Welcome, in this video, we're talking about examples of Pay Strategy.
So first of all, what are the goals of our compensation plan?
Once again, our compensation plan needs to attract, retain, and motivate the kind
of person who we need to successfully execute our business strategy.
And we also want to do it in a way that's tax efficient.
That is, we're spending all of this money on our compensation plan,
we want to make sure that we're allocating our payments in such a way that
we can get as much money to our employees to boost that value proposition.
And also to save money ourselves.
We'll be talking more about the second part,
tax efficiency, throughout the course.
For now we want to talk about some different ways that organizations have
tried to attract, retain and
motivate the person they need to execute their business strategy.
So, our methods for attracting, retaining and
motivating those workers are going to depend on our strategic messaging model.
We'll focus on each of those in turn.
So first of all, let's talk about how companies compete on money.
So here's an example of Costco.
Costco is an American retailer.
Their compensation strategy relies on them being an employer of choice.
That is, they want to pay a premium for
workers in order to get premium productivity.
It's well known that Costco tends to pay their workers and
has a compensation package that tends to greatly exceed their competitors.
Both in terms of their base cash and also their benefits.
But we shouldn't really think about this as costing $1 increase in pay per hour,
as directly mapping on $1 in increase cost.
That is, they also earn higher returns in that they have a very productive and
loyal workforce.
They have relatively less loss and
leakage of their inventory from their stores.
And they also try to get the most advantage of their premium pay
through a whole set of complimentary practices.
So for example, Costco, because they pay more than the market,
get a lot of applications.
And that lets them be very, very selective in who they bring into the organization.
When they've identified somebody who they think would be a great fit for
Costco, they then invest intensively on training them.
They're able to do this because when someone joins Costco, Costco,
since it pays above the market, has very, very high retention rates.
And so by training them they know that they can make those investments because
they're going to stick around for a long time.