HR Challenge: Strategic Pay Structure
Order Instructions
Design a pay structure for CapraTek that is commensurate with job classifications. The deliverable is a 3-4 page recommendation memo to upper management.
Introduction
The challenge in this assessment is to focus on creating a strategic pay structure that should include considering the number of pay structures, market pay line, defined pay grades, and pay ranges (Martocchio, pp. 172–179). Additionally, analyze merit pay systems, sales-incentive plans, and person-focused programs. Keep in mind the alignment of job classifications and pay structure.
Reference
Martocchio, J. J. (2020). Strategic compensation: A human resource management approach (10th ed.). Boston, MA: Pearson.
Preparation
It is critical to know that a successful compensation strategy will gain more acceptance by senior management when HRM can demonstrate a link between the rewards strategy and the attainment of the organization’s strategic goals.
For your next HR Challenge, your manager has asked you to design a pay structure for CapraTek that is commensurate with job classifications.
CapraTek
CapraTek is a virtual technology company. The assessment is based on the CapraTek scenario.
CapraTek: Strategic Pay Structures.
Get the perspective of CapraTek employees and determine the elements needed for a strategic pay structure.
Assessment Instructions
Building on your work in the previous assessment’s HR Challenge: Internally Consistent and Externally Competitive, design a pay structure for CapraTek that is commensurate with job classifications. The deliverable is a recommendation memo to upper management.
To develop the recommendation memo to upper management, do the following:
Create a strategic pay structure for CapraTek using Martocchio’s five-step system, including the number of pay structures, market pay line, defined pay grades, and pay ranges (Martocchio, pp. 172–179).
Analyze merit-pay systems and their applicability to CapraTek.
Analyze sales-incentive compensation plans and their applicability to CapraTek.
Analyze person-focused programs and their applicability to CapraTek.
Evaluate the alignment of job classifications to this pay structure.
Note: Your faculty may also use the Writing Feedback Tool to provide feedback on your writing. In the tool, click the linked resources for helpful writing information.
ePortfolio
You should consider adding this assessment to your personal ePortfolio. This assessment demonstrates your ability to share a design for a pay structure. This skill is necessary in a professional setting when you are trying to make strategic compensation recommendations. You will want to organize your assessments to easily support future reflection and completion of your HRM capstone project as well as for showcasing your knowledge with employers after graduation. For more information on ePortfolio, visit the Campus ePortfolio page.
Additional Requirements
The deliverable for this assignment applies professional skills in HRM to workplace situations that you will likely encounter in your day-to-day work in HRM. As part of your learning, focus on the development of effective professional communication skills for the workplace.
Length: Your 3–4 page memo should be typed, double-spaced pages, including the resources page.
Organization: Make sure that your assignment writing is well organized, using headings and subheadings to organize content for the reader.
Font and font size: Times New Roman, 12-point.
Resources: Use two scholarly, peer-reviewed or academic sources.
Evidence: Support your assertions with data and/or in-text citations and create a reference list at the end of your document.
APA formatting: Resources and in-text citations are formatted according to current APA Style and Format.
Written communication:
Adhere to the rules of grammar, usage, and mechanics.
Use spell-check and other tools to ensure correct spelling and grammar.
Write for a specific audience, using the vernacular of the profession.
COMPETENCIES MEASURED
By successfully completing this assessment, you will demonstrate your proficiency in the following course competencies and assessment criteria:
Competency 1: Assess the impact of compensation systems on individual and organizational performance.
Analyze the applicability of merit pay, sales-incentive plans, and person-focused programs for a given scenario.
Competency 2: Apply compensation theories to formulate a total rewards strategy.
Propose a strategic pay structure for a scenario including the number of pay structures, market pay line, defined pay grades, and pay ranges.
Competency 3: Analyze the influence of job classification systems on compensation programs.
Evaluate the alignment of job classifications to the proposed pay structure.
Competency 4: Communicate clearly, accurately, and professionally in the Human Resource Management field.
Adhere to the rules of grammar, usage, and mechanics.
Reference
Martocchio, J. J. (2020). Strategic compensation: A human resource management approach (10th ed.). Hoboken, NJ: Pearson.
