Northern Software Compensation

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Our recommendation was to use the performance-driven hybrid policy for the Marketing Manager. Incentives and stock options make up a greater percentage of total compensation for this policy with respect to the other three policies (market match, work/life balance, security). A performance-based pay mix that lags in base pay would be to offer 50% of the total compensation in base pay, 17% in both benefits and bonuses, and 16% in stock options. This is an attractive option for a start-up that cannot have high labor costs. By offering high incentives and stock options, the employee sees how important growing the company and increasing productivity can be for his or her income.

Question 3

The theories presented in this chapter are: compensating differentials theory, efficiency wage theory, and signaling theory.

We used signaling theory in order to come up with our recommendation. Signaling theory states that employers design pay levels and pay mixes as a strategy that signals to potential and current employees the preferred behavior.

Northern Software is a start-up, thus it wants to have low labor costs in the beginning.

A performance-driven policy that lags in base pay signals to the marketing manager candidates that the start-up is promising higher future returns (i.e. stock options). This can impact employee commitment positively, foster teamwork, which can then increase productivity.

Question 4

We could use additional information to refine our recommendation. It would be useful to know if Northern Software leads on other returns from work, such as outstanding colleagues, cool tools, and interesting assignments, among others. This is important because lagging base pay is easier if other facets of the work are valuable to employees.

Secondly, in order to decide on an accurate pay mix, it would require knowing the market pay mix for a marketing manager in a start-up. We based our recommendation on the example in the textbook, which is not tailored to the marketing manager position. Our dashboard and pie chart could be more accurate with more information, instead of just being theorized.

Lastly, statistics on the software industry in Fort McMurray was very difficult to find. We were only able to find some information on the professional, scientific, and technical services industry in the province overall. Better quality information regarding the industry in the actual city would be more helpful in refining the recommendation.

Appendix 1.1

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