Case Study

Case Study

8

Case study, Nutriment’s New Hires

The most important aspect of a hiring process in a new organizationis the development of a compensation structure. Although it is also acritical process in existing organizations, it is relatively easybecause some compensation structures already exist. Additionally, itis important to adopt an appropriate pay policy that will make theorganization more attractive to the desired employees. This paperlooks at the compensation structure and the pay policy that is moreappropriate for Nutriment Biotech.

Compensation structure

The compensation structure adopted by Nutriment Biotech will havehuge impacts on its ability to access the most desirable employees.The labors markets favor the company in the recruitment ofadministrative and support staff. Therefore, it would be relativelyeasy to develop a compensation structure for employees in thiscategory. However, the highest number of employees required in theorganization is biotechnology scientists. To access this category ofemployees, a more strategic approach is necessary in determiningtheir proposed pay. According to Gerhart and Rynes (2013), a welldesigned compensation structure has the ability to promote thedesired behaviors and plays a critical role in the implementation ofthe organizational strategies. Additionally, the compensationstructure will influence the number of qualified individualsinterested in the job offer. However, it is important to note that inaddition to the expected pay, there are other factors that are likelyto put off potential employees, such as the work ethics, geographicallocation and the nature of the working environment. The recruitingexpert needs to establish the needs of each of the position and theirvalue to the organization before developing a compensation plan.According to Gerhart and Rynes (2013), the ability of theorganization to match the compensation systems and the businessstrategies can influence the effectiveness and thus the success of abusiness organization. There are several factors that have a directinfluence on the compensation structure adopted by the organization.Some of these factors are either organizational based or individualemployee’s based.

One of the most important strategic considerations in developing anattractive compensation structure is the organizational factors. Thisincludes all factors that are within the control of the organizationthat have a direct or indirect impact on the level of compensation.Before establishing a working compensation structure, the hiringexpert need to conduct an analysis of the internal organizationalfactors that are likely to have an impacts on the expected or themost attractive pay structure. An important strategic considerationis the size of the organization. Generally, the level of compensationvaries when larger organization is compared to relatively smallerorganizations. Huge organizations have economies of scale and have ahigher level of compensation compared to smaller organizations. Additionally, compensation in larger organization increases morerapidly compared to smaller organization. As a result of thesefactors, highly qualified and experienced employees tend to preferlarger organization. On the other hand, smaller organization finds itsignificantly difficult to attract and retain qualified personnel. Nutriment Biotech is a relatively new and small organization seekinghighly qualified and experienced biotechnology scientists. Theorganization will be competing with bigger and more establishedorganizations for the few available experts. The compensationstructure adopted should take into consideration this importantfactor (Gomez-Mejia, 2014). According to Alkadry (2004), theprocurement volume of the organization has an impact of thecompensation structure. In many organizations, the level ofcompensation is closely related to the amount of work done. Theamount of work done is directly proportional to the organizationalbudget. Therefore, procurement volumes within a particular perioddictate the level of compensation (Ogden et al, 2002).

Another strategic consideration that is necessary in hiring expertsand support staff at Nutriment Biotech is the geographic factors.Generally, geographical factors have an impact on salaries and wages.The cost of living and essential needs such as housing varies fromone geographical area to another. Human resources experts use thesegeographic differences in the development of compensation structures.The cost of living is one of the most important factors thatinfluence the level of compensation demanded by potential employees.According to Alkadry (2014), the compensation structures in theimmediate geographic region will have an influence on thecompensation levels adopted by an organization. For example, in ageographic area which is less attractive to highly demandedemployees, the employers are more likely to use higher levels ofsalaries to attract more potential employees. Employees are alsolikely to demand higher compensation in these geographic areas.Therefore, in determining the compensation structure, NutrimentBiotech should consider its geographical location and relatedfactors.

There are also individual employees’ factors that need to beconsidered in the development of the compensation structure. Forexample, Nutriment Biotech seeks to hire both highly skilledscientists as well as administrative and support staff. Theseindividual employees will have different levels of responsibility.According to Staff (2001), the compensation level is directlyinfluenced by the responsibility of the individual. Employees withhigher supervisory and professional responsibilities have highercompensation potentials. Employees with higher number of subordinatestaff have higher levels of compensation. In the case of NutrimentBiotech, the most important individual factor that has a directinfluence on the level of compensation is the responsibilities of theemployee. For example, senior scientist and researchers will havedifferent compensation levels with research assistant. Otherconsiderations those are likely to have a direct impact oncompensation structure include previous experience of theprofessionals and the level of education. Although the significanceof level of education reduces significantly while that of experienceincreases, both have a direct influence on compensation levels.Individuals with higher levels of education as well as moreexperience are more likely to assume more responsibilities. Thistranslates into higher levels of compensation.

