FastCat phase II.docx

1、FastCat phase IIPart 1. Executive Summary:We propose that FastCat implement our pay system that is designed to reward growth of sales (productivity) within the company by linking pay to performance of the organization. This system is designed to control employment costs so as not to grow faster than

2、 the companys sales growth rate. In order to remain strategically competitive, FastCat must ensure that its pay structure is strategically differentiated within the marketplace so that it can retain employees and increase productivity through motivation incentives rewarding performance and employee

3、engagement. Aligning the competitiveness of employees pay is imperative to FastCats success as controlling labor costs is the largest determinant on firm profitability; ultimately, FastCats success will be determined by its ability to balance its salary program with firm profitability.As you already

4、 know, FastCats labor expense growth rate has outpaced that of the sales growth rate over the past couple years. As a result, firm profitability has suffered with the lack of sales productivity. In order to reward productivity of the firm our pay system is designed to attract, reward and then retain

5、 the best sales and development staffs that the company can obtain through a carefully designed system which aligns compensation growth with increased productivity for the company. On the other hand, our pay system is designed to tightly control costs in roles that are less strategically impactful a

6、nd thus do not add significant marginal value to the firms performance. In order to do this we have set forth the following principles for establishing a superior competitive position in the software marketplace: Align FastCat employees compensation with an externally verified level of compensation

7、so that compensation levels are strategically and methodically determined. As a result employees compensation will be tied to the strategic objectives of FastCat namely increasing staff productivity. Compensate the Sales and Development Departments with potential market-leading wages, but have those

8、 wages determinant on their ability to produce results for the company. The revenue to labor cost ratio will increase over time as sales growth will outpace labor cost growth. Market-leading compensation will reduce the expenses associated with searching, interviewing, training, on-boarding, and mot

9、ivating employees. Control the pay levels associated with the Administrative Department by targeting wages 15% below market level so that we can decrease the overall cost burden of the department on FastCat as a whole.Currently, FastCats employees have a somewhat confounded view of the company manag

10、ement. While 90% of employees say they would be willing to go above and beyond in their job, only 70% feel a strong sense of commitment to the company. Further, only 40% of the employees say that they understand how their pay is determined. Therefore, FastCat must clarify and articulate its pay stra

11、tegy to employees in order to explain managements desired business objectives and how employees can increase their compensation by aligning their effort with this strategy. Our system helps clarify and articulate how FastCat will be able to match employee salaries with the competitive environment.Pa

12、rt 2. Strategy on External Competitiveness When designing an external competitiveness strategy, we developed a unique strategy for each group of administration, sales and development. We did this, so that we could more easily integrate the external competiveness with the internal alignment structure

13、 that we developed for each group in phase I. When the internal alignment and external competitiveness are coordinated and align, then FastCat will be able to more effective achieve its strategy and goals as well as have a compensation strategy that competitors cannot easily copy.Development Group P

14、ay Level- As we discussed in phase I, it is our initial recommendation that to attract the best software engineers to help develop and create the products that will drive FastCats success in the future, we recommend that the total compensation pay level be above the market average. However, the indi

15、vidual base pay, meaning the annual amount of cash that the employee is guaranteed, will be at the market level of cash base pay to allow for other forms of compensation and incentives to increase the total compensation above market level. The pay level for development will also have two tiers, each

16、 consisting of its own pay policy line. The first tier will consist of technician jobs; these jobs are responsible for quality assurance and testing purposes. The second tier will consist of engineering jobs. These are the jobs that are the creative reservoir for developing FastCats innovative produ

17、cts. The reason why establish two tiers is because the salaries fit a quadratic function instead of linear. Thus it was difficult to have a regression line with a reasonable fit. Further differentiating these jobs allows us to better align compensation with our overall objectives of innovation, crea

18、tivity and cooperation. Pay Mix- The base pay for the engineering sub-group will account for 60% of the total cash compensation. To help foster communication and cooperation, there will be short-term group incentives that could comprise 20% of the total cash compensation. However, we believe that in

19、dividual innovation and contributions are necessary, so there is also a 20% individual short term bonuses. For the technician sub-group base will account for 80%, 10% for individual performance and 10% of team compensation. The development employees will also be eligible for a 401 (k) their first ye

20、ar with up to a $2,500 match. Employees will also be eligible for profit sharing at the managers discretion. For technician subgroup, FastCat will pay 50% of their health premiums and for the engineering group, it will be 100%. Also, these employees will be eligible for stock in the company. The pai

21、d time off for this group is 10 vacation days and 5 sick/personal days, starting off. With more seniority, more days will be added. Integration of External and Internal- The quality assurance technicians and analysts benched marked very closely to the external jobs, as did the engineers. Appendix 1

22、shows which jobs were matched up. Later in the paper we will discuss the grades and ranges. However, it appears now that by benchmarking 9 jobs, there will be room to develop a hierarchical structure. This is intended to motivate employees to develop their skills and increase productivity. Additiona

23、lly, it is intended to have each employee excel in their specific set of development tasks, while also tying part of their compensation to assisting group productivity. Preliminary Ideas- We believe that the total compensation package is attractive and leading the market for technicians and engineer

24、s in the software market. We chose our relevant competitors to be all software companies and our pay policy is based on this. This was chosen because we believe FastCat should aim to recruit and retain the best in the industry and in doing so, will need to compete with even the largest software comp

25、anies. However, our percentages may need to be altered as we investigate the cost in the next phase of the project. We will also have to see if productivity of creating new products that FastCats customers want has increased due to the focus on team work and collaboration with the marketing team. Sa

26、les Group Pay Level- The sales group plays the pivotal role of maintaining existing clients as well as acquiring new clients for FastCat. They are the group that can most directly affect the total revenue. Therefore, their total compensation will lead the market by about 5%. Our relevant competitors

27、 are the software market as a whole. We believe that the sales force must be very knowledgeable about FastCats products as well as have a general knowledge of computers and software- specifically as it relates to medical practices. We believe that this knowledge is unique to this industry and sales

28、reps in other industries have a different set of skills and knowledge. Pay Mix- With the goal of reducing total labor expenses when compared to revenue, the sales group will have a cash compensation structure of 25% base pay, 60% commission pay and 15% group compensation that will be shared with dev

29、elopment. By having 60% of the total cash compensation directly related to bringing in additional revenue, the revenue to labor cost ratio will be increased. The teams that these employees will work with are the development group. If a sales member clearly relays customers needs and wants for future

30、 products to the development team and the development team correctly makes a product that the sales group can sell, then the entire team will be eligible for a performance bonus. Also, FastCat will offer to pay 50% of the health premium for the sales employee. A 401 (k) retirement plan with up to 3%

31、 of total cash compensation match annually will be available on day one. By making this available at day one, we are making a greater effort to retain employees for a longer period of time. For paid time off, the marketing/sales group will have 10 vacation days and 5 sick/personal days starting off

32、with a chance to earn more each year they stay with the company. These employees are also eligible for profit sharing as determined by managers. Managers in the sales group, as determined by their pay level will also be eligible for equity purchases in FastCat. A final perk that will allow FastCat t

33、o attract the best sales people and drive the corporate strategy, is to allow these employees to have travel clubs, that FastCat would pay for, in his/her own name. These jobs are required at times to travel to clients, and allowing these employees to gain frequent flier miles and other travel perks that they could