Reference no: EM133042198

Strategic compensation management means formulating a total rewards package that produces the employee skills and behaviors that the company needs to achieve its strategic goals.

Wegmans exemplifies this. It competes in the retail food sector, where profit margins are thin and where online competitors and giants like Walmart drive costs and prices down. The usual competitor's reaction is to cut employee benefits and costs. Wegmans takes a different approach. It views its workforce as an integral part of achieving Wegmans's strategic aims of optimizing service while controlling costs by improving systems and productivity. For example, one dairy department employee designed a new way to organize the cooler, thus improving ordering and inventory control. The firm offers above-market pay rates, affordable health insurance, and a full range of employee benefits. Wegmans's pay policies thus aim to produce exactly the sorts of high-productivity employee behaviors the company needs to achieve its strategic aims.

It's likely that its pay policies are one reason for Wegmans's exceptional profitability. For example, its employee turnover (about 38% for part-timers, 6%-7% for full-timers) is well below the industry's overall average of about 47%.50Its stores (which at about 120,000 square feet are much larger than competitors') average about $950,000 a week in sales (compared to a national average of $361,564), or about $49 million in sales annually, compared with a typical Walmart store's grocery sales of $23.5 million in sales. As Wegmans's human resource head has said, good employees assure higher productivity, and that translates into better bottom-line results.

Question:

1. Why is the Wegman's high-pay policy so successful? Why don't other employers adopt this policy? What other extrinsic pay policies do think could be successful as well?