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Compensation at Wal-Mart

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Research Wal-Mart. Discuss the compensation philosophies and approaches that have been used at Wal-mart. Discuss the nature of the product or service provided. Answer the following questions related to that system:

- Were they market based, or internal equity based?
- Were they competency-based to help you grow and develop? Based on the use of some formal job evaluation system?
- Was there a team performance component included?
- How were base salaries typically set?
- Was it a performance based system? Based on seniority? Based on across the board increases for everyone? Based on cost-of-living increases only? Based on lump-sum approaches or a bonus?
- Did it include a variable pay component (incentive system)? A piece rate system? A profit sharing a stock ownership component?
- Were supervisor ratings used or peer and/or self-appraisals? Were 360-degree approaches used? Or was the system based on a combination of some of these factors?
- How were executives paid? Were their total packages based on salaries, bonuses, long-term performance-based incentives, or other benefits and perks such as a "Golden Parachute")?
- Finally, what were the consequences of these philosophies and approaches? Do you think they helped the organization complete its strategic objectives or

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Solution Preview

Wal-Mart's compensation plan is based on internal equity compensation approach. In internal equity based compensation, organization rewards or compensates the employees fairly according to the relative value of their jobs within organization. On the other hand, market based compensation is a method of utilizing market pay data for evaluating organization's pay level and then decide the compensation of employees (Baldwin, 2003). Wal-Mart provides fair compensation to its employees based on their performance and contribution to the company to attract and retain skillful employees. In addition, Wal-Mart conducts the annual review of the performance of the company management and employees to reward them. Wal-Mart considers several factors such as skills level, the efforts, responsibility and working condition of employees, while compensating them (Wal-Mart Stores, Inc, 2012). Company focuses on internal equity based compensation to provide fair compensation to management, executives and employees. Internal equity based compensation encourages employees to perform well and increase contribution in organization that can help Wal-Mart to compete in the market.

Competency Based Pay Philosophy
In competency based pay, organization pays its employee on the basis of their skills, knowledge, capacity, and behavior rather than the position they hold. It is an effective approach to address organizational needs to motivate employees and support organizational strategies (Caruth & Handlogten, 2001). Wal-Mart uses competency based philosophy to compare job or performance of employee through using job evaluation factors such as effort, skill and responsibility. According to this system, Wal-Mart pays reward to employees on individuals based such as their ability to perform tasks. Competency based pay system encourages employees to become a high achiever that can help Wal-Mart to grow and improve its performance (Walmartwatch.com, 2007). In this system, employees must apply certain skills and competency that can be beneficial for it to achieve strategic goals.

Compensation Based on Individual Performance
Wal-Mart cannot include team performance components into the competency based pay system because company philosophy is based on individual pay performance related system. The philosophy of Wal-Mart pay system is based on individual competencies that ...

Solution Summary

This solution discusses the following pay issues/concepts at Wal-Mart: competency-based pay philosophy, compensation based on individual performance, employee salaries base, performance-based system, performance appraisal approach, executive compensation strategy, and compensation practice effectiveness. This solution is 1125 words with nine references.