Digifile Recordings Company’s Total Reward Strategy

Introduction

The issues facing DigiFile Recordings are a major source of concern not only to the administration board but also to the entire stakeholders in the company. The organization is a family business. However, despite this ownership structure, a lot needs to be done if increased profitability is to be realized. In this report, the company is analyzed from the perspective of compensation management.

Over the past three decades, scholars have developed various concepts about compensation management. Some of the most common elements include broad banding, skill-based pay, and total reward concept. Some of them exhibit excessive ambition as far as the achievement of organizational goals is concerned.

The total reward concept is the key needed to solve the various problems faced by DigiFile Recordings Company. The superiority of this approach of managing compensation stems from the nature of the management structure adopted by the organization. The competitiveness of this company can be addressed by attending to all the operational, personnel, and managerial dimensions of the entity.

The following report outlines the concept of total rewards and development of the total rewards strategy for DigiFile Recordings. The framework will address the current compensation management issues facing this company. It will also enhance its competitiveness in the industry.

A Critical Analysis of the Total Rewards Concept

The total rewards framework was developed from the ‘new rewards’ concept. It was formulated between 1970 and 1980. What this means is that it is a relatively new element of compensation management. The new rewards model adopted a broad perspective on the composition of pay packages. It deviated from the tangible and extrinsic rewards system, which was mainly used in early compensation management concepts (Giancola 2008).

Initially, the total reward framework focused on four aspects of management. It addressed the issues of pay, career development, work environment, and benefits. However, with time, it expanded to encompass a broad range of organizational management issues. Currently, it focuses on, among others, the nature of organizational leadership, corporate social responsibility, as well as the balance between work and personal life (WoodatWork 2007).

The main elements of total rewards can further be subdivided into various items. For instance, the pay aspect includes base pay and variable salary. It also defines share options and schemes, as well as long-term incentives. Healthcare, retirement benefits, cars, and holidays are some of the additional elements of total reward (Hsu 1991).

On its part, career development encompasses learning experiences and planning for succession. Also, it includes performance management and training as far as employees are concerned (Lawler and Ledford 1987). On the other hand, the work environment deals with the overall support for the organization, its leadership, and its performance in the market. It also establishes the relationship between work and life.

The personal interests of employees in an organization differ significantly. They depend on the various elements of the total reward concept (Lawler 1983). For instance, opportunities for career development will be very important for employees aiming at improving their future. Such employees include engineers who further their education to improve the chances of future employment. On the other hand, cleaners might be attracted to an organization by favorable working hours, better pay, and other similar intrinsic rewards (Risher 2007).

Developing an effective total reward strategy relies on the adoption of various approaches. Such a perspective is needed given the diverse nature of interests among employees. An effective and efficient total reward strategy for DigiFile Recordings would have to take into consideration all of these elements.

Total Reward Strategy

The strategy refers to the organizational philosophy developed by human resource managers. It focuses on the approach adopted by the organization about rewards and compensation among employees. At the minimum, the total reward strategy must adopt the four major elements of total reward. It can be used as a road map to attract, retain, and motivate an effective and efficient workforce (Henderson 2005).

The approach is part of the people strategy adopted by a given business entity. As a result, when combined with the company’s business strategy, the approach facilitates the realization of organizational goals. It achieves this by reinforcing behavior patterns and actions needed to drive the company forward.

An analysis of the people strategy adopted by DigiFile Recordings reveals a lot of weaknesses. Despite the 7% annual growth in employees’ salaries, the company is still losing its market share (Giancola 2009). The loss is attributed to low-quality products, wastage of resources, increased production costs, and waning motivation and commitment among employees. The shortcomings can be effectively dealt with if the company implements the proposed reward strategy.

The weaknesses associated with the current approach can also be attributed to the narrow focus of the strategy. The company puts more emphasis on compensation compared to other important facets of the entity. The skewed focus leaves out most of the other total reward aspects, which include benefits, work environment, and employee development (Milkovich, Newman and Gerhart 2013).

