Strategic Planning in the Small Business

HO

2-5 (continued)

Unit 2

dermine

the expansion

efforts) that a firm

with stronger

em­

ployee

commitment

and morale

can avoid.

Similarly, for

unionized

firms,

the quality

of labor relations

should be

noted.

Again,

a history of

adversarial

relationships

with bitter

dis­

agreement

and an

underlying

tone of mistrust

may be

consid­

in achieving

the expansion

goals

noted

ered a

key obstacle

above.

A third

factor that

needs to be

examined

is the compensation

system of

the organization.

Compensation

refers

to wages

and

salary plus

any fringe

benefits. Compensation

is a topic worthy

of detailed

and lengthy

consideration.

However,

for our

pur­

poses, one

essentially must

determine

whether the

present com­

pensation system

is (1)

adequate and

(2) consistent

with the

strategic

direction

of the firm.

The adequacy

of the firm's

compensation

is determined

by

both

internal and

external comparisons.

Internally, most

work­

ers will

feel compensation

is adequate

if it

is equitably distrib­

earn

more than

lesser

uted.

That is, better

performers

performers.

Workers

must be able

to perceive

not only

dis­

tinctions,

but meaningful

distinctions

between

performance

key force

to future

motivation of

levels. Internal

equity

is a

employees

and

credibility

of the compensation

system.

Exter­

nally,

adequacy

is largely a

function of competition.

Are

work­

ers

receiving compensation

that is reasonably

consistent

with

that

of workers

in similar firms

and industries?

In some

cases workers may

be willing

to accept some

degree

of compensation

deficiency if

other factors

make up for

it. For

example,

two businesses

may be

competing

in the same market

area. One

provides a

slightly higher

compensation

package

for

its workers.

The second,

however,

offers a

more challenging,

interesting,

and pleasant

work environment.

Some

workers

may

feel that the

opportunities

available

at the second

business out­

weigh the

compensation

losses. Yet,

managers should

not de­

ceive themselves.

In

general, workers

expect a

compensation

package that

is similar to

or better than

that of competitors.

The adequacy

of the firm's

compensation

system affects

many

areas. Employee

motivation

is affected

at least in part

by

perceptions

of the adequacy

of the compensation

system.

83

Chapter

Two Internal

Analysis

226