Managing a company is a complex process, requiring balancing the needs of the business with the expectations of employees, consumers, and regulators. Webster wants to grow his company and allow it to flourish without his micromanaging approach that he has build up. His primary goals from a management perspective are to create loyalty, build trust, reduce turnover, and redefine the perception of the company to make it viewed as an honest and fair organization to both consumers and employees. The current system is flawed as it is not conducive to building loyalty, but rather builds unhealthy competitiveness and pressure, while not valuing good employees. The compensation system is unfair, inconsistent, and potentially illegal and does not achieve the company’s goals. Furthermore, there is a potential issue of discrimination as the company lacks a diverse workforce.
At Webster’s company, managers lack loyalty and have little responsibility because the owner prefers to step in and micromanage. There is inconsistency in responsibilities and rewards as Webster expects them to do whatever he asks rather than having set duties. Managers are plagued by high turnover and almost a complete lack of loyalty at this company. Mechanics are also experiencing issues, particularly with compensation by Webster adopting a system that only pays them when performing active work leading to them ‘cheating the system’ by adding unnecessary work to customer’s vehicles, making it more expensive and undermining consumer trust. The third group of employees are administrators, who are young women, with high turnover rates, with a lack of competitive compensation.
The company is generally lax on benefits or other forms of compensation. There are few incentives for employees to remain loyal to Webster, and he experiences high turnover in all of the positions. While it may be easy to find new employees according to the case study, the business suffers with lost costs and inconsistency, lack of culture, and generally poor reputation and work ethic that reflects on its sustainability and profitability.
Road Map
Compensation is a great tool for Webster to achieve his goals of creating loyalty, building trust, reducing turn over, and the company being viewed as a fair and equitable organization. Currently the rewards systems in place do not promote employee achievements, support Websters goals for the company, retain qualified individuals, promote desired employee behavior, complies with the law, and does not achieve company goals cost-effectively. Webster’s compensation system is a liability. Let’s change it into an asset with a total rewards system that provides both intrinsic and extrinsic rewards.
Understand Your Organization and People
Webster believes he is providing extrinsic rewards. He is, but very minimally. His employees do not trust him because he is showing them, they are disposable. He is only willing to pay them for the time they are doing their work, his way. Webster is also demonstrating he does not trust his employees as everything they do needs approval. We want to retain employees and gain new ones: membership behavior. Creating job descriptions will also be a good place to start.
By creating job descriptions for each position, Webster will be able to divide the total tasks of the organization into the required fields to ensure every aspect of the job is taken care of, ultimately creating a job design. When job designing, Webster can ensure the correct people communicate with each other for the tasks to be completed seamlessly. A full on-submersion into each job may not be necessary but coordinating tasks will be essential for the overall success.
Organizational Fit
We want to create membership behavior, along with that we need to create a vision, mission, and some company values that people can relate to and feel that they have a purpose towards. Currently there is a loose vertical fit, the human resource strategies do not closely fit with the organizational strategy. A loose vertical state is due to not having a vision or mission statement and no stated values. Webster is currently using a classical managerial strategy. Due to the company’s small size, type of simple yet complex environment, and moderate skills required, a human relations managerial strategy may be an easy transition by appealing to employees needs according to Maslow’s hierarchy (ch. 2, p. 49).
Alongside membership behavior, we want to foster task behavior and organizational citizenship behavior. Currently employees are not performing these behaviors in an undesirable way, through high turnover, not preforming tasks to company standards, and not taking incitive and a lack or organizational identification. By increasing job satisfaction, organizational identification and motivation we can decrease work stress, lower absenteeism and turnover, and increase job effort (ch. 3 p. 96).
- Vision statement: To be a local leader in automotive service and repairs
- Mission statement: Focus on our premium automotive and customer service in a team-oriented environment
- Values: responsibility, accountability, integrity, transparency, and teamwork.
Coordination between departments
- Management communicates and coordinate with the owner, mechanics, and administrative staff.