Proposed Total Rewards Strategy for DigiFile Recordings

Factors Influencing the Development and Implementation of Rewards Strategies

The process of formulating a compensation plan requires managers and other stakeholders to make several key decisions. For instance, they need to make decisions about the intentions of the reward policies formulated. They also need to decide on the impacts of the various policies on the performance of employees. It is also important to take into consideration the types and combinations of rewards and communication.

Several factors determine the nature of these decisions. Some of these elements are external to the organization, while others are from within. Internal factors likely to influence the development of the rewards strategy for DigiFile Recordings include the organization’s vision, mission, culture, and values. The financial position of the company would determine the availability of funds to develop and maintain the programs. External factors also come into play. They include the availability of resources and the expectations of stakeholders (Main, O’Reilly and Wade 1993). All these issues will determine the success of the total rewards strategy. For instance, a shortage of researchers and designers would significantly influence the rewards package that is constituted to attract and retain workers at DigiFile Recordings.

Shareholders of DigiFile Recordings, in this case, the owning family, might demand the achievement of set performance targets. They may also call for the provision of high-quality services. On their part, the customers might demand highly skilled workers. Due to this, managers at DigiFile Recordings must understand the composition of the workforce to effectively achieve the organization’s rewards philosophy.

Development of Total Rewards Strategy

Individual organizational objectives are some of the main reasons why companies formulate and implement total rewards strategies. For instance, an organization’s overall reward program may focus on the attraction and the retention of talent in the industry (Kenan and Hand 1994). Other objectives include recognition of performance, development of employees, and a set of other desires.

The development of an effective rewards policy for DigiFile Recordings requires the following six major steps. The first step entails understanding the company’s business strategy (Lin 2001). The mission of this company is ‘to provide technologies that make recording music easy and accurate’. As a result, some of the major objectives of a total rewards strategy in the company include recruiting and retaining talent, facilitating productivity, and enhancing the quality of the production processes (Risher 2007).

The second step in developing the policy involves aligning the people strategy with the business objectives (Main et al. 1993). The competencies of the various workforce segments should be evaluated. Also, the policy should seek to formulate attitudes, skills, and behavioral patterns required in the execution of the business strategy (Lawler and Ledford 1987).

The third step involves linking the total rewards strategy with a broad perspective of the organization. For instance, the rewards of hiring the right employees should be identified at this step. Identification of the financial implications of the policy, as well as the support from the management team, comes in fourth (Parker and Slaughter 1993). The financial impacts of this policy on the DigiFile will result from the nature of the rewards portfolio in the entire strategy. The support of top management and cooperation of lower-level employees would ensure that the investment made is sound.

The fifth step involves the implementation of the strategy (Parker and Slaughter 1993). A series of activities determine the success of this step. One of them is effective communication. The new programs need to be communicated to the rest of the employees and managers. Also, the significance of the policy should be made clear to these stakeholders. Communication ensures that the desired results are attained.

Monitoring and evaluation come after the strategy have been implemented (Porter and Lawler 1968). Reviewing the process would determine whether or not it is in line with the organization’s objectives, vision, mission, and values (Schendel and Hofer 1979). The strategy might require adjustments in some instances. For example, it may be important to strike a balance between value and cost. In other cases, employees might point out issues that require redress. The evaluation and monitoring process should be an ongoing venture. The continued review ensures that the potential of the program is fully realized.

A Sample of Proposed Total Rewards Strategy for DigiFile Recordings

The recommended framework should bolster the company’s competitive advantage. Also, it should maximize efficiency to reduce costs. The labor market is a significant driver as far as competitiveness is concerned. In light of this, the proposed strategy should capitalize on the company’s human resources. The company should endeavor to provide the workers with high base salaries. The wages should be set at 50% percentile (Armstrong 2007). It should also include total cash compensation at a level of 75 percentile. Evaluation of performance about employees’ rewards should be made based on individual output. In this case, whenever the company exceeds the set goals, the benefits of collective success should percolate down to the employees (Armstrong 2007).

