Compensation and pay structures that support effective employees

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Compensation structures of an organization influence market factors, such as revenues, market

share attained, and overall success. Often, the strategy to recruit, motivate, and retain employees is

based on what competitors in the industry are offering. However, the most successful companies look

inward, toward their own objectives and targets, to develop sound strategies for recruiting and retaining

employees who will help the company succeed. If employees are expected to contribute, they must

believe they play an integral part in shaping the outcomes for the organization. If the organization

looks beyond the current pay rate which is standard for a certain type of worker, and bases pay and

benefits on the value the employee should bring, the employee is more likely to live up to the

organization's expectations.

Costco, a membership retailer, competes mainly with Sam's Club and BJ's Wholesale Club.

However, Costco has become the leader in this retail industry, by considering how to get the most

from employees and how to show employees they are valued. Costco's sales revenues continue to

grow annually, at 5%, compared to WalMart's 1.4% (Ungar, 2013). Sam's Club prices are generally

lower in several categories. However, Costco experiences greater customer loyalty, which contributes

to growth over time. Many repeat customers assert Costco's customer service is at least adequate.

Sam's Club customers service is lacking or is unresponsive, according to Ungar (2013). Cuts in the

number of employees and cuts in hours make it difficult for customers to find the help they need, when

they need it. Sam's Club employees make an average of $4 to $5 an hour more than Sam's Club

employees. They contribute only 8% of the cost of their health benefits, while Sam's Club employees

pay over 30%. It is believed that these factors contribute to high turnover at Sam's Club and lower

than average turnover at Costco.

High turnover affects revenues, as organizations focused on always replacing employees pay

higher costs in recruitment efforts and in replacing employees. High turnover affects morale of

remaining employees, which can negatively affect productivity and motivation. Low motivation, in

turn, can lead to poor customer service. Willingness to help customers helps maintain customer
loyalty (Deeb, 2014). Costco employees are likely more wiling to help customers and have a higher

level of motivation, as their physical needs are more closely met with the benefits and compensation

package.

Pay structures, within most organizations, is based on experience, level of responsibility, and

performance. It should not be based on any single factor, because a pay structure based on a single

factor, such as experience or level of responsibility, does not help promote the best performance.

An employee that is motivated to perform, takes an active role in his or her duties. The interest level

in making a contribution to the organization's strategy is high. Pay should be linked to performance,

to send the message that performance is important to the organization. ...