On the other hand, organizations that focus on external equity enjoys the advantage of attracting and retaining highly qualified employees. Similarly, the rate of staff turnover is extremely minimal as the staffs remain aware that their organization is offering compensation packages, which are streamlined accordingly with the compensation in the market. However, insisting on the external equity bears also some disadvantages. For instance, by focusing on the prevailing market compensation, an organization whose economic state does not support such pay package ends up hurting its operations. Similarly, resentment within the top brass, such as CEO's and other managers may crop due to inequality dictated by the conditions in the market (CCH, Incorporated and Myers, 2003).
It is worth noting that a given organization may resort to choose a definite compensation plan depending on its objectives. For instance, Intel chose internal equity plan which is in accordance to its objective of harmonizing...
As regards to the financial state of this organization, this plan has effectively worked to their advantage bearing in mind that this industry exhibits cut-throat competition. Choosing an alternative plan would imply that the company would be operating at uneconomical scale. On the other hand, Coca Cola Company preferred external equity basing on its objective of streamlining its packages relative to prevailing conditions in the market, geographical location and the size of the organization. As regards to the economic situation of the company, the plan has worked effectively as Coca Cola generates a lot of revenue to pay for hefty packages in the market.
References
CCH, Incorporated and Myers, D.W. (2003). 2004 U.S. Master Human Resource Guide. New York, NY: CCH Incorporated.
Armstrong, M. (2007). A Handbook of Employee Reward Management and Practice. New York, NY: Kogan Page Publishers
