Running head: BMW
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BMW
Anthony Green-Powell
Professor Marilyn Fitzpatrick
Strayer University
BUS 409 Compensation Management
January 28, 2018
BMW
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BMW company overview
BMW of North America, LLC (BMW NA) was initially founded in 1975 as the United
States major importer of BMW’s performance vehicles. BMW NA took up shipping and
dispensation responsibilities for the BMW motorcycles in 1980 as well as the distribution of light
trucks in 1999. BMW of North America has its corporate headquarters in Woodcliff Lake, New
Jersey: Regional Headquarters and Technical Training Center of the eastern region in Woodcliff
Lake, New Jersey. The Vehicle Preparation Center in Port Jersey, NJ, and finally, has a Regional
Distribution Center in Nazareth, PA. The company’s international headquarters is in Munich
Germany. BMW is a luxurious product offered at a premium price. The company’s mission
statement is one that promises exceptional customer experience. BMW has been rated as the
most maintained automobile manufacturer globally. The company is built on providing efficient
vehicles that reduce consumption and emission rates by as much as 30% (Company information).
Introduction
Compensation strategy is a vital aspect in all business platforms. For an organization to
maintain its competitive stance, an effective compensation strategy needs to be employed.
Compensation strategy keeps businesses afloat as it provides for the assessment of the businesses
finances to determine compensation to be awarded for the tasks being undertaken. Compensation
packages can determine what skills the company adopts through the individuals it seeks to hire.
Higher packages would therefore demand better skills. In truth every individual seeks to earn
high compensation, therefore it is fairly common to find individuals advancing their skills to earn
higher compensation. Compensation varies by organization in both the direct and indirect
aspects. Direct compensation is inclusive of the monetary rewards awarded to individuals for the
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performance of a task. Indirect compensation, on the other hand, includes benefits, and
discounts amongst other benefits that the company may seek to offer. This paper investigates
BMW and the compensation strategies it employs as well as the challenges faced. The paper will
delve into the manner compensation has influenced shareholders and some of the best practices
BMW has adopted that has gained the company competitive advantage. A comparison and a
contrast of the compensation factors such as labor laws, unions, and the relative market trends,
will also help in unearthing more challenges.
Compensation strategy and related problems
The Supervisory board in BMW is mandated the task of determining and reviewing the
board of management’s compensation while the personnel committee undertakes the role of
preparing the process. The principles of compensation are that the work force is encouraged to
foresee development at BMW. The principle of consistency in granting remuneration is
considered in different levels at the BMW Company: for this reason, they contain similar
structures and components. The supervisory board ensures that the board of management has
ascertained that all the compensation and components therein are up to par always. Therefore,
the board of management is not required to take risks on behalf of the BMW Group. The
compensation model formulated for the board of management attracts highly qualified
executives while the compensation of members in the board of management is determined by the
performance criteria based on the remuneration they receive as well (Schmitt, Zacher, & Frese,
2012).
The compensation of the board of management can either have aspects of fixed and
variable remunerations and a share-based component. Retirement dependents also gain
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entitlements. Fixed remuneration comprises of salary that is often paid monthly with
remuneration elements such as company cars, insurance premiums, security systems and medical
check-ups. The members of the Board of Management can make vehicle purchases of the BMW
Group with strict conditions. The variable remuneration by the board of management members is
made up of variable cash remuneration and a share-based remuneration. The bonuses at BMW
then comprise of corporate earnings-related bonus and a personal performance-related bonus.
Equal consideration is granted based on personal performance, the decisions made in forecasting
periods, as well as the key decisions that affect the future development of the business.
Performance factors include innovation, customer focus, adaptability, leadership, and
contributions of an employer, as well as elements that promote corporate social responsibility
(Schmitt, Zacher, & Frese, 2012).
BMW best practices
BMW has concentrated more on digitalization, modifying their products as per customer
requirements, the implementation of regulatory requirements, volatility, as well as the
introduction of new technologies and Services further enhance on the group successes. To
ascertain its stance in the competitor market and uphold its vision of remaining steadfast and
inspiring people, they have created a competitive advantage through providing attractive services
to its customers. The company’s strategic approach in branding and designing has contributed
greatly to the new era and ensuring profitability. The creation of desirable brands is propelled by
the company’s brand management as well as the exceptional designs it offers. In addition to this,
BMW has also gone the extra mile in making a vehicle that offers a scan of the surrounding
areas. Technologies that facilitate this include a stereo front camera, full-Range radar, park
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distance control, etc. It has also created electric cars that can charge through streets lights to
sustain mobility. This action, by far, allows for the company’s models to stand out every time.
Compensation practice to determine the positive or negative impact to the company and its
stakeholders
The influence compensation has on an organization is an indicator of the effectiveness of
a fair and equal pay plan. A satisfactory compensation plan contributes to positive work attitude
and behavior amongst the employees. This contributes to positive impact on employee
cooperation, performance and consequently effectiveness. With this guaranteed productivity and
profitability are granted. The supervisory board in BMW is mandated with the task of
determining and reviewing compensation plans. Compensation plans are reviewed annually.
Competitive strategies at BMW act as a determinant of the compensation of its management,
staff, and stakeholders (Samnani, & Singh, 2014).
Governance and leadership techniques adopted by the company as well as constitutions
set aside for the same reason act as a determent of the impact of compensation of a company.