- Administrative staff coordinate schedules and payment with mechanics and customers. Administrative staff will take instruction from managers. Administrative staff will report to the owner and organize their schedule
- Mechanics will report to mangers and coordinate scheduling and payment with administrators.’
Domain: providing automotive upkeep, diagnostic, inspection, detailing, and repair services.
Job Descriptions
- Job title: General Managers.
- Purpose: to oversee day to day operations and ensure the business is running efficiently. General managers are decision makers and problem solvers.
- Job Specifications necessary to perform the job:
- General knowledge and experience in the business environment including the practices and principals of budgeting and accounting.
- Experience in supervision and management in a team-oriented environment.
- The ability of efficiently and effectively communicate with employees and customers.
- Team player who wants to work as a collective with other departments and foster a membership environment.
- Ability to maintain confidentiality.
- Job analysis: observation, interviews, questionnaires, fictional job analysis.
- The ability to solve problems and take initiative.
Education
- A minimum of a Bachelor’s Business degree or equivalent.
- A minimum of three years in supervision or management, preferable in a related automotive environment.
Major Duties
- Planning daily operations such as employee work schedules.
- Directing other employees and delegating tasks to fulfill the missions and goals for the department.
- overseeing operation and fiscal standing of the business.
- meeting the goals of the department including maintaining health and safety, and managing budgetary activities.
- mentoring and developing staff including providing effective performance feedback.
- maintaining frequent and regular transparent communication between owner and other managers.
- the ability to work with Microsoft and general computer analytics.
- Inadequate performance will result in a performance review alongside training to reach satisfactory levels.
Environment
Employees will be working directly with the owner and other departments. Employees can be exposed to hazards related to vehicles, moving mechanical parts, and stress in a fast-paced environment.
Job Title: Office administrators
Purpose: to carry out administrative duties for the office to run efficiently. Working direcrly with other departments and customers.
Job Specifications necessary to perform job
- The ability to effectively communicate between customers and the internal team.
- The ability to pay close attention to detail along with multitask.
- Ability to problem-solve and think make quick decisions.
- strong interpersonal skills: experience in customer service is preferred.
- Ability to work independently with little supervision.
- The ability to work as part of a team and work with different departments.
Education
- A minimum of a high school diploma or an equivalent is preferred
- A minimum of two years in customer service is preferred
- Proficient in Microsoft Office.
Environment
Employees will be working directly with customers, the owner, and other departments. Employees can be exposed to hazards related to vehicles, moving mechanical parts, and stress in a fast-paced customer-oriented environment.
Major duties
- Scheduling customer appointments and coordinating with the other teams;
- Answer customer phone calls phone calls and transferring calls to different departments;
- Answering customer inquiries through email or phone;
- Performing general data entry;
- communicating with management of daily itinerary and complications;
- arranging meetings and taking notes during meetings;
- collecting customer payment;
- greeting customers when they come and go;
- organizing paperwork;
Job Title: Vehicle Mechanic
Purpose: Preforming damaged vehicle appraisals, conducting safety inspections for safety, making repairs, to ensure vehicles are working to company standards.
Job Specifications necessary to perform job
- Problem solving and identification skills.
- Experience in inspecting and diagnosing vehicles.
- The ability to follow guidelines and perform procedures to company standards.
Education
- For entry level position a minimum of a high school diploma.
- General mechanics require a minimum of three years training in the field along with regulated certification.
Environment
Employees will be working directly with customers, the owner, and other departments. Employees can be exposed to hazards related to vehicles, moving mechanical parts, and stress in a fast-paced customer-oriented environment. Employees can be exposed to gasoline fumes, lifting, and using heavy machinery and tools, exposure to loud noises, and exposure to corrosive and hazardous materials.
