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Abstract摘要
本文以通用电气公司为研究对象，以赛事理论为理论基础，分析其薪酬管理中存在的潜在问题，为完善薪酬管理策略提出建议，以帮助他们解决可能面临的高级管理人员流失的潜在风险。采用定性和定量的研究方法，发现在这项研究中，风险是与它的工资管理系统。通用电气支付其首席执行官的最低，这有利于鼓励高管和管理层低于首席执行官努力工作。笔者建议，在未来，通用电气可能会考虑适当的薪酬增加，特别是提高工资和奖金，以扩大首席执行官和其他管理人员之间的收入差距，这有助于更好地激励首席执行官和其他管理人员。This essay took GE as a research object, the tournament theory as the theoretical basis to analyze its potential problems in compensation management, so as to make recommendations for improving its compensation management strategies to help them address the potential risks of the loss of senior management personnel that it may face. By using qualitative and quantitative research methods, it was found in this study that the risk is associated with its salary management system. GE pays its CEO lowly, which counts against encouraging the executive and the managers below CEO to work hard. The author suggested that in the future, GE may consider appropriate salary increase, especially to raise wages and bonuses to widen the income gap between CEO and other managers, which contributes to a better incentive of CEO and other managers.
Keywords: GE; compensation management; tournament theory; income gap
1.0 Introduction介绍
The advent of globalization and the knowledge economy era makes talents one of the core competitiveness of enterprises, human resource becomes the second source of corporate profits, and therefore human resource management has become an important part of modern enterprise management system (Rynes, Gerhart & Minette, 2004). Human resource management involves recruiting personnel, job design, compensation management, corporate culture, teamwork, corporate culture and other aspects, of which compensation management is a very important part of human resource management. Excellent compensation management plays a very active role in attracting, motivating and retaining staff (Rynes, Gerhart & Minette, 2004). There is a lot of research and theory on compensation management, tournament theory is one of the most famous theories (Lazear & Rosen, 1981; George, Gibbs & Holmstrom, 1994). General Electric is one of America's most successful companies, but recently it also faces potential risks of the loss of senior management personnel. This essay takes GE as a research object of case study, taking the tournament theory as the theoretical basis to analyze its potential problems in compensation management, so as to make recommendations for improving its compensation management strategies to help them address the potential risks of the loss of senior management personnel that it may face.
2.0 Methodology 方法论
This essay makes use of combining qualitative with quantitative research methods. Quantitative research data in this study was mainly from official reports released by GM or related researches on GM. This study was through analysis and comparison of these data to understand GE’s salary management status and problems. Qualitative research of this study was mainly based on the tournament theory to analyze the potential problems in GE’s salary management system, as well as why GE has a potential risk of loss of senior management personnel.
3.0 Analysis and Discussion分析和讨论
3.1 Compensation management
A key principle of GE’s compensation management towards its senior management personnel is that part of their salary is directly linked to their task performance, rather than how many employees they supervise or how long they have worked in the company. The company pays according to actual performance rather than pays based on the management right. GE believes that linking remuneration with jobs will establish a team of indignant resentment, experts call these people "POPOS", meaning people who have been passed over and pissd off. GE approves raising wage levels of employees without promotion (Rynes, Gerhart & Minette, 2004).
GE provides employees with different types of a combination of payroll. The plan includes salary, annual bonus, long-term equity and performance incentives, deferred compensation and pension. It is worth noting that, with the promotion of a management personnel in the company, the proportion of the "risk" part in its overall payroll will also be increased. It means that a large part of salaries of senior executives of GE will achieve a long-term equity incentive after a certain time, which requires that their performance must be maintained for a longer period of time, then they can really acquire high incomes. These systems make the interests of management personnel closely link with shareholders’ interests, because their income depends on the company's stock performance (Rynes, Gerhart & Minette, 2004; Lehmberg, Rowe, Philips & White, 2009).
