Business Human Resources And Worker Term Paper

Length: 15 pages Sources: 10 Subject: Business Type: Term Paper Paper: #33674572 Related Topics: Toshiba, Workers Compensation Law, Executive Compensation, Business Theory
Excerpt from Term Paper :

S. jobs, or approx. 25% of its employees, overseas by end of 2004. The plan is to ultimately move EVERY job that supports an internal account. I also hear they are behind schedule at the moment.

Certainly, this is a very significant proportion of the computer giant's American workforce. Yet, IBM's management justifies such drastic demographic changes by appealing to the humanitarian side of the globalization debate.

It's not about one shore or another shore," an I.B.M. spokeswoman, Kendra R. Collins, said. "It's about investing around the world, including the United States, to build capability and deliver value as defined by our customers.

And to further emphasize their socially-redeeming values,

Executives at I.B.M. And many other companies argue that creating more jobs in lower cost locations overseas keeps their industries competitive, holds costs down for American consumers, helps to develop poorer nations while supporting overall employment in the United States by improving productivity and the nation's global reach.

To be sure, the above statements represent the corporate party line when it comes to globalization and staff restructuring. But do these same assumptions promote the greater happiness of those already employed, or yet to be employed?

As previously stated, the proper rewarding and compensating of employees is essential to maintaining a profitable organization. Employees who feel they have no job security, fear for loss of benefits such as retirement packages and medical insurance, or who in other ways are dissatisfied with the potential for change, will not be fully productive members of the organization. These issues bring to the fore the potential conflicts between corporate mission statements and business strategies, on the one hand, and the genuine needs and concerns of personnel, on the other. Compensation, taken in terms of salary and non-monetary incentives, is a powerful tool in encouraging worker loyalty and productivity. A study by Stevens and Hill (2001) focused on executive compensation in large organizations. According to the research,

They found that low performing firms use higher fixed salaries and fewer incentives while high performing firms use lower fixed salaries and a greater percent of overall compensation is incentive pay. This would suggest that higher performing firms are using various forms of incentive compensation such as cash incentives, noncash incentives, and benefits and perks more than low performing firms.

Companies that try to cut corners, or to cut back on salary and other incentives, as a way of showing that costs are just to high in their usual place of business may be creating the very conditions they claim to be trying to avoid. Since the onset of globalization, a common complaint has been the lack of skilled workers in many developed countries, and their corresponding availability, and low-cost, in developing nations. Yet, by cutting back on benefits packages, and holding down salaries, many large businesses in the developed world are also undercutting their employees' performance. A working who is not regularly receiving decent raises as a reward for work well done, or who sees his or her other benefits being cut away is not likely to be the model loyal employee. Nor is that same individual likely to go the extra mile toward serving the corporate mission and business strategy. The less well employees are compensated the more likely are they to be unproductive; to participate in the creation of the very situation that employers' claim drives them to eliminate these incentives and seek qualified help elsewhere.

Another major problem in terms of employee compensation concerns employee perception of how compensation is awarded; whether that compensation is awarded fairly or in accordance with a clear plan or strategy. To listen to the mission statement of an IBM, one would get the clear impression that business strategy is focused on rewarding outstanding service to the company and its goals. Recent years have witnessed a considerable outcry regarding companies that have offered their executives enormous compensations packages while at the same time denying similar, though scaled, rewards to employees. In many cases, companies have actually laid-off thousands of workers, or cut their benefits, while giving multimillion dollar awards to high-ranking executives. Furthermore, executives have at times been granted huge compensation...


They have even received these compensation packages even in cases where they have actually been dismissed on grounds of poor performance. According to one theory, an individual's compensation correlates directly to set spending patterns that are relatively constant during the course of an individual's life:

That is, while actual income levels vary considerably throughout a person's lifetime, consumption is a smoother function because it is based on average expected, rather than actual current, income. To illustrate, receiving a $500 windfall gain will not entice an individual to immediately purchase a $500 consumption good. Rather, after receipt the individual's annual spending is predicted to increase by a fixed proportion of the long-term value of $500, such that the value will be completely consumed by the time of death. The actual immediate consumption of any given windfall will be limited and would differ depending on the age of the individual.

Companies believe that, by paying executives at exorbitant rates, they are somehow contributing both to the good of the company and to the greater good of society. The idea is part of a kind of trickle down theory of economics in which, in the particular case of corporate consumption and compensation, could be seen as setting a model of performance for lower-level employees. Apparently, ordinary employees are supposed to take from all this, the lesson that, if they perform well enough, they too will rise to the level of the executives, and that they too will be rewarded with compensation out of all proportion to their value to the company. Nonetheless, the above ideas show that enormous increases in compensation will not lead directly to enormous increase in productivity, or net worth. The executive who receives compensation far out of proportion to his performance does not give it back to the company by performing better, he or she merely keeps the extra money and goes on performing like before. Compensation is an incentive. In the general marketplace, it is an incentive to buy goods or services, whereas in the realm of human resources it is an incentive to remain loyal to the company's mission and business strategies and to continue to be productive... And if possible, more productive than before. The message sent to ordinary employees by outsized executive compensation packages is that poor performance is rewarded, while steady, even exemplary effort, is at best, compensated at far-reduced rates.

As shown also by the above theory on the correlation between compensation and consumption, pay rates must also correspond to actual needs and expected expenses. Many employees are no longer receiving compensation at rates that keep up with cost of living increases. The amount a typical employee expects to spend must correlate somehow with the amount she or he expects to receive, yet the compensation of many of these employees does not permit even an even rate of consumption over time. Corporate executives on the other hand are frequently awarded in creases in compensation that are out of all proportion to any increase in the cost of living - even at their accustomed standards of living. A more sensible approach for both employees, and management, would consist in linking compensation to various specific goals; goals that encourage the goals of employee loyalty and performance. One example of an employee compensation package that takes into account all areas of concern to both the employee and the firm is to be found at Meyners and Co.

The new compensation program includes a yearly salary increase that reflects a cost-of-living adjustment (COLA) and three bonus pools. It calls for the firm to evaluate employee performance in three areas: core values (workplace behavior), core competencies (business skills) and meeting goals (performance-measures win-win agreements). Early indications are that the individualized evaluation process is motivating employees. Janet McHard, CPA and manager in the litigation and business valuation services department, says the new system helps underscore what the firm values. If you contribute, not only will your efforts be recognized, but "you'll be compensated for having worked hard to meet those goals," says McHard.

The new system imparts to workers the sense that they are individuals working together as a team toward specific goals. Productivity is enhanced because each worker knows that he or she is being evaluated in the same way as any other, and that concrete benefits are the reward of good performance. Annual cost of living increases guarantee that workers will be able to maintain their living standards - that is, their consumption patterns - regardless of inflation or other increases in the price of necessary goods and services. Unlike corporate executive packages that often neglect regular workers' needs, this plan provides for those employees and establishes the sense that the firm cares for them…

Sources Used in Documents:

Works Cited

About IBM." (No Date). URL:


Brotherton, Phaedra. "Meyners Pays for Performance: Changing a Compensation System Is a Sensitive Undertaking. Here's How One Firm Handled it." Journal of Accountancy 196.1 (2003): 41+.


Cite this Document:

"Business Human Resources And Worker" (2007, March 25) Retrieved June 17, 2021, from

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"Business Human Resources And Worker", 25 March 2007, Accessed.17 June. 2021,

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