BUS681 Performance Management Issues

Introduction:

Compensation and benefits are referred to the aids that are provided by an organisation to its employees in exchange of the labour they provide (Gerhardt, 2020). Whenever we accept a job offer from an organisation, the first and foremost thing we look is wage that is being provided for the job. Whether the employer lists the salary as an hourly, weekly, monthly or an hourly rate, the applicants see it as the most important share of their job offer. In the same way, when the staffs think about recompense, the main thing they are looking for is their salary. But for many employees mainly the senior employees, recompense is much more than just a regular pay check.

On the other hand, benefits cover the indirect pay by the organisation to their employees. Benefits includes health insurance, stock decisions or many other things depending upon the organisation (Zeb et al. 2018). All of these things are very important in any job offer for the employees. For instance: when you get two job offers with the same salary, it might vary in the category of benefits, making one of them a better financial position than the other. But there are several organisations who face challenges with their compensation and benefits which results in dissatisfaction among the employees. The main aim and purpose of this paper is to address the challenges faced by American Airlines with compensation and benefits and the necessary steps taken to overcome these issues.

Overview of the Organisation:

The selected organisation is American Airlines which is the main airline of America headquartered in Fort Worth, Texas (American Airlines, 2021). It is one of the largest airlines measured by fleet size, passengers carried and revenue all across the world. The airlines with its provincial partners function an extensive domestic as well as international network with approximately 6,700 flights per day to around 340 destinations in more than 60 countries. The organisation was started in the year 1930 with a union of 80 small airline (American Airlines, 2021). American airline was created from two small organisation namely: Colonial air transport and Robertson aircraft corporation. The airlines operate the largest commercial fleet across the world which comprises of 881 aircrafts including Airbus and Boeing as of February 2021.

Current Challenges Faced By The Organisation:

American airlines have faced several challenges during their past. but the current and most important challenge faced is related to their compensation and benefit system. There is not much data present related to the issues faced by the organisation, but after a lot of research it can be said that the employees have a hard time wile navigating themselves or knowing which way to turn to for their certain needs including the compensation and benefits. There are huge issues related to compensation and benefits within the organisation due to which there was a huge turnover (Adler & Ghiselli 2015). The employees wish to get the exact compensation or benefits which have been offered to them by the organisation. If the organisation is facing a financial distress, they might wish to conserve cash for their operations or they might even try to avoid layoffs by implementing a broad- based reduction in salary. But personally, I believe that an employer is not prohibited to reduce the base salary of employees. It affects the relationship of employees with the organisation and they wish to leave the organisation and go for good opportunity. This impact the overall productivity and reputation of the organisation. Therefore, it is important for American airlines to find ways so that they can overcome the issues and gain a good reputation in the marketplace.

The issues of compensation and benefits is faced by one other organisation which is Walmart. It is one of the largest retail chains across the world and based in America. The organisation faced a huge turnover of employees within few years due to lack of human resource management. According the employees of Walmart, they were made to work a lot, more than their shift hours and were offered a less salary. There were no compensation and benefits as promised by them during their interview. This made the employees to leave the organisation and look for better opportunity. Walmart realised the issue and took necessary steps in order to overcome the situation and implemented several human resource practises. The organisation implemented a recompense and benefits associated program with training and guidelines to motivate the employees and assure them about the organisation’s good working culture.

Strategies:

In order to develop a compensation and benefit management plans, American airlines must take help of some of the related theories. According to the Behaviour reinforcement theory, if an individual is rewarded for their behaviour, they are more likely to perform those actions again (Shabana & Ravlin 2016). You can think of a time when you did a work which made your parents or teachers happy and you were rewarded for that. The position reaction of them motivated you to do the work again because you would think of getting the same appreciation and reward again. Same thing works with the employees as well. Another theory related to compensation and benefit is the Equity theory, which suggests that the actions of employees can change based on their perception on how they are paid compared to their co- workers (Ryan, 2016). For instance: If you and you co- worker Jack works in the same department with same responsibilities. If you would know that Jack is paid much more than you despite of the same performance, then your productivity will automatically decrease since you would be demotivated. Therefore, it should be made clear that the organisation should be unbiased with the employees and should pay them equally.

