Compensation Practice Essay Example | Topics and Well Written Essays - 1500 words

Compensation Practice - Essay Example This entails use of rewards in place of punishment to get the expected results and this was also influenced much by the motivational theorists such as Abraham Maslow (Armstrong & Baron, 2005). The needs of workers must be taken care of for them to be productive. This in turn led to development of performance management systems to evaluate employees and reward them accordingly; compensation is no longer job based but is based on performance. Successful companies thus strive to develop effective compensation strategies to ensure workers are rewarded accordingly and that the business strategies are achieved. According to Heneman (2002 p. 198) the cornerstone of a compensation strategy is the compensation philosophy of the company. This is the strongly held belief about goals of all components of compensation system relative to business strategy. The aim of this paper is to evaluate the compensation practice of a publicly traded company. To achieve this, the company to be discussed is an international company dealing with foods and beverages; PepsiCo, Inc. Its short history will be outlined after which its compensation strategy will be evaluated bearing in mind best practices and challenges faced. Its impact will then be discussed followed by the factors impacting on the practices such as unions, laws and regulations and finally, a brief summary. Company Background PepsiCo, Inc is a leading global food and beverage company with respected brands throughout the world. It was formed in 1965 after the merger of Pepsi-cola Company and Frito-lay, Inc. It acquired Tropicana in 1998 and Quaker Oats in 2001 and an addition of Gatorade thereafter (PepsiCo, 2013). Its mission is to be the world’s premier consumer Products Company focused on convenient foods and beverages with a vision to improving all aspects of the world in financial success which is to be achieved through driving shareholder value. It operates in a very competitive environment but its main competitor is coca-cola company. It boasts of net revenue of over $65 billion as recorded in the financial year 2012. It is managed by a board of directors with Indra Nooyi as the board chairman and chief executive officer since 2006 and has a workforce of 297, 000 scattered in many parts of the world. Its headquarters are in Purchase, New York in the United States. It is committed to delivering sustainable growth through empowering people and as such its compensation philosophy is for employees to act and be rewarded as business owners’ thus recruiting, retaining and motivating workforce. Compensation Strategy Compensation is a vital part of performance management in organizations. This involves rewarding employees for their achievements and also correcting underperformance. A company has a great task of deciding on how to reward employees as this strategy may make or break the company. According to Aquinis (2011) the compensation strategy should be aligned to business strategy to ens ure the organizational goals are achieved and to achieve a sustainable competitive advantage. If the business strategy is cost-cutting then the company cannot go on to develop costly compensation strategies such as those involved with monetary rewards. Before everything else when