Examination of Compensation Structure and Strategies: Super-Tech Chemicals Case Study

Assignment Information

This assignment is focused on how a Compensation Manager or team will work to examine the structure of compensation across an organization. Students will demonstrate their ability and understanding of how pay mix and structures integrate with benefits and pay for performance plans. The idea of compensation budgets and administration is then applied by examining all of these in an organization and deciding on the possible compensation strategies for the future. 

Assignment Information 
• This assignment is primarily related to Chapters 9,10,11 and 13, but other chapters may apply. 
• NOTE: This information is related to the content in the final exam. Make sure you conduct a thorough analysis and completion of the questions, so you can be in a better position to prepare for the final exam. 
• SUBMISSION INSTRUCTIONS: This is an individual assignment, but it is strongly recommended to complete as Pair Group. If submitted as a Pair Group, only one person submits to the Assignment Box. Ensure both names are on the title page. A Pair Group agrees to a shared grade. 

Assignment Instructions:  
1.  Answer all questions based on the Super-Tech Chemicals (STC) scenario below. Marks are assigned on specific numerical values, visual representations, case facts, and use of course theory. 
2.  All percentage values must be rounded to ONE DECIMAL. All dollar values must be rounded to the next dollar amount. (Example: Universal rounding rules apply – i.e., 21.561% = 21.6% or $1,233.48 = $1,233 or $159.51 = $160] 
3.  You MUST use/apply COURSE THEORY (when/where appropriate) to assist with supporting and/or reinforcing answers provided to maximize full grades. Especially those that require compensation/business recommendations. 
4.  You MUST neatly and accurately show ALL calculation work (when/where appropriate and/or requested) to obtain full grade(s). There are no exceptions to this requirement. If there is no support, a grade of zero (0) is given. 

Super-Tech Chemicals (STC) is one of the leading Paint and Coating Protection Film company in North American responsible for the manufacturing of modern-day adhesives and coatings - including leading-edge research. The company is 14-years old and based on its recent company town hall meeting, has stated its strategic goal of wanting to become a 1.5 billion dollar company in the next four years from its current worth of 810 million. This would clearly make them a market leader and consistent with their “Pay-for-Performance” type of approach that tends to be consistent with the industry. STC revenues have started to stagnate this year (i.e., remained even or even a slight drop 1-2%) because of (1) an increase in new competitors, and (2) the influence of increased government monitoring and taxation on environmental mandates. Illustration 1 shows the progression of company results over the past few years.

Assignment Instructions

The change in the market-space has made the “war on talent” in this industry much fiercer and more competitive. The need for talented and high-performing employees (Note: Especially in Product Development departments and specifically in Research Scientist positions) has been elevated because of the critical need to ensure quality products and efficiency in research as a monitored global-wide standard. This could literally mean the difference between bigger contracts and established patents on products used for future sales to major retailers; as well as large research projects from countries around the world to help with potential environmentally friendly products that potentially reduce greenhouse emissions. As a result, STC has had to “step-up”, “pay-up” and “work-up” (i.e., longer hours) to maintain aggressive recruitment practices nationally and internationally (as needed). As a result, STC’s compensation budget has exceeded by 5% each of the last two years (24 months) past their initial estimates.

 
You are the Compensation Director and have been asked to take on some important support and assessment functions for the CEO and founder of STC. You need to do in a department-by-department approach. First, you will re-assess the compensation structure in the Research Department. Next, you will work side-by-side with the new Director of the Research Department to complete a Pay-for-Performance merit allocation. Finally, you will complete a more comprehensive compensation administration breakdown using a cross-section of a few departments to gain a better perspective on the organization’s overall compensation structure and performance.

This will help make some early recommendations to the CEO and then a larger more robust plan for an organization-wide analysis next year. Here are some key company facts from your meeting that will be important for the completion of your work assignment. Use this information (as needed/where relevant) to complete the assignment: 
• One challenge as a result of this fierce competitiveness in the industry has been turnover; this needs to be further analyzed in the compensation figures for the upcoming budget and to HR for recruitment strategies: 
o There has been 17% turnover rate in Grade Level 5 jobs 
• Despite the turnover, the company has committed to a 3.0% merit increase for each department this year in all grades (except Executives). Executives received an 8% merit increase. 
• Executives receive a 10% lump sum bonus each year regardless of performance. 
• A 16% Benefit Expense factor should be used in determining the compensation budget. 
• Lump Sum bonuses at 5% were given to all Red Circled employees this year in fear of more turnover. 
• A bottom-up budgeting plan approach has been used, but the CEO has expressed concern about this approach. 
• All Level 1 employees were given an additional 1.5% to their Benefit Expense factor for the upcoming year to deal with Green Circles, as well as offer additional long-term health options as a result of the higher OH&S risks. 
• STC used the following minimum/maximum percentages with the corresponding points allocations values.