Merkle began as a small data processing company. David Williams Merkle purchased the small company in 1988 and since then, David has remained at the helm of the company’s leadership. When he purchased Merkle, William was only 25 years old (Merkle, 2016). However, the young entrepreneur would beat all the odds by growing the company to have more than $382 million in revenues by the end of 2014. The company employs at least 3000 employees who are located in the more than 18 offices that Merkle operates in the United States, London, and China (Merkle, 2016). Over the years, the company has grown both organically and mechanistically through the acquisition of more than 12 smaller marketing companies in every new market where the company ventured. The growth placed the company on the path of becoming the world’s greatest company in the provision of marketing agency services. Based on this information, this paper provides a detailed look into Merkle’s total compensation plan for its employees with the intention of identifying areas of overhaul or improvement. The overall intention is to show the strengths, weaknesses, opportunities and threats that relate to the currently applicable total compensation plan for the employees.
Merkle recognizes the important part that its people play in the performance and the growth of the company. Based on this importance, the company has a robust total compensation and rewards system that is the heart of the employee performance at the organization. In essence, the mantra ‘led not managed’ runs through the veins of the company and it indicates the company’s strong resolve of focusing on not only professionally competent members of staff but also self-driven members of staff. Consequently, the company’s managers are more of career advocates and the square display of what this means was the move by the company’s CEO to announce the EVP that means the Employee value proposition (Merkle, 2016). The EVP encompasses various elements that include the career opportunities, learning and development, the people, the work and work-life balance, and the rewards and recognition systems. Of particular importance in this study is the rewards and recognition systems at Merkle and over the next few paragraphs, a lot more focus will be geared towards providing a comprehensive environmental review of the system.
On the strengths of the total reward system, which is the name for the rewards and recognition package under the EVP, the identifiable benefits include the fact that the program balances with the shareholder interests. The manner in which the program is structured allows the employees to earn a better reward and recognition in their identifiable performance milestone (Merkle, 2016). Secondly, the program provides the employees with a base pay greater than the prevailing market reward for the same position. It translates to the company’s ability to attract, hire, and retain competent employees (Armstrong, 2002). Thirdly, the total reward plan matches the performance of the employee to the reward and recognition that they get from the organization, including the base pay, the bonus, equity rewards, benefits, and benefits and other awards. The other strength associated with the total reward package is that it rewards good performance with equity in the company. The move merges the interests of the employees with those of the shareholders considering that the employees would not act in a manner that is not in line with the possibility that they will grow the value of their equity interest in the company. Notably, the points provided in this paragraph also stand out as the major benefits or advantages of the total compensation program as employed at Merkle.
On the weaknesses, the program allows for a basic pay that is higher than the market rate for a company in the same industry. According to information the company’s total reward system, the employees are set to receive a base salary of not less than $80,000 (Merkle, 2016). There are no indications that the base salary is likely to go down in case of poor performance in the organization and neither does the base salary set standards on the minimum performance standards that the employees must achieve while working with the company and enjoying the return. Instead, the company only provides guidelines on how the program can be graduated upwards based on the performance of the employees. However, the bonus is available only to those in a director position or higher. Further, the equity offer is only available to those of the vice president position or higher. Having the bonuses for only those above the director’s position and the equity for the vice presidents is one of the disadvantages with the total compensation program at the company and one that needs to be addressed promptly because it deters the pay system.
On the threats that the company faces, there is the regulatory environment with the possibility that the laws on equity rewards for the employees may change depending on the findings of the SEC and other regulatory bodies. The market and economy’s cyclical nature may also affect the business cycle and the performance of the company and considering the huge fixed or base salary bill, the company may suffer immensely if the profitability drops (Armstrong, 2002). The third major threat relates to having the base salaries above the normal industrial averages and having no policy on how the company can reach a decision to reduce the base salary of its employees. In case of a depressive business cycle, the company may not be able to effect the much needed cost control measures without attracting suits form the employees.
Based on the strengths, weaknesses, and threats above, there are several opportunities whose utilization would provide the company with the chance to improve the total compensation program. Firstly, the company can reduce the base salary bringing it closer to the industrial averages and then compensate that with a more robust bonus or commission system in which the employees earn extra income for good performance (Milkovich et al., 1999). It gives the employees the incentive to work harder. Secondly, the company has the opportunity to extend the equity and bonus programs to all the employees in the organization, meaning that instead of providing the employees with cash bonuses, it can award them bonus shares that the employees are required to hold for a specified minimum period such as two years before disposal. This ensures that there is a total balance between the interests of the employees and those of the shareholders. Thirdly, the award of shares limits the need for perquisites for the employees a senior levels as the growth in value of the shares promises a better return and opportunity for growth.
The recommendation for the company, therefore, is to design a more inclusive total compensation package with lower base salaries and more bonuses and commissions that are majorly availed through equity and cash awards. The bonuses must be open to all employees of the organization and the same case applies to the equity. Perquisites must be limited since they are in disagreement with the shareholders’ interests. Lastly, the company must establish proper performance measures such as profitability and turnover and use this as the basis for the award of cash bonuses and bonus shares. With the new program of total compensation, the employees in all levels of the organization will benefit from the performance of the organization. It is so considering that the award system will be based on one’s contribution to the performance of the organization unlike in the currently available system where the directors and other persons benefit more from the system than will other members of the organization.
References
Armstrong, M. (2002). Employee reward. New York: CIPD Publishing.
Milkovich, G. T., Newman, J. M., & Milkovich, C. (1999). Compensation. T. Mirror (Ed.). Burr Ridge, Ill.: Irwin/McGraw-Hill.
Merkle (2016). Our Hiring Process. Merkle. Retrieved 28 March 2016, from http://www.merkleinc.com/careers/our-hiring-process#.VvJ8MuIrKUl
Merkle (2016). Rewards & Benefits. Merkle. Retrieved 28 March 2016, from http://www.merkleinc.com/careers/rewards-benefits#.VvJ8buIrKUk
Merkle. (2016). Who We Are - A Performance Marketing Agency. Merkle. Retrieved 28 March 2016, from http://www.merkleinc.com/who-we-are-performance-marketing-agency#.VvJ84OIrKUk