According to Yanadori et al (2006), human resources experts tend todevelop compensation programs that consider the level of importanceand contributions of an employee in the organization. Strategically,the compensation structure of Nutriment Biotech should consider whatevery employee will contribute to the success of the organization.The company seeks to recruit scientists as well as administrativesupport staff. This means that a different compensation structurewill be developed for the different categories of employees.

Pay policies

Jack as a human resource expert has three options to suggest toNutriment Biotech. He can suggest a “match the market” strategywhere Nutriment Biotech would adopt a compensation policy which iscomparable to the market rates. The company can also adopt a “lead’the market strategy by offering higher compensation compared to themarket rates. Another option would be “lag the market” byadopting lower rates compared to the market rates (Sturman &ampMcCabe, 2006). I would recommend that Nutriment Biotech adopt bothlead the market and match the market strategies in the compensationstrategy.

In developing the compensation program for the more skilled andexperienced biotechnology scientists, I would recommend a led themarket pay policy. Although there are few companies in agriculturalbiotechnology sector, Nutriment Biotech access to highly trained andexperienced scientists is an important human resources challenge. Itis a challenge to find ten scientists with the required expertise andexperience. Nutriment Biotech faces intense competition from otherbiotechnology firms, research institutions and universities. However,the compensation policy such as lead the market is likely to attractmore potential candidate. Lead the market policies are moreappropriate for very competitive labor market. Lead the market willinvolve offering compensation package that is more attractivecompared to the current market rate. The attractiveness of thepackage will increase the number of candidate and rate of qualifiedcandidates. Additionally, the policy will reduce unnecessary cases ofemployee turnover, prevent unionization of workers and increaseproductivity (DeYoung, 2013). It is important to note that highlyskilled and experienced scientists and other highly rated employeesare only willing to switch jobs if there is a genuine reason to doso. A more attractive compensation package is likely to motivatescientists to develop interests in Nutriment Biotech. However, thiscompensation policy may attract undesirable reactions from thecompeting institutions.

On the other hand, a match the market policy will be appropriate forthe administrative support staff. This is because the labor market inthis category is not very competitive. Match the market is one of themost commonly used compensation strategies. This strategy isrecommended because it is cost effective and can effectively managelabor costs. However, maintaining a competitive working environmentwould be essential in attracting and retaining highly skilled andexperienced workers (DeYoung, 2013).

Conclusion

The compensation structure and the pay policy adopted by NutrimentBiotech will significantly impact on the ability of the organizationto attract the experienced and skilled workers. The success ofNutriment Biotech is dependent on its ability to attract and retainbiotechnology scientist. The HR consultant need to guide theorganization towards the adoption of a strategic compensation and paystructure that considers all the necessary factors.

References

ALkadry, M. (2004). “Drivers of compensation of heads ofprocurement units, supervisors and material managers in the publicsector.” Journal of Public Procurement, 4(1), 1-21.

DeYoung, R. et al. (2013). “Executive Compensation and BusinessPolicy Choices at U.S. Commercial Banks”, Journal of Financialand Quantitative Analysis, 48(1), p 165-196.

Gerhart B. &amp Rynes S. L. (2003). Compensation: Theory,Evidence, and Strategic Implications. Thousand Oaks, CA: Sage.

Gomez-Mejia, L. (2014). Compensation and OrganizationalPerformance: Theory, Research, and Practice, ISBN 1317473965,Routledge.

Ogden, J. et al (2002). “Factors that influence chief purchasingofficer compensation”. The Journal of Supply Chain Management,37(3), p 30-38.

Staff (2001). Who gets paid most. Purchasing, 130(23), p15-18.

Sturman, M. &amp McCabe, D. (2006). Choosing whether to lead, lagor match the market. The scholarly Common. Cornell University.

Yanadori, Y. et al (2013). Organizational Pay Mix: TheImplications of Various Theoretical Perspectives for theConceptualization and Measurement of Individual Pay Components,Ithaca, NY: Cornell University, School of Industrial and LaborRelations, Center for Advanced Human Resource Studies.