Enumerating Compensation Philosophy for Organization's Adaptation (Essay Sample)

Compensation Philosophy
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Institution
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Compensation Philosophy
All organizations in the world should adopt a suitable compensation philosophy that will help them gain the best competitive advantage against their competitors. A compensation philosophy refers to the guiding principles that help an organization in making decisions concerning its compensation structureCITATION Ste \l 1033 (Stewart & Brown, 2015). These compensation philosophy include; leading, lagging and meeting. Apparently, this analysis will use Microsoft organization to enumerate on the best compensation philosophy that the organization can adopt.
Leading refers to a payment scheme where the organization sets a salary range midpoint that is above the market prevailing rate CITATION Ske14 \l 1033 (Skenderi & Skenderi, 2014). Leading implies that the organization will focus on the fiscal year compensation and offer higher salaries than its competitors. For instance, the philosophy will ensure that payment is settled prior to the end of the month like 30th December but not on first or after 2nd. In this context, its major advantage is to attract and retain the most skilled employees in the organization, it leads to higher return and bigger market share due to high competitive advantages CITATION Ske14 \l 1033 (Skenderi & Skenderi, 2014). On the contrary, this philosophy puts the company at an excess spending rate. This is due to higher salaries offered to employees hence leading to bigger loses and hefty payrolls.
Lagging on the other hand refers to a payment scheme where the organization sets salary ranges midpoint below the prevailing market rate CITATION Wal14 \l 1033 (Walker & Foushee, 2014). The salary range of this plan is less than that of the competitors. The employees on the other hand receive their compensation days after the fiscal period collapses. For instance, if the fiscal year ended 31st December, the scheme will settle its compensation process in any date after 2nd of January CITATION Eld15 \l 1033 (Eldenburg & Goodman, 2015). Nevertheless, this model has both advantages and disadvantages to the organization. One of the major advantages of this scheme is that, it puts the organizational goal of wealth maximization as the first priority. This is achieved by use of lower payment rate offered to the employees. Additionally, it minimizes the expenditure section of the organization while maximizing the return by due to labor cost savings. The delayed payment plan reduces the pressure on the organization compensation settlement to the employees hence providing a convenient payment time to the organization CITATION Eld15 \l 1033 (Eldenburg & Goodman, 2015). On the contrary, this scheme is dangerous to the organization’s competitive advantage. It derails the competition of the organization as they cannot attract and retain highly skilled employees. Additionally, the likelihood of low quality products or lower returns to the organization is immense.
Meeting refers to a payment plan that offers salary midpoint range at the same rates as the prevailing market rates. It offers salary ranges offered by the competitors CITATION Wal14 \l 1033 (Walker & Foushee, 2014). The compensation is settled on the exact dates of the ending fiscal year. Its major advantage is the fact that it does not spend much on salary expenses. It therefore enjoys average returns from the average expenses as a result of less taxing payroll CITATION Wal14 \l 1033 (Walker & Foushee, 2014). On the other hand, the major risk involved in this plan is the inability of the organization to attract and retain highly skilled employees. This therefore reduces the competitive advantage of the firm. Additionally, the company will not enjoy the cost savings benefit from lagging the market strategy.
The appropriate strategy for Microsoft Company in terms of compensation philosophy is lagging plan. The company’s activities such as software engineering need a strong competitive scheme that will ensure a higher market share is achieve