Going by the company’s mission statement, it appears that most of the tasks require specialized skills. Consequently, DigiFile Recordings should start paying premium rates to the employees, helping it to attract the best candidates in the industry. The organization should adopt a competitive and innovative recruitment technique. It should introduce referral and hiring bonuses to attract employees with the right set of skills. Employees should be allowed to take responsibility for their health and welfare (Armstrong, Cummins, Hastings and Wood 2003).

Total Rewards Strategy and Organizational Competitiveness

The company’s competitiveness will be influenced by the total reward strategy. For instance, it will be possible to attain congruency about compensation management. The policy affords the business owner a broad view of all the organizational rewards (Porter 1980). It promotes the effectiveness of the design, making sure that the organization’s people strategy corresponds to its business plan (Sharma, Durand and Gur-Arie 1981). What this means is that compensation of employees supports the company’s strategic objectives.

The total rewards strategy also helps to effectively manage labor costs. With the help of this framework, DigiFile Recordings would be able to regulate operational costs by introducing the appropriate remuneration structures. For instance, flexible work and work-life balance arrangements, which cost less, can be implemented. Reduced expenditure would result in increased competitiveness in DigiFile Recordings.

The employees working for DigiFile Recordings lack motivation and commitment to the company. The two factors lower their productivity, impacting negatively on the company’s overall performance. With the adoption of the total rewards strategy, employers can make offers that enhance commitment, reducing the rate of turnover among employees (Leete 2000).

Tying the policy to employee performance will most likely revitalize the disenfranchised workforce. Also, the right rewards can transform employees’ indifference into energy, which is essential in enhancing the competitiveness of the company. A total strategy that addresses the needs of workers facilitates increased productivity. Customer satisfaction is closely related to the attitudes of employees in a given organization (Kantor and Kao 2004). The relationship enhances the performance of the company, facilitating the realization of organizational objectives and goals.

The nature of the operations carried out at DigiFile Recordings creates the need for innovation. As a result, the company finds it important to attract and retain qualified employees (Kantor 2003). The proposed total rewards strategy augers well with the company’s competition for talent in the industry. The reason is that the envisaged rewards system addresses the needs of potential workers.

The documented strategy guides the human resource management practitioners in designing and updating existing policies (Kenan 1998). The development of the strategy should be a continuous process, which is essential in updating the packages offered to employees. Such a scenario will create and sustain a competitive advantage for DigiFile Recordings.

Every organization’s reward system should be formulated in a manner that motivates employees and enhances their performance. Also, the system should be consistent with the firm’s strategy of absorbing and retaining people with essential knowledge, abilities, and skills (Kenan and Hand 1994). The strategic alignment should create a supportive structure and culture, which is necessary for the realization of the organization’s objectives (Henderson 2005).

The components of the total rewards system provide the organization with a high degree of external and internal fit. The new human resource system becomes a source of unique competitive advantage. Numerous scholars have argued that aligning organizational strategy with a rewards system helps in improving the effectiveness of the company (LeBlanc and Ellis 1995). The quality is prominent in the total rewards concept. Applying the concept in DigiFile Recordings can lead to the achievement of the much needed competitive edge in the industry.

Non-Financial Rewards and Benefits Menu for DigiFile Recordings

The total rewards statements usually carry with them details of pension contributions, salary, and benefits that employees are receiving. Out of the four main elements of total rewards system, three are non-financial. It is only the compensation element that covers pay, monetary recognition programs, as well as long-term and short-term financial incentives. It also includes equity.

Most employees view their value to an organization from the perspective of the figures in their paycheck. The same applies to DigiFile Recordings. It is only the wages that grew over the years at a rate of 7% per annum. The decreasing motivation among employees, in contrast to the increasing wages, indicates a deficiency in the total rewards package strategy adopted by the company.

