Harvard Case - Pergah Transport Limited: Compensation Fairness in a Multinational Context
"Pergah Transport Limited: Compensation Fairness in a Multinational Context" Harvard business case study is written by Helena Addae. It deals with the challenges in the field of Human Resource Management. The case study is 12 page(s) long and it was first published on : Mar 29, 2023
At Fern Fort University, we recommend Pergah Transport Limited implement a comprehensive compensation strategy that addresses the current discrepancies and fosters a culture of fairness and equity across its global operations. This strategy should be built upon a foundation of transparency, data-driven analysis, and a commitment to continuous improvement.
2. Background
Pergah Transport Limited is a multinational company facing challenges regarding compensation fairness across its diverse workforce. The case highlights the disparity in compensation between employees performing similar roles in different countries, leading to dissatisfaction and potential talent attrition. The company's current compensation structure is based on local market rates, which fail to account for the company's global presence and the value of its employees' skills and experience.
The main protagonists in this case are the company's management team, particularly the CEO and HR Director, who are tasked with addressing the compensation fairness issue. They face the challenge of balancing the need for a competitive compensation structure with the company's financial constraints and the desire to maintain a positive and equitable work environment.
3. Analysis of the Case Study
This case study can be analyzed through the lens of Strategic HR Planning, focusing on the alignment of HR practices with the company's overall business strategy. The current compensation structure is not aligned with Pergah Transport's global ambitions and is hindering its ability to attract and retain top talent.
Key issues identified:
- Lack of a Global Compensation Philosophy: The absence of a clear global compensation philosophy results in inconsistent and unfair compensation practices across different locations.
- Limited Data and Analysis: The company relies heavily on local market data without conducting a thorough analysis of job roles, skills, and experience across different countries.
- Lack of Transparency: The lack of transparency in the compensation process creates a sense of mistrust and dissatisfaction among employees.
- Potential for Legal and Ethical Issues: The current system could lead to legal and ethical issues related to discrimination and unfair treatment.
Framework for Analysis:
- Organizational Behavior: The case study highlights the impact of perceived unfairness on employee morale, motivation, and performance.
- Talent Management: The current compensation structure is hindering the company's ability to attract and retain top talent, impacting its long-term growth and success.
- Diversity and Inclusion: The case study emphasizes the importance of addressing compensation disparities to create a more inclusive and equitable workplace.
- International Business: The case study highlights the challenges of managing compensation in a global context, requiring sensitivity to local laws, cultural norms, and market conditions.
4. Recommendations
To address the compensation fairness issue, Pergah Transport Limited should implement the following recommendations:
1. Develop a Global Compensation Philosophy:
- Define Core Values: Establish clear principles of fairness, equity, and transparency as the foundation for the global compensation strategy.
- Implement Job Evaluation System: Conduct a comprehensive job evaluation across all locations to standardize job roles and identify the skills, responsibilities, and experience required for each position.
- Benchmarking and Market Analysis: Conduct thorough market research to understand salary trends and compensation practices in different countries, taking into account factors like cost of living, industry standards, and local regulations.
2. Implement a Data-Driven Compensation Structure:
- Develop a Global Compensation Model: Create a transparent and consistent compensation model that considers factors like job level, experience, performance, and location adjustments.
- Utilize HR Analytics: Leverage HR analytics tools to track compensation data, identify potential disparities, and monitor the impact of changes over time.
- Regularly Review and Update: Conduct periodic reviews of the compensation structure to ensure it remains competitive and aligned with the company's evolving business needs.
3. Foster Transparency and Communication:
- Communicate Compensation Philosophy: Clearly communicate the company's global compensation philosophy and the rationale behind the new compensation structure to all employees.
- Provide Individualized Feedback: Offer employees personalized feedback on their compensation, explaining the factors that influence their salary and providing clear avenues for appeal.
- Promote Open Dialogue: Encourage open communication and feedback from employees regarding their compensation concerns, fostering a culture of trust and understanding.
4. Implement Training and Development Programs:
- Leadership Development: Train managers on the importance of fairness and equity in compensation practices, equipping them with the skills to manage compensation effectively and address employee concerns.
- Employee Development: Invest in employee training and development programs to enhance their skills and knowledge, increasing their value to the company and justifying higher compensation levels.
