Part I: Compensation Strategies: Read the following scenario and answer the questions.

Nutrition is a startup company created to offer a new and unique healthy skincare
product that is not offered by its competitors. Their highest priority is quality in their product and
transparency in their advertising. They are aware that their brand reputation starts with their first
product and that any mistakes will damage customer loyalty and their reputation.
In order to successfully attract the right staff to ensure Nutriment has a competitive
advantage, the company must decide on the most appropriate compensation package to attract
the right employees for each position and to ensure that their pay structure is competitive in the
local market while also managing costs.
The administrative positions are standard positions and will be easy to fill. However, the
senior research scientist positions will be more difficult to attract since they are scarce in the
industry and this is a unique product. They will have to train these senior scientists in their
specific production process. However, any senior scientist with solid, extensive experience
should be able to learn the production process.
In addition, the marketing manager needs to have a scientific understanding of the
product to accurately promote and market it. Again, a knowledgeable Marketing Manager with a
marketing background in scientific products should be able to quickly learn the product. Filling
this position might be a little challenging but not as challenging as finding the right research
scientists
1. Should Nutriment use a compensation policy to lead, lag, or match the market to fill the
administrative positions?
a. Lag
b. Lead
c. Match
2. Should Nutriment use a compensation policy to lead, lag. or match the market to fill the
senior research scientist positions? Explain.
a. Lag
b. Match
c. Lead
3. Should Nutriment use a compensation policy to lead, lag or match the market to fill the
Marketing Manager's position?
a. match
b. Lag
c. lead
4. Should HR use a traditional or pay-for-performance compensation plan? Explain the
difference between the two and justify your recommendation. Should they use the same
policy for all or some of the positions?
The traditional pay is pay based on the loyalty of the employee to the company, no matter the
performance, and there will be a raise annually. As for pay-for-performance, it is pay based on
the performance and dedication to the company’s goal, no matter the period the employee stays
in the company. In this situation, HR should use a pay-for-performance compensation plan
because Derma Vita is entering a highly competitive market that required highly skilled worker
to make the company have an advantage in the market and advertise the company brand. They
should use the policy mainly for important positions like senior scientist and marketing manager
because these two positions are very hard to recruit the right people for the jobs. As for
administrative roles, the company should use the traditional pay since this position is very
common on the market and Derma Vita is a start-up company which requires saving costs to
make profits.
5. An annual employee review is a critical document that serves many purposes. Identify
three purposes the document serves in the overall Performance Management System.
Answer:
- Feedback and development
- Goal setting and Alignment
- Performance Evaluation and rewards
6. The most useful type of performance information for performance appraisals is
Behavioral- based information. (True or False)
6. Many companies are starting to use a 360 Degree Performance Appraisal. Which of the
following is NOT an advantage of a 360-degree performance appraisal?
a. Provide more depth of performance
b. is more objective and factual
c. provides multiple feedback
d. Quick and easy to use
PART 2: Case: Compensation Changes at Addison-Wesley
Addison-Wesley: founded in 1960, is a publisher of college textbooks and computer
literature. It is an imprint of Pearson PLC, a global publishing and education company. In
addition to publishing books, Addison-Wesley also distributes its technical titles through Safari
Books Online, an e-reference service. Addison Wesley’s majority of sales derive from the United
States (60%) and Europe and Asia (40%).
Having been in business for over 50 years. Addison-Wesley has experienced highs and
lows in organizational performance. Though sales have remained good, in the last 7 years. its
turnover rates in its sales department have exceeded industry averages: 18 % compared to 12%
industry. the average tenure for a person also has dropped from 5 years to 2.5 years
To respond to the increasingly competitive environment, Addison Wesley reviewed its
benefits. It found that its medical benefits, paid time off and retirement benefits were
competitive. It also believed that it offered a supportive work environment. consequently. the
vice president of sales decided to revise the compensation system for the sales department.
Traditionally, it offered 3% incentive bonus for sales that exceeded the monthly quota.
To retain more sales personnel, it added an additional sales incentive: 6% for amounts over 25%
of the monthly sales quota was added. This second tier of sales bonus was challenging. but not
impossible for good salespeople to achieve. Now salesperson had two opportunities for sales
bonuses. And this was one of the lightest total bonus payments in the industry.
results for these changes in compensation were mixed. As expected, sales went up, which was
good. Though turnover dropped to 15%, key salespersons were still leaving. complaining about
nowhere to go in the organization. In addition, those key salespeople said that they felt like they
were not valued by the company and they had limited autonomy and decision-making.
The VP of sales has heard that there is a new strategic HR compensation plan called Total
Rewards System. He has asked you to evaluate the company’s revised compensation plan using
the total Rewards system
1. Evaluate Addison Wesley’s compensation system according to the Total Reward System
model. In other words, classify the rewards Addison Wesley provides in each section of the
total reward system model. If by any chance, a section of the total reward system as no
rewards, be sure to mention that and explain why.
Ans:
- Tangible direct reward: wage or salary, incentives, and bonus.
- Tangible indirect reward: medical benefit, paid on time, retirement benefits.
- Intangible reward: supportive work environment, and challenging work.
However, the key sales still leaving the company due to the lack of one intangible reward which
is autonomy, to have the power to make decision.

2. Based upon your analysis using the Total Reward System, offer one practical, specific
recommendation for Addison Wesley to retain more of its salespersons.
Ans: Addison-Wesley should establish a career development program with clear promotion
opportunities, training, and mentorship for salespeople. This will help employees see long-term
growth within the company, reducing turnover and increasing retention.

3. Identity the “misconceptions” Addison-Wesley had about employee motivation

Ans: Addison-Wesley had a misconception about employee motivation. They thought that
paying more money would keep their top salespeople. But they forgot about the things that really
matter, like having the freedom to make decisions, getting promoted, and feeling like their work
is valued.

10. Organizational Justice is the foundation of trust in all organizations, ———— is

perceived fairness in how outcomes are shared, while —————- is perceived fairness of
the way in which decisions are made.
a. Interactional justice and Procedural justice
b. Distributive Justice & Procedural Justice
c. Procedural Justice & interactional Justice
d. Procedural justice & Distributive Justice

11. What is the most important insight you gained from this class and how will it help you
in the future either as an employee or in your career?

The most important insight I gained from class was how important it is to communicate well and
get employees to buy into things. This will help me in the future by making my team work better
together, managing my coworkers better, and helping to create a happy and productive work
environment, whether I’m an employee or a leader in my career.