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Pay Framework and Store Management of Matalan Retail

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Published: Wed, 07 Feb 2018

The following paper is a report about the introduction of an innovative pay framework at the Matalan stores. The company is relatively new in the market since its inception in the year 1985. Though the progress has been staggering and the company has moved forward while imbibing some of the best management practices seen in corporate history, there is a slack in the current pay structure practised at Matalan.

Though they had a formal structure in the past, at the moment each store has its own recruitment policies and salary structures. Thesis causing problems within the human resource department at each store due to the discrepancy in maintaining similar levels of pay structure. The company would need to undergo change and create a new pay framework, which imbibes all the concepts of equal pay to avoid any legal proceedings in the future.

At the same time the paper also takes into consideration factors, which are important while trying to create pay frameworks for organisations – motivation, communication channels, training and development, equal opportunities and similar non financial rewards which have proven to go a long way in improving performance at the work place. The report goes through a series of different headings which come together to weave a structure which best explains the problems, founding issues and a possible solution.

Introduction

Matalan is one of UK’s leading clothing and home furnishings retailer. The quality of clothes and home ware is relatively high with an affordable price tag. It was John Hargreaves who founded Matalan; he initially discovered the concept of out of town selling at lower prices in the US markets. The learning process was enough for him to know that this could turn out to be a very successful retail strategy in the Upmarket. The first Matalan store was opened in Preston in the year1985. By 1995, the company had made tremendous progress and had 50 stores to their credit across UK. The year 1997 was one with multiple changes in the business strategy and management practices, since the company was growing at a phenomenal pace; the head office was moved to Skelmersdale to be in a better position to oversee company growth and management issues.

The success was reinstated in the market with company floatation in the year 1998, at the moment Matalan trades from 5 million square feet in over 170 stores. For the consumers the opportunity to shop at Matalan is very satisfying since they get unrivalled quality at unsurpassed prices. The strategy Matalan follows is to buy from the manufacturers and having out of town less costly stores, which enable them to pass on the cost benefit to the customers. Please refer appendix 2 for more information about Matalan’s positioning the UK market in comparison to other clothing retailers.

A visit to a Matalan store reveals the complete family range the store has on offer, there is something for everybody. On an average the store size is an approximate 30,000 sq. ft. per store, the product range is comprehensive combination of home ware, clothing line for men, women and children. Each clothing line has a further divide in range and styles – formal, informal, sporty, seasonal, modern basics to some very classical styling, other than having their own labels on display there are also other brands on offer – Wrangler, Flamer, Lee Cooper, Wonder bra and Wolsey, this gives the customers a more balanced profile to choose from. The head office provides immense functional support tall stores across UK – be it buying, merchandising, marketing, HRM,finance, operations or property management. To get a better understanding of what each store entails in terms of human resources, we have the following line up.

  • Store Manager
  • Deputy Manager
  • Sales Manager Ladies wear
  • Sales Manager Men swear
  • Sales Manager Children’s wear
  • Sales Manager Home ware
  • Full and part time General Sales Assistants

At the same time, there are flexible changes in the way roles might be managed in a store, in smaller stores the home ware and children ‘swear departments are overlooked and managed by a one sales manager instead of two which is a norm in bigger sized stores. Matalan prides itself on some very progressive practices in all departments; the management believes that what they have on offer for employees is a fast track progressive career path, which is completely matched with one’s personal ambitions to succeed. [www.matalan.co.uk]

The pay framework at Matalan includes the following benefits and perks.

  • Highly competitive Salary
  • Bonus Scheme
  • Discounted Share Save scheme
  • Life assurance policy
  • Private Health Care
  • 10% discount at all stores
  • Generous holiday entitlements

[http://www.inretail.co.uk/pages/content.asp?PageID=311]

The above is an insight into what Matalan Retail has to offer its employees and staff across the stores. There are problems with the current pay structure, some of the new recruits are paid with regards to market rates and this is not in sync with what is paid to the old recruits in similar roles. The local HR offices have been exercising autonomy in recruitment and salary structures, which might, create friction between employees, peers and draw inter store comparisons. There is no clear-cut strategy for assimilating information on employees, their satisfaction levels and ways to gauge their performance at work. All this and more in the long run can create some damaging effects to the organisations performance as a whole. The following report is to create an understanding and balance between problems, issues and executable solutions so that the company can align the employee/staff goals with the organisation objectives.