Major duties
- Maintain a clean environment;
- Maintain equipment and tools;
- Diagnose and respire vehicles;
- Maintain upkeep of company vehicles;
- Effectively communicating the repairs required to customers;
- the ability to handle customer vehicle concerns and the ability to problem solve the solution;
- Creating quotes for customers;
- Creating and maintain customer service logs;
- Following company and city guidelines on safety.
Behavioural framework for compensation
Formulate Your Reward and Compensation Strategy
Please view Appendix A for an overview of each department’s compensation strategy with the respective percentages.
Manager
We are matching the current market. Based on the current market research (See Appendix A) managers will be paid a base pay salary of $155,000 per year which is 75% of their total compensation.
- Base pay will include a job evaluation, market pricing, and industry knowledge.
- Performance pay is 10% of the total compensation which includes bonuses, sales percentage, and returning customer percentage.
- Indirect pay is 15% of the total compensation which includes mandatory benefits such as WCB, health and life insurance, other benefits etc.
Administrator
We are matching the current market. Based on the current market research, administrators will be paid a base pay wage of $35,000 per year which is 80% of their total compensation.
Base pay will include: Educational level, years of experience, hours worked.
Performance pay is 10% of the total compensation which include: Customer satisfaction, accurate recordkeeping, semi-annual evaluations
Indirect pay is 10% of the total compensation which includes: health and dental benefits, partial childcare coverage, employee discounts products and services.
Mechanic
We are matching the current market. Based on the current market research, mechanics will be paid a base pay salary of $73,000 per year which is 75% of their total compensation.
Base pay will include: Education, experience, hours worked.
Performance pay is 10% of the total compensation which include: Tiered payment rates (the more hours worked per week, the higher the hourly wage is), vehicle guarantee bonuses (customer does not return with the same issue within 3 months), individual incentives decided by management.
Indirect pay is 10% of the total compensation which includes: health and dental benefits, partial childcare coverage, employee discounts on products and services, WCB.
In Appendix B, one can see the breakdown by payment for each respective position.
Determine Your Compensation Values
The point method system will be used to evaluate how much each job is worth the company. There are twelve compensable factors that can be applied to all positions. There will be up to five degrees for each factor. Please view Appendix C for a rating chart to apply to each position and their respective scores. The factors include:
- Skill.
- Education.
- Experience.
- Effort.
- Mental demands.
- Physical demands.
- Responsibility.
- Consequences of errors.
- Accountability.
- Working conditions.
- Stress of multiple demands.
- Exposure to accident/hazard.
The degrees to the factors can be from daily, weekly, monthly exposure to hazards. It can also be the levels of education required per position. The higher the level of degree required for each compensable skill; they higher pay that position should technically receive for it. However, since Mechanics are not always working on vehicles, they will be compensated through individual performance pay to may up for the higher points.
A competently designed job evaluation system such as seen in Appendix C, is helpful to eliminate some of the inconsistencies and inequities in the compensation system. This approach has a relatively high degree of accuracy and can be applied consistently, helping to avoid base pay structure inequalities seen at Webster’s before (ch. 8 p. 290).
Evaluating Individuals
Individual evaluations can be focused on the duties demonstrated in the job descriptions, which are the goals for each department. When the job description duties no longer apply to the position, they should be changed in both the description and employee evaluation. Feedback should be provided to show encouragement and support towards the required goals. Rewards such as company recognition, monetary incentives, and additional benefits will be awarded to high achievers. Examples of the individual evaluation forms for each department with their respective goals can be found in appendix D.
Design Your Performance Pay and Indirect Pay Plans
As seen by the charts in Appendix A, the compensation is broken down into base pay, performance pay, and indirect pay. Base pay was founded on the average for market research for those types of position. In the specifics of the business, performance pay is individual for each position. Individual performance pay is broken down into piece rates, commissions, merit bonuses, and special interests. Some examples of these may include commissions from sales that the managers would receive, or piece rates, a bonus that mechanics would receive per ‘guaranteed vehicle’. All three would receive special interests’ performance pay, potentially based off individual or position-based incentives for the business.