The non-financial rewards and benefits for DigiFile should include other aspects of the total compensation concept. The company should take into account the work environment, employee development, and benefits. The work environment should incorporate the tangible and the intangible offers made to promote life and work balance. The balance creates a positive work experience for the employees (LeBlanc and Ellis 1995).

More specifically, DigiFile Recordings should embrace non-financial rewards about the work environment. Such rewards involve telecommuting and community volunteer programs. Also, job designs can be modified and workweeks made more flexible. Comfortable workstations should be provided, together with the introduction of business and casual dress policies.

Employees’ development and other non-financial rewards incorporate programs related to skill development, learning, personal growth, and career enhancement (Schonberger 1994). Under this category, DigiFile Recordings can introduce such rewards as training programs, career planning, and professional memberships. Benefits to do with succession planning, ‘lunch and learns’, mentoring programs, as well as annual conferences should also be made available.

The benefits that employees derive from their organizations include life insurance, health care, retirement programs, and membership to fitness clubs. They can also benefit from child care support, disability policies, and other on-site conveniences (Porter and Lawler 1968). A combination of these non-financial rewards and benefits enhances employee’s commitment, loyalty, and productivity. An employee who is well paid, but working under strenuous job schedules, can be demoralized very easily, leading to reduced productivity.

The total rewards concept creates a balance between financial rewards, non-financial rewards, and benefits. Low productivity and lack of competitiveness in the market are dealt with. By embracing these non-financial rewards and benefits for employees, DigiFile Recordings can reclaim market leadership as far as quality and profits are concerned.

Job Evaluation Techniques

Overview

Job evaluation usually focuses on providing a systematic and consistent approach to define the relative worth of specific tasks within an organization (Schendel and Hofer 1979). The jobs are usually ranked in order of importance and according to the overall demands that are placed on the holder. In essence, the evaluation provides the management with a basis for orderly and fair grading of roles.

Before the implementation of the total rewards strategy, job evaluation should be carried out. The analysis plays a significant role in the determination of the reward package. DigiFile recordings should take into account the evaluation of jobs before the development and implementation of the proposed strategy. The reason is that the reward package should factor in the returns or value derived from the jobs.

It is important to note that the job evaluation process does not determine the actual pay. DigiFile Recordings should be aware of this. The employees, their trade unions, and the management should agree on the rewards package and terms. Job evaluation should determine the demand for specific tasks. For instance, it should highlight the level of responsibility and experience required for one to carry out the role (Leete 2000). The process is not concerned with total work volume or scheduling of jobs. It is also not based on the abilities of the employee or the number of people required for the task.

There are several job evaluation techniques that DigiFile Recordings can apply to determine the value of the various tasks. The techniques fall into two major categories. They are analytical and non-analytical processes (Lin 2001).

Analytical Job Evaluation: Points Rating Technique

The technique breaks down specific designations into numerous factors, such as responsibility, efforts, and skills. The factors are further sub-divided into minute components like education and dexterity (Kantor and Kao 2004). Following a pre-determined scale, each factor is awarded points. The total points are used to rank the jobs in the organization.

The points rating technique can be costly and time-consuming. However, it is also very advantageous. The technique provides a rationale for ranking jobs differently. It is less subjective in comparison to the non-analytical techniques (Kantor and Kao 2004).

‘Tailor Made’ Job Evaluation Techniques

The techniques are customized to evaluate jobs for specific organizations (Kantor 2003). The main advantage of these schemes lies in the fact that they have been tried and tested over the years. As a result, they save on time. The definition highlights the range of tasks to be evaluated more accurately. They are arrived at through consensus.

Non-Analytical Job Evaluation Techniques

Paired comparison job evaluation technique

Under this technique, a given job is compared with another in the same organization. Points are awarded about the overall importance of the task. It is ranked using terms like less than, more than, and equal to other jobs [0, 1, and 2] (Kantor 2003). The points awarded to each category are then totaled, ranked, and then an order determined.

