Human resource management and organizational practices

Human Resources

What balance of intrinsic and extrinsic compensation is likely to exist in a company that successfully pursues a lowest cost strategy? Why?

A company that pursues a lowest cost strategy tries to keep the price of the good or service it provides at the lowest price point possible. Increasing the volume of sales is how it derives its revenue, rather than maintaining a reputation for individuation or quality. To keep prices low the company must keep input costs low. Wages are a significant input cost. One example of such a lowest cost strategy company is McDonald's. Workers are often employed part-time at the minimum wage. There is a company-engineered high level of workforce turnover. Extrinsic and intrinsic motivators are kept at a minimum, as often employees are grateful for getting any wages at all (given it is their first job or they are difficult to employee because of a spotty job history). Extrinsic "carrot" type motivators might be flexible work schedules, or "stick" motivators such as surveillance by managers and punishment if employees fail to follow correct procedures and fail to come to work on time.

Intrinsic motivators to encourage employees to select and stay at a particular Wendy's, for example, over a McDonald's down the block may be because Wendy's has a friendlier atmosphere. It might take worker's suggestions to improve store efficiency, and treat employees with respect. But there is a disincentive to encourage retention, as the company must pay these workers higher wages and benefits

What should the minimum wage be? Defend your answer.

The minimum wage should be the lowest wage an employee can make working full-time to support him or herself above the poverty line within a particular area. The costs of living that should be taken into consideration are that area's rents, the cost of food, and the costs of basic necessary goods and services like transportation. Access to adequate public transportation or maintaining a car in areas that lack public transportation must also be factored into setting the minimum wage. While it is true that many workers at minimum wage jobs are part-time, without some minimum compensation there is little incentive for workers to become employed at such jobs if they are seeking to extricate themselves from poverty and remain off of welfare. Despite classical economic theory that suggests that competition for workers will keep wages up, in the real world, workers are not infinitely mobile, like consumers are with their money (although even that is limited to some degree). Workers, especially minimum wage workers often have transportation and childcare issues that mean they can only work in a few jobs close by their homes, and if there was no minimum wage the wages provided by these entry-level jobs would sink below the federal minimum standard of what is necessary to live on a basic level.

Summarize the provisions of the Medicare Prescription Drug Improvement and Modernization Act of 2003. In your opinion, is this a good law? Explain.

After this Act passed, Medicare recipients happy with their current coverage could remain within their program, through a stand-alone drug program. However, the Act created a second option that allowed seniors to choose a new program called Medicare Advantage. This allowed seniors to join an integrated health plan, which would provide hospital coverage, doctor coverage and prescription drug coverage. Beneficiaries could also enroll in so-called Preferred Provider Organizations similar to PPOs available to privately insured Americans. Critics of the bill noted that although 89% of all seniors chose traditional Medicare rather than going to a Medicare HMO when given that option, under the 2003 plan, seniors were not permitted to stay in traditional Medicare and to have a Medicare-run prescription drug benefits unless private insurance plans were unavailable in their area ("Medicare RX," 2003, a News Hour with Jim Lehrer Transcript). The Act seemed to convey little added value to the Medicare program, or expand senior choices to any great degree. Furthermore, it is unclear if seniors wanted more choices, or simply drugs that are less costly. A better way to help seniors that need drugs to function normally might be to address the spiraling health care costs of America in general of which prescription drugs are only one facet.

What can be done to make the function of compensation committees consistent with shareholder interest? Explain.