Strategic Compensation: Excellence and Plain Mediocrity

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There is a clear business case for strategic compensation. Well managed rethinking of performance management, rewards and benefits leads to better business results, stronger capability, higher staff retention levels, heightened motivation and employee satisfaction. The success stories of organizations leading the field in strategic compensation prove that how employees are motivated, rewarded, recognized, fulfilled and challenged to perform better is a key differentiator between excellence and plain mediocrity.

One of the best ways to keep employees from walking out the door is to pay a higher salary. Paying employees more in salary, however, won't necessarily align them with the company's priorities. In order to do that, companies need
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"Younger people want time off and money; older people want 401(k)s and good medical. Those in the child-bearing years want child care and flexible leave" (Frase-Blunt, 2002).

In order to make Plastec a more competitive company in regards to wages, Paul should utilize a third-quartile strategy (Mathis and Jackson, p. 366). Wage increases should be based on performance. Each position will be assigned a wage range and the employee's productivity will determine his or her hourly wage. In the article "Strategic compensation: Pay for performance," the author discuses several automated systems that can help managers sort and manage employees. Paul can utilize an On-demand compensation management application to assist him with developing the wage, salary, and reward system for Plastec (Dobbs, 2006).

Compensating employees financially will often result in better performance and higher levels of motivation. Pay for performance plans are the most popular incentive plans in businesses today and would be ideal for Plastec to integrate into their new compensation plan. "For a compensation plan to motivate performance, employees must believe that good performance will lead to more pay, want more pay, not believe that good performance will leads to negative consequences, see that other desired rewards besides pay

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