Job comparison and evaluation techniques are relatively simple and systematic. However, the method is not suitable for organizations with a job population exceeding 30 units (Kantor 2003). Also, the technique does not involve any specific analysis of the tasks.

Job ranking evaluation technique

The technique utilizes job descriptions and titles in the ranking. Every task is considered as a whole and then placed within a ranking order that is regarded to be fair. The jobs create a ‘league table’ (Armstrong et al. 2003). The technique is a simple job evaluation strategy.

Job classification evaluation technique

The technique considers whole jobs in the evaluation process. The number of grades is determined and then detailed definitions of the same provided (Armstrong et al. 2003). To validate the definitions, representative jobs are evaluated. Non-benchmark jobs are slotted into the grades based on relevant definitions.

The usefulness of this technique is made apparent where the definition of job groups is made easy. For instance, sales representatives, administrative employees, and quality assurance checkers are identified. However, the technique is not popular. It fails to defend an equal value claim.

Job Evaluation Techniques Applicable to DigiFile Recordings

The various job evaluation techniques are suitable for organizations with a certain number of jobs in the company. Considering the number of jobs at DigiFile Recordings, both analytical and non-analytical job evaluation techniques can be used. Three jobs can be evaluated. They include chief executive officers, sales representatives, and personal assistants. The paired comparisons of job evaluation and job classification techniques can be used to rate these tasks.

Evaluation of DigiFile Jobs using Paired Comparison Technique

Jobs to be evaluated:

  • Personal Assistants (Secretaries).
  • Sales Representative.
  • Chief Executive Officer.

Each of these tasks is compared with others. In case the job is considered to be of high value, it is awarded two points. In case the jobs are of equal value, then one point is awarded. In case the task is considered to be less important, then it is awarded no points (Armstrong et al. 2003).

The total scores of each task are determined. An order is established from these scores as shown in the figure below:

Job Reference Chief Executive Officer Sales Representative Personal Assistants Total Score Ranking
Chief Executive Officer 2 2 4 1
Sales Representative 0 1 1 2=
Personal Assistants 0 1 1 2=

Comparing jobs under this technique is easier than using normal ranking. From the comparison results in the figure above, the Chief Executive Officer ranks above the rest.

Evaluating DigiFile Jobs using Analytical Points Rating Technique

The tasks are classified into pre-determined job classes or groups. The selected jobs are assigned to the classifications and their value determined according to the cluster.

There are several pre-determined job classifications. They include:

  • Class I – It is made up of executives. It also includes assistant office managers and supervisors. Office managers and chief executive officers are also in this group.
  • Class II – Skilled workers: Other jobs under this category include personal assistants, cashiers, purchasing, and sales assistants.
  • Class III – Semiskilled workers: Jobs under this category include machine operators, switchboard operators, drivers, and sales clerks.
  • Class IV – Unskilled workers: Jobs under this category include office messengers, file clerks, and subordinate staff (Armstrong et al. 2003).

Under this classification, the chief executive officer is the most valued job. The sales representative and secretary jobs are equally valuable since they fall under the same classification.

Conclusion

Total rewards strategy, if well developed and implemented, can address most of the organizational shortcomings associated with employees. As already indicated, the package meets the needs of the employees. It also makes sure that their activities are geared towards the achievement of the company’s goals. Organizations that claim a broad definition of total rewards must include compensation and employee development, as well as work environment, in their policies. The compensation framework must be tailored to fit into the organization’s overall business plan. Also, it should be uniquely positioned such that the organization only derives a win from the market.

DigiFile Recordings requires a comprehensive total rewards strategy to address the issues that are leading to losses in the marketplace. The elaborate sample total rewards strategy provided above can be implemented, monitored, and evaluated to realize optimum results for the company.

