Assignment : Compensation Practice
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Question 1. Briefly describe the company you researched, its compensation strategy, best practices they are applying, and compensation-related challenges they are facing.
Answer : Compensation practice
Introduction
Compensation strategy is generally defined as how an organization is able to define the way in which it is able to pay the employees working in the organization, and provide them the benefits that they have been promised. It looks at how an organization is bale to view the benefits and pay that it gives to the employees, along with the tools that are used for motivating employees into working for the organization(Bryant and Allen, 2013).
Google is one of the biggest information technology firms in the world. They have offices all over the world, and have a central office in Silicon Valley. It provides online advertising services, cloud technology and search engines that are used by billions of people all around the world. It was founded by Larry page and Sergey Brin in 1998, while Mr Page was pursuing his PhD at Stanford University. The current CEO of Google is Sundar Pichai and he has replaced Larry Page, after Page decided to step up and become the CEO of Alphabet Inc, which is the conglomerate of which Google is a part. There is a total of approximately 94,372 employees in Google, and all of them are compensated heavily for their role. The unofficial phrase of the company was Don’t Be Evil, since it was a popular phrase that was featured in the Google Code of Conduct(GILLETT, 2015).
The following paper looks at some of the compensation strategies that Google is able to use in order to continue motivating employees to come up with unique product ideas, such as a self-driven care or Google Lens. It also looks at some of the possible compensation challenges that the company faces, and how the strategy is able to affect stakeholders. It also looks at some of the effect that labour Unions, laws and marker factors have on the compensation strategy and the effectiveness of the traditional bases of pay.
About the Company
Google is one of the big four technology companies in the world, and is known for being one of the most visited pages on the Internet. There have been many challenges that have to be faced by Google, amongst which is the concern that the public has regarding privacy laws and the neutrality of the search engines. They have also become synonymous for providing many services and products, such as the Google Pixel, Chrome browser, and Google Fiber, which is an internet carrier. Google is also the owner of several other websites, amongst which YouTube is one of the most popular sites as well(Soules, 2013).
Compensation Strategy
Google has one of the largest employee bases of any major company. It is also known for offering extremely competitive compensation strategies, which often ensure that the employees working in the organization are able to avail a high salary, and many traditional and non-traditional benefits as well. The salaries of the employees who work for Google are some of the top salaries in the world. In addition to the financial incentives, the company also offers the employees with moral incentives in order to ensure that there is motivation in the employees to give the best to the company(Schöndube-Pirchegger and Voigt, 2016).
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Practices Applied
Google is known to focus on the overall compensation package, which includes stock units and bonus, along with the base salary pay and offer that to the candidates. They do not negotiate with candidates on the compensation package that is provided to the employee, and it is often based on the location, job title, and the role, along with the current market rate for someone in the position that they are hiring for. Thus, if an individual receives a higher package from a competing firm, then Google executives would consider their stance when it comes to increasing the salary package. This happens even if the current compensation of the employees is well below the offered level(Stenis, 2014). In most cases, it is noted that Google is willing to compensate employees fairly well for their role in the company, and if an employee is doing exceedingly well, then the company would be willing to offer employee more than the current rate as well. Google thus, has a pay-for-performance strategy, where only employees who are performing to the extent that Google wants get a handsome compensation. This motivates employees to increase their performance, in order to get a better compensation package, which is beneficial to the company to a large extent(????xkhkoba and Rogozhnikova, 2013).
Compensation-related Challenges
The main challenge with the system that Google has is that very often, employees who might not be performing at their best, due to any illness might not receive compensation. Potential employees are also unable to negotiate with the company, which could often lead to discrimination against someone from a minority background. This would be the main challenge that employees in Google would have to face when looking at their compensation packages(Madhani, 2011).
Question 2. Analyze how your company applies compensation practice to determine the positive or negative impact to the company and its stakeholders.
Answer : Analysis of impact of Compensation practice
The compensation practice of Google has a mainly positive effect on the employees working in the company. Since it is based on the performance, and at the latest market rate, most employees are very happy with the package that they receive at Google, and many feel that the compensation package that they are able to receive at Google is the best, since it also provides many other benefits, such as medical insurance, retirement benefits and free meals, on top of the salaries, bonuses and the stock options. The main stakeholders, who are the employees, have thus, mostly found the compensation to have a positive impact on them. Employees are the major internal stakeholders, since they are often the ones who can create something that is extremely profitable, or ensure that the company does not succeed in making a name for itself(Chowdhury, 2010).
