SCHOOL OF BUSINESS MANAGEMENTBM0175COMPENSATION MANAGEMENTAY 2017/18 SEMESTER 2ICA1 FULL NAME : Durga d/o Subramaniam ADMIN NUMBER : 153119WPEM GROUP : BM1523DATE : 15th December 2017Table of Contents?Introduction to Company 3Compensation Strategy 3Job Structure and Job Description 4Pay Structure 5Appendix 5Reference 5?Introduction to CompanyI have chosen IKEA as the organisation. IKEA is a Swedish-founded organisation that designs and sells ready to assemble products. IKEA operates in 49 countries with 411 stores as of 2017.
IKEA adopts the cost-cutter and customer focused business strategy for their organisation. Cost-cutter focusses on efficiency and cost cutting during production. This in turn delights consumers as products will be priced lower. IKEA provides home furnishing products that is affordable to many. They re-invest majority of profits in sustainable solutions and continue lowering their prices to consumers. Their aim is to ensure that as many people as possible will buy their products. Thus, making them a cost-cutter organisation.
Customer focused strategy increases customer expectations and stresses on delighting customers. It is achieved by combining value, function, design and quality. Customers get involved in many ways. They assemble flat-pack products and give feedbacks on ways to improve. Every year, IKEA visits people’s home to find out what consumers dream about to provide appropriate solutions. This measure makes IKEA a customer-focused organisation.Compensation StrategyA total returns compensation system will be implemented for the employees of IKEA.
The total returns compensation system consists of cash compensations, and relational returns which is also known as direct, indirect and non-financial compensation respectively. As talent becomes more and more difficult to find, organisations must differentiate themselves based on a rewarding work environment. Total compensation brings to light the intangible aspects that brings value to employees’ lives.
Cash compensation includes the base pay, short term and long-term incentives while benefits includes insurance, medical benefits, vacation, leave, holidays and work-life balance. The relational returns will mainly consist of recognition, challenging work and learning opportunities.Cash CompensationThe employees will get a base salary, short-term incentives, which will be commissions given for high performance, and long-term incentives, which will be long service bonuses and increase in leave days. The short-term incentive will give employees the drive to do better and encourage them to perform exceptionally well.
The long-term incentive will encourage employees to stay loyal to organization to get the long service bonus and more leave days. Employee loyalty is important as they contribute extensively to the productivity of the business.BenefitsThe employee benefits will include life insurance and retirement benefits. This helps them ensure that they will have savings when they retire. Employees will also get non-portable medical benefits. Non-portable medical benefits are not transferrable when the employee changes company. This also ensures that employees continue to stay loyal to the organization.
As part of benefits, employees will also get vacation days, holidays and leave days which will increase the longer the employer works for the organisation. Employees can also be sure to get work-life balance as family is also an important part of the employee’s live.Relational ReturnsFor total returns, the employee will be getting recognition for job well done.
Every month, the company should award the best performing employee to boost confidence and a fighting spirit. This will in return create a challenging work environment as employees will want to be recognize for the work they do. This will give them the drive to work harder to achieve the award. Employees will also be sent to courses so that they can develop themselves and be able to perform better and be promoted to higher work levels. Pay Mix StrategyIKEA should adopt the Performance Driven pay mix. The performance driven pay mix is where the base salary takes up 50% of the pay. The benefits the employee receive will be 25%, the bonus will be 10% and incentives the employee receives will be 15% as can be seen in figure 1 in the appendix.
The performance driven pay mix will encourage employees to work harder and perform well as the bonus they get will be based on the what they have accomplished and how well they have performed. The benefits they get will encourage them to be loyal to the organisation and thus giving them the drive to work hard for the company.Job Structure and Job DescriptionI will be using the hierarchical pay level structure.
A hierarchical structure will encourage employees to perform better, aligning it to the business strategy of customer focused organisation and will be aligned with the compensation system. Employees quit less as they know that they will be compensated well for their hard work. A hierarchical structure values the differences in work content, skills and contribution.
It includes a detailed description of work done at different levels. I will be choosing the sales department. The sales department will adopt 5 different levels, the Sales Administrator, Sales Associate, Sales Executive, Sales Manager and the Sales Director.Job Description Sales AdministratorThe duties of a sales administrator are to process the product orders, process invoices for transaction and report the monthly sales to the sales team. The sales administrator has to answer phone calls and be able to respond to enquiries efficiently and has to process staff timesheets.
He or she must have high organisational skills and ability to manage a few projects at the same time. Being well versed in IT is also important as the staff must manage the timesheets of the sales department. Sales AssociateA sales associate is expected to ensure high levels of customer satisfaction through excellent service, access customer needs and provide them with the assistance needed. The staff should also maintain in-stock and keep assigned areas clean and presentable for consumers. Lastly, a sales associate must also have product knowledge to provide customers with more information and suggest other available choices.
A sales associate must possess great knowledge in customer service practices, be familiar with inventory products and be able to work under pressure in a timely manner. He or she must also be energetic and friendly so that consumers will be able to approach them in need of help. Sales ExecutiveA sales executive’s duties are to conduct market research to identify other selling possibilities and seek new sales opportunities through cold calling. The sales executive must constantly create sales and financial data and prepare and deliver appropriate presentations about products and services offered by IKEA. A sales executive must have work experience of an executive role or related job experience.
He or she must be proficient in English and be able to deliver attractive presentations. The staff must also be self-motivated and results driven. Sales ManagerA sales manager is expected to implement marketing strategies by determining annual unit and gross-profit plans and maintain sales volume by keeping up with supply and current demand and changing trends. He or she must maintain professional knowledge by attending workshops and participating in professional societies.
A sales manager must have degree in business administration or related field and have previous experience in a sales field, consistently meeting or exceeding targets. He or she must have a strong business sense, be committed to continuous education through workshops and seminars and demonstrate the ability to communicate and influence credibly at all levels of the organisation. Sales DirectorThe sales director must build and maintain strong relationship with customers, partner with customers to understand their needs, oversee and manage a large team of Sales Manager and identify emerging markets that are valuable.
The sales director must accurately forecast future sales and adapt to constant shifts in the market place. He or she must also form sale strategies to keep IKEA competitive and innovative. A sales director is required to have proven sales executive experience, exceeding targets, the ability to communicate and influence all levels of the organisation, drive the sales process from plan to close and demonstrate experience as head of sales, developing client-focused solutions.Pay StructureThe pay structure refers to the array of pay rates for different work or skills within a single organization. It can be defined by the levels of work, pay differentials between the levels and the criteria used to determine those levels. In my job structure, I have chosen to follow a hierarchical structure that has 5 levels.
The sales director manages the sales managers while the sales managers will be implementing marketing strategies that the sales executive will be tasked to follow. The sales executive will ensure that the sales associate is able to follow the strategies implemented and be able to get the forecasted sales achieved. The sales administrator will have to be responsible to ensure that products are ordered for sale, so that the sales associate is able to sell them.
IKEA should plan to target pay for each job level and there will be hierarchical promotions for employees who continuously exceed target and expectations. Bonuses will be given to employees who have worked with the organization for a long time. The number of levels the sales department will have can be seen from figure 2 in the appendix.
There will be a pay difference for each level. This is due to the experience, skills and knowledge the employee possesses and must possess at the different job levels. Sales director needs to have working experience, relevant knowledge and will be doing a more complex planning. Thus, receiving the highest pay compared to the other level. A sales administrator is only required to be able to communicate well and be well versed in IT thus, receiving the lowest pay compared to the other levels.