Often a salary structure has ranges—minimum, midpoint, and maximum. Frequently,

Question

Often a salary structure has ranges—minimum, midpoint, and maximum. Frequently, a market position is drawn from the range midpoint. Another option becoming popular is broadbanding. Each method has advantages and disadvantages. You may wish to look at the salary structure and occupational families presented in the U.S. Office of Personnel Management Salary Table 2011-GS, referenced in the Resources. Notice how broad the bands are for individual jobs. Complete the following:

•Analyze the advantages and disadvantages of broadbanding as a compensation plan.

•Conclude your essay by explaining your position on whether you think broadbanding can be successfully competitive in your current or previous work environment, and provide supporting reasons for your position. How might broadbanding help with being successfully competitive compared to alternative salary structure ranges that might be used?

Explanation / Answer

Advantages of broadbanding as a compensation plan: One of the primary advantages of broad banding is that the management is entrusted with higher autonomy. According to Milkovich et al. (2013), the broad banding compensation plan allows managers to have the power to pay their employees what they want. This practice helps minimize conflict between the human resource and the hiring manager of a corporation. Additionally, the view that the human resource act as a controlling gate keeper in salary structure preservation diminishes. Secondly, the use of broad banding facilitates internal mobility. This aspect is due to the probability of a person current job and alternative position increases within the same payment range, thus, making the payment not to be prioritized more than the position attributes. This practice results in encouragement of internal movement of workers and more development of prospective assignments.

Streamlining of the hierarchy is another merit of broad banding compensation plan. Roebuck (2012) asserts that sometimes the strategic direction of a corporation makes the firm more hierarchical, hence, making the communication flow between the top executive to line workers and also the communication flow between the line workers and senior executive ineffective. However, use of broad banding minimizes the hierarchical levels of a company, hence, making it easy for the company to develop salary ranges.

Disadvantages of broadbanding as a compensation plan: The broadband compensation plan does not create any awareness regarding the external market rates, unlike the traditional salary structure. An efficient traditional salary structure usually provides the management with the current data regarding the market rates (Milkovich et al., 2013). However, in broad banding, the manager primarily guesses the market rate when the management wants to pay at the midpoint or the maximum/minimum rate of the market. Secondly, the broad banding method of compensation results in minimization of promotion in an organization. This assertion rests on the promotions in an organization depends on the salary bands available. Therefore, availability of fewer salary bands implies that the promotional opportunities available to higher ranks are fewer.

Inequity is another principal disadvantage presented by the broad banding compensation plan. This demerit arises because the high trust and the flexibility of the management of a corporation presented to them may or may fail to be warranted. According to Gomez-Mejia et al. (2014), this aspect is due to it is relatively simple to have two workers with similar responsibilities earning a salary with a broad range difference in the broad banding system due to the weakening of linkages between the growth of salary and development of skills for the higher ranks.

My position on whether broadbanding can be successfully competitive in my previous work environment: I believe broad banding cannot be successfully competitive in my previous workplace. This perspective is due to the fact that management of an organization always desire enhanced flexibility in rewarding, hiring and retaining quality workers. However, the broad banding system only helps in simplification of the classification of jobs and reduction of positions, but the system does not help in the provision of an optimal flexibility of the management. Additionally, the system paves ways for possible abuses of workers by the managers. This aspect makes the workers pessimistic regarding the broad banding plan due to fear of favoritism and discrimination practices of the managers.

References:

Gomez-Mejia, L. R., Berrone, P., & Franco-Santos, M. (2014). Compensation and organizational performance: Theory, research, and practice. Routledge.

Milkovich, G. T., Newman, J. M., & Gerhart, B. (2013). Compensation (11th ed.). New York, NY: McGrawHill/Irwin.

Roebuck, K. (2012). Human Resource Management System (HRMS): High-impact Strategies-What You Need to Know: Definitions, Adoptions, Impact, Benefits, Maturity, Vendors. Emereo Publishing.

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