Review the following scenario and answer the questions below. You will have two attempts for this assessment.
Fresh Munchables is a mid-sized but steadily growing food-processing company founded in 1967. Since its inception, the company has been committed to providing only premium quality health foods. The company is headquartered in Wichita, Kansas, and it is one of the area’s largest producers of soups and simple meals. In the past 20 years, the company has also begun processing healthy snacks and beverages. Fresh Munchables has traditionally sold its products through large grocery stores, but it is now venturing into online and restaurant businesses, which is all very new territory for management.
The company is split up into three overarching strategic business units—soups and meals, drinks, and snacks. Additionally, the company is divided into several business units at the operational level, consisting of a mix of business operations, manufacturing (production), research and development, finance, and so on. As the company continues to grow, the executive team and other leaders are constantly looking for ways to improve processes.
Because Fresh Munchables has grown from a very small company into a well-established organization, management has decided to broaden the company’s strategic HR functions. The human resources team is currently working to improve recruiting and hiring processes, succession planning, and most importantly, compensation and rewards.
For many years, the company has delegated compensation decisions to managers with little to no training on the subject. This has left the company in a disorganized, confused state when it comes to paying and rewarding employees. These problems have compounded as Fresh Munchables has recently opened up new manufacturing locations with new managers and many new employees.
The chief human resources officer has organized a team of compensation specialists of which you are a part to spearhead total compensation-related problems and help the company to reach its current and future goals. You and your team can achieve this by revising the current total compensation system to reflect the company’s current business strategies and goals as well as attract and retain top talent.
The supply chain management unit at Fresh Munchables is creating an entirely new international purchasing team solely focused on purchasing food ingredients, machinery, and supplies from companies abroad. The compensation team must determine how to pay this new team. The compensation for the new jobs must account for the shifting budgetary allowances involved in the creation of the new team. It should also motivate employees to do their best work.
Which form of pay should you choose to use in order to address these needs?
- Performance-based pay, because it is flexible and controls costs within the company
- Seniority-based pay because it encourages employees to stay at the company
- Hourly-based pay, because it is the standard for purchasing positions and controlling costs
- Achievement-based pay, because it motivates employees to compete with one another
The executive team at Fresh Munchables is working to increase collaboration and flexibility in regard to compensation. They are also trying to motivate lateral changes within the business operations unit without facing compensation-related barriers.
How can the compensation specialist achieve this outcome?
- Incorporate a hierarchical structure because it increases employee motivation to collaborate and solve problems.
- Incorporate widebanding because it encourages employees to change roles and responsibilities and bring new perspectives to different parts of the company
- Incorporate broadbanding because it allows employees to manage career changes within the organization without a reduction in compensation.
- Incorporate a rigid structure because it provides an incentive for employees to reach strategic company goals that are tied to compensation.
One of the ways that Fresh Munchables grows its revenue streams is by finding new retail locations to sell products. The company is currently seeking to grow its client base and has established a search team to seek out and acquire new retail locations. The search team is composed of self-motivated employees with a growth mindset toward development and goal achievement, and they are currently being paid a base salary. The compensation team is going to revise the current pay plan to motivate these employees even further.
Which of the following forms of pay will help Fresh Munchables reward the desired behaviors?
- Performance-based pay, because it provides an incentive for the team members to produce the desired result of growing the company’s client base
- Hourly pay, because the more time the team members spend contacting potential clients, the more they will be paid
- Capability-based pay, because some employees naturally have better social skills and are better at persuading new clients to partner with them
- Piece-rate pay, because it is the gold standard for customer relations employees and provides a foundation for performance appraisal
In an effort to help frontline employees feel more valued, Fresh Munchables would like to give managers the autonomy to reward employees in real time for “above and beyond” effort on a weekly basis.
Which of the following approaches will best help the company reward frontline employees for outstanding effort and performance?
- Permit managers to award individual bonuses, because individual bonuses do not require any contingencies for payout.
- Permit managers to give out spot awards, because spot awards can be given immediately to reward employees.
