BUSI 645 Week 1 DB Forum 1 Example

Discussion Board Forum 1

BUSI 645 Compensation Management, Discussion Board Forum 1 (thread and 2 replies)

Thread by [Student Name]

The forum prompt, the grocery chain and the two classmates' threads are composites standing in for the course's own; the textbook and research cited are real, and the requirements follow Liberty's public course guide for BUSI 645.

Thread

The regional grocery chain where I work in human resources, a composite of 40 stores across Virginia and Tennessee, loses about 60 percent of its cashiers and stockers each year. Store managers lose hours every week to interviews and first-day training, and customers notice the lines. Martocchio (2017) presents pay level as a strategic choice: a company can lead the market by paying above prevailing rates, match it or lag it, and the right choice depends on the company's competitive strategy and labor market. Our chain has always matched the market, adjusting rates once a year from a regional survey. I would argue that for a few job groups, leading it would be cheaper.

The efficiency wage argument explains why. If a job pays more than workers could earn elsewhere, losing it costs them more, so they work harder and quit less. Cappelli and Chauvin (1991) tested this idea across the plants of a single manufacturer that paid the same union wage everywhere, so the wage premium relative to each local labor market varied by location. Plants where the company's wage stood further above local wages had lower rates of disciplinary dismissals, a measure of shirking, and discipline was also lower where local unemployment made other jobs harder to find. The authors were careful to note that their data could not show whether the lower discipline saved enough to cover the premium.

That caution matters, which is why I would not raise every wage. Our turnover is concentrated among stockers on the overnight shift and among cashiers in our six highest-volume stores, where competing employers, such as warehouse distribution centers, pay several dollars more. For those roles, a lead policy of about 10 percent above the local market could reduce the cost of constant hiring, which our finance team estimates at roughly $2,500 per departure when advertising, interviewing, training hours and lost productivity are counted. If the premium cut turnover in those roles by a third, it would largely pay for itself. A wage premium is not generosity if it buys back the cost of replacing people every few months.

For other roles, such as part-time baggers in low-turnover stores, matching the market remains sensible. Martocchio (2017) also reminds us that pay decisions sit within legal constraints, such as the Fair Labor Standards Act's minimum wage and overtime rules and state minimum wages that now exceed the federal rate in many places. Any lead policy must be built on top of those floors, and the chain must watch for pay compression as minimum wages rise and push entry rates closer to experienced employees' pay.

My recommendation is a two-year pilot: lead the market by 10 percent for overnight stockers and for cashiers in the six busiest stores, track turnover, absenteeism and customer wait times against comparable stores and expand the policy only if the savings appear. I would welcome classmates' views on whether non-wage factors, such as predictable schedules or a clear path to shift lead, might reduce turnover just as much at lower cost.

Reply to Gabriela

Gabriela, your thread proposed moving the agents at your company's call center from hourly pay to a base wage plus a per-call incentive. The best-known evidence on such a shift supports the idea, at least where output is easy to count. When Safelite Glass Corporation began paying its auto glass installers per unit installed instead of per hour, Lazear (2000) found that each installer's output climbed by 44 percent. Some of that rise reflected the same people working faster, and some reflected a change in who joined and stayed, as the new system appealed to the most productive installers; output also became more uneven from one worker to the next. Profits rose too, which suggested that the earlier hourly system had been a poor fit.

Martocchio (2017) lists the conditions under which individual incentives work: performance must be measurable, employees must control it and the incentive must not reward one goal at the expense of another. Windshield installation met those conditions well, since each installation was countable and quality could be checked when customers returned with defects. Calls are different. A per-call incentive may reward agents for ending calls quickly rather than solving problems, which could raise repeat calls and lower customer satisfaction.

I would therefore suggest pairing the per-call incentive with a quality measure, such as first-call resolution or customer survey scores, and a cap on calls counted per hour. That design keeps the motivation Lazear observed while protecting the outcome the company actually cares about. It may also help to phase the change in, starting with one team, since agents who prefer predictable hourly pay may leave when the system changes, as the Safelite results on sorting would predict. How does your call center currently measure call quality?

Reply to Martin

Martin, your thread argued that your company should audit pay for Equal Pay Act compliance before state law forces it to publish pay ranges. I agree, and Martocchio (2017) summarizes the Equal Pay Act's core rule: within one establishment, an employer may not pay women and men differently for substantially equal work, with exceptions for seniority, merit, quantity or quality of production and factors other than sex. An audit tests whether pay differences fit those exceptions.

I would add that an audit should look beyond legal compliance to how employees will react once pay becomes visible. In an experiment by Card et al. (2012), a randomly selected subset of University of California staff was told about a newly launched website that published every employee's pay. Staff who discovered that they sat below the midpoint of pay for their own department and job title grew less satisfied with their pay and their jobs and more inclined to search for other work; those above the middle showed no change. Differences in pay rank mattered more than differences in pay levels.

That finding suggests your audit should flag not only gaps that could be illegal but also employees who sit low in their range without a clear reason, since they are the ones likely to leave once ranges are posted. Correcting those cases before publication could prevent a wave of departures. The audit should also document the reasons for every remaining difference, so managers can explain them when employees ask, which they will. Has your company estimated what such corrections would cost?

References

Cappelli, P., & Chauvin, K. (1991). An interplant test of the efficiency wage hypothesis. The Quarterly Journal of Economics, 106(3), 769-787. https://doi.org/10.2307/2937926

Card, D., Mas, A., Moretti, E., & Saez, E. (2012). Inequality at work: The effect of peer salaries on job satisfaction. American Economic Review, 102(6), 2981-3003. https://doi.org/10.1257/aer.102.6.2981

Lazear, E. P. (2000). Performance pay and productivity. American Economic Review, 90(5), 1346-1361. https://doi.org/10.1257/aer.90.5.1346

Martocchio, J. J. (2017). Strategic compensation: A human resource management approach (9th ed.). Pearson.