Compensation Practice and Plan Term Paper

Excerpt from Term Paper :

Compensation Practice

Ford Motor Company

Henry Ford established the Ford Motor company in the year 1903. This was done with the help of eleven other business associates at a time when there were eighty seven other motor companies in the U.S. Before Henry Ford got into the motor business, cars were very expensive and were considered as luxury possessions and that only the wealthy minority could afford them. What set Ford apart from other car manufacturers was his realization that by employing the needed technology, he could make cars for the general public and at a price they could afford. By increasing efficiency, Ford produced a higher number of cars while charging a lower price for them. This propelled Ford to massive success in the car manufacturing business. The revolutionary model "Tin Lizzie" popularly known as "T" was launched in 1908 following twenty years of experiments. With a 20-horsepower, an ability to cruise at 45 mph, side-valve four-cylinder engine plus two- speed planetary transmission resting on 100-inch wheelbase, it was one of the most powerful cars on the road. The car's fuel efficiency saw it consume a gallon of gasoline for every 25 miles. Ford's revolutionary innovations were not limited to the cars. Ford literally changed the car manufacturing landscape. An introduction of a conveyor belt that moved at his manufacturing plant in Highland Park greatly increased production. Ford made 308,162 cars in 1914. This was more than was made by all the other car manufacturers combined thereby establishing Henry Ford as the inventor of mass production. Ford, in 1917, was the pioneer of manufacturing complexes where different stages of manufacturing can take place seamlessly under the same roof. In the same year, Ford began making tractors and trucks. Ford family gained complete control of the company in 1919 when a conflict saw him go separate ways with the other stockholders. (Kotzegger, 2010).

The automobile was not an invention of Henry Ford. What Henry Ford did was transform this little known invention into a great innovation so significant that it shaped a whole century and still affect the 21st century. The introduction of the Ford Model T. On October 1, 1908 would see the launching of one of the most influential and famous products in American business history. At the time Ford stopped producing the model in 1927, the model had changed forever the American society and made Ford Motor Company fortunes. What made Model T. so successful was Henry Ford's ability to figure out what the general American population wanted in a car and avail such a product at an affordable price (Casey, Dodge & Dodge, 2010).

From its inception, the company has found its place in the car manufacturing business, being acclaimed as one of the best in the world. Ford's distribution and manufacturing operations can be found in not less than 200 markets spanning 5 continents. The company's primary operations are based in the United States and also Europe supported by ninety five manufacturing plants around the world. With 246, 000 employees, December 2007 count, the company has its headquarters in Dearborn, Michigan and earned revenues amounting to $172, 455 million in the financial year ended December 2007. This was a 7.7% growth over the earnings recorded the previous year. In the fiscal year 2007, the company recorded a $5,631 million operating profit, an improvement over 2006's $8, 190 million operating loss. In 2007, the net loss recorded was $2,723 million. The company had recorded a $12, 613 net loss in 2006. (Kotzegger, 2010).

For five consecutive years, Ethisphere Institute has recognized Ford Motor Company as one of the most ethical companies in the world. Ethisphere Institute, a notable think tank, promotes ethics in business, fight against corruption, sustainability and social responsibility. Ford is the only car manufacturer to be honored in 2014 and is among a handful of companies to be honored five times. The selection is made from among 144 different companies shortlisted from thousands of other companies around the world. Ford's governance, CSR and exemplary business practices earned it the award (Ford Motor Company, 2014).

Ford has the highest number of dealers belonging to minority groups in the country. Its African-American dealers outnumber those of other car makers combined. Ford also gives more business to minority group in terms of purchases than any other company does. Ford has given more support to organizations advancing interests of minority groups in recent past. The company has increased its donations to charity as concerns education, arts and humanities, welfare, health focusing more on activities that encourage diversity. Ford has created an inclusive culture since they appreciate this diversity and also to make sure that they are in possession of capable personnel to achieve this. In such an environment, every person is welcome, given support and respect and also inspired to contribute significantly and be a success. (Padilla, n.d.).

Ford has 350,000 employees and has operations in not less than 200 markets globally spanning six continents. Its process aptly called Best- Practice Replication is licensed and has been a huge success since the mid-1990s. The process is defined yet rigorous and measurable and has helped establish the means to gather and take up on practices which can be passed and applied across the board in the company. Characterizing theBest-Practice Replication Process are the following three activities (Ford Motor Company, 2003).

Capture practices that are valued and proven to work;

Qualify or quantify the value addition to the company; and Have the process managed using reviews by management, deployment of policy and real-time status and reports.

Among many other factors that caused the financial crisis beginning 2007 was practices relating to compensation. Disregard to risk was also a contributing factor to the obscene compensation amounts in the financial industry. These wrongs are reason enough for action to be taken to make sure that the industry's compensation practices are good. Boards of major firms in the financial industry should be good stewards of compensation practices of their companies so as to make sure that such compensation works flawlessly with the other firm's practices to ensure healthy risk profiles. These principles should be hardwired into the organization's culture over a span of time.

The board must oversee the structure of the company's compensation.

The company's board must review as well as supervise the compensation system so as to make sure that it operates as it should.

Staff charged with overseeing financial as well as risk control should have independence, be led appropriately, and also be remunerated in a way that is not dependent on the areas they supervise. Such remuneration should match their contribution to the firm.

Adjustments must be made for compensations for all kinds of risks.

Payout schedules as concerns compensations must consider the term of the risks.

The compensation mix including equity, cash, etc. must take into consideration the risk profiles.

Compensation for any employee should consider those risks which he or she undertakes on the firm's behalf. It should consider risks already realized and those that are not yet realized (Financial Stability Forum, 2009).

The operations of Ford Motor Company affect many stakeholders. The belief is that having strong relationships not only with employees but also the dealers, customers and the communities helps meet set objectives. Good relationships with business partners and employees help improve efficiency, quality, cut costs and afford them the opportunity to grow and innovate. Effective communication with customers and dealers and other players plays a role in them figuring what their customers really want. There is an annual pulse survey in which the salaried employees participate. This helps them gauge employee satisfaction with various areas of their jobs. The employees are encouraged to submit comprehensive and honest feedback and participation and results are gauged externally. These results are taken into account when planning and also in the review process. The senior managers at Ford strive to improve Pulse scores every year. (Ford Motor Company, 2014).

Total participants in the survey in 2011 accounted for 75% of the salaried employees. The survey encompasses fifty three items including eight items that form something called Employee Satisfaction Index (ESI). In the 2011 ESI, 69% of those surveyed gave good ratings. This was an improvement of 1% over the results of 2010. This is above industry figures. Training and development improved the most. Other notable areas showing marked improvement include employee satisfaction and adoption by employees of the ONE Ford behaviors. Actions taken to improve employee satisfaction was already highly rated but also showed marked improvement. To further enhance satisfaction, the company promotes open and inclusive dialogue with the employees. The company has continuously enhanced its internal communication so as to foster trust and transparency (Ford Motor Company, 2014).

Multi- Nationals employing PCNs, HCNs, and TCNs frequently face problems and risks as concerns making decisions on ways to remunerate in their countries of operations. Consequently, systems involved are increasingly becoming challenging for HR managers of MNCs. As these companies expand globally, the independence of their operations internationally…

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