- Allow managers to administer merit pay, because merit pay targets desired performance.
- Allow managers to administer quick awards, because quick awards can be offered in real time and they focus on discretionary performance.
The compensation system at Fresh Munchables aims to better align with its strategic goals and culture. The compensation team has performed an internal evaluation of each job and has analyzed the external market.
Which of the following analyses should the team use in order to integrate the job evaluation and market data?
- An ANOVA because it allows for comparison of the means of several groups
- A regression analysis because it has predictive power and produces a line of best fit
- A Pearson’s correlation analysis because it shows how tightly two variables are correlated
- A t-test analysis because it allows for comparison of the means of two groups
The engineering unit at Fresh Munchables is trying to attract and retain employees with a niche set of skills. The compensation team has spoken with the engineering manager and decided to create a capability-based pay system to attract qualified engineers.
What should be the first step in creating this system?
- Define the individual characteristics that will allow a person to be successful as an engineer in order to create value for the organization.
- Define the different levels of each desired skill in order to create an appropriate basis for skill measurement.
- Select the appropriate information sources because it is essential to communicate the desired skills and abilities to potential employees.
- Create the training and support structure because the foundation of the system is dependent on it.
A typical job performance model for a food preparation worker at Fresh Munchables states that high performance includes the following:
1. Using proper cooking methods to prepare and package appealing and nutritious food
2. Checking food during preparation and using proper food handling procedures to ensure that quality and safety standards are met
3. Producing accurate quantities of each product with little to no waste
How could a manager improve this job performance model?
- Specify the direct causes of high performance, such as knowledge, rewards, and employee characteristics, to show how employees can achieve high performance
- Include more factors that are outside the employees’ control in order to increase employee motivation
- Provide less detailed objectives in order to allow for creativity on the job
- Mention budget constraints to deter employees from wasting time or inventory
For the past week, the compensation team at Fresh Munchables has been collecting market data and identifying benchmark jobs. They have collected data from three years ago from a number of different sources to establish external market pay rates.
In order for the data to be most accurate, the compensation team must first do which of the following?
- The team must compare the data to data from another industry in order to account for market biases.
- The team does not have to do anything to the data because it is already accurate.
- The team must first aggregate the data, because it comes from multiple sources.
- The team must age the data in order to account for inflation.
The compensation team is trying to determine the total number of pay grades that should be used in the engineering unit of Fresh Munchables. This unit has sometimes struggled to meet productivity goals but overall contributes to the company’s mission to provide high-quality products to consumers. The engineering unit includes several dynamic job positions, and employees frequently change responsibilities as they work on a variety of different projects. Some engineering employees are promoted to become managers, but others later use the skills they have learned to apply for jobs at other companies.
How should the compensation team determine pay grades for the engineering unit?
- Institute flexible pay grades based on how well the engineering unit meets its productivity goals.
- Create a highly structured pay grade system to encourage stability and upward mobility within the engineering department.
- Create a loosely organized structure of pay grades to align with the flexible job responsibilities in engineering positions.
- Establish a different pay grade for individual employees based on how much each employee contributes to the company’s bottom line.
Kit is an employee at Kormel Foods, a local competitor of Fresh Munchables. Kit has worked for his company for roughly 10 years, and, for the most part, has been happy with his pay. Recently, however, Kit had a conversation with an old friend from high school who works in one of Fresh Munchables’ manufacturing facilities but makes $10 more per hour for performing the exact same work. Apparently, Kit isn’t the only Kormel employee being underpaid.
How can management at Fresh Munchables leverage this information?
- They can now reduce the wages of their manufacturing employees to match the competition.
- They can inform Kormel that Kormel’s employees are unhappy with their pay.
- They can capitalize on the dissatisfaction of the Kormel employees and attract talented workers from Kormel.
- They can inform union officials that Kormel may be a good candidate for union formation.
The manager of the engineering business unit at Fresh Munchables is working with HR to develop a variable pay program in the form of individual bonuses. The manager hopes that it will help employees focus on the goals of the unit to increase compliance with safety procedures and reduce the number of accidents in the workplace.
