Analyzing Compensation Strategies – A Case Study on Costa Vidas Pay Decision

Analyzing Compensation Strategies – A Case Study on Costa Vidas Pay Decision

There are different reasons why Costa Vida’s CEO, Nathan Gardner, sought to ensure the chain of restaurants pays its employees externally fair compensation. First, externally fair compensation enhances a company’s reputation as a good employer and will attract the best talent (Harvard Business Review, 2011). The fast-food industry is characterized by cut-throat competition for employees, and a company that fails to compensate its employees competitively will not attract the best talent. Secondly, paying externally fair pay bolsters employee retention. It is vital to make employees feel appreciated in an industry where they know they will get alternative jobs if they leave their current workplaces (Harvard Business Review, 2011). Another strategic objective that may influence externally fair compensation is reducing turnover costs. If employees leave a company due to poor pay, a company will be forced to source and train recruits. The process requires resources, and a company would rather pay its employees competitively to avoid these turnover costs.

In the same breath, internally fair compensation is vital to any company. The framework supports justice and fairness, making employees feel recognized by the company based on their jobs. Implementing internally fair compensation requires an analysis of the job worthiness of different jobs in a company and compensating employees fairly. Offering varying compensation for two employees doing the same job may breed discontent and workplace disharmony (Snell & Morris, 2019). For instance, at Costa Vida, attendants, and cashiers may not receive similar pay because their jobs are not similar. Cashiers may earn more than cleaners, given that their jobs offer different value to the organization. Once employees receive internally fair compensation, they feel attached to the organization and will do everything to help their company achieve its objectives.

Costa Vida should adopt an externally fair compensation strategy to support its profitability and employee retention goals. As mentioned in the case, Costa Vida is located in the US, a region that has many fast-food restaurants (Snell & Morris, 2019). Therefore, embracing an externally fair compensation strategy will help the company safeguard its best talent pool from being poached by rival restaurants. Another obvious goal of Costa Vida ought to be legal compliance. Most of Costa Vida’s franchises are located in the US, an environment that has stringent minimum pay regulations (Snell & Morris, 2019). Failure to comply with these regulations may subject the business to legal constraints, hence the need to ensure employees receive competitive pay packages. Based on the above, externally fair compensation enhances not only fairness but it is also strategic.

Costa Vida’s CEO, Nathan Gardner, must communicate the new compensation strategy in a way that convinces franchise owners and managers. The franchise owners should be convinced that externally fair pay will help them achieve their short-term and long-term objectives. Instead of persuading them to adopt the framework because it enhances fairness, Nathan Gardner should communicate the strategic benefits accompanying externally fair pay.

High wages in line with externally fair payment will reduce Costa Vida’s profits in the short run. This is because a significant portion of its revenue will be directed toward salary payments. However, in the long run, the company will create a positive reputation for caring for its employees (Snell & Morris, 2019). In the same breath, turnover costs will be significantly cut as the company reinvests business proceeds into other productive business areas. Ultimately, Costa Vida will achieve sustainability in the long term.

References

Harvard Business Review. (2011). Harvard Business Review on Finding & Keeping the Best People. Boston Harvard Business Review Press.

Snell, S., & Morris, S. (2019). Managing human resources (18th ed.). Cengage Learning.

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Read the case study An In-N-Out Pay Strategy: Costa Vida’s Decision to Boost Pay on page 352 of your textbook, analyze the cases, and complete a detailed case write-up for each case.

Analyzing Compensation Strategies – A Case Study on Costa Vidas Pay Decision

The case write-up needs to adhere to APA formatting and be at least two (2) to three (3) pages in length.

The content needs to be substantive and reflect an advanced level of understanding of the material. Students must draw from specific topics covered in the main text, as well as supplemental readings, and analyze the case studies.