The case in review is that of Denton Fabricators. I will be reviewing the salaries of four positions within the accounting department. These positions include; accountant, senior accounting clerk, bookkeeper, and bookkeeper assistant. I will begin by noting that “the goal of Denton Fabricators Corporate Compensation is to motivate personnel to support the achievement of company business goals” (Clardy, A.B., 1996). They also note that in order to reach their goals they plan to compensate employees that perform at specific levels competitively. This is in accordance to current market level. The case notes that “there have been no changes to Denton’s salary levels for over 3 years” (Clardy, A.B., 1996). This has resulted in employees resigning for their positions and seeking employment elsewhere. “Managing pay systems is one of the most controversial and hotly debated areas of human resource management” (Coz, A., 2003).
Upon reviewing the staffing and compensation chart I notice that their accountant positions seem to be on par for the market average. This is most likely due to the fact that both of their accountants are new within the last year and a half. I do not see that any changes need to be made in this area. Now as I move into the accounting clerk position, I notice that one employee in particular is being paid below the market average for that position. We see the same issue in the bookkeeper position. They are paying a bookkeeper with double the years of experience a mere ten cents an hour more. The lower two paid employees in this department are making around sixty cents less an hour than the market average. The bookkeeper assistants all seem to be close in line with the market average but one is falling short by a small margin.
The solution to this problem is quite simple. Denton Fabricators needs to conduct pay benchmarking. “Pay benchmarking is the practice of establishing standards of evaluation or comparison by collecting data on the pay provided for similar work and then using these standards to adjust pay levels or benefits” (Magnan, M., Martin, D., 2018). This would ensure their employees were compensated fairly against other employees within their field and within their market. This would cause their longevity rates to increase and their turnover rates to decrease. To ensure they can pay these wages and maintain a profitable company they need to analyze their budgets along with profits and losses. The bible say’s “whoever sows injustice will reap calamity, and the rod of his fury will fail” (Proverbs 22:8). This is seen to be true among the employees that are unhappy and have chosen to seek work within other organizations. The bible also says, “People should benefit from their work” (1 Timothy 5:17-18). If Denton Fabricators wishes to maintain their goals regarding compensation and quality of employee, these changes will need to take place sooner rather than later. Pay scales should be reviewed annually along with company budget to ensure employee satisfaction and fair wages.
Clardy, A. B. (1996, eBook Published 25 February 2014). Managing human resources. New
York: Psychology Press.
Coz, A. (2003). The importance of employee participation in determining pay systems effectiveness. Retrieved from https://onlinelibrary-wiley-com.ezproxy.liberty.edu/doi/abs/10.1111/1468-2370.00047
Magnan, M., Martin, D. (2018). Executive compensation and employee remuneration; the flexible principals of justice in pay. Retrieved from https://search-proquest-com.ezproxy.liberty.edu/docview/2002115933?pq-origsite=summon
Denton Fabricators has not made any changes to its salary structure levels in over 3 years (Clardy, A. p. 83, 1996). The company has experienced high turnover the last 2 years; therefore, I will make some recommendations with hopes to help the company reduce its turnover. Denton Fabricators has a clear and concise compensation policy in place that all employees are aware of. I agree with the current salary chart’s range levels and I believe that jobs should be linked to a specific base rate of pay. “A fundamental premise of discussion of pay structure is that pay rates are linked to jobs” (Gerhart, B. & Rynes, S. L., 2003). The jobs should initially be worth a certain amount, but then the range comes into play because people have different levels of experience. This is how employees may start at a higher range due to years of experience.
After reviewing Denton’s policy and staffing and compensation chart, my first recommendation would be to eliminate a bookkeeper position. Based on the compensation policy under “Role of Performance-Based Pay,” the policy states, “Employees will be regularly assessed by their supervisors, and those who are not meeting minimal acceptable standards will be terminated” (Clardy, A. p. 83, 1996). According to the staffing and compensation chart, Terry Johnson has the highest seniority, makes the highest salary in the position and holds the lowest performance rating score. Before I initially decide to terminate this employee regarding performance, I would want to review previous performance appraisals or reviews. There should be something in writing showing that the employee was given goals and chances to improve performance. According to SHRM it is important to focus on goals during a review. They follow the SMART method: S – Specific, clear and understandable, M – Measurable, verifiable and results-oriented, A – Attainable, yet sufficiently challenging, R – Relevant to the mission of the department or organization, and T- Time-bound with a schedule and specific milestones (SHRM, 2019). I would want to be sure that the employee knows that there have been performance issues. In the policy under “Desired Market Position,” it is understood that Denton’s pay rates will be competitive. “Competitive” is understood to mean that the employee’s fixed, base salary will approach but never exceed the market average for compensation in comparable jobs” (Clardy, A. p. 83, 1996). It does state that strong performers are eligible fore bonus compensations. So, with that being said, Terry Johnson is a low performer and makes the most in that position. This clearly does not make sense and needs to be reviewed.
My second recommendation would be to determine whether or not the company needs two Sr. Accounting Clerks and two Bookkeeper Assistants. Depending on the level of work there is. My personal experience with a company operating 115 retail stores and employing over 450 employees, there was an accounting department of 6 with a CFO. That is a total of 7 in the accounting department. This department seems to be overstaffed. My suggestions would be to reduce the Assistant Bookkeeper to just one position and eliminate the one with less seniority. I would then reduce a Sr. Accounting Clerk position and again would eliminate the one with less seniority. I would reduce the four positions from 9 down to a total of 6.
For actual salary level changes and changes to the department, I would increase the Sr. Accounting Clerk, Gene Williams to a higher salary range due to his years of experience and additional work he may take on with reduced staff. His salary would change from $9.72/hr to 10.50/hr. I would also increase Bookkeeper Assistant, Kerry Powers for similar reasons. Years of experience and additional workload. Her salary would change from $6.80/hr to $7.50/hr.
Working with employees and dealing with performance reviews, I often am burdened with what I can and what I can not give an employee for pay. I always want to pay them more especially those who are great all around. They have a good personality, trustworthy, reliable, works well with others (team player), and does their job well. I think of the verse in Philippians 2:3, “Do nothing from selfishness or empty conceit, but with humility of mind regard one another as more important than yourselves” (biblegateway.com). I hope that I can always remember this when dealing with employees regardless of my position.
Biblegateway.com. Philippians 2:3 Retrieved from:
https://www.biblegateway.com/quicksearch/?quicksearch=care+for+others&qs_version=NASB Clardy, A. (1996). Managing human resources. New York: Psychology Press.
SHRM. (2019). Managing Employee Performance. Retrieved:
Gerhart, B. & Rynes, S. L. (2003). Pay structure: relative pay within organizations. In
Foundations for Organizational Science: Compensation: Theory, evidence, and strategic implications (pp. 81-114). Thousand Oaks, CA: SAGE Publications, Inc. doi: 10.4135/9781452229256.n4