The supervisory board reviews the compensation policy periodically to ascertain that the facts
and details included therein are accurate and appropriate. They then approve the benefit policies,
incentives, and the overall compensation policy to employees. Annual evaluations are often
conducted in order to assess compensation impact on a company. The annual evaluation of
BMW’s performance is aimed at acknowledging the efforts of determined executives as well as
other employees (Samnani, & Singh, 2014).
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Compensation-related challenges at BMW
Attracting and retaining of employees
Rating employee performance is not always an easy task. Effective compensation is a
challenge. Compensation management with monetary value is also difficult. There has been an
increase in competition in the market for employees is a challenge with different company’s
offering different compensation rates and values thereby meaning employees are becoming
harder to source. Therefore, the supervisory board often has to review their compensation
strategies to ensure they are attractive for employees seeking work in the same industry. Not only
is it proving a challenge in attracting employees but also retaining employees who know the
compensatory rates of other companies. The increasing demand for competitive salaries and
talented has contributed to compensation wars employees therefore meaning that the assessment
of BMW’s compensation plans is vital in the motivation of employees. (Wallace et al, 2014).
Labor Costs
Labor costs become stressful on the BMW’s budget. The BMW Company therefore
undergoes economic hardship as a result of compensation wars. Granted the cost of labor
escalates to higher levels than employee remuneration which is challenge to BMW and its
compensation strategies (Laing, 2011)
Multinational Operations
As BMW is now a company that operates not only regionally but also globally and has
achieved recognition for the same compensation strategies in this regard should have a constant
balance but yet meet the needs and expectations of its management team and the employees
regardless of the country the subsidiary company is based. Compensation strategies therefore
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need be in conformity with the local regulations, customs and laws against global corporate
policies.
Ways in which Laws, Labor Unions, and Market Factors Impact BMW’s Compensation
Practices
There are many factors that can influence a company’s compensation practices including
market conditions, laws and labor unions. The market may call for higher compensation at the
time with regard to other competing firms. This could contribute therefore to a company’s
inability to pay or delay its employee’s compensations. The number of skilled workers in a
market can also influence BMW’s compensation practices. Thus, incentives to revise the
compensation practice normally employed will be assessed in the case the company employees
under-skilled workers who’s pay is often revised further once they have attained the necessary
skills through a job evaluation and performance rating program.
Labor Market demand for the supply of labor is a contributor to employee compensation.
Low wage is cases whereby the demand is often less labor supply. However fixed pay
contributes to higher labor supply. The rate is often decided by what other companies are paying
as compensation for the same tasks. This therefore contributes to the rate of production whereby
the value of compensation increases with higher productivity. New technology and better
management techniques are may contribute to better employee performance, thereby resulting in
the enhanced productivity.
Labor Unions influence the compensation plans at BMW. The labor unions are
formulated in cases whereby the demand is relative to labor supply. For this reason, BMW has
sought to create fixed compensation plans to cater for the needs of its employees. Unions often
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cause a rift in the company’s profitability thereby affecting the company’s compensation rates if
profitability is rated at a minimal or lack of it thereof. Labor unions result also wage inequalities.
An example of this can be seen in the 2008financial crisis. The U.S. automakers to the precipice
of failure, conservatives, notably Mitt Romney made a claim to the United States president at the
time Barack Obama’s administration that they should advocate for bankruptcy of car companies.
Blame was being put on the high wages that were being paid out to union autoworkers.
Labor laws are enforced and implemented by the government with the intent of
safeguarding employee rights can contribute to BMW’s compensation practices. These include
laws such as the payment of wages act of 1936, the minimum wages act of 1948, the payment of
bonus act of 1965, the equal remuneration act of 1976, and payment of gratuity act 1972. BMW
group accounts for the ecological and social responsibilities. It takes into account the 10
principles of the United Nation’s global compact. It has also signed a declaration on human
rights. The human rights declaration assesses the details of working conditions of employees
both in the national and international level. The legal compliance code complies with the legal
requirements. Applicable laws include the structure for a binding framework. Violations of these
laws attract serious consequences including fines and claims on compensation.
Traditional bases for pay at BMW
The traditional base for pay is more effective as it centers on matters pertaining to
compensation. The approach evaluates whether BMW is offering remuneration to its employees
as standards depict. It helps in the assessment of BMW’s equity in terms of payment. This
creates a comparison in the amounts of remuneration and compensation that is being awarded to
other employees. Traditional base pay foresees the market testing of BMW’s competitiveness in
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pay scales. Assessing of productivity in the platform is therefore achieved. Though the
traditional base for pay quantification does not promise fairness, it allows for dependable
systems. In contrast to incentive-based and the person compensation approaches, traditional base
for pay results in career orientation, the higher the skills the higher the compensation thereby
underrating the performance of employees with admirable talents.
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References
Company information (n.d) Retrieved from https://www.bmwusa.com/about/bmw-of-northamerica.html
Laing, D. (2011). Labor Economics. WW Norton & Company.
Samnani, A. K., & Singh, P. (2014). Performance-enhancing compensation practices and
employee productivity: The role of workplace bullying. Human Resource Management
Review, 24(1), 5-16.
Schmitt, A., Zacher, H., & Frese, M. (2012). The buffering effect of selection, optimization, and
compensation strategy use on the relationship between problem solving demands and
occupational well-being: a daily diary study. Journal of occupational health
psychology, 17(2), 139.
Wallace, A. P. M., Lings, I., Cameron, R., & Sheldon, N. (2014). Attracting and retaining staff:
the role of branding and industry image. In Workforce development (pp. 19-36). Springer
Singapore.
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