Role of Compensation
...any goals and what the need to work toward” (Caudron). At Raytheon, there is a variable pay plan that allows employees to share in the profits of the company. The pay out is based on the percentage of the profits of the company and whether certain goals are met by the business unit. It does help focus employees on the bigger picture of what the company expects and how particular segments increase the companies profits. It also brings attention to those segments that are losing money and puts pressure on them to perform at a higher level. Another effort to recognize and encourage individual achievement in the blue-collar ranks comes in the form of skill based pay programs. Skill based pay is an effort to pay employees for the number of skills they possess, rather than for the specific job they may be doing at any given time. Pay increases are given when the employees add to or improve their skill sets, rather than when they have achieved a certain level of seniority or management responsibility. This way, employees can receive pay increases based on their own readiness (Henderson 390). So how does an employer decide what a certain skill is worth? Most companies assign prices to skills based on their relative worth to the organization, rather than on how long it takes an employee to learn a skill. At Northern Telecom’s Meridian PBX Plant in Santa Clara, California, managers decided to implement a skill based pay system for the hourly employees. They priced each skill block equally, instead of making value judgments about which skill might be harder to learn or more distasteful to perform. “We knew in our hearts that employees would chase after the skills that they already could perform or that they found the most agreeable,” says LeBlanc, the company’s former assistant vice president of compensation (Caudron). Skill based pay gives the employees incentive to cross train making them more valuable to the company. Furthermore, skill based pay makes the workforce more flexible and gives the supervisor more choices when they need someone to fill in for a worker that is out. In addition, employers are looking at other ways to boost the productivity and performance of white-collar workers. One of the trends that employers are using is called broadbanding. Banding refers to the clustering of jobs into wide categories or groups of jobs. This allows companies to flatten the organization and create greater flexibility in employee compensation (Dessler 413). RJR Nabisco Inc. went to a banded structure at its corporate headquarters to give managers more flexibility in making salary decisions. “We put seven salary grades with three pay ranges apiece into four broad job bands,” explains Lewis Nerish, vice president of total compensation at RJR Nabisco.” “But we also attached salary ranges to each of those bands.” Why? “Because we felt that managers needed some guideposts to help them make salary decisions. After all, budgets will always be with us.” However, one of the main reasons that RJR Nabisco and other companies pursue broadbanding is to de-emphasize the importance of titles and to increase the likelihood that employees would be willing to do cross-departmental tran...