Literature Review

Michael Armstrong (2001), in his book, ‘New dimensions in pay management’ talks about new systems and processes in reward management and pay structures. It also talks in length about the factors, which need consideration when planning a new pay structure in an organisation. It also covers methods of developing; introducing and evaluating new pay structures. Organisations in towards era have to move at a fast pace while adjusting to the changes in the internal and external environment. These pressure make these organisations react indifferent manners, it could be delayering, project based, flexible or continuous.

The emphasis is on continuous improvements in terms of performance management, reward management, personnel appraisal, quality control and customer service. The quality of human resources within an organisation is considered a significant advantage and differentiating factor. The focus should also be on business strategies and using systems like reward management and performance appraisal to bring about change in organisations. The reward concept is a focused effort of various forms of rewards, base pay, variable pay, benefits and non-financial rewards. The significance of pay revolves around motivational strategy, attracting and retaining employees in their job roles to build a more effective organisation.

The non-financial rewards include more recognition, praise, and training options, responsibility and although more studies on organisational behaviour have revealed that it’s the non-financial rewards, which have more scope for retaining employees. It was in the year 1990 that Ed Bawler spoke about the limitations of using this approach, “The starting point for any reward system design process needs to be the strategic agenda of the organisation. Thus the first step in designing the reward system for an organisation is to focus on the individual and organisational behaviours that are needed in order for the organisation to be successful”. Bawler further enhanced and improvised on this belief to cover all organisations, “The business strategy, in particular, serves as a crucial guide in designing organisational systems because it specifies what the company wants to accomplish, how it wants to behave, and the kinds of performance and performance levels it must demonstrate to be effective”.
[Michael Armstrong (2001), cap 1-15]

Shaun Tyson and Alfred York (1989) in their books ‘Personnel Management’, talk about how most organisations design their pay and wage packages based on the hierarchy. Another big difference is that blue-collar jobs are usually at an hourly rate, the wages are paid weekly or monthly basis and the salary earners are the ones who are Gina middle or senior management position. The differences are not limited to the salary; they also extend to the additional perks and benefits, which are offered to the employees. The objectives of a policy towards making a payment could be described as to ‘remain competitive for labour whilst rewarding good performance and adopting a position on pay which is felt to be fair by all employees.’ [Shaun Tyson and Alfred York (1989), cap 210-211]
The distinction that companies enjoy while treating different job roles with different salary structures is a matter of internal personnel philosophy. There are certain important criterions, which needs to be considered while planning a salary and wages structure –

If the company wishes to afford large salaries and pay packets to employees then they are working with the strategy of getting maximum output and high standards of quality and work from the employees. The effort to keep the standards high has to be sustained through time.

If the company wishes to offer other benefits and perks like travel allowance, car, mobile phones, laptops, inflation proof pension etc., the other way of doing this could be by giving the flexibility to the employee to decide what structure would be most appealing to him or her in terms of salary spend.

Another option is to trade off these benefits against wages. The most important factor to be seen by organisations remains retaining employees. They need to understand what appeals to the employees, what motivated them to work harder and perform better. Employee retention is a big problem and a lot of organisations are trying to tackle this through financial perks, raising salaries and other perks.

There are options like profit share benefits and bonus schemes which also need to be worked through the system. This does not call for direct employee participation and might not prove to be a great motivational tool.

There are policies on variation of pay frameworks, what needs consideration from management and organisations is whether pay is the main incentive and motivational tool for employees. They also need to understand the kind of employee evaluation scheme, which needs to be adopted and run.

The organisations which operate from more than one location need to understand the repercussions of giving more autonomy to its line managers in terms of drafting salary structure and pay frameworks. The other option would be to draft a company wide policy and run it across all departments and locations irrespective of size, force and structure.

The last step would be the pay reviews and how often one needs to undergo one at a certain location. The evidence, which is needed to corroborate what, the employee is saying and how the performance has been in the past. [Shaun Tyson and Alfred York (1989), cap 210-215]

In the same way when one needs to approach the way wages are offered to the resources, the basic flat rate is what is paid to the employee based on the amount of work he or she has put in a specific time frame.ased on this principle the employee can actually generate more income by completing more pieces of workloads and assignments.

A differential piecework is what in other words means ‘time allowed ‘system of piecework, other than the amount of bonus one earns, which is further shared between the company and the employee. There are then small group incentive schemes as well as long-term large group incentive schemes. Given that this paper is about a large sized retail organisation, a long term large group scheme should be a more worthwhile option to discuss although one does need to consider the number of revolving labour one is faced with at retail outlets. The big difference between these schemes is that they have a long-term goal to achieve, apply through the whole organisation/factory structure and try and involve the employees in the organisation structure and future objectives.

