Running head: ASSIGNMENT 1: COMPENSATION PRACTICE 1

Assignment 1: Compensation Practice

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Assignment 1: Compensation Practice

Overview of Apple Company

Apple Company was incorporated in the year 1977 to manufacture, design, and further

promote the market of mobile communications. Besides, the company deals in the manufacture

of other media devices, such as personal computers and digital music players. However, the

company has absorbed other small companies, which aids it in mapping of the software and

applications used in the development of smart phones. Such small companies include Silicon

Valley and Novauris Technologies Ltd. Apart from manufacturing the communication devices;

Apple majorly focuses on developing and maintaining the software and applications used in

these media gadgets. Additionally, Apple provides a variety of products, ranging from iPods,

iPhone, iTunes, and Mac books. Consequently, many consumers of these products prefer Apple’s

products, simply because the company has a high profile in terms of customers’ satisfaction.

Apple’s Compensation Strategy

In Computer Industry, such as Apple, it is vital for the management team to constantly

review the stiff competition associated with the manufacturing of products. In these competitive

environments, the management team of Apple needs to set up strategies that balance out between

the freedom and creativity of employees. Therefore, the management team of Apple endorses

such reforms in order to control costs and efficiency in the company. In doing this, the Upper

Management Team set up some rigid rules that encompass the structuring of the organization in

the year 1992. Though the rigid rules looked promising in relation to safeguarding the company

against malpractices, many of these regulations occasioned challenges. For example, the top

managers provided the junior staffs with the specifications to which they were to adhere. By
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specifying the kind of duties and tasks to execute, the management ensured that employees did

not strive for unattainable goals and objectives.

However, the company seems to be worsening off, regarding the promotion of

employees’ morale. The company offers more strict rules to employees, thus discouraging

workers from endorsing the kinds of creativity that comes with freedom. In particular, the upper

management receives negative feedbacks, resulting from their worse compensation plans.

Indeed, Apple Compensation Strategy needs some sorts of adjustments, regarding the way it

offers promotion to inexperienced managers. More so, the company focuses on developing and

promoting managers from outside, who are not well conversant with the company’s culture.

Apple has been hiring outsourced managers, who possess little knowledge related to

management as compared to existing employees found inside the company. These outsourced

managers have experiences of less than six years, working in large, multi-faceted companies like

Apple. Nonetheless, the company in context prefers to compensate employees as a whole

fraternity, rather than evaluating employees based on their respective departments and lines of

specialization.

Best Practices attached to the Apple Compensation Strategy

According to the Leadership Development Program conducted by John Sculley, it is

certain that Apple Company needs to restructure its organization, particularly in the field of

employees’ compensation. The company needs to alter its system of payment. For example,

many of its employees endorse the use of commission, as a means of payment. The use of

commission as means of payment acts as a motivation tool to the employees. Indeed, Sculley

looked into this method of payment, and further examined the benefits it attaches to both the

company and its employees. Categorically, this means of payment motivates employees into
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working efficiently with the available resources to produce better quality products. Additionally,

it improves the productivity of the company since employees feel as part of the company’s

fraternity. In accordance with this kind of feeling, employees’ work performances improve

because the management team entrusts them with delegated responsibilities. Hence, the

management team involves them in meetings that entail making critical decisions, concerning

Apple’s strategies

The company’s management system needs to restructure the compensation strategy in

that it compensates employees in line with their lines of duty. This measure is possible if the

company evaluates the performance of each worker individually, but not as a whole. In following

this approach, employees will have a feeling that the company desires to achieve its long-term

goals via their practices. Since the Research and Development Team works 80 hours a week in

coming up with new ideas, the company has to compensate different employees in relation to

their goals-achievements. Categorically, the Quality Control Department (QCD) in Apple

Company needs to outline the bonuses in respective to the work performance and the number of

periods workers have performed their roles (Kapferer & Bastien, 2012). In contrast to this, the

QCD should evaluate the performance of the top senior managers based on the entire company’s

external analysis. In putting this into practice, the top managers receive their bonuses, regarding

the final work output and productivity of the company. Consequently, the QCD has to determine

the Average Profitability Index of Apple before awarding bonuses to the top senior managers.

Challenges associated with Apple’s Compensation

Compensation for pay among employees working in Apple Inc. poses a challenge to the

management of the company. In this regard, the company’s CEO, Timothy Cook receives a

monthly pay of $4.6 million, which is a slight increase from the past salary packages (Walker,
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2014). From this scenario, it is certain to say that the top most management teams in the Apple

Company get huge amount of salary packages at the expense of other lower level employees,

who do their best. Indeed, the lower level employees are the key players in ensuring the company

achieves its immediate and long-term objectives effectively. Therefore, the lower level

employees should also receive a handsomely amount in order for them to attain the required

level of morale, associated with improving the quality standards. Apple Company makes a lot of

profits at the expense of small salary packages it offers to its employees.