Bibliography

Armstrong, Michael, Ann Cummins, Sue Hastings, and Willie Wood. Job Evaluation: A Guide to Achieving Equal Pay. London: Kogan Publishers, 2003.

Armstrong, Michael. A Handbook of Employee Reward Management and Practice. London: Free Press, 2007.

Giancola, Frank. “Is Total Rewards a Passing Fad?.” Compensation Benefits Review 41, no. 4 (2009) : 29-35.

Giancola, Frank. “Total Rewards: A Current Assessment.” WorldatWork Journal 17, no. 4 (2008) : 50-61.

Henderson, Richard. Compensation Management in a Knowledge-Based World. Upper Saddle River, New Jersey: Prentice-Hall, 2005.

Hsu, Robert. Economic Theories in China, 1979-1988. Cambridge: Cambridge University Press, 1991.

Kantor, Richard, and Tina Kao. “Total Rewards: Clarity from the Confusion and Chaos.” WorldatWork Journal 13, no. 3 (2004) : 7-15.

Kantor, Richard. “Managing Global Total Rewards.” In Human Resources in the 21st Century, edited by Marc Effron, Robert Gandossy, and Marshall Goldsmith, 157-167. Hoboken, New Jersey: John Wiley & Sons, 2003.

Kenan, Abosch, and Janice Hand. “Characteristics and Practices of Organizations with Broadbanding: A Study of Alternative Approaches.” ACA Journal, (1994) : 1-16.

Kenan, Abosch. “Confronting Six Myths of Broadbanding.” ACA Journal 7, no. 3 (1998) : 1-8.

Lawler, Edward, and Gerald Ledford. “Skilled Based Pay: A Concept That’s Catching On.” Personnel 62, (1987) : 30-37.

Lawler, Edward. The Design of Effective Reward Systems. California: Center for Effective Organizations, Graduate School of Business Administration, University of Southern California, 1983.

LeBlanc, Peter and Christian Ellis. “A Testimonial from Eight Organizations: The Many Faces of Broad Banding.” ACA Journal 4, (1995) : 52-63.

Leete, Laura. “Wage Equity and Employee Motivation in Nonprofit and For-Profit Organizations.” Journal of Economic Behavior & Organization 43, no. 4 (2000) : 423-446.

Lin, Cyril. “Corporatization and Corporate Governance in China’s Economic Transition.” Economics of Planning 34, (2001) : 5-35.

Main, Brian, Charles O’Reilly, and James Wade. “Top Executive Pay: Tournament or Teamwork?.” Journal of Labor Economics 11, no. 4 (1993): 606-628.

Milkovich, George, Jerry Newman, and Barry Gerhart. Compensation. New York: McGraw-Hill, 2013.

Parker, Mike, and Jane Slaughter. “Should the Labor Movement Buy TQM?.” Journal of Organizational Change Management 6, no. 4 (1993) : 43-56.

Porter, Lyman, and Edward Lawler. Managerial Attitudes and Performance. London: Routledge, 1968.

Porter, Michael. Competitive Strategy: Techniques for Analyzing Industries and Competitors. New York: The Free Press, 1980.

Risher, Howard. “Second-Generation Banded Salary Systems.” WorldatWork Journal 16, no. 1 (2007) : 20-28.

Schendel, Dan, and Charles Hofer. Strategic Management: A New View of Business Policy and Planning. Boston, MA: Little, Brown & Company, 1979.

Schonberger, Richard. “Human Resource Management Lessons from a Decade of Total Quality Management and Reengineering.” California Management Review 36, no. 4 (1994) : 109-123.

Sharma, Subhash, Richard Durand, and Oded Gur-Arie. “Identification and Analysis of Moderator Variables.” Journal of Marketing Research 18, no. 3 (1981) : 291-300.

WorldatWork. The WorldatWork Handbook of Compensation, Benefits & Total Rewards. Hoboken: John Wiley & Sons, Inc., 2007.