ADDITIONAL INFORMATION
CapraTek Activity
Strategic Pay Structures
Introduction
Email and Documents
Interviews
Voicemail
Email Reply
Email Response
Conclusion
Introduction
Progress on the new manufacturing facility in Mahomet, Illinois is moving briskly and the role of human resources is significant. The executive leadership team is aware that decisions made about staffing and compensation at the front end have the opportunity to be more strategic than reactionary. Your overall responsibility is to create a comprehensive compensation and reward plan for one of the job families found at the Mahomet plant. In this activity, you will gather information about the key tactical and strategic issues that should inform your pay structure.
After completing the activity, you will have:
Met with key stakeholders who discussed compensation strategies for CapraTek and the new division.
Gathered information necessary to making an informed recommendation.
Email and Documents
Subject: Key Issues and Initial Analysis
From: Evelyn Unger, Senior HR Generalist
Thanks again for volunteering to be part of this project – things are moving fast and there is a fair bit of information gathering to be done before we can even start talking about what kind of a compensation approach to recommend.
I’d like you talk to some of our internal stakeholders to get a sense of the key issues we need be aware of. I’ll see who is available to talk with you this week, but in the meantime, I can put some information on your network folder so you can get up to speed on the project. You need to understand the key strategic and tactical issues and how they might differ from previous staffing decisions we’ve made here at CapraTek.
Thanks again for being part of the team. I’m looking forward to hearing your ideas.
Evelyn
CapraTek Intranet
Our Vision
CapraTek will provide excellence in everything we do as we define and deliver technology solutions for tomorrow’s problems.
Our Mission
To measurably contribute to the goals of our customers – both direct consumers and resellers – by providing extraordinary products at a fair and competitive price. CapraTek will focus on enhancing the success of its partners, employees, and investors by enacting the values of teamwork, respect, accountability, integrity, and innovation.
For business customers, we will create value through efficiency, reliability, and flexibility both in our products and our customer service.
For resellers, we will offer unique products that create sales and profit opportunities, including valuable vendor relationships, sales programs, access to credit, and training and development.
Our Values
These are the values that should shape every decision made at CapraTek from the board room to the assembly line.
Teamwork: We work together as a unified team to meet our goals.
Respect: We strive to bring the highest degree of dignity, equality and trust to every interaction with our co-workers, our customers, our shareowners, our manufacturers and our community.
Accountability: We take responsibility for our actions, decisions, and products. We accept our individual, team, and corporate responsibilities and we meet our commitments.
Integrity: We employ the highest ethical standards, demonstrating honesty and fair-mindedness in all our interactions.
Innovation: We consider innovation crucial to our mission and to our ability to continually live our values. We welcome change and the many opportunities that change brings.
Recent News & Announcements
Company Announcement: Alfred! Limited Only by the Imagination
Over the past several months, we’ve achieved tremendous progress with our smart-home project, including acquisition of the Mahomet facility, which will be headquarters for manufacture, delivery and support for the Alfred! system and all associated components. This expansion will support a 5-year growth plan for our wireless capabilities and will build on industry-leading delivery and service capabilities.
CapraTek is well positioned to enter this new market, particularly in terms of creating systems that simplify integration by the average consumer. Our goal is to provide the means for our customers to control whatever aspect of their environment they want, from home entertainment systems to specific lighting needs to security, energy use, and more. The only limitations will be their imaginations… or ours.
Press Release: CapraTek Expands Manufacturing Operations Into Illinois
URBANA, IL (January, 2020) — CapraTek today announced it will expand capabilities for its manufacturing operations with the addition of a 500,000-square-foot building in Mahomet, Illinois, located in the Lake of the Woods Industrial Park. The expansion will be accomplished in phases over the next two years and will include a capital investment of up to $40 million and the addition of up to 300 new, highly skilled jobs. The expansion comes on the heels of the company’s recent $70 million investment to upgrade existing plants in South Carolina and New Mexico.
CapraTek is recognized globally for its tower and server systems, high-end workstations, storage server systems, motherboards, chassis, and server components. CapraTek offers its products through value-added resellers, system integrators, and original equipment manufacturers, as well as through its direct sales force.