By ensuring it surpasses its objectives, Apple discourages the employees from viewing

the company, as a profit-oriented firm, and instead changes their perceptions. In particular, it

endorses the hiring of young-aged employees, who seem to have fewer financial needs, such as

less number of insurance covers (Walker, 2014). Therefore, Apple experiences a challenge

attached to shifting of its compensation strategy. For instance, the company desires to increase

the working hours for the employees, but it is not ready to pay workers in relation to the

commission-based method of payment.

Analyzing how Apple applies its Compensation Plan in determining both the Negative and

Positive Impacts on itself and the Stakeholders

Apple Inc. applies its compensation plans in accordance with the following factors;

namely, the Acts’ legislations, exempt and non-exempt jobs, attitudes and behaviors of

employees, internal employees ‘consistencies, and external competitiveness. First, the company

establishes the effects of adhering to the Legislations Acts on the stakeholders as having negative

impacts. Precisely, the industry views that it occasions some losses in case it stick to Salary and

Compensation Acts. Sticking to these rules means that the authorities prohibit the company is

from offering low pay to employees (Graham et al., 2008). Second, Apple determines how much
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it pays its employees based on the exempt and non-exempt jobs. As an example, Apple pays

workers performing exempt jobs huge amount of salaries and bonuses because they have

outstandingly high skills and knowledge. Such exceptional skills and knowledge among top

management teams requires high pay, particularly for the company’s CEO.

Third, the company allocates compensation benefits to employees according to the kinds

of behaviors and attitudes employees possess. Employees who have better attitudes and morale

benefit a lot. According to Graham et al. (2008), these kinds of workers receive high pay since

they promote the profile of the company due to their excellent work performances. Thus, the

company’s stakeholders receive much praises from the entire consumers across the globe.

Lastly, the company awards its staffs compensation packages in terms of the attributed internal

consistencies in producing quality products, and achieving the targeted output. More so, it

evaluate s the competitive nature of the company in the market sector and determines how much

its employees should get. In case the company attains and maintains a highly competitive

perspective in the public domain, it is ready to add some bonuses and promote other lower level

staffs. Consequently, Apple practises these reforms based on how such reforms impact positively

on the entire earnings of stakeholders.

How the Laws, Labor Unions, and Market Factors impact on the Apple’s Compensation

Practices

Despite the fact that Labor laws have impacted negatively on Apple Compensation

strategy, these regulations have somehow improved the working conditions of all employees. For

example, the Fair Labor Standards Act of 1938 restricts Apple Company from hiring minors,

who seem to have much of their time dedicated for the progress of the company. Besides, the

law suggests the minimum wages paid to employees, and further requires the company to pay
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overtime workers an additional amount of money. In particular, the Act specifies that Apple pays

50 percent of their monthly pay for each hour an employee works overtime. Thus, this impact

negatively on the company since Apple does not have to make more profits, as a result of paying

employees less amount of bonuses. Market factors, such as customers’ tastes and preferences and

profitability indices, influence the decision of the company, regarding the compensation strategy

(Williams & Mueckenheim, 2005). To be precise, the company is obligated to maintain its public

image in the market; therefore, it offers a compensation package that literally attributes to the

performances of its employees. Besides, it perceives that the ultimate behaviors and attitudes of

employees are key factors that determine its public profile. Consequently, Apple sets up

compensation plans that correlate with the existing profitability index, simply because job

seekers look forward to the company’s allowances for compensation.

Effectiveness of Traditional bases for Pay in the Apple Inc.

For many years Apple has been using its traditional means of payment. It uses Apple Pay,

which has features that synchronize with its products, such as iPhone 6 and Apple Watch. The

company’s means of payment is compatible with many of its applications. As an example, Apple

uses a tap and pay procedure, in which its employees have installed such software in their

communication devices. The Apple Pay is fast and convenient for both the company and

employees since Apple Payment Department monitors every transaction accordingly. Though it

charges a small fee every transaction, Apple Pay is convenient and beneficial to the employees,

as it provides the employees with the records of all transactions (Walker, 2014). It does this with

the help of the Near-Field Communications (NFC). NFC is a radio protocol that enables weak

radio signals to communicate, and have information interchangeably. Hence, employees enjoy
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the Apple Pay, as they use the Touch ID on their iPhone, regarding the provision of the

authentication “thumb”.
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References

Graham, M., Roth, T. & Dugan, D. (2008). Effective executive compensation creating a total

rewards strategy for executives. New York: AMACOM/American Management

Association.

Kapferer. & Bastien, V. (2012). The luxury strategy: break the rules of marketing to build luxury

brands. London Philadelphia: Kogan Page.

Walker, J. (2014). Information technology and collection management for library user

environments. Hershey, PA: Information Science Reference.

Williams, M. & Mueckenheim, J. (2005). Gale directory of databases. Farmington HIlls, MI:

Gale Group.