The organisation must communicate with their employees on a regular basis and should update their employees with the status of their payment. The employees must be informed about the organisation’s compensation and talent objectives. A total compensation mission statement must be developed by the company, which will clearly state the specific results that must be achieved by the employees. In addition to this, the mission statement will also include the necessary behaviours required for the company. This will help the organisation to lay a foundation on the overall compensation program (Kadir, AlHosani & Fadillah2019). It will help the organisation to serve as a compass to lead them over the difficult tasks of implementing and creating the program. The compensation must be linked to the overall business strategy as compensation is the most attractive tool for getting the staffs to transfer in the desired direction which the company wants. If the compensation does not directly connect with the organisation's goals and objective, then the employees will not take it seriously. The strategy of compensation starts with identifying the organisation’s strategic objectives by defining what they actually mean in terms of organisational behaviour as well as scheming its compensation plan in a way that will recognise and reward those behaviours.  

A compensation plan strategy cannot get the results alone that the organisation wants. To get a change in permanent behaviour, the organisation must change the working culture and environment, and after that, compensation can be used to reinforce the changes (BERGER & BERGGER 2020). Culture change requires classifying the results that they want to attain, recognising the behaviours that will lead to changes, and designing a compensation plan to reward and reinforce those behaviours to implant them within the company permanently. Compensation delivers a very operative tool to strengthen the organisational values.

Implications:

Designing and implementing a compensation plan allied with the business wants and talent management strategy is the most influential methods American Airlines can use to retain and attract new talents within the organisation (Flammer, Hong & Minor 2019). Yet, even the best plans are only actual if they are applied correctly. Suppose the organisation becomes a failure to follow the compensation plan. In that case, it might contradict all the hard work the organisation has put into planning and researching to craft the company's program. When the company has a strong compensation that can attract, retain, and engage a high-quality workforce, they can follow the implementation steps.

To implement the compensation and benefits plan, American Airlines must keep the leaders informed about the plan to decide about the strategic pay. The company must gather as well as analyse the survey data. They should not be dependent on the survey data but should also research the current market trends and then make the informed decisions (Musacchio, Lazzarini & Aguilera 2015). The organisation needs to appoint a compensation manager who should be from human resources, and they will align the program and research what each of the position pays in the industry, how classifications of the job will be set on and how to select the direct compensation. They must create a compensation philosophy as well in order to determine the level of competitiveness of the organisation within the job market in the industry, if the organisation will lead in the market with direct compensation or will offer a pay will the great benefits.

Additionally, they must rank the jobs and place them within a matrix to determine if any levels of pay exist in the pay structures of the sales staffs or executives. Developing grades can be done for seniority and experienced employees. After the organisation has an outline of their compensation platform, they can assign the salary and pay ranges for each position according to the job classification. With the help of this, American airlines can also fine-tune their organisational budget. The development of a communication plan is a must as all the employees must learn about the compensation plan at the same time. The organisation can use numerous communication methods to share the plan with its employees (Chatterji et al. 2016). For instance: email can be used, or the leaders will share a group gathering where each and every one must be present and all the policies. The employees' messages must be in different languages as every employee does not have English as their first language. The organisation must also accept different employees' questions to clear their doubts or queries regarding the policy, and it must be assured that it is understood by everyone easily.

Recommendations:

American Airlines have faced a huge loss due to compensation and benefit, which has resulted in employee turnover and loss of reputation. Therefore, it is recommended that the organisation must work on its human resource department to assure that these issues do not arise shortly. The employees should be provided with the same benefits and compensations as promised during their recruitment. The organisations that have the highest employee morale and productivity provide their employees with a mixture of incentives and salary (Barrick et al. 2015). The salary motivates them for performing all the tasks that are required from them with a consistent income. The incentives or benefits motivate them to meet and exceed their objectives, and it also provides them with the opportunity to increase their earnings. Salaries must be paid to them every month, whereas incentives or benefits should be paid to them when they perform extra from what is expected from them.

