MGMT 210 Week 7 Discussion 1

MGMT 210 Week 7 Discussion 1 | Devry University

Week 7: Compensation

The Hotel Paris’s competitive strategy is “To use superior guest service to differentiate the Hotel Paris properties, and to thereby increase the length of stay and return rate of guests, and thus boost revenues and profitability.” HR manager Lisa Cruz must now formulate functional policies and activities that support this competitive strategy by eliciting the required employee behaviors and competencies.

Like several other HR systems at the Hotel Paris, the compensation program was unplanned and unsophisticated. The company has a narrow target range for what it will pay employees in each job category (front-desk clerk, security guard, and so forth). Each hotel manager decides where to start a new employee within that narrow pay range. The company has given little thought to tying general pay levels or individual employees’ pay to the company’s strategic goals. For example, the firm’s policy is simply to pay its employees a “competitive salary,” by which it means about average for what other hotels in the city are paying for similar jobs. Lisa knows that pay policies like these may actually run counter to what the company wants to achieve strategically, in terms of creating an extraordinarily service-oriented workforce. How can you hire and retain a top workforce, and channel behaviors toward high-quality guest services, if you don’t somehow link performance and pay? She and her team therefore turn to the task of assessing and redesigning the company’s compensation plan.

Even a casual review by Lisa Cruz and the CFO made it clear that the company’s compensation plan wasn’t designed to support the firm’s new strategic goals. For one thing, management knew that they should pay somewhat more, on average, than did their competitors if they expected employees to consistently exceed expectations when it came to serving guests. Yet their review of a variety of metrics (including the Hotel Paris’s salary and competitive salary ratios, the total compensation expense per employee, and the target percentile for total compensation) suggested that in virtually all job categories, the Hotel Paris paid no more than average, and occasionally, paid somewhat less.

The current compensation policies had also bred what one hotel manager called an “I don’t care” attitude on the part of most employees. What she meant was that most Hotel Paris employees quickly learned that regardless of what their performance was, they always ended up being paid about the same as employees who performed better and worse than they did. So, the firm’s compensation plan actually was dysfunctional: It was not channeling employees’ behaviors toward those required to achieve the company’s goals. In some ways, it was doing the opposite.

Lisa and the CFO knew they had to institute a new strategic compensation plan. They wanted a plan that improved employee morale, contributed to employee commitment, reduced employee turnover, and rewarded (and thus encouraged) the sorts of service-oriented behaviors that boosted guest satisfaction. After meeting with the company’s CEO and the board, the CFO gave Lisa the go-ahead to redesign the company’s compensation plan, with the overall aim of creating a new plan that would support the company’s strategic aims (Dessler, 2015, 385–386).

Lisa knew little about setting up a new compensation plan. What would you tell her if she asked, "How do I set up a new compensation plan for the Hotel Paris?"

Dessler, G. (2015). Human resource management (14th ed.). Boston: Pearson Learning Solutions.