Compensation Practices

Subject: Business
Type: Expository Essay
Pages: 3
Word count: 1802
Topics: Human Resources, Management


In the recent years companies have been forced to make very difficult decisions in trying to align some of the major compensation practices it has with business strategy. And this can be attributed to the difficult economic climate in most of these companies and this includes Ford. Even while observing some of the improvements that have happened in the economy as well the performance of the company one challenge that constantly comes across is in the implementation of these compensation practices and it should be noted that these companies very much like Ford quite often put these policies in place so as to grab the attention but particularly the attention of these employees. Ford has been known to adopt quite a flexible way of handling its compensation strategy for years and this method have constantly worked in its favor despite some of the visible challenges that they constantly face. 

Compensation Strategies at Ford

At Ford it has been proven through these strategies that Ford constantly through these policies fights for some of its best employees. This sis because its organization structure as well as its work process has always been built around the concept of employee incentive (Boon et al., 2017). With this, it has then come up with a package payment that puts its concentration very much on not just the energy of its staff but also the direction they would want to take. Ford has also taken very much on the reward system and this it has done beyond what is considered the traditional payment systems and this is inclusive of all that the company has to offer (Chen et al., 2014). Some of the most evident challenges that this company had to face under this context was that it Human Resource department had to constantly come up with better ways of reengineering these packages at annual time table  and even at some time in the middle of the year (Chen et al., 2014).. This is also because Ford is known to make some of the best motor vehicle brands in this industry and as such retention of some its most qualified has constantly become not only one of its top priorities but also a major challenge in these aspects (Björkman & Lervik, 2007). This is because the demand of Ford products never declines and even more importantly is that Ford competitors are always pout there shopping for some of its best employees  as such it has constantly proven to be a challenge sin retaining those employees but it’s something that Ford has deemed important so as to keep those employees.  And because of all these, Ford has always found it very important to put in place policies and even further a package system that works certainly for all in the company and not just the top management

When it comes to the question of market relations choices in compensation package, forecasting, optimization, analysis method and even feasibility, Ford is known to come up with one of the best selections. As nit is known to be one of the best companies around it constantly feel the obligation to pull out one of the best strategies for its companies (Boon et al., 2017).. This strategy is constantly branded as the flexible compensation strategy, and because they believe in the philosophy of whoever pays the piper calls the tune, they have set a mandatory standard that they push to be applied throughout by all departments  and more often than not it would be safe to say that these strategy,  works.

With this strategy put in place there are constant steps that are usually taken by the company to gauge the effectiveness of their compensation strategy. The company therefore has constantly put in pace strategies to review not just the overall performance of everyone but the morale (Boon et al., 2017). The impact of the compensation package in the company has been everything but positive. The evaluation is has not just been constricted to the employees but to the top executives and also the governing board of directors and interestingly the response has been resoundingly positive.

Impact to the company and its stakeholders

These compensation strategies have encouraged the stake holders in this companies and in this sense being the employees to up their skills and become more productive in a way and this is because of the rewarding culture that the compensation package has put in place.  This system has been a constant recipe for a higher self-esteem and even self-worth and thus increased effectiveness in the place of work. This pay system has attracted and retained very highly qualified individuals for the company and as such made the level of competition in at Ford very high (Björkman & Lervik, 2007). It has also impacted the culture in this organization in a very positive way and this is because of mostly the aspect of teamwork it has carried across the board. It has also seen the prospects of employees taking on the concept of lifelong learning and as such are always free to learn something new which has immensely contributed to the company. It’s therefore very safe to say at this juncture that this practice has been a force of common good for the company more that it is bad and this compensation strategy is going to be around at Ford for the foreseeable future.

