Evaluation of the Coca-Cola Company Compensation Strategy
Compensation is one of the key function of the human resource department. The human resource is supposed to develop a compensation strategy which is in line with the company’s objectives and goals while considering the market rates and also the rewards needed for the job. The compensation strategy, therefore, varies between companies and industries. Proper formulation of the compensation strategy requires that the HR and the Compensation Committee be able to define who the market is, know the competitive strategy and level you want to develop and then choose the most appropriate reward for the employees. The compensation strategy adopted affects the competitiveness of the organization, the productivity and the motivation of the employees and hence the total performance of the organization (Hopkins, McLaughlin & Scot, 2012).
This essay will here forth evaluate the compensation strategy used by the Coca-Cola Company, a multinational company to reward its employees and hence ensuring efficiency. It focuses and criticizes the appropriateness of the current compensation strategy in remitting the desired motivation and workplace productivity (Hopkins, McLaughlin & Scot, 2012). The essay further focuses on the possible changes which can be effected to adopt better compensation strategy for better performance of the company. More so, it will focus on the pay structure of the Coca-Cola Company and whether it reflects proper recognition of the employees’ contribution to the organization.
Coca-Cola Company's decisions on compensation strategies affect the various levels of workers working for the company worldwide. Currently, Coca-Cola Company utilizes various compensation strategies with the aim of satisfying its employees. The company mostly focuses on the managerial level of employees. Firstly, Coca-Cola Company has been using the stock-based strategy of compensation where the corporation's managers issued with company shares at the attainment of the set performance target. The 2014 Equity Plan eliminated access to the shares by the low-level company employees who would be compensated for better performance by shares. During its application in the company, the company was able to improve motivation through existing connection between the roles played by the organization and the goals of the company. This compensation strategy has been able to attract stakeholders to the daily business of the corporation. More so, the strategy has increased the awareness in the company and externally through employees marketing, it has enhanced its business strategies and also exploring new channels which create new opportunities and hence the success of the company (Hopkins, McLaughlin & Scot, 2012)..
Through the implementation of the above strategy to the corporation's managers only, the company have weakened the morale of the employees. The Coca-Cola Company Compensation Committee introduced the cash awards for extemporary performance to the employees. The cash award strategy to the other employees affected the performance of other employees as it was seen to reduce the loyalty of the employees towards the corporation (Hernandez & O'Connor, 2010). However, the company has held that the stock-based strategy of compensation will only benefit top managers who include the plant managers who have high impacts on the performance of the corporation and whose performance can be easily measured.
Secondly, Coca-Cola Company operates consumer driven compensation approach. This strategy is utilized in the cases where the Coca-Cola Company managers can develop strategies and plans which ensure better branding of the company's products and hence better sales. The Corporation Compensation Committee resolved to rewards those managers who bring in innovative ideas on how to promote the products of this corporation. This strategy assists in the growth of innovations which promote the use of the products and creating more customers’ loyalty (Hernandez & O'Connor, 2010).
The most recent strategy adopted by the company is the cash-balance strategy of the pension plan which is also considered as a compensation strategy. Under the new system, some flexibility has been introduced where the Coca-Cola Company will issue age-weighted credits equal to the percentage of pay. The strategy was adopted as a competence to ensure that employees are retained in the company for a longer time after hiring and recruitment (reducing the turnover rate) (Hernandez & O'Connor, 2010). This type of defined-benefit plan come after the executives rejected the defined-contributions plans which are being adopted by the many employers. This strategy also comes amid the Congress passing the Pension Protection Act, which advocates for cash-balance plans by the employers. The corporation has, however, being looked upon by the lower level employees to adopt and implement an inclusive compensation strategy whose impact would be enjoyed by all.
In developing a favorable compensation strategy, which will be acceptable by the employees worldwide, the Corporation Compensation Committee will have to consider some important factors. These factors will reduce the collision of the compensation strategy with nations' labor laws and human rights requirements. The factors to consider in this are Employment Laws in various countries, market factors, economic and legal forces, social, technological and political factors and also the various components of traditional pay systems (Aswathappa, 2013). The traditional compensation systems ensured inclusivity in the structure of the organization where the HR Department and the Compensation Committee was supposed to incorporate the aspects such as the cost of living, the current labor market, the base salary/ wage and the individual performance of the employees (Aswathappa, 2013).