“Our continued investments in innovation, combined with expanding wireless technology have fueled the need for more manufacturing space to meet the increasing demand for our products and services,” said Fred Barton, CEO of CapraTek. “We are delighted to expand our operations here in Illinois, which offers a quality workforce, particularly due to the proximity to Research Park and the University.”
Products
ParaCore+
Manufactured: Spartanburg, SC
CapraTek’s ParaCore+ server family is designed for the most demanding workloads, such as email, database and virtual environments. With a sophisticated blend of density, performance, and scalability, ParaCore+ servers deliver cutting edge memory density and performance while consistently supplying the power to support enterprise level solutions.
The ParaCore+ server line allows data centers to achieve and deliver more than was ever thought possible. With a memory capacity that set the industry standard, 24 DIMM capacity, and up to 36 cores, along with scalable I/O capabilities, the ParaCore+ is the system of choice for meeting the ever increasing data processing needs of the business community. Powered by Intel® Xeon® E5-2600 or E5-2600 v2 processors, the ParaCore+ provides the performance our customers demand while still allowing the flexibility to address today’s application needs.
CapraTek’s ParaCore+ technology addresses failsafe issues so that our clients can be confident that their critical virtual environments will be supported. For customers who are running high-performance computing (HPC) application clusters, the ParaCore+ delivers superior computational density and robust processing capability in a sleek half-height form factor.
SwitchBack
Manufactured: Spartanburg, SC
CapraTek’s SwitchBack server solutions are the workhorse of our product line and for good reason. The SwitchBack offers small to medium businesses the reliability and flexibility they need to compete with larger enterprise based companies. With its certified 95% power efficiency, the SwitchBack server solution offers the best Total Cost of Ownership in Performance-per-Watt/per-Dollar. The SwitchBack TQF line is the latest addition to CapraTek’s evolving line of server solutions. The SwitchBack improves cost-effectiveness and reliability, while the flexibility of its modular design makes it an ideal choice customers who demand ease of maintenance and configuration.
The SwitchBack is available in a variety of hot-plug system node configurations, as well as a wide range of memory capacities, hard disk drives, power supplies, front or rear I/O, PCI and networking options and more. Its shared cooling architecture, which allows the system to operate in high-temperature, free-air cooled environments, is a key factor in delivering substantial cost savings and improved TCO. SwitchBack’s versatility makes it a winning choice for a wide range of user environments including:
Data Center
Cloud Computing
Research
File and Storage Server
General Server
Enterprise Server
Human Resource Services
One of the main goals of the Human Resources team at CapraTek is to provide resources that allow employees to focus on and maximize their work and personal lives. This Service Center provides access to policies, training and development resources, and select Human Resources programs.
Policies
Whether you have just joined our staff or have been at CapraTek for some time, we hope that you will find it a place that encourages you to be your best possible self. We consider CapraTek’s employees to be its most valuable resources. Our employee handbook has been written to serve as the guide for the employer/employee relationship.
Training & Development
Your career development is unique to you, and can include:
Developing new skills
Becoming more proficient at your current role
Taking on stretch assignments
Moving laterally across the organization
Advancing within your current department
Shifting to a role outside of your department
Ultimately, your career development is your responsibility. CapraTek leadership, your supervisors and managers, and human resources professionals collaborate to support and guide career development activities.
Career development is more likely to happen when there is an overlap between the needs of the organization and your skills, experiences, interests and education within the context of industry and economic forces.
Benefits & Compensation
This page is being updated to reflect changes to our benefits and compensation packages.
Employee Handbook
Policies
Accommodating Disabilities
Attendance Guidelines
CapraTek Communication Policy
Code of Business Conduct
Disability Policy for Staff
Dress Code
Drug and Alcohol Policy
FMLA
Holidays and Holiday Pay
Identification Badge Policy
Information Security Policy
Paid Time Off (PTO)
Sexual and Other Unlawful Harassment
Social Media Policy
Locations
Sunnyvale, CA
Capratek HQ
CapraTek’s headquarters is located in the heart of Silicon Valley in Sunnyvale, California. Within the Sunnyvale facility, approximately 6,000 sq. ft. is dedicated laboratory and controlled environmental areas for research, prototyping, and limited production. This includes areas designated for incoming component testing and qualification, in-process production, final product assembly including packaging and labeling, and testing. The customer service and quality assurance functions are also located in our headquarters.
