The Fit Stop Case Study

Executive Summary

Determining the most suitable amount of compensation for employees is not an easy process. The five step compensation formulation strategy provides a step by step guide for determining the appropriate remuneration based on the persisting business conditions. At the first stage of the drafting process of the organizational behavior, low compensation system is appropriate considering that the employees have no professional skills. Furthermore, high remuneration could cause a financial crisis to the business. Similarly, under the objective of compensation, low-level compensation would be appropriate since the salespersons have future training opportunities.

Regarding the compensation mix, incorporation of the base and performance pay would be the most suitable criterion for determining the compensation.Accordingly, it provides motivation for the employees and prevents the organization from excessive expenditures at the initial stage of its development. As to the part of compensation level, the most proper level is the leading one that will help the organization stabilize its functions by maintaining employees. Moreover, a compensation strategy between the company and the employees would be the most appropriate criteria for determining the compensation of the sales persons. Such method presupposes consultative meetings with the sales staff to decide on the most appropriate amount of salary across all the branches. Additionally, the method would be desirable in that it would identify the particular range of compensation.

Introduction

Compensation is one of the most important aspects of business. The advance plays a crucial role in determining the productivity of the company. Most organizations have a particular number of workers who are accountable for the execution of business related tasks. In most cases, the productivity and the success of the company is entirely dependent on the ability of the workers to assume their responsibilities. Determination of appropriate remuneration requires the use of various methods and consequently choosing the most felicitous criteria for the company considering the prevailing market conditions. This paper discusses the five-step compensation formulation strategy and the specific issues that occur at every point of the payment formulation process.

The Organization

The organizational behavior plays a critical role in determining the compensation strategy within an organization. When analyzing the case, it becomes evident that a proprietor’s goal is to ensure their company has high productivity level and is in a position to meet the needs of customers. Given that the sales team will be required to participate in the excellent customer service in the course of operations, the compensation strategy will vary significantly. However, the most appropriate compensation is low-level salary scheme due to the current conditions and following reasons. Firstly, the task at hand is simple as it will involve the general operation of machines. However, as indicated in the case, the sales team will need a change from the payment scheme after the psychotherapy training program to a high salary scheme. At this stage, the team will develop greater skills necessary for the personalized service.

Secondly, as stated in the case, the sales staff have low qualification and lack professional training on sales and marketing. Consequently, such type of skills will only attract low compensation until an employee will improve them. Thirdly, the tasks involved are “procedural and will depend greatly on individual output as compared to a team-centered which would attract high compensation” (Long, 2013, p. 202). Lastly, the worker has a narrow scope of work that does not allow them to utilize fitness machines. Judging by the case, only the physiotherapist and sports expert will have direct contact with the customers. casein fact, high compensation would be suitable if the sale staff directly interacts with customers. Moreover, satisfying each of the client needs would require high compensation to motivate the sales persons.

Compensation Objective

The organizational behavior determines the type of payment systems. Consequently, organizations that are likely to offer opportunities for growth or provide incentives for development tend to attract low compensation scheme. The reward system usually motivates employees and makes them work productively. From the case, the recruitment of the sales staff with high school diplomas relieves the entrepreneur of the need to provide high-level compensation. However, entry levels of professional sales people may necessitate the company developing an effective rewarding system to honor the team for their skills. The compensation goal in the case of the Fit Stop may take two different forms to allow the company allocate an appropriate amount of perks and bonuses based on the reward system to the sales staff.

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First, the company can formulate the recruitment exercise of the sales staff as an opportunity for the employees to learn about providing personalized service and operating the fitness machines. As a result, the company can use certain criteria to set the compensation system for the sales staff to low levels. In addition, the idea of the business owner to offer training sessions at a later stage to the sales staff can potentially facilitate minor compensation system as the employees will regard it as the opportunity that eventually leads to higher remuneration. Therefore, compensation objective that is likely to offer intrinsic and extrinsic rewards may likely lower the payment system at the initial stages of the business and increase as the company starts making enough revenue to cover the utility and labor costs.

Compensation Mix

The bonus mix can play a significant role in determining the level of rewards. Incorporating different types of rewards can facilitate the smooth operation of the organization and help achieve returns sooner than expected. The willingness of the proprietor to offer various kinds of compensation, such as “base pay, indirect pay or performance” pay, can help the company motivate salespersons (Long, 2013, p. 207). For instance, if the employer chooses to provide base pay only, then they will have to introduce an attractive rewarding system to the employees as their contribution will depend on the amount of the compensation. However, full adoption of performance pay can demoralize the sales people as the initial stages of operations may be quite difficult for the business to make even a single sale. Therefore, a compensation mix that consists of a base pay and performance pay can be viable for both the business and the sales persons. Moreover, the strategy would benefit the company as it will incur relatively small compensation costs at the initial stages of business operations. As a result, the salespersons will remain motivated and profit-oriented as their work has to produce sales.

Compensation Level

Salary level is critical for any existing or newly formed businesses. There are several compensational levels such as “lagging market, leading market, hybrid, matching market and utility analysis systems” (Long, 2013, p. 209). Owing to the high competition from other firms, it would be essential for the Fit Stop to use the leading compensation level to attract and maintain sales personnel. It is vital to note that staff plays a significant role in the prosperity of any business. As a result, it would be essential for the company to use the above average market compensation to achieve employee stability. The sales staff will develop an attachment to the firm thereby enhancing their efforts in making the company successful and be as highly competitive as the other established companies offering the same products and services. However, the strategy will have a high-cost impact on the company in the short run.

Compensation Strategy

Formulation of company’s compensation strategy can play a crucial role in determining the most appropriate compensation to the sales staff. Incorporating some of the employees in policy development can be the best option of creating the viable payment system. Understanding of the employees’ needs for active participation in employment and consideration of the business position in the market can enable the Fit Stop to achieve the successful compensation system. Payment acceptance is vital for the healthy working environment. Furthermore, the strategy would be appropriate across all the company’s stores. Consequently, the employer would not have to rely on the conventional low or high compensation system, because it would rather adopt one that works both for the sales staff and the company depending on the dominating business environment. The compensation strategy would also be appropriate for determining an accurate remuneration range for individual exclusive of sales staff across all the zones of business operation.

Conclusion

Compensation is a contentious issue in business environments. The level of commission determines the productivity of the company. Enterprises that provide small payment risks their productivity compared to the companies who offer significant packages. Determining the level and amount of compensation is not a direct or easy task. However, the appropriate definition of the organization work behaviors can help decide on the most suitable remuneration. Jobs that require basic skills attract small compensation and vice versa. Moreover, the role of the commission can determine the amount of gain. Companies that offer growth opportunities can provide little remuneration in the initial stages. Similarly, adopting compensation mix of base pay and performance pay can give a company significant advantages in the early stages of its operation. Furthermore, the benefit level can play a critical role in influencing the level of remuneration. In fact, such indices depend entirely on the company’s objectives and plans. Lastly, the  strategy of involving employees in the formulation of compensation plan is a reliable option for creating a payment that works for both the company and staff.

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