The opening case deals with unique compensation at Wegmans. Students can utilize the book and other sources for more in-depth research to answer the case ending questions. The paper should be 2-3 pages not including the title and reference page. Please post papers before 11:55 pm on the due date.
Please read and answer the questions in APA formatting. Do not write the questions and the provided the response under. Incorporate the questions and answers in the paper. The paper needs to reflect the junior/senior level of the class.
Unique Compensation at Wegmans
If you’re looking for the best Parmesan cheese for your chicken parmigiana recipe, you might try Wegmans, especially if you happen to live in the vicinity of Pittsford, New York. Cheese department manager Carol Kent will be happy to recommend the best brand because her job calls for knowing cheese as well as managing some 20 subordinates. Kent is a knowledgeable employee, and Wegmans sees that as a key asset. Specifically, Wegmans believes that its employees are more knowledgeable than are the employees of its competitors.
Wegmans Food Markets, a family-owned East Coast chain with more than 80 outlets in six states, prides itself on its commitment to customers, and it shows. It consistently ranks near the top of the annual Consumer Reports survey of the best national and regional grocery stores. But commitment to customers is only half of Wegmans’ overall strategy, which calls for reaching its customers through its employees. “How do we differentiate ourselves?” asks Danny Wegman, who then proceeds to answer his own question: “If we can sell products that require knowledge in terms of how you use them, that’s our strategy. Anything that requires knowledge and service gives us a reason to be.” That’s the logic behind one of Kent’s recent assignments—one which she understandably regards as a perk. Wegmans sent her to Italy to conduct a personal study of Italian cheese. “We sat with the families” that make the cheeses, she recalls, “broke bread with them. It helped me understand that we’re not just selling a piece of cheese. We’re selling a tradition, a quality.”
Kent and the employees in her department also enjoy the best benefits package in the industry, including fully paid health insurance. And, that includes part-timers, who make up about two-thirds of the company’s workforce of more than 37,000. In part, the strategy of extending benefits to this large segment of the labor force is intended to make sure that stores have enough good workers for crucial peak periods, but there’s no denying that the costs of employee-friendly policies can mount up. At 15–17 percent of sales, for example, Wegmans’ labor costs are well above the 12 percent figure for most supermarkets. But according to one company HR executive, holding down labor costs isn’t necessarily a strategic priority: “We would have stopped offering free health insurance [to part-timers] a long time ago,” she admits, “if we tried to justify the costs.”
Besides, employee turnover at Wegmans is about 6 percent—a mere fraction of an industry average that hovers around 19 percent (and can approach 100 percent for part-timers). And, this is an industry in which total turnover costs have been known to outstrip total annual profits by 40 percent. Wegmans employees tend to be knowledgeable because about 20 percent of them have been with the company for years, and many have logged at least a quarter century. Says one 19-year-old college student who works at an upstate New York Wegmans while pursuing a career as a high school history teacher, “I love this place. If teaching doesn’t work out, I would so totally work at Wegmans.” Edward McLaughlin, who directs the Food Industry Management Program at Cornell University, understands this sort of attitude: “When you’re a 16-year-old kid, the last thing you want to do is wear a geeky shirt and work for a supermarket,” but at Wegmans, he explains, “it’s a badge of honor. You’re not a geeky cashier. You’re part of the social fabric.”
“We would have stopped offering free health insurance [to part-timers] a long time ago,” she admits, “if we tried to justify the costs.”Footnote
— WEGMANS HR MANAGER
Wegmans usually ranks high on Fortune magazine’s annual list of 100 Best Companies to Work For. “It says that we’re doing something right,” says a company spokesperson, “and that there’s no better way to take care of our customers than to be a great place for our employees to work.” In addition to its health-care package, Wegmans has been cited for such perks as fitness center discounts, compressed work weeks, telecommuting, and domestic partner benefits, which extend to same-sex partners.
Finally, under the company’s Employee Scholarship Program, full-time workers can receive up to $2,200 a year for 4 years and part-timers up to $1,500. Since its inception in 1984, the program has handed out $80 million in scholarships to more than 24,000 employees. Like most Wegman policies, this one combines employee outreach with long-term corporate strategy: “This program has made a real difference in the lives of many young people,” says President Colleen Wegman, who adds that it’s also “one of the reasons we’ve been able to attract the best and the brightest to work at Wegmans.”
Granted, Wegmans, which has remained in family hands since its founding in 1915, has an advantage in being as generous with its resources as its family of top executives wants to be. It doesn’t have to do everything with quarterly profits in mind, and the firm likes to point out that taking care of its employees is a long-standing priority. Profit sharing and fully funded medical coverage were introduced in 1950 by Robert Wegman, son and nephew of brothers Walter and John, respectively, who opened the firm’s original flagship store in Rochester, New York, in 1930. Why did Robert Wegman make such generous gestures to his employees way back then? “Because,” he says simply, “I was no different from them.”
Think It Over
Why does Wegman’s approach to compensation seem to work so well?
In your opinion, why don’t other grocery chains use the same compensation model as Wegman’s?
Chapter Review 9
Learning Objectives/Key Terms/Key Legislation
Describe the basic issues involved in developing a compensation strategy.
Compensation and benefit programs have several fundamental purposes and objectives. One fundamental purpose is to provide an adequate and appropriate reward system for employees so that they feel valued and worthwhile as organizational members and representatives. Firms, however, can adopt one of three basic strategies when it comes to compensation: pay above-market compensation rates, pay at-market compensation rates, or pay below-market compensation rates. Several different factors contribute to the compensation strategy that a firm develops. The critical source of information that many organizations use in developing compensation strategies is pay surveys.