Spartanburg, SC
Manufacturing Plant
Download Spartanburg Org Chart
The company’s first manufacturing facility Spartanburg, South Carolina now focuses on producing the Switchback and ParaCore+ products. Employing approximately 300 employees, the Spartanburg plant is ISO 9001 and ISO 13485 certified, as well as being ITAR and FDA compliant.
Gilbert, NM
Manufacturing, Delivery and Support
The Gilbert plant is responsible for manufacture, delivery, and support for our Concerta and Interlude server line. The 72,000 square foot facility houses a state-of-the-art electronics manufacturing operation and employs over 350 highly skilled workers. The Gilbert plant is ISO 9001, ISO 13485, and ISO 14001 certified as well as being ITAR and FDA compliant.
Mahomet, IL
Manufacturing, Delivery and Support
CapraTek’s plant in Mahomet is a 500,000-square-foot facility located in the Lake of the Woods Industrial Park. The facility will be the center of operations for manufacture, delivery and support for the Alfred! smart home technology system. When the facility is operational, we anticipate up to 300 employees will work there.
MAHOMET, ILLINOIS FACT SHEET
Timezone: Central Standard Time
Postal Code: 61853
Area Code: 217
Mahomet Median Age: 37.5 years
Illinois Median Age: 38 years
US Median Age: 38.1 years
Mahomet Median Household Income: $97,621
Illinois Median Household Income: $62,992
Mahomet Average Male Salary: $71,579
Mahomet Average Female Salary: $52,403
Mahomet Illinois
Population in 2018: 8,628 12,741,080
Population in 2017: 8,506 12,786,196
Population in 2016: 8,294 12,826,895
Highest Paid Occupations: Computer & Math Physicians & Surg.
Most Common Occupations: Health Care Food Svc.
Mean Travel Time to Work (minutes): 21.7 28.1
Average Range Property Tax: $3K+ $3K+
Median Value of Owner-Occupied Homes: $220,900 $195,300
Households: 2.94K 4.81M
Median Household Income: $97,621 $62,992
Poverty Rate: 4.87% 13.5%
Interviews
Gloria Shaw
Director of American and European Sales
Do you think the pay structure for the Alfred sales force should be the same as the rest of CapraTek?
Well, it would be easier for everyone, but no, I don’t really see that as being a good approach. For one thing, commissions for our existing product lines are based on gross profit. That makes sense for server systems, but not so much for a consumer item like the Alfred controller. I expect that we’re going to go with some kind of revenue-based system that can also reward people for advancing objectives such as increasing our market share and establishing brand awareness.
What should we be considering in designing an effective compensation strategy?
This is something that I think often falls through the cracks, but when you design the plan, consider ways to ensure that it is updated on a regular basis. We’re starting out in this market, so targets and goals need to reflect that – now. But, what about next year or even six months from now?
Whatever the plan, salespeople want a challenge, particularly when we’re talking about our younger sales people from Gen Y. There should be a base salary, but the incentives should be meaningful to a person’s bottom line and shouldn’t be too easy to get or too difficult. But, a lot of this will need to be worked out with the sales managers. That’s a large part of their job – helping to determine what the goals are for each member of the sales team and ensuring that the sales goals truly are stretch goals – attainable, but only with effort.
Ashlei Smith
Director of Compensation and Benefits
What alternatives to a traditional merit pay system should we be considering?
There are some strategies that you might want to consider, particularly for the production workers. Skill-based pay – a variation on person-based pay – might be an interesting way to make sure that line workers in the manufacturing process are more versatile. For example, let’s say there are 10 different tasks on the manufacturing line and the supervisors want the greatest flexibility in making work assignments, then it would be effective to have most or all employees able to work on any of those tasks.
