Good morning everyone. Today I am presenting a case study on the impact of poor compensation strategy on employee performance in ZZZ Accounting Firm. Compensation means the reward that employees receive in return for their work. It includes salary, bonuses, incentives and other benefits. Compensation is very important in Human Resource Management because it directly affects employee motivation, job satisfaction and organizational performance. If employees are not compensated properly, their morale decreases and productivity also drops.
ZZZ Accounting and Consultancy Services is a firm that provides accounting, tax, consulting and secretarial services. In 2014, the firm expanded its services by adding business training and GST advisory services. The company focused heavily on business growth and client expansion. However, while expanding their business, they ignored proper human resource planning, especially compensation management.
The main problem in this case was a poor compensation strategy. The firm only provided fixed monthly salary. Promised bonuses were not given properly. There were no incentives for high-performing employees. Employees were pressured with heavy workload and overtime. The company was not transparent about its compensation structure. Because of this, employees started feeling undervalued and dissatisfied.
Mr. Edward was a senior executive in the accounting department. He was highly skilled and helped the company gain new clients. He trained junior employees and contributed significantly to the firm’s success. Despite his contribution, he was not properly rewarded. As a result, he left the company in 2020. This shows how poor compensation can lead to loss of talented employees.
Due to poor compensation management, employee morale decreased. Motivation levels dropped and many employees left the organization. The company had to spend more money on recruiting new employees. Because of high turnover, the company was not able to achieve its targets and started going downhill.
The HR department is responsible for designing and managing the compensation system. HR should ensure that salary and benefits are fair and according to industry standards. They must connect performance with rewards and ensure legal compliance. In this case, HR failed to align employee performance with compensation.
First, create a clear compensation philosophy. Second, review the current salary structure. Third, conduct market surveys to compare pay with competitors. Fourth, evaluate job roles and responsibilities. Finally, design a fair and performance-based pay system.
Different types of pay systems include pay grade levels, skill-based pay, competency-based pay and broadbanding. The system must be fair, transparent and linked with employee performance. When employees see that effort leads to rewards, motivation increases.
After designing the compensation strategy, proper implementation is important. The company must communicate the new plan clearly. Anonymous surveys should be conducted to collect honest feedback. Total compensation statements should be provided. Regular monitoring ensures employee satisfaction.
Employees are valuable assets of an organization. Salary alone is not enough; fairness and recognition are also important. A well-designed compensation strategy increases motivation, retains talented employees and improves productivity. Compensation is not just a cost, but an investment in human capital.