1.) You own Falzer's Tool Coating Company, a high-tech firm specializing in the coating of cutting tools (e.g. drill bits, cutting blades) to provide longer life before resharpening is needed. You are concerned that the competition continues to develop new coating methods and new applications of coating in different industries. You want to create work environment where employees offer more new product ideas and suggest new industries where these ideas might be applied. What type of compensation plan will you recommend? What are some of the problems you need to be aware of? 

 

Answer:

The management of Falzer's Tool Coating Company should adopt the following compensation plans:

• Introduction of benefits that motivate the employees to be innovative. The company can recognize and reward employees that develop new and unique ideas that help the company in beating its competitors in the market.
• Rewarding risks through bonuses. The top management should be rewarded by being given some bonus for taking on risky undertakings with the intention of beating competition. This strategy enables the top management to actualize ideas generated by the other employees in improving the coating methods.
• Stock options. The top management employees can be given a stock option benefit if they ensure that the company remains competitive in the market. This strategy motivates the top managers to lead the organization in a manner that facilitates the actualization of the company's strategic goals and plans.
• Training and development. The company can take into consideration some of the ideas the employees have regarding their training and development. This enables the company in creating training programs that the employees need and feel are necessary in developing new coating methods.
• Group reward system. The company can introduce a group reward system for the various departments in the organization. This will motivate the employees to be innovative and creative so as to devise various ways pf improving the organization from their individual department level. This facilitates the wholesome improvement of the company's performance hence beating the competition in the market (Pathak and Pandey, 2019).

The above compensation plans may however create some problems for the institution such as:

• Labor costs. The introduction of additional benefits will definitely increase the organizations expenditure which might impact the profitability of the company especially if the revenue does not increase.
• Profitability. The increase in expenses due to the new compensation benefits will negatively impact the profit of the company which minimizes the returns the shareholders get from the company.
• Failure to attain the intended objectives. The management may fail to attain the intended objectives despite the company creating and giving the above compensation benefits.

Citation:

Pathak, P., & Pandey, M. A. Creativity and Innovation in Reward & Compensation Practices.