Smith Manufacturing overview and operations

Health Care -- Short Smith Manufacturing

What is broadbanding? What are its benefits and drawbacks to an organization the size of Short Smith?

Broadbanding is the collapse of numerous pay grades into fewer bands of widely ranging salaries, usually keyed to logical categories of skills and/or levels of competency (Buford, n.d.). Broadbanding would benefit Short Smith in several aspects. First, by broadly categorizing salary ranges according to skill/competency such as clerical, sales, etc. (Buford, n.d.), broadbanding would organize Short Smith's clearly disorganized method of setting pay grades for its 81 employees, as compensation is currently imposed at whim by designated employees. Secondly, broadbanding is geared to encourage employee continuing education and development of additional skills (Kovac, 2006), so it would logically encourage Short Smith's employees to obtain greater education and skills to improve their compensation. Third, broadbanding is designed to be administered by the departments in which the employees work, freeing up administrative time and effort in assigning proper compensation (Bennett, 1999), so Short Smith's obvious problem with having a few administrative individuals arbitrarily assign compensation could be solved. Fourth, broadbanding's reward of individual development through education and skill development (Bennett, 1999) will focus Short Smith's compensation dollars more effectively.

Broadbanding is also disadvantageous to an organization of Short Smith's size in several aspects. An organization as small as Short Smith, with only a few employees assigning compensation in addition to their other duties, cannot devote adequate attention, time and effort to accurately collect and assess data for effective bands of compensation according to the current market (Bennett, 1999). Secondly, Short Smith appears to have a very limited number of skill/competency pay grades in its relatively small organization, so it would not necessarily benefit from the collapse of multiple pay grades into widely ranging bands as would a far larger organization (Bennett, 1999). Finally, Short Smith's haphazard and traditional approach to setting compensations shows that it might not be ready for a broadbanding system and could fail in applying the system (Kovac, 2006). Consequently, while broadbanding would be advantageous to Short Smith, the compensation system would also present drawbacks for an organization of Short Smith's size.

b. Provide a private-sector (business) example: an organization with a broadbanding pay system and whether or not it works for them.

One organization with a broadbanding pay system is Household International, which successfully uses the system to pay approximately 25,000 employees (Bennett, 1999). Rather than laboring with 30 pay grades, Household now uses 5 bands of pay ranges and keys pay raises to individual achievement, encouraging individual continuing education and new skills development (Bennett, 1999).

c. Do you recommend that Short Smith develop a broadbanding system? Why or why not? If not, what type of system do you recommend?

I recommend a broadbanding system for Short Smith because the potential advantages listed above outweigh the potential drawbacks listed above in adopting broadbanding at Short Smith.

d. Provide some concluding statements on managing a change to a new pay system at Short Smith.