Equity Comparison, Real estate, Organizational compensation
It is normal for those of us not familiar with performance based programs to hear the word equity and automatically think "real estate". On the contrary, equity in this particular sense pertains to an organizations employee total compensation and rewards system; which are most commonly referred to as employee recognition programs. Organizational compensation structures are designed to address goals. There are two very important functions that an effective total compensation plan must achieve; (1) worker motivation; and (2) cost effective labor expenditures ("Kokemuller", 2014). To accomplish this balance, internal or external equity have to be factored into the design and development of the total compensation plan. A total compensation plan is a quantifiable employee rewards package that contains three essential components: (1) base compensation; (2) pay incentives; and (3) indirect compensation/benefits ("Kokemuller", 2014).
One of the determining factors regarding the viability of a business in todays' extremely globalized competitive economy, is its methodology and incorporation's of both internal and external equity. The organizations perception of equity can impact its ability to attract skilled workers as well as encourage, motivate, and retain existing employees. External equity refers to the comparisons with other competitive pay structures; while internal equity is concerned with ensuring fairness in pay for employees in the same work class ("Kokemuller", 2014). The following report will define and clarify the differences between internal and external equity, how each plan supports the organization's total compensation objective, the relationship of the organization's financial situation to its plan, and the advantages and disadvantages of each.
[...] Retrieved from http://businesscasestudies.co.uk/coca-cola-great-britain/creating-an- effective-organisational-structure/#axzz3BhHXZk2u Coca Cola Journey. (2014). Retrieved from http://www.coca-colacompany.com/ Custom Writing Tips. Retrieved from http://customwritingtips.com/component/content/article/35-social- sciences/4932-internal-and-external-equity.pdf. Intel. (2014). Retrieved from http://www.intel.com/intel/company/corp1.htm. Kokemuller, N. (2014). [...]
[...] To accomplish this balance, internal or external equity have to be factored into the design and development of the total compensation plan. A total compensation plan is a quantifiable employee rewards package that contains three essential components: base compensation; pay incentives; and indirect compensation/benefits (“Kokemuller”, 2014). One of the determining factors regarding the viability of a business in todays' extremely globalized competitive economy, is its methodology and incorporations of both internal and external equity. The organizations perception of equity can impact its ability to attract skilled workers as well as encourage, motivate, and retain existing employees. [...]
[...] Employers are working to overcome this snafu by offering bonuses and other alternative rewards. Organizational Relationship and Support of External Equity Coca Cola, the world's largest beverage company, has found organizational success, relative to company objectives, via external equity also referred to as the matching strategy ("Business Case Studies", 1995- 2014). To successfully implement this method, Coca Cola performs a detailed analysis of market pricing. The information obtained from the research is used to formulate an appropriate compensation plan for the company. [...]
[...] Small Business Chron. Com. Retrieved from http://(http://smallbusiness.chron.com/advantages-internal-equity- compensation-plan-81169.html). The Perfect Pay Plan. [...]
[...] This is resultant of the premise that when employees are aware of what his or her colleagues are earning as opposed to what other people are compensated in other organizations, employees can be better encouraged by their opinion or view of impartiality in relation to the company's pay structure. In addition to maintaining internal harmony in relation to CEO's and senior organizational management compensation, internal equity acts as a check against excess compensation while effectively evaluating market biases ("Custom Writing Tips"). Unfortunately, depending entirely on internal equity, places Intel in jeopardy of losing some of its most valuable, skilled, and knowledgeable employees to competition. In essence, internal equity is beneficial in the short term but can prove to be costly in the long term ("Custom Writing Tips"). [...]
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