Given the large rotating base of employees at large retail outlets, we will consider the author’s views on small group incentive schemes. The advantages of these schemes are that they draw in the people and their tendency for bringing about a norm, which is acceptable and comfortable. This in turn leads to a team spirit, which does help while building a positive atmosphere at a store/outlet/organisation. In terms of paper work, these schemes are much easier to monitor and control.

The cost savings in terms of money, manpower, effort is less considering the monitoring required, less inspection and savings onetime study periods. There are indirect workers who can also participate in these schemes, the workers, cleaners; store assistants can enjoy the same benefits and perks. There is a larger amount of flexibility and teamwork amongst the work force; the people themselves are keen to get rid of hurdles and bottlenecks in the work process to help provide better work environment.

There are disadvantages to these schemes too; there might be impacts of group pressures on workers who are not as efficient as the others. The holidays and sickness leaves will easily upset the system; there would be a need to carve out special arrangements to tackle the holidays. Here could be problems with production, supply chain management that could in turn affect the performance of the employees. In retrospect this could create a substantial amount of disillusionment with the scheme.

Coming back to the long-term schemes, there are many variations, which might apply to these. The Scan long plan (1947) was a suggestion plan as well as a collective incentive scheme. The suggestion scheme is what one comes across in a lot of production and manufacturing environments. The employees are asked to come up with suggestions on how to improve the efficiency levels and reduce time at work; these ideas are then enhanced and improvised by the management and the union. The bonus calculation in these cases is then based on the improvements shown in reducing the cost of good produced as well as improvements in the actual output, manpower per hour.

Another set of work rules would be if there is a reduction in the sales revenue then the e employees would be deprived of a bonus irrespective of how hard they have worked. In long term view there is absolutely no motivational quality attached to this variation in pay structure. The other plan was introduced by Trucker(1955), which entailed the use of ‘productive value’ or added value. This was based on a collective bonus scheme. The value in this variation is the difference between the sales revenue and the cost of raw materials and supplies. This approach is very fragile with regards to the effects market forces might have on this scheme.

The advantage of these long-term large group schemes is that it will provide the incentive for long-term earnings. The employee participation helps overcome the most frequently seen sentiment to them versus us. The level of involvement with the management and production base is stronger than in other cases. This helps build trust and stability. Here is more scope of a wider base of applications, which can be used in the business, and the working of the organisation. The value added schemes are being adjusted to the changing conditions the company might be undergoing. [Shaun Tyson and Alfred York (1989), cap 210-220]

There is however disadvantages to this long term, large group schemes. If these are actually applied across the whole production line, it might dissolve the sentiment of teamwork. These schemes need to have some form of bonus for the employees else it will have no incentive for them to perform better or to increase productivity. The larger the number of employees covered through this scheme the less the percentage which goes to each employee, hence in the final turn of events it reduces the usefulness. Another question rather doubt which arises is whether the individuals see their own efforts helping towards the final cause and long term goals of the scheme and production value. Here is a list of variables which can cause damage to the production process – change in personnel, supervision, customer requirements, machinery, external environment changes.

Michael H. Bottomed (1983), in his book, Personnel Management, talks about job satisfaction, motivational tools, compensation package sand benefits which are all integral factors affecting the performance of an organisation. The writer brings an interesting fact to the forefront; the compensation package for employees had grown more complex in the past years. A simple break down of the framework seems like a complex thing to do. It is now important to design frameworks, which suit the individual requirements and needs of the employees. Any organisation has to get the mix right for them to address issues like retention, attrition, motivation and performance.

While designing the pay framework for an organisation, it is important to note the background of the corporation, individuals job roles and what they entail, individual pay systems and the after effects on the performance and reaction of the employees. The external factors, which affect the way organisations can design pay packages, is because of government taxation rules and pay restraints. A lot of writers have written on the total compensation package, perks and inducements. “Simon (1958) refers to inducements as payments made by the organisation to its participants in return for contributions. Thomason (1981) identifies a level of consideration necessary to attract labour. Lupton (1975) suggests that the rules of a pay system say how effort is to be related to reward.”[Michael H. Bottomed (1983), p 80 – 90]

An interesting factor, which needs consideration, is the effect of compensation on behaviours. Two of these theories, which have surfaced, are those of expectancy and reinforcement. The critical component of the expectancy theory is the way people relate to compensation with the reward package offered as a result of providing a service. In an important study conducted by Schwa and Heneman (1975), this form of sentiment and perception was found strongest in workers with individual incentives schemes. The reinforcement model finds its origins in Skinner’s (1969) writings. The process defines and develops the patterns, which are experienced while pairing good behaviour with rewards and bad behaviour with punishment. The way this sort of conditioning takes place is through a learning process. The conditioning in this case is so deep and inherent that when an individual is faced with a similar situation, he/she reacts in similar manner as they have done before. [Michael H. Bottomed (1983),p 80 – 95]

There are various types of payments and rewards, which can be introduced as part of the main structure. One the popular schemes are the bonus scheme, in effect the system of payments is through a bonus. There is a need to create a specific background before introducing this scheme; the management needs to be committed to the scheme. A big factor towards failure of most of these payment frameworks is the lack of ownership on part of the management. If the cost attached to the transition is not going their way, the management finds it easy to stop the process midway.