However, managers also benefit from some aspects of group and organizational performance pay. They are incentivized to work together to drive sales as a group while also in interest in the organizational performance due to stock ownership. For each position, I have maximized and put performance pay at 10% for each position, as a means to incentivize employees for productivity.
Indirect pay consists of various categories of benefits and income which can greatly increase employee satisfaction. First, there are mandatory benefits for each full-time worker regardless the position – Canada Pension Plan, Employment Insurance, and Workers’ compensation. Although not mandatory, the majority of businesses with more than 10 employees offer life insurance and health and dental benefits. At Webster’s life insurance will be available to managers and mechanics, while health and dental across the board.
Another category of indirect pay is paid time for not working. Managers and mechanics get two weeks off paid (standard rate no bonuses), while administrators receive one week off paid each year, which can be used for either sick days or vacation. If an employee needs additional time off, it will not be paid. In the employee services category, the business will offer a 25% coverage of childcare if an employee meets quarterly KPI goals. For miscellaneous benefits – mechanics are provided work uniforms, while all three roles have a 10% employee discount on products and services at Webster’s.
Both of these components of the compensation strategy can be highly effective add-ons to the base pay. Despite not having the immediate financial value, both offer long-term value, particularly indirect pay which translates into tens of thousands of dollars of costs that the employer Webster’s takes on itself. Although part of it is mandatory regulation, much of this is aimed at creating an environment where employees feel stability and consistency, while being incentivized to perform and achieve objectives. Webster’s is matching the market but also making the business more competitive in terms of retaining skilled employees and potentially, their loyalty.
Implementing and Evaluating the Compensation Plan
An effective plan has been developed using labor market analysis and the considerations of both the industry and unique characteristics of Webster’s business. One of the key elements to implementation is preparation. First it is necessary to prepare a compensation budget, with the bottom-up approach preferred where compensation rates are applied to employees factoring probable bonuses and expected turnover.
The new compensation has to be officially documented in company policy, and there has to be a designated individual who administers the compensation, someone who collects the information about the time worked and bonus eligibility and then pays out the salaries while keeping track of all the deposits and employee benefits. Most likely an administrator accountant will have to be hired specifically for the role of compensation administration. It may viable to consider outsourcing payroll and benefits administration, particularly if Webster does not have the capacity to expand the information technology infrastructure to support it in-house currently.
Next, the new compensation policies should be communicated. An open-door policy will be maintained, for any questions to ease the transition. Managers of each department will aid employees with the adjustment and help with team communication. Initial communication of the compensation plan change will be done by Webster himself. Employees will be kept informed throughout the process. A communications plan should be developed ahead of time, to ensure that the compensation strategy is understood, and make employees realize the benefits and need for the changes. Prior to implementation, Webster’s needs to develop an evaluation plan for the compensation system, with an emphasis on monitoring conditions, employee attitudes, and performance indicators to determine its effectiveness. The evaluation should focus on the strategic objectives that the compensation strategy aims to achieve in the long-term (ch. 13, p. 470).
According to Singh and Long (2021), there is a 6-step plan to implementing the compensation system.
- Establishing the implementation task force – this will include Webster himself, maybe a couple trust managers, potentially the most experienced mechanic and administrator on the team. They will learn the compensation system and help others to understand it.
- Putting the infrastructure into place – this would be the optimal time for Webster to make new hires, if necessary, rearrange the workforce. Webster has to make the decision whether to insource or outsource the compensation system. A survey of employee attitudes should be conducted at this time for future comparison.
- Test the system – implement a 1-day beta trial of the system to test if everything is working and that everyone understands how it operates and how they are getting paid.
- Conduct the training – company-wide training focusing on making the compensation system work, ensuring they understand changes to their compensation, and shifting workflow if necessary, such as mechanics will be strongly encouraged to not seek out extra work on customer’s vehicles just to boost their compensation, that will no longer be the case.
