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Pros and Cons of Cornings New Pay Structure
The current case concentrates on activities at Corning Inc. It is alleged that the company has done away with a traditional approach to compensation and other benefit programs. According to the case, the company has divested, which led to an alteration of the companys methods of operation. In particular, the new system bolsters innovation, teaming, risk-taking, and speed. Based on the changes in the operations of the company, it is only logical that the company adjusts its compensation system to fit the new framework. It is highlighted that the number of grades was reduced from 11 to 5 for exempt employees and from 7 to 3 for nonexempt employees. This is a major shift in the companys treatment of employees, which is tailored towards meeting the entitys objectives.
Focusing on the reduction of pay cadres, Ducharme, Parbudyal and Podolsky (2007) note that reducing cadres is advantageous to organizations in a number of ways. For instance, under the new structure characterized by innovation, teaming, risk-taking and speed, the company is able to assess each members contribution towards the organization in terms of efforts and outcomes closely. Consequently, the creation of fewer cadres is consistent with the companys new structure as it allows for appropriate remuneration of employees. Thus, the development of such a system implies that the organization is better placed to tie pay with performance or introduce a performance-based pay system.
Another advantage rests on the idea that the new system allows the organization to satisfy customer needs since workers understand that their service delivery influences the pay they earn. As Armstrong and Stephens (2005) emphasized, employees will increase their responsiveness to the needs of customers by pursuing best practices of service provision when they know that their pay is tied to their performance. Moreover, the new structure is likely to bolster the principle of meritocracy. Meritocracy is characterized by the allowance for merit to prevail. In an organization where pay is linked to performance, it is possible to identify top and poor performers (Ducharme et al., 2007). After such identification, appropriate action is taken to enhance performance levels of both poor and top performers. Such a move contributes to an increase in efficiency since each employer increases their urgency to deliver. In addition, employees motivated by a revamped pay structure are more likely to become innovative. Such system leads to an expansion of the companys productivity since it is in a position to make use of new ideas advanced by its workforce.
Despite the popular view that the revamped pay structure would spur production, it should be noted that the system has its disadvantages, such as the possibility of facing challenges like employees rejection. Gkorezis and Panagiotis (2008) observed that existing employees are already used to the traditional approach to remuneration. Hence, changes are likely to meet resistance. If the concerns are not tackled appropriately, there is a high possibility that the system may fail. Another concern is that average and below average performers are likely to be disillusioned by the new system. For this reason, if the organization does not take appropriate steps to prepare the workforce, a possibility remains that overall performance would decline.
Shifting Product Market Conditions and Cornings Restructuring
Restructuring has assumed great significance owing to the environmental dynamics in business. The Corning Inc. has embraced the strategy of divesting in order to streamline its operations with industry realities. Precisely, the company finds itself in a more competitive environment, hence it needs to restructure its operations to remain relevant in the industry. Motifs of divesting vary, although it is evident that one of the objectives is to generate funds (Madura, 2007). In practice, divestures allow companies to generate funds since they entail selling some business units. Divestures also contribute to an organizations ability to generate additional funds since they allow them to focus on their core businesses. To be more specific, due to divesting, an organization is able to focus on the business where it has the best capability while disposing business where it lacks a competitive edge. Sometimes firms also realize that divesting is important because the breakup value is lower than the value a firm would enjoy after disposal of a unit (Madura, 2007). Put differently, a firms assets liquidation worth is greater than the market worth of a firms collective assets.
After the changes in the product market, the company was under an obligation to alter its compensation package in a bid to re-energize its workforce for the new tasks. In addition, the company had to alter the employee structure in order to enhance responsiveness, innovativeness and competitiveness. A major shift was witnessed in the decentralization of pay decisions. After the changes, managers were allowed to apply flexibility in determining the pay for the companys employees. This was a critical undertaking that allowed the managers to implement the performance-based pay, which, in effect, increased performance. Another major change was the permission to increase employees shareholding in the organization. Ownership is a major factor in workplaces. When workers know they own a part of the organization, they are motivated to offer better services (Gkorezis & Panagiotis, 2008). Overall, the performance of an organization has an improved chance of succeeding when workers are part of the owners. The new structure also allowed learning to take place. Learning is a major source of improvement for organizations since production is an ever-changing process, which requires updating from time to time. Thus, tying pay to learning was also a critical step that the organization took to improve its performance.