How should the manager determine whether each employee should receive a bonus and how much the bonus should be in comparison with others?
- Have employees rank one another on how well they complied with safety procedures and ask them to report any accidents to the manager.
- Assess each employee’s relevant education and experience prior to working for Fresh Munchables and assign greater bonuses to those who are more qualified.
- Reward employees equally according to how well the entire team shows improvement in compliance with safety procedures.
- Define the desired safety behaviors and deliver bonuses according to the extent to which each employee demonstrated those behaviors.
Ena is a mechanical engineer with a history of good performance. He has worked at Fresh Munchables for six years and makes roughly $67,000 a year. Phillip is also a mechanical engineer, but has had poor performance in recent months. He has worked for Fresh Munchables for two years and makes roughly $76,000 a year. Ena recently became aware of the pay discrepancy, and he is upset by the injustice. He brings the issue to the attention of the HR department.
What should HR do in this situation?
- HR should immediately increase Ena’s pay to $76,000 and decrease Phillip’s pay to $67,000 in order to show that good performance should be rewarded and bad performance punished.
- HR should evaluate the company’s internal reward alignment and Ena’s recent performance, then correct Ena’s current pay level in order to ensure pay equity.
- HR should forward the complaint to Phillip and Ena’s manager and suggest that Phillip be fired for his poor performance in order to alleviate Ena’s complaints about compensation.
- HR should immediately decrease Phillip’s pay to 10% less than Ena’s pay and leave Ena’s pay the same in order to show Phillip that he must work at the company longer in order to deserve a higher salary.
Allison recently graduated from college and was just offered a position as a food scientist at Fresh Munchables. The hiring director offered her a yearly salary of $48,000. However, Allison heard from a friend who graduated with her that he had been offered a yearly salary of $60,000 for a similar position at Tasty Tidbits, a competitor of Fresh Munchables in the snack industry. Allison then proposed a higher salary of $55,000 to the hiring director who refused and said that the typical compensation for an entry-level food scientist was actually $44,000. Allison turned down the job offer. Since then, Fresh Munchables has had a difficult time hiring and retaining food scientists due to higher salaries being offered at other companies.
Which challenge is the company facing in terms of external reward positioning?
- The cost challenge, because the company did not align Allison’s proposed salary with other food scientists within the company
- The job matching challenge, because the entry-level food scientist position has not been compared to entry-level positions in other industries
- The ethical challenge, because managers may have colluded to raise their own pay by preventing lower-level employees from earning a reasonable salary
- The bad data challenge, because the company does not have accurate data about the average level of compensation for similar jobs within the industry
Although Fresh Munchables has been hiring many young and highly-educated people lately, the company still strongly values its more tenured employees who have been with the company for many years. It’s important to the company that all employees, regardless of demographics, are paid fairly within their respective pay ranges. As Fresh Munchables is building out its new compensation system, the compensation team must establish pay ranges that allow for growth within a job.
While establishing these ranges, it would be most prudent to do which of the following?
- Move the pay ranges close together in order to allow employees to move to higher pay grades more quickly.
- Allow pay ranges to slightly overlap successive pay grades in order to allow for higher performance-based pay without moving grades.
- Exclude the use of pay grades altogether because it is considered to be an outdated practice.
- Move pay ranges far apart from each other in order to allow for more direct compensation and fewer indirect benefits, thus saving the company money.
One goal that is crucial for Fresh Munchables’ success is obtaining new retail locations in order to increase revenue streams. With that in mind, the company wants to reward the business operations unit if it reaches its goal of opening 100 new retail locations in the next year. If the goal is met, each employee in the business operations unit will receive a fixed individual bonus.
How should HR structure the payout on this incentive plan?
- Raise the amount of intangible rewards by increasing the number of vacation days.
- Increase the fixed rewards slightly by raising the employee’s salary and increase variable rewards in the form of a bonus.
- Keep fixed rewards the same and increase variable rewards in the form of a bonus.
- Increase the amount of fixed rewards by raising the employees’ salaries.
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