However, it could have a negative impact on the minority employees, who while also being stakeholders might be discriminated against when it comes to the salary. Since they would be the employees who might not be given a proper compensation package, and it might even be that they would not be able to negotiate based on the normal package that Google is able to provide to other recruits in the same position.
The stockholders, who also consist of the Board of Directors, are also one of the largest stakeholders in the organization. They are also benefited from the compensation package that Google provides, since it ensures that the most talented recruits work in Google. Thus, the company increases their revenue as well. This increases the price of the stock, which is beneficial for the stockholders(Bryant and Allen, 2013).
External stakeholders include the customers and competing firms as well. The customers are also positively impacted by the compensation practices and strategies. The more motivated the employees of the company are, the more the company can grow, and provide better products to the customer. This can increase the customer satisfaction level and the experience of the customers with the company, which is also beneficial to the company.
The compensation strategy of Google can negatively impact the competing firms, since it would be likely that the high-performing and talented employees in the company might quit the company in order to work at Google, which can reduce their profits. It would also lead to negative press for the company as well, which is why they would be negatively impacted(Bhattacharyya, 2015).
Question 3. Examine the ways in which laws, labor unions, and market factors impact the company’s compensation practices. Provide specific examples to support your response.
Answer : Impact of Laws, Labour Unions and Market factors
There are a number of laws that can have a significant impact on the compensation strategy and practice at Google. Most compensation packages are provided in line with the local, and national laws. The salary package would be in line with the minimum wage that is offered in the country at the very least. In California, the state in which Google has its main offices, the minimum wage is $15 an hour, which means that the minimum that the employee should be getting would be $3600 for a month, or have an annual salary of $43,200. There are no Labor Unions allowed in the USA, and Google prohibits employees from unionizing(Soules, 2013).
However, in many countries such as India, where Google still has offices, unions can dictate the compensation package to a large extent as well. Most employees in Google however, earn up to $200,000 as an annual salary. However, there are still calls for unions being allowed in the company, and for the contractors who work for the company, who are not paid as much as they should be.
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In International cases, Google follows the minimum wage and compensation laws of the country that they are hiring from. For example, in India, the number of holidays the employees are allowed to take, and which the government makes mandatory are higher than the holidays in USA, even though the salary that they can offer would be low compared to the salary that is offered to employees in the USA. Most times, International laws are a benefit to Google, and often have a positive impact on the company, since it would mean that the company would be able to get talented employees for a cheaper salary package(Stenis, 2014).
Google bases the compensation package that employee receives on many factors, and one of the main factors that is considered include Market factors. If there is a rush for the type of talent that is required for the company, and there are many competitive firms offering a better salary, then Google will increase the compensation package that they provide to the employee. This means that market factors play a significant role in the compensation practices of the company.
Effectiveness of Traditional bases of pay
Question 4. Evaluate the effectiveness of traditional bases for pay at the company you researched.
Answer :
Google does not have the traditional system of pay, and they do not have the traditional bases of pay. In the case of the company though, the traditional bases of pay have been found to be completely ineffective, since most companies in the Silicon Valley, including Google, offer many of the services that the Traditional bases of pay are based on. One of the factors in the traditional bases of pay includes food and living. For many employees in Google, the company already provides them with meals, and their salaries are easily able to cover the rent or mortgage on their homes.
The transportation cost is also reduced to a large extent, since Google employees have shuttles that they use to and from the office. Traditional bases of pay are also evenly distributed on seniority and are equal for every employee. This often means that the employees who are senior and have worked for the company the longest get the most pay. However, this would not work for Google, since they base it on the position and the job of the employee, along with their potential. Paying employees at the same level the same amount would not work for the company, since the potential of each employee, and the talent that they have, which they can provide the company with, would be different(Madhani, 2011).
Thus, traditional bases of pay do not work for the company, and are not very effective in the company. Most companies in the Silicon Valley base pay of the employee based on the performance, which is what works for Google as well.
Conclusion
The compensation strategy that is offered by Google works extremely well for the company, and it can be seen that the company has benefited from the strategies and practices that they have used to a large extent. Most employees who work for Google have job security, and a pay that is often extremely generous. This has found to be of immense benefit to the company, since it has been able to motivate employees and to recruit new employees. The non-financial benefits that are offered have also given Google the title of “Best Company to Work For” for many consecutive years. This has been found to have a positive impact on all the stakeholders as well.
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