3.2 Analysis
For those who achieve good results at work, GE generally takes bonus or grant of equity method to show recognition. Studies have shown that to truly make incentive bonus play the role of encouragement, the amount of bonus offered must be at least 10% higher than the basic salary of those who are rewarded. In fact, the amount of bonus paid by the company is far less than the ratio. A variety of incentives, including bonuses, stock options, profit sharing, etc., are add up to only 7.5%, which indicates that the pay gap between GE employees is relatively small (Rynes, Gerhart & Minette, 2004; Lehmberg, Rowe, Philips & White, 2009). GE has cultivated several excellent CEOs in its history. However, over the last 25 to 30 years, a relatively large number of GE’s ex executives acted as the core figures of Fortune 500 companies. Wall Street feared that the income of GE’s senior management mainly relies on stock, so excellent managers might leave the company (Lehmberg, Rowe, Philips & White, 2009). In 2013, the US research firm name PayScale investigated the compensation for CEO of 100 listed companies in the United States in 2012. The market value of GE ranked No. 6 among the 100 companies, but GE’s CEO, Jeffrey R Immelt acquired the total income of $ 7,750,000.00, this income ranked No. 59 (PayScale, 2013), the data show that compared with other listed companies, the revenue for GE’s executives is low.
Tournament theory thinks that the levels of salary increases linked to promotions will affect the enthusiasm of the staff below the job class; as long as the results of promotion have not been clear, employees have an incentive to work hard to get promoted (Lazear & Rosen, 1981; George, Gibbs & Holmstrom, 1994). Therefore, the theory advocates promotion to motivate employees. Tournament theory shows that enterprises pay high salaries for corporate management, which can on the one hand induce them to make the greatest efforts under the temptation of high pay; on the other hand, the theory believes that the more important point is doing so would encourage managers of a lower class to work hard and strive to obtain higher pay, while reducing the likelihood of good employees’ leaving to find other work (Lazear & Rosen, 1981; George, Gibbs & Holmstrom, 1994). GE’s remuneration management mode of separating positions from salaries is beneficial for reducing the sense of injustice for the general staff and the low-level management personnel, it is also in favor of creating a harmonious working atmosphere. However, according to tournament theory, GE gives its CEO low pay, on the one hand, it is not conducive to encouraging executives to work hard, on the other hand, it goes against encouraging managers below CEO to make efforts for promotion. Wall Street believed that it may be one of the reasons leading to that GE’s outstanding management is likely to leave the company.
3.3 Recommendation
For GE, how to avoid the potential risk of loss of management personnel in the future, a feasible way is appropriate rise of wage, especially wage and bonus for CEO, so as to appropriately widen the gap in the difference in income between CEO and other managers. This can on the one hand help to motivate CEO to work harder, on the other hand, it can stimulate the high-level executives below CEO to continue to move forward, as they know that continuing to work tirelessly can bring them a promotion and substantial raise in income.
4.0 Conclusion总结
The potential risk existing in GE is that the excellent managers are likely to leave. The risk is associated with its salary management system. A feature of GE’s salary management is that salary is directly linked with an employee's performance, the pay gap between employees is small, income for executives is relatively low, income for senior management relies on the stock. According to tournament theory, what GE pays its CEO is low, which counts against encouraging the executive and the managers below CEO to work hard. It is one of the reasons leading to that GE’s talented management may leave. The author suggested that in the future, GE may consider appropriate salary increase, especially to raise wages and bonuses to widen the income gap between CEO and other managers, which contributes to a better incentive of CEO and other managers.
References文献#p#分页标题#e#
George, B., Gibbs, M. & Holmstrom, B. (1994). The internal economics of the firm: evidence from personnel data. Quarterly Journal of Economics, 109(4), 881-919.
Lazear, E. P. & Rosen, S. (1981). Rank-order tournaments as optimum labor. Journal of Political Economy, 89(5), 64-841.
Lehmberg, D., Rowe, W. G., Philips, J. R. & White, R. E. (2009). General Electric: an outlier in CEO talent development. Ivey Business Journal.
PayScale. (2013). CEO pay in perspective.
Rynes, S. L., Gerhart, B. & Minette, K. A. (2004). The importance of pay in employee motivation: discrepancies between what people say and what they do. Human Resource Management, 43(4), 381–394.
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