the positive or negative impact to the company and its stakeholders.

At McDonalds, there are various stakeholders such as management, shareholders and employees who have great expectations on the compensation practices. The origination wants to always retain its top performing managers and CEOs. On the other side, there are other large companies that are aspiring to influence such managers to join their companies. One key objective of any top manager is that they want to be famous and recognized for the effort they put within an organization.

Therefore, McDonalds has strategized its compensation practices such that they are put in line with the global market expectations. The company ensures that the managers have a say in the share of the accruing profits. In addition, the company has given autonomous authority among some senior managers over determination of the remuneration package. This is how the company ensures that employees remain committed and loyalty in helping the company achieve its goals and objectives.

Shareholders are very important to McDonald’s success. They are great contributors of the company’s growth strategies. Every shareholder investing within the company aims at maximizing his wealth. Recent company reports indicate that the company shareholders had held a meeting, and the objective was to discuss the compensation for the chief executive. Out the meeting what emerged was divisions on whether the executive manager was receive the correct reward packages. The views of McDonalds shareholders differed as some of them believed that the company was extravagant by granting hefty compensation to its top management. However, from the company’s management perspectives they are justified to have the hefty bonuses they receive since they are the sheer drivers of the company’s success which can be remarkably noted where the company is globally known for its strong culture of customer’s service.

Employees such as the crew staff spend the majority of their workers in dealing with customers. They are responsible for ensuring that quality services are delivered to prospective customers. Without them, McDonalds would not be able to operate its primary function. On the contrary, the major issue that has led to numerous complaints even among the general public is the less concern the company has over compensation for its crew members. This has seen the company conduct frequent trainings since there is high turnover rate as the low salaries are demotivating to the employees yet the cost of living is so high. It is said that hourly an employee can earn as much as $ 8 which is a very minimum wage rate.

Examine the ways in which laws, labor unions, and market factors impact the company’s compensation practices. Provide specific examples to support your response.

Within every institution, there are laws that govern the operations. They determine the operations procedure of the company within a specific environment (Steinberg, 2009). Due to the recent strike by the employees of McDonalds, president Obama said that he would urge the congress to move forward as fast as they can in order to establish a law is setting minimum hourly wage rate at $ 10. Labor unions are responsible for ensuring that working conditions for the employees keep on being improved.

McDonalds has held several collective bargaining with labor unions though there are yet to be seen the amicable solutions alighted at. Many workers have complained about the low wages they earn from the company yet they work over long hour, but this seems that the company has lots of influence in terms of determining workers condition as compared to trade unions. For instance, this is evident where the company workers were arrested for protesting outside its headquarters.

The market factors have greatly influenced the way McDonalds handle its top managers. Usually the company ensures that it payment system is updated in order to much the current trends that exist in the market. For instance, as a result of many industries establishing a day care unit that allow people to work while at the same time having children being taken care off, McDonalds has also established such a unit. This approach helps many employees to remain dedicated towards ensuring the company success. Additionally the existing market wage rates have greatly influenced they remuneration package which the executives who manage various branches of the company receive. McDonalds further has its focus towards ensuring that it is able to provide salary and other benefits to the senior managers who are located in different countries on the basis of existing economic conditions.

Evaluate the effectiveness of traditional bases for pay at the company you researched.

McDonalds is known for its approach on payment in reference to the performance. Usually the system is effective since majority of customers are always happy with the services delivered by the crew members. The systems also encourage especially the young people to work over long periods of time in order to raise capital so that they are able to meet their basic needs while in school. Through the traditional approach also, the company has been in a position to attract different employee whom it engages to with its work. This helps to bring new flavor, and there is further boosting of creativity in term of the way customers are attendance.

To the top management position the higher an employee is ranked the better the pay. This is a good indication of the efforts employees put within the duties they are assigned while still expecting to be rewards with promotions that will lead enjoyment of the numerous benefits. The traditional pay base methodology further helps McDonalds in identify the most remarkable talents from the many employees and further retain them through high pay. The various privileges that are within the compensation policy framework also help to keep such employees motivated towards helping the company to achieve its goals.

In conclusion, the McDonalds compensation practices to a greater extent have proven worker able. The evidence is traceable where the company has continuously grown to become a global company in the food industry. Without the best human resource, a company cannot stand in a better position to achieving its objective (Steinberg, 2009). Therefore, it’s important for any competitive business organization to ensure retention of the top performing employees. Yet it is not an easy approach to convince employees to remain dedicated to the organization work while they are not well paid. With the example of McDonalds where they value the top managers who are responsible in formulation of decisions, other companies can emulate this example and, therefore, they will be able to have their strategies well achieved.

Acquiring a profession with the right attitude to work within an organization is very costly. Compensation practices, therefore, have a great contribution towards seeing that once a company has realized that there exist a rare talent full of creativity and other unique potentials, they are well taken care off in terms of remuneration package. It further becomes advantageous to the company since other employees gain an opportunity to learn some implementable ideologies from such employees and generally, the work of the company keeps undergoing continuous improvements (Lebow, 2012).

References

Lebow, D. E. (2012). Recent trends in compensation practices. Washington, D.C.: Divisions of Research & Statistics and Monetary Affairs, Federal Reserve Board.

McDonald's (MCD)/Compensation Policies Practices. (n.d.). Stock:. Retrieved July 4, 2014, from http://www.wikinvest.com/stock/McDonald's_(MCD)/Compensation_Policies_Practices

Milkovich, G. T., Newman, J. M., &Gerhart, B. A. (2011). Compensation (10th ed.). New York: McGraw-Hill Irwin.

Steinberg, R. J. (2009). Emotional Labor in Job Evaluation: Redesigning Compensation Practices. The Annals of the American Academy of Political and Social Science, 569(3), 143-157.