A quarterly incentive plan is much more motivating than the annual payment of incentives. Another way to attract, motivate and retain the top employees is to pay them more than the competitors. Every few years, the organisation must determine how much their competitors are paying to their employees, and they must adjust their pay scale (Tarhini et al. 2015). This can be done informally by asking the employees of other organisation at the time of recruitment or the organisation can even help a consulting firm who will benchmark the plan of American airlines against others and advise them on adjusting it. Besides, this salary of employees must be based on their geographical locations but the incentive program should not change. The geographical locations must be considered to reflect the cost of living of employees so that the organisation will not penalise those living in an expensive city. Therefore, it can be said that by implementing the above- mentioned points, American Airlines will be able to overcome the issues related to compensation and benefits.

Conclusion:

Lastly, from the above discussion, it can be concluded that compensation and benefits are the most important thing that an organisation should consider. American airlines are facing issues related to compensation and benefits that impact the overall business of the organisation and have been the main cause of employee turnover. There are several theories related to the compensation and benefit in an organisation: Behavioural reinforcement theory and Equity theory. These theories will help the organisation understand how they can implement certain ways to retain and motivate their employees in their desired jobs. In addition to this, after making an effective strategy for compensation and benefit, the organisation should find ways to implement it. In order to implement the strategy, they must at first keep the leaders informed about the strategies as they are the ones who will look after the pay raise.  They must also gather and analyse data from other organisations about their compensation and benefits and pay the employees accordingly so that they do not think of moving out. A list of recommendations has been presented in the discussion, followed by American Airlines to have successful growth by overcoming their current issues.

References:

Adler, H., & Ghiselli, R. (2015). The Importance of Compensation and Benefits on University Students¡¯ Perceptions of Organizations as Potential Employers. Journal of Management and Strategy, 6(1), 1-9.

American Airlines. Americanairlines.in. (2021). Retrieved 13 March 2021, from https://www.americanairlines.in/intl/in/index.jsp?locale=en_IN.

Barrick, M. R., Thurgood, G. R., Smith, T. A., & Courtright, S. H. (2015). Collective organizational engagement: Linking motivational antecedents, strategic implementation, and firm performance. Academy of Management journal, 58(1), 111-135.  

BERGER, L. A., & BERGGER, D. R. (2020). The compensation handbook. A state-of-the-art guide to compensation strategy and design.

Chatterji, A. K., Durand, R., Levine, D. I., & Touboul, S. (2016). Do ratings of firms converge? Implications for managers, investors and strategy researchers. Strategic Management Journal, 37(8), 1597-1614.

Flammer, C., Hong, B., & Minor, D. (2019). Corporate governance and the rise of integrating corporate social responsibility criteria in executive compensation: Effectiveness and implications for firm outcomes. Strategic Management Journal, 40(7), 1097-1122.

Gerhardt, P. (2020). Compensation. University of Michigan: Humanities Text Initiative.

Kadir, A. A., AlHosani, A. A. H. H., & Fadillah Ismail, N. (2019). The Effect of Compensation and Benefits Towards Employee Performance. In ACHITS 2019: Proceedings of the 1st Asian Conference on Humanities, Industry, and Technology for Society, ACHITS 2019, 30-31 July 2019, Surabaya, Indonesia (p. 171). European Alliance for Innovation.

Musacchio, A., Lazzarini, S. G., & Aguilera, R. V. (2015). New varieties of state capitalism: Strategic and governance implications. Academy of Management Perspectives, 29(1), 115-131.

Ryan, J. C. (2016). Old knowledge for new impacts: Equity theory and workforce nationalization. Journal of Business Research, 69(5), 1587-1592.

Shabana, K. M., & Ravlin, E. C. (2016). Corporate social responsibility reporting as substantive and symbolic behavior: A multilevel theoretical analysis. Business and Society Review, 121(2), 297-327.

Tarhini, A., Ammar, H., Tarhini, T., & Masa’deh, R. E. (2015). Analysis of the critical success factors for enterprise resource planning implementation from stakeholders’ perspective: A systematic review. International Business Research, 8(4), 25-40.  

Zeb, A., Sultan, F., Hussain, K., Javaid, M., Abbas, Z., & Imran, M. (2018). The influence of compensation and benefits and employees’ involvement on employees’ outcomes-evidence from PTCL. International Journal of Research and Review, 5(11), 98-103.

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