- Communicate information on the system – official publications and policy are published. Employees are sent digitally and given in-person a brochure explaining the new compensation structure. Open communication and supervisors are encouraged to practice openness and patience during this time of transition.
- Launch and adjust the system – officially implement the new compensation strategy and monitor it. If necessary, make adjustments in small details, ensuring that there is accurate logging of hours as well as performance aspects which are used to calculate benefits and performance pay.
At first, the business may experience a transition period, which is expected with major changes to its operations and attempts at shifting culture as well. There may be what is known as the ‘initial dip’ where performance and efficiency may decline, but as the workforce adjusts, it will grow again and hopefully exceed previous indicators given that the compensation strategy now aims to improve effectiveness, quality, and teamwork rather than pure competitiveness.
When it comes to evaluating the compensation system, it depends on the needs of the business. Most importantly, it is key to evaluate the impact on compensation objectives, which in Webster’s case were employee behaviors and attitudes demonstrated via their job satisfaction, loyalty, membership behavior, and approach to work. This may take some time to show, considering attitudes are strongly dependent on culture, and that takes time to change.
Employee behavior will be monitored to determine whether the new compensation system has been effective in driving their performance and cohesiveness, rather than just finding new ways to work around the system. Surveys after some time may be helpful as well to compare to baseline indicators, but these may be biased or inaccurate due to fear of losing employment. For Webster, the key strategic outcomes are based in membership behavior which consists of attraction, retention, and attendance. He wants the company to be strong and a desired place to work. Monitoring data regarding retention rates, new applicants, and conducting exit interviews may prove insightful in determining if the compensation strategy has had any affect.
Reference
Singh, P., & Long, R. (2021). Strategic compensation in Canada (7th ed.). Top Hat.
Appendices
Appendix A: Market Research
Mechanics
- Automotive Service Technicians.
- Journeyperson automotive service tech wage rat4es range 28-45 an hour plus benefits.
- Average wage: 34.11.
- Average Salary: 71754.
- Hrs per week 40.7.
- Minimum education: apprenticeship.
- Starting: $26.92.
- Overall: $34.11.
- Top: $41.89.
- Certification: provincially regulated.
- Alberta Alis. Occupations in Alberta. Automotive Service Technician.
- Automotive service technician/ mechanic.
- range $25-$42, avg $34.
- PayScale. Average Hourly Rate for Alberta Honda Employees in Canada.
- Automotive Service Manager.
- 73, 698 ave base salary.
- Base salary:
- 45k starting
- 127k top
- Bonus: 2k-33k
- Profit sharing 0-4k
- Paysale. Average Service Manager Automotive Salary in Calgary, Alberta.
Managers
- Auto Dealership Manager Salary in Alberta, Canada.
- Avg Salary: $155954.
- Avg hourly: $75/hr.
- Avg bonus: $20 508.
- Entry: ~$80.
- Senior: >~$200k.
- Economic Research institute. Auto Dealership Manager Salary in Alberta, Canada.
- AB auto parts manger.
- Avg $159K.
- Low $78,100K.
- High: $248k.
- AVG Salary with Education:
- high school $116k
- Certificate/diploma: $133k
- Bachelor’s degree: $179
- Master’s degree: $225k
- 34% receive bonus whereas 66% do not, avg bonus rate is 4% of annual salary.
- Salaryexplorer. Auto Parts Manager Average Salary in Alberta 2021.
Administrators
- Receptionist at AutoCanada Inc. Edmonton.
- Benefits dental and health benefits, employee pricing on cars,
- Min education high school diploma.
- administrative clerk rocky view ab.
- 25-40 hr.
- avg salary: $34,820.
- avg wage: &20.90/hr.
- starting: $18.44.
- Top: $23.45.
- Alberta alis. Receptionist.
Formulate your reward and compensation strategy
Rating Chart for Point Method of Job Evaluation
Examples of Individual Evaluations
Manager
Administration