Ways in which certain aspects affect company’s compensation practices

Even though Ford has one of the most attractive compensation packages in this industry, there are certain aspects that affect the kind employees at an individual basis. An example in this instance would be the kind of laws and even company regulations. These aspects do affect the kind of remuneration that an employee gets at Ford For example those employees that are on contract basis most of the time do not get paid when they do compulsory time offs (Björkman & Lervik, 2007). It’s also worth noting that under United States labor laws there are minimum wages that have been set by the government and as all companies even Ford have to comply with. Similarly there are rules that have been set that guide on how things like overtime are compensated and this is usually done so that there is no mistreatment or even exploitation of the work force other laws cover areas of employment at will as well as the question of compulsory bonuses.  To added to this sis the question. Labor Unions have constantly set the standards that they expect the companies to operate (Boon et al., 2017). An example is that labor Unions have made it an obligation of the company to not just pay the employees on time but also raise the standards of living for all the employees that the company employees and because Ford constantly seeks every means to avoid getting on the wrong side of the authorities it makes it tends to heed all these set regulations.  Labor Unions also protect employees from possible exploitation by the companies that they work for. As such Labor Unions oversee the compensation practices at Ford and constantly make sure the company compensates a person’s services at the company as the standard that is on the labor market.

There is always a constant fluctuation on the market demand for goods from Ford. This fluctuation affects directly the revenues of Ford and as such go on to affect some of the compensation practices at Ford.  An example is during an economic crash like the crash of 2008, there is always a chance that the company’s sales revenue may be very low and at times even force companies to lay off staff. Those who have been retained mostly don’t enjoy the kind of compensation they sued to (Björkman & Lervik, 2007). But as the economy undergoes recovery they slowly go back to the original pay plan that they were enjoying. Also in emerging markets high profits are usually redirected towards employee compensation.

Effectiveness of traditional Base for Pay at Ford

Seniority based payment

This type of payment is still a common practice in so many of our organizations including Ford. This payment system at Ford takes into deep consideration the level of performance of employee even though it also looks at tenure (Boon et al., 2017). Such that those employees who have stayed in the company for long will likely be compensated highly due to their loyalty. This to some scholars is normally seen is an encouragement to the staff that are still junior in the organization. Furthermore this kind of payment is most of the time there to ensure financial stability for all its employees and this is irrespective of the performance levels.

Ford is usually reluctant in phasing out theses traditional pay practices and its reasons are that there will be employee dissatisfaction which will in turn bring in poor performance (Boon., 2017). Even with the ever soaring operation costs, it’s been a belief shared by the top management that it is vital to invest in employee welfare vital if the organization to maintain its level of productivity. As such quelling discontent is vital to ensure their productivity and loyalty remain at an all-time high and this made through adequate compensation that is based on compensation practices that are traditional in nature.

Performance-Based Pay System

In Fords pay system the performance of an employee is very vital in determining his or her pay. This payment system which mostly is effective when it comes to its staff that are still junior has created a group of very hard working individuals who constantly strive to bring in their best to achieve the maximum. It may sound like an ideal option but looking at it closely it reveals several loopholes.

One of those loopholes that may be hit Ford the potential skyrocketing of the turnover rates. And this constantly come from those low performers who fight to meet the high performance standards. This can then be conceptualized that the winners in these scenario are the individuals who are considered high performance while the losers here are likely the low performers and in the end those who rank low will more often than not quit (Boon et al., 2017).  There are constant threat to these traditional models and they are issues like technology.


To summarize this what has come out is the nature by which Ford is trying to maintain its competitive nature and this by its consideration of the employee welfare. This has been achieved by its compensation strategy constantly getting modified to accommodate the changes that are present in the labor market as well as tend to the regulations that are given out by the authorities. Therefore Fords success can be alluded to the fact that it has constantly looked after its employees.

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  1. Björkman, I., & Lervik, J. E. (2007). Transferring HR practices within multinational corporations. Human Resource Management Journal, 17(4), 320-335.
  2. Boon, C., Eckardt, R., Lepak, D. P., & Boselie, P. (2017). Integrating strategic human capital and strategic human resource management. The International Journal of Human Resource Management, 1-34.
  3. Chen, G., Zhu, M., & Cai, X. (2014). Medium-voltage level dynamic voltage restorer compensation strategy by positive and negative sequence extractions in multiple reference frames. IET Power Electronics, 7(7), 1747-1758.
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