Reference no: EM133250568

Running Case - LearnInMotion - The New Pay Plan

LearnInMotion does not have a formal wage structure, nor does it have rate ranges or use compensable factors. Jennifer and Pierre base wage rates almost exclusively on those prevailing in the surrounding community, and they temper these by trying to maintain some semblance of equity among what workers with different responsibilities are paid. As Jennifer says, "Deciding what to pay dot-com employees is an adventure: Wages for jobs like web designer and online salesperson are always climbing dramatically, and there's not an awful lot of loyalty involved when someone else offers you 30 percent or 40 percent more than you're currently making." Jennifer and Pierre are therefore continually scanning various sources to see what others are paying for positions like theirs. They peruse the want ads almost every day and conduct informal surveys among their friends at other dot-coms. Once or twice a week, they also check compensation websites like Monster.ca.

Although the company has taken a somewhat unstructured, informal approach to establishing its compensation plan, the firm's actual salary schedule is guided by several basic pay policies. For one thing, the difficulty they had recruiting and hiring employees caused them to pay salaries 10 to 20 percent above what the market would seem to indicate. Jennifer and Pierre write this off to the need to get and keep good employees. As Jennifer says, "If you've got 10 web designers working for you, you can afford to go a few extra weeks without hiring another one, but when you need one designer and you have none, you've got to do whatever you can to get that one designer hired." Their somewhat informal approach has also led to some potential inequities. For example, the two salespeople- one a man, the other a woman-are earning different salaries, and the man is making about 30 percent more. If everything was going fine-for instance, if sales were up and the calendar was functional-perhaps they wouldn't be worried. However, the fact is that the two owners are wondering if a more structured pay plan would be a good idea. Now they want you, their management consultant, to help them decide what to do.

1. Identify the major problems that suggest something has gone wrong with the company's compensation system and compensation practices.

2. Analyze compensation-related root causes of those identified problems (All points must be compensation related)

3. Recommend solutions, in terms of compensation system and strategy design and implementation, to solve the problems you have identified. You need to explain and justify your recommendations with established findings in the field of compensation studies.