Compensation and Workforce Diversity Issues

Subject: Employee Management
Pages: 8
Words: 1941
Reading time:
7 min
Study level: College

Introduction and Thesis Statement

In the modern business world, human resources management is becoming an important part of strategic management (Wright & McMahan, 2011). It is no longer about the normal practices of recruiting and employee welfare. Strategic human resource management is majorly concerned with how to best manage the available human resources to be able to attain the strategic goals of the organization. However, there are many issues that are bound to face the human resource management even when they are on course to attain the set organizational goals. Strategic goals rely on the successful action of people who must be well managed, motivated and guided on the processes and procedures involved. Inversely, the interaction of people within organizations usually arises in various challenges.

When such challenges arise, it is important for human resource departments to not only look at the best means of solving them but also to integrate strategic management principles in doing so. This particularly implies that an organization should be able to handle human resource issues from the top and not only leave it to their human resources division. Since strategic human resource is about getting the right employees to do the work in line with set strategic plans, it is important that employees’ issues also be handled at strategic levels. This paper looks at two of the most common issues that arise within the human resource management interactions. They include compensation and workforce diversity. These issues will be addressed both at conceptual and personal experience levels and thereby solutions proposed in line with strategic human resource principles.

Issue 1: Compensation

Compensation is an avenue through which the human resources of any organization reward and maintain the welfare of their employees for the work they are doing. Related to performance or not, this is one of the most important factor of employee motivation and retention within any organization. Anyone is looking to work in an organization that recognizes the importance of his or her output through competitive benefits and pay grade. According to Mondy (2011), compensation also presents one of the greatest challenges for human resources, general management and workers’ unions.

Employees are always looking for fair and equitable reward and pay structures within the organization that also reflects their real inputs within the organization (Wright & McMahan, 2011). Every worker will be happy to hear that a salary increment is in the offing. However, management has to deal with a problem of a limited budget allocated to human resources every financial year. In addition, there are external factors that influence compensation levels like regulations on pay structures and even the average industry compensation levels for certain professionals. There are three main forms of compensation as a practice of modern human resources. They include financial benefits (salaries and wages), non-financial compensation (work environment, recognition) and other benefits like insurance, paid leaves among others.

The constitution and implementation of all these forms of compensation is important for the success of human resource strategy as well as the overall organization’s performance (Chuang & Liao, 2010). According to my experiences in my first work place, compensation is quite essential for performance. The organization generally neglected the need to have an all round compensation plan. Particularly, the need for benefits like health insurance was ignored even when similar organizations offered their employees the same. This was a cause of conflict in the organization for long leading to higher rates of employee turnover. The pay structure followed the industry average and basically many people did not have an issue with it, however, the fact that there was no cover for employees made many feel like the organization did not value their lives.

The organization’s response to the issue was even more surprising to many after several years of union lobbying. The company yielded to demands of availing an insurance cover but on condition that a portion of the normal pay was to be used in supporting the payment of premiums.

Generally, the plan was to contract an insurance firm that only covered basic health payments, while the employees would opt to pay for more premiums, deducted in their monthly salaries for better and comprehensive health coverage. Even though this was a major breakthrough for the company’ compensation structure, it was not the best it could to enhance motivation and commitment. Many employees still thought the company had given them a raw deal and was even looking to reduce their pay through premium reductions. This response was therefore positive but lacked strategic principles of human resources that are meant to attract and retain skilled and experienced employees for performance excellence.

At personal level, I felt that the organization could have been more proactive in its decision to introduce the health insurance packaged that was to be supported through partial contribution of employee pay. This decision did not take into account two very important factors of employee motivation that have an influence on the success of human strategic goals’ achievement. First, the organization did not consider that salary deductions may translate to perceptions of lower pay in the organization. Secondly, asking the employees to take part in the contributions was a wise way of cutting on the budgets but was not to result in increased motivational levels. Compensation and performance is related to the levels of motivation, which is subject to perceptions in many occasions.

Based on the modern approaches to human resource management, the company would have explored different alternatives of benefits that would not result in the reduction of pay. To ensure that this action was more strategic, the company would have laid out a plan for the introduction of a comprehensive health insurance plan that would be rolled out in stages. The employees would have been informed of the importance of this plan and the impact it would have on the budgeting function of the organization. In this way, the employees are likely to feel involved and even be ready to participate in the proposed plan. Employee involvement in decision-making is an important factor for strategic human resources because it encourages commitment and sense of ownership.