With the view of the above compensation plan by the Coca-Cola Corporation, it will be important to include some reviews which will enhance the high level of motivation towards achieving the set objectives. Low level managers and employees motivation are very important for the operation of the worldwide branches. Having eliminated the employees stock ownership plan as the compensation strategy, the Committee should put in place incentive compensation strategy as a short-term strategy for the motivation of the workers and low-level managers. The incentives will involve bonuses which may influence the level of motivation of the employees. Improvement needs to be reviewed on the fixed pay structure and allowances which do not enhance motivation in the organization (Aswathappa, 2013). Actions need to be taken to review the clauses of compensation strategy which makes stagnant the compensation of lower levels managers for long. The compensation committee should consider the more bonuses, variable compensations, incentive pay and also the possible inclusion of compensation-at-risk as tools for improving the total performance and maintaining the competence of employees and the competitiveness of the corporation at large.
Recommendation(s) to improve the effectiveness of the discretionary benefits
The Coca-Cola Company has been known for providing various discretionary benefits under the benefits package of the employees in the corporation. The benefits offered by the Corporation include education benefits, medical insurance benefits, retirement plan, disability insurance, stock options, family health insurance, performance bonus, maternity leaves among others, tuition benefits, supplemental worker compensation among other benefits. The company has also ensured better performance through identification of areas which need to be addressed on the dispensation of the discretionary benefits. The central Benefits Committee have also delegated its functions to worldwide branches who can identify the hardships which need to be addressed at their levels. However, Coca-Cola Company is supposed to ensure some improvement in making decisions of the recipients of the benefits and maintenance various benefits through ensuring flexibility. The following recommendations will be of help to the corporation.
Firstly, improvements need to be considered in the determination of the individual and the job groups to enjoy the benefits of the organization. The Benefits Committee should reach to the low-level employees as well as temporary contract employees who spend most of their life working on contractual basis for the company. The Benefits Committee should introduce benefits which take into accounts these individuals who have the high impact on the performance of the corporation. Low-level employees need to be included as recipients of the discretionary benefits given by the company. The corporation should hence ensure equality in the compensation plan. Newly hired and recruited employees should enjoy the benefits which are enough to keep them motivate as they aim at the weighted age benefits which may take more time.
Secondly, improvement in the manner in which the Social Security Benefits and the Disabled Benefits have been handled at the corporation is highly desired. More so, Coca-Cola Company should address the issue of car reimbursement benefit and the accidents insurance, which has been seen to perform poorly as benefits are considered. The Benefit Committee has not updated the car reimbursement for a long time while it is very evident that the individual use if the company cars have ceased to be felt as a benefit by many of the employees. Accident insurance benefits also remain an issue as the accident cover has not been catered for and especially in the production plants where possible accidents continue to increase due to the high level of work stress and high mechanization. It is important, therefore, for the Benefit Committee to do research and evaluate the situation and the risks facing the employees and hence update the accidents and health insurance programs. This covers individuals working in areas of high risks and reduces the high rates of turnover in the corporation.
Employer-sponsorship retirement plan and health insurance programs by Coca-Cola and PepsiCo
Compensation strategy adopted by the company should always take into consideration the compensation plans of the competitors in the market. With this, the comparison between the compensation strategy and plans of the Coca-Cola Company should compare with the strategy used by PepsiCo Company. PepsiCo is the main competitor of Coca-Cola Company in the world. In the two corporations, the health insurance plan has seen a continuous decrease of the value of money which employers set as insurance covers for these employees. The employees in the two corporations have expressed their dissatisfaction with the benefits.
The employer-sponsorship retirement from the Coca-Cola Company and PepsiCo Company are highly determined by their respective country to headquarter laws. PepsiCo Company encourages employees to contribute to their retirement, and the employer supports them through ensuring 150% additional benefits on what have been contributed. On the other hand, Coca-Cola Company has developed a 50% contingent benefits plan for the married person as a retirement benefit. This is where the employee enjoys 50% retirement payment for a given period.
In conclusion, motivating employees is highly affected by the compensation plan adopted by the company. It affects the productivity of the company and the duration of service of the employees in the organization. Compensation strategies are also used as competitive strategies between the competitors in the market. HR departments, Compensation Committees, and the benefits committees are therefore expected to formulate compensation strategies which work for the better of their organization. The compensation strategies should, however, reflect the considerations of the environmental forces and factors such as national laws and human rights standards.
References
Aswathappa, K. (2013). Human resource management: Text and cases. New Delhi: McGraw-Hill Education.
Hernandez, S. R., & O'Connor, S. J. (2010). Strategic human resources management in health services organizations. Clifton Park, NY: Delmar Cengage Learning.
Hopkins, B. R., McLaughlin, T. A., & Scot, L. (2012). Nonprofit law & finance essentials e-book is set: Tools to manage money & mission. Hoboken, N.J.: John Wiley & Sons.