The employees need to be part of any new scheme, which is in the offing; they need to know the implications, benefits, disadvantages and time frame needed for a successful introduction. The measures, which define productivity, are always a contentious issue and so the management and employees need to be on the same page. A feedback system needs to be in place through which all are informed of the progress made and how the employee stands in terms of rewards towards work input. Communication is essential while implementing any new system or process, the best route would be to discuss the progress, the ways the productivity can be increased and how can all gain the most.

The work productivity measure is more or less decided based on the following methodologies –

  • The job role of the employee and the time input needed to complete the job at a satisfactory level
  • The actual physical production of goods/commodities and the time taken to do so
  • The actual physical production of goods/commodities and the cost of production
  • An additional value achieved or the cost of labour
  • The cost of materials used for production, cost needed to get a production going

Another way of sharing benefits is through the profit sharing scheme. Good example for this would be NatWest, which introduced this scheme. The staff does reach a point of identification and self-achievement when the results are grouped. The employees feel a greater sense of loyalty and commitment towards the job and the organisation. The performance is not in isolation and with regards to personal achievements; the employees also begin to see the bigger picture and what it means to have greater financial success. At the end all businesses are about profit, the biggest sense of achievement is to derive a balance between employee cost and the profitability.

The three common ways to determine how much to pay in the profit sharing scheme are as follows –

  • The amount of profits before tax
  • The directors at their own discretion decide how much to pay the employees under this scheme
  • The amount of profits accumulated after a certain limit has been reached

Andrews (1975) talks about reasons, which are critical to the introduction of compensation and pay benefits. As mentioned before by many other writers, the employee base and staff are important resources, it is important for any business/organisation to retain and attract staff to meet the current and future objectives of the company. The staff at all times needs to feel that their efforts in the organisation are noticed and rewarded accordingly. There has to be encouragement and identification of interests, which match those of the employees with regards to reward management. The employees and staff need to be motivated and propelled to perform better and take on more responsibility during the course of their work.

There is a need for asset criterion for differentiating between different job roles and titles, each one has its own set of complexities and leverage, this needs to be considered while preparing a compensation package. The company also needs to see some value in the amount of remuneration and rewards being given to the employee. All organisations need to have clear structure for career progression for all employees; they need to know what the future holds for them in the organisation hierarchy. All employees need to have some stability and ways to maintain their standard of living. [Michael H. Bottomed (1983), p 80 – 100]

Clive Fletcher and Richard Williams (1992) in their book Performance appraisal and career development talk about appraisal schemes, equal opportunity employment, future challenges and opportunities in this sphere, persisting issues, maintenance and evaluation. The appraisal systems are an effective tool, which has helped a lot of organisations to collect information from the staff and employees about pays and promotions. An increase in the bonus scheme and other incentives, this was a motivating mechanism as well as a productivity enhancer.

The management to further develop and plan the welfare of the personnel used the information collected. The appraisal system also acts as process line up for re visiting the initial recruitment decisions also place to decide the promotion schemes and incentives on offer. This can also be an effective communication channel, for introducing new training and development schemes for the personnel; the same can also be used for succession planning. There is an inherent change in the way managers think in current times, pay and rewards are important but appraisal systems will also show that family and time off work is as crucial, else there is bound to be high stress levels and chances of complete burn out.

Gorier and Philpot (1978, p 2-5) in their paper point out the following, “Whilst managers are concerned about their careers, they are equally concerned about their home and family life. Numerous comments on the difficulties of finding time for family and leisure activities whilst coping with a demanding job indicate the potential for conflict between these two areas of their life”.

The career concept has undergone an immense amount of change and managers are realising this while planning their internal performance management schemes. Work is no more in isolation, its involves the family and home life as well, else there will always be a carry overload syndrome from home to work and vice versa. An interesting quote in this direction of thought comes from Evans and Bartolome (1980, p7-10), “Professional life affects the quality of private life on a day to day basis. But the reverse is not true; private life only affects the quality of professional life in extreme situations. The effect of private life on professional life is through its influence on major career and life decisions”.