You could base the pay on the number of tasks a person is able to do. Someone starting at entry level would start at the bottom trainee rate and then progress to the highest rate when they’ve been signed off on all 10 tasks. Obviously, you have to make sure that everyone has an equal opportunity to be trained in the different tasks and to be evaluated, but this does offer both employees and the organization benefits. Pay tends to go up under this sort of system, but because it also offers the plant managers more flexibility around workflow, payroll costs can often be kept down.
What other pay structures are out there?
Well, there is the broadband pay structure, which, I’ll say right now, I wouldn’t recommend. The basic idea is that you have fewer ranges in the pay grades, but with a significantly broader range between minimum and maximum. The main idea is that the spread is wider and you don’t see the kind of overlap with other pay ranges that you’d see in a traditional job grading plan.
Another strategy, you see this in the airline industry a lot, is a two tiered approach. In that strategy, you’re putting together a pay system for newly hired workers that is lower than the system for senior employees. These systems can be permanent or temporary. In the latter, employees can progress into the higher tier. In the former, they are always on separate tracks. Generally, you see these kinds of plans in union settings and they are a way to bring labor costs down and usually the organization agrees not to impose layoffs. Usually, these plans are seen as having some significant down-sides for a company. They can become a barrier to recruitment and they can contribute to tension and resentment between the different groups of employees. Some companies find the lower-paid workers do just what is required and nothing else. It can get ugly.
Jason Lin
Director of Asian Sales
Do you think the pay structure for the Alfred sales force should be the same as the rest of CapraTek?
No, not at all. The best compensation plans are closely aligned to the business objectives. Selling computer servers requires the sales person to function in an environment where our customers are making a major purchase that will be integrated at the core of their own business and where our product quality, customer support, and reputation are key drivers. The sales person has limited impact in that kind of a sales environment and our salary structure of 80% base pay and 20% commission reflects that. Alfred will be a completely different kind of sales and as such, the plan should be more appropriate to a retail environment and a different set of business drivers.
What should we be considering in designing an effective compensation strategy?
The plan should be tied clearly and thoughtfully to the business strategy for Alfred. The way to do that is to make sure that the performance measures – the things that earn salesperson incentives – are clearly, observably, and logically aligned with business objectives. Sales people are motivated by getting rewarded for performance, so we need to define very clearly to ourselves what that means in terms of the Alfred line. Do we want sales above all else, or are there other factors that are also important? I don’t know the answers, mind you, but these are the questions you need to ask.
Peter Kennedy
Director of New Product Development
What are you looking for in a pay system?
Call me old-fashioned, but I want to see people getting rewarded for performance. It makes sense to reward the employees who make the greatest contribution to the organization. It’s fair and it’s in our best interest, because it helps us retain the best employees.
What problems do you see in the rewards system at CapraTek that you would like to avoid with Alfred?
Whatever we do, we need to make sure we think it through. Employee engagement is going to be a critical factor in the success of the Alfred division and a haphazard approach to compensation and other rewards could undermine that engagement. We need to know what we’re trying to do and have all the pieces in place when we roll it out. No improvising.
Voicemail
From: Evelyn Unger
I wanted to check in with you to see how your interviews went, but I am going to be in training for the rest of the day. Would you please shoot me an email summarizing what you learned in your interviews today? I’m interested in hearing your thoughts on how the information you gathered will shape the recommendations you’re putting together. Nothing fancy required–just giving me your initial thoughts.
Email Reply
At this point, you should write Evelyn an email letting her know the insight you gained from your interviews and how that will guide your recommendations.
Your Email Response:
This question has not been answered yet.
Email Response
Subject: Re: Mahomet Compensation Plan
From: Evelyn Unger, Senior HR Generalist
Looks good! I am looking forward to seeing how all this fits into the pay structure you recommend.
Thanks for all your hard work.
Conclusion
Activity Complete!
You have completed the CapraTek Strategic Pay Structures activity, which allowed you to obtain some vital information about the expectations key stakeholders have for the pay structure you will create for the Alfred division.
Based on your completion of this activity, you should be able to:
Describe how the total rewards system impacts an organization.
Create a pay structure for an organization or division.
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