Posted: April 4th, 2015

ope-rationalizing the compensation system

ope-rationalizing the compensation system

Order Description

Section N: Recommended Compensation Budget. The outcome of all the previous steps is a
Recommended compensation budget for the coming year. Compare this with the current Expenditures, and explain why your new budget will be advantageous to the company. At the same time, discuss any possible downsides or risks in adopting your recommended budget.
In so doing, remember to take the structure (not just the total cost) of your new compensation system into account. For example, if organizational performance pay accounts for a large portion of your total compensation, remember that these plans will only pay out if company performance is good. The same is true, although to a lesser extent, for group and individual performance pay.
There are many things you could do in this section. For example, you could do some projections of various revenue scenarios for the next two years. If revenues stayed the same for the next two years, what would happen to profits under your new compensation system? What would happen if the old compensation system is simply carried forward? What would happen to profits if revenue went up by 10 percent? What if revenues went down by 10 percent?
The section “Evaluating the Compensation System” in Chapter 13 should give you some ideas of what you could do here. Include a printout of Screen 4 in this section.
Finally, note that when you discuss what the annual compensation costs will be under your new system, you need to multiply your “recommended compensation budget” by 20 if your client is Duplox Copiers or by 10 if your client is Zenith Medical Systems. The reason is that you have applied your new compensation system to only 5 percent of Duplox employees and 10 percent of
Zenith employees, so you need to adjust your “recommended compensation budget” to account for that.