Another issues which organisations now need to consider with stringent measures is that of equal employment opportunities. Equal opportunities could be based on gender, skills, nationality or religion among other factors. Organisations need to revisit their policies and regulations to ensure that they are not breeding grounds for lawsuits on various discriminatory grounds. A big reason why women have not moved too far with context to organisational skills is due to systematic barriers imposed by organisations, the attitude of the management and also partially due to their own behaviour and attitude towards career progression.

If we consider the implications of the above issues with regards to retail stores like Matalan, there is a lot of temporary staff and permanent staff; a majority of the temporary staff comprise women. Organisations like Matalan need to consider the implications of treating the part timers and temporary employees as part of the larger picture, one that manages the day-to-day operations at the stores. These employees and staff need to be made part of an appraisal system too to ensure that there can be room for career development opportunities along with the full timers. Much of what has been said about women applies to members of different ethnic backgrounds and racial groups too.

Their representation in management and as part of the professional roles is discriminatorily low. Although there have been steps taken to curb this partial reaction, there are still large gaps in the way these people have been treated by line managers. The performance appraisal training needs to consider the attitude and aptitude of these minority groups so that they can be pushed towards a better role when an opportunity arises.

All the authors in the literature review have managed to cast important information regarding pay structures, motivation, career development, training and development, equal opportunity, discriminatory pay, appraisal systems to counter balance the changes organisations need to make in personnel management. This will help one understand better in terms of the changes Matalan needs to introduce to mitigate the problems they are currently facing.

Methodology

The Techniques used for data collection are both qualitative and quantitative. Qualitative research is exploratory; Quantitative research on the other hand involves statistical surveys to quantify factors previously exposed in qualitative research. Van Mane (1983, p9) defines qualitative techniques as ‘an array of interpretative techniques which seek to describe, decode, translate and otherwise comet terms with the meaning, not the frequency, of certain more or less naturally occurring phenomena in the social world’.

The data collated for this paper has been primarily through desk research using the internet, online journals, books, reports and the Matalan website. Given the time frame and the confidentiality regarding information on the existing pay framework being used by the Matalan stores did not leave much room for secondary research. The data collated was ample to find out patterns in changes, which had taken place at the stores and the way the staff had reacted to them. It is also reflective of the management involvement and how prompt they are to react when a problem arises at the stores.

The organisation culture also came in play while researching this paper, though there is autonomy in job roles, they need to curtail that freedom to ensure that uniform pay framework exists at all stores across job levels. Pay frameworks don’t need to be dictated only by the internal conditions prevailing in the organisation, the existing market structure would also have some bearing to what is being offered to the employees and staff.

Some authors have validated the authenticity and importance of personal interviews even though it is a more time consuming tool for data collection. The importance of interviews is summarised by Burgess(1982, p 107): ‘the interview is the opportunity for the researcher to probe deeply to uncover new clues, open up new dimensions of a problem and to secure vivid, accurate inclusive accounts that are based on personal experience’. Jones (1985, p 45) comments that, ‘between these two extremes is an abyss of practice and therefore theory about the purpose and nature of the qualitative interview’.

In her view the main reason for conducting qualitative interviews is to understand, ‘how individuals construct the reality of their situation formed from the complex personal framework of beliefs and values, which they developed over their lives in order to help explain and predict events in their world.’ Though due to time constraints and confidentiality factors, interviews were not possible, we have taken information from testimonials and case studies presented by employees at Matalan about the existing framework. Through the course of the research, there was some data collated from testimonials and case studies published on the Matalan corporate website. Though each shows Matalan in a very positive frame, there is no doubt that the company website wont carry information on grudges the employees and staff might have with the way the organisation operates, the management issues and the unsatisfactory pay frameworks.

The grounded analysis by Glaser and Strauss (1967) provided major benefits while understanding how the data collected from the testimonials and information from desk research had been analysed. It needs feel and intuition, there is no logical sequence one needs to follow to decipher results, there is constant sifting through, comparison with what has been found, and eventually there are some patterns, themes and categories, which emerge giving way to concepts.[Smith Easter-by Mark, Thorpe Richard and Lowe Andy (2003), p 100 – 130]

Data Collection and Findings

A report into the Matalan Store Pay framework shows that there areissues and ample grounds for legal proceedings. The way the paystructure is as of now can be the cause for a potential equal pay claims or a sex discrimination pay. The management considers the progress more through the level of jobs instead of the level of responsibility. There is no clear strategy for internal recruitment at the moment. There are reasons for dissatisfied


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