Issue 2: Workforce Diversity

Globalization and technological innovation has led to increased diversification of the workforce for many organizations. Diversity can be defined using the different interest groups that work within organizations. They are usually denoted by gender, culture, ethics, physical abilities and even age (Mondy, 2011). For globalised organizations, taking care of each interest group, while enhancing proper coordination and channeling energies towards the attainment of organizational goals and values is quite a challenging task. As a strategic component of organizations today, human resource management is required to develop plans that when successfully implemented, harmony in the workplace is created through the utilization of each group’s or individual’s key strengths rather than exposing their weaknesses.

The recognition of an employee’s culture, for instance, makes the employee feel recognized by the organization, which is good for attracting talent in future as well as the marketing of the organization (Chuang & Liao, 2010). In my organization, lack of proper policies for cultural recognition was a source of conflict for longer periods. With the majority of the employees being Caucasian whites, the minority groups like blacks and Hispanics felt that they were being given little attention especially in the development of organizational principles and general values.

There was no developed policy of sustainable diversity within the organization. In many cases, employees from the minority ethnic groups usually felt that they were not participating in the formulation of values and key strategic plans that touched on organizational culture (Wright & McMahan, 2011). In addition, they also felt that the composition of top leadership did not reflect the composition of diverse cultures in the organization. This was one main source of attrition within the organization. Many individuals began to be involved in internal rivalry where a supervisor from a dominant group would constantly find that their orders were being defied by his or her subordinates. Obviously, this was affected the overall productivity in the organization.

The organization’s response to the problem was structured, even though it ignored important principles of human resource management in handling workforce diversity issues. First, the organization’s management resorted to the development of policies that guided conduct and behavior within the organization. All employees were required to follow a chain of command when they felt that there was any form of discrimination with regards to their culture. Even with policies however, there were no proper feedback channels that would guide management on the areas that were largely affected by this issue. As a result, the strict guidelines only served to reduce conflicts in command but did not help in improving the organizational culture and recognition of workforce diversity.

Certainly, this response did not have any effect on the improvement of performance. It only worked to increase levels of conformance and not commitment. Most employees still thought that management was being insensitive to the plight of its employees, mostly from the minority cultural groups. This was certainly the wrong route by management to follow in order to achieve harmony and a favorable work environment for every single employee within the organization regardless of their cultural, social or economic backgrounds.

By strengthening policies of command and feedback, the organization was only responding to the need for leadership to gain control and not commitment. However, the issue was not about a lack of control but on management’s ignorance of the fact that as any organization grows in terms of the number of workforce, diversity is a great factor for commitment and eventually, performance. Any organization that is able to appreciate that its employees come from different backgrounds and have different abilities is in a good position to formulate good strategies to take advantage of this fact to be able to improve on performance.

Personally, the proposed resolution based on the new HR knowledge and understanding of human resources management already obtained is to develop a strategic plan to encourage and promote diversity. The culture of diversity and recognition may only be cultivated only through involvement of all employees in the planning exercise. As a result, it is important that the organization constitutes a diversity working team that should comprise of all interest groups within the organization and particularly with emphasis on cultural foundations.

Through this team, all diversity issues apart from cultural recognition are to be identified. After the identification process, the group will incorporate the views of all employees and come up with priority areas of implementation. Management is to therefore integrate the recommendations of the team through introduction of necessary changes beginning with the alignment of the organizational structure to take into account the importance of diversity. Importantly, the organization’s strategy should be altered towards attainment of the culture of diversity. All employees should be involved in implementation to ensure that there is improved commitment.


The purpose of integrating human resources principles to an organization’s strategy is to ensure that all employees work towards the attainment of set organizational goals. Any organization looking to improve workforce motivation and performance should therefore be proactive in its response on arising issues relating to human resource development. As noted in the analysis above, compensation and workforce diversity are important principles of strategic human resource management in line with the modernization of organizations as well as the increased globalization of markets. Eventually, the best approach of managing human resource issues is through the involvement of all employees in the formulation of best alternatives (Chuang & Liao, 2010). This is because they are likely to feel part of the changes and therefore remain committed to attaining performance related objectives.


Chuang, C., & Liao, H. (2010). Strategic human resource management in service context: Taking care of business by taking care of employees and customers. Personnel Psychology, 63(1), 153-196. Web.

Mondy, W. (2011). Human resource management, 13th ed. New Jersey: Pearson Education Ltd. Web.

Wright, P. M., & McMahan, G. C. (2011). Exploring human capital: putting ‘human’ back into strategic human resource management. Human Resource Management Journal, 21(2), 93-104. Web.