Your organization has two business units. One unit is a long-established manufac
ID: 460071 • Letter: Y
Question
Your organization has two business units. One unit is a long-established manufacturer of a product that competes on price and has not been subject to many technological innovations. The other business unit is just being started. It has no products yet, but it is working on developing a new technology for testing the effects of drugs on people via simulation instead of through lengthy clinical trials. Would you recommend that the two business units have the same pay programs for recognizing individual contributions? Why or why not? Remember to review the chapter to learn how pay programs are generally administered.
Explanation / Answer
There should not be same pay structure to recognize the individual contribution in both the units. Unit 1 is already in running mode and there is no or very little ambiguity in the process. They should have high component of fixed pay because there is no scope for innovation.
Second unit is innovation based which needs a lot of motivation for the individuals to perform at their optimal level. Here , there should be very high variable pay along with the fixed pay because they are working in an ambiguous situation with no clear and defined goal.
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