- Career Advancement Opportunities: Create clear career paths and opportunities for growth within the company, motivating employees and fostering a sense of loyalty and commitment.
5. Basis of Recommendations
These recommendations are based on the following considerations:
- Core Competencies and Consistency with Mission: The proposed strategy aligns with Pergah Transport's mission to provide high-quality transportation services while fostering a diverse and inclusive work environment.
- External Customers and Internal Clients: The strategy aims to attract and retain top talent, ensuring the company can provide excellent service to its customers while maintaining a positive and productive work environment for its employees.
- Competitors: The proposed compensation structure is designed to be competitive with industry standards, attracting and retaining talent in a global market.
- Attractiveness ' Quantitative Measures: The implementation of a data-driven compensation structure will improve efficiency and cost-effectiveness, potentially leading to increased profitability and return on investment.
- Assumptions: The success of these recommendations relies on the company's commitment to transparency, open communication, and continuous improvement, as well as the willingness of employees to embrace change and contribute to a more equitable workplace.
6. Conclusion
By implementing these recommendations, Pergah Transport Limited can create a more equitable and transparent compensation system that fosters employee satisfaction, reduces turnover, and enhances the company's overall competitiveness in the global market. This will require a commitment to continuous improvement and a willingness to adapt to changing market conditions and employee needs.
7. Discussion
Other Alternatives:
- Maintaining the current system: This would be the least desirable option, as it would continue to perpetuate existing disparities and potentially lead to legal issues and employee dissatisfaction.
- Implementing a global minimum wage: This could be a simpler solution, but it may not be feasible for all locations and could lead to a loss of competitiveness in certain markets.
- Focusing solely on local market rates: This would be a step backward and would not address the core issue of fairness and equity across different locations.
Risks and Key Assumptions:
- Resistance to change: Employees may resist changes to the compensation system, particularly if they perceive it as unfair or detrimental to their current situation.
- Cost implications: Implementing a new compensation system could require significant investment in data analysis, training, and communication.
- Cultural differences: It is essential to consider cultural differences and sensitivities when implementing a global compensation strategy.
Options Grid:
| Option | Advantages | Disadvantages |
|---|---|---|
| Implement a comprehensive compensation strategy | Addresses core issues of fairness and equity, fosters employee satisfaction and retention, enhances competitiveness | Requires significant investment, potential resistance to change, cultural considerations |
| Maintain the current system | Low cost, minimal disruption | Perpetuates existing disparities, potential legal issues, employee dissatisfaction |
| Implement a global minimum wage | Simple solution, promotes fairness | May not be feasible for all locations, could lead to loss of competitiveness |
| Focus solely on local market rates | Aligns with local market conditions | Does not address core issue of fairness and equity, could lead to talent attrition |
8. Next Steps
Timeline:
- Month 1: Conduct a comprehensive job evaluation and market analysis.
- Month 2: Develop a global compensation philosophy and model.
- Month 3: Communicate the new compensation strategy to employees.
- Month 4: Implement the new compensation system and provide individualized feedback to employees.
- Month 5-6: Monitor the impact of the new system and make adjustments as needed.
- Ongoing: Conduct regular reviews of the compensation system and ensure it remains competitive and aligned with the company's evolving business needs.
By taking these steps, Pergah Transport Limited can create a more equitable and transparent compensation system that fosters employee satisfaction, reduces turnover, and enhances the company's overall competitiveness in the global market.
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Case Description
A female entrepreneur in Ghana developed a transportation company that provided services for national and large multinational organizations in the country. A key service that Pergah Transport Limited (Pergah) offered was vehicles and drivers for the executive expatriates of multinationals. The drivers for that service were employed by Pergah but embedded with the contracting companies. Pergah's remaining employees-mechanics, other drivers, and support staff-were based out of the company's premises in Accra. The employees at Pergah's premises were paid above the employment standards for Ghanaians; however, the drivers who were embedded with the multinational companies were compensated according to the standards established by those companies. The variance between local and multinational standards for employees of the same company led to differences in job satisfaction, motivation, and compensation. The Pergah-based employees were paid fairly, and increasing their rate to the multinational level would have posed financial challenges to the company. How, then, could Pergah address the discrepancy and resolve these issues?
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