As they design their employee compensation packages, companies need to consider the benefits that their competitors are offering their employees. By conducting the comparison, the companies are able to determine where they are performing well and the issues that require action. Medtronic is among the key players in the healthcare industry. This company has taken crucial steps to design a total rewards program that is made up of a number of benefits. In general, the program is in line with the industry standard. However, there are some issues that the firm may need to adjust.
Areas of Misalignment, Differences and Gaps
As already noted, Medtronic’s rewards program matches the compensation packages of other healthcare providers. However, there are some issues that are either missing or misaligned. Recruiting from within is among these issues. As part of their efforts to promote seamless succession and contribute to employee empowerment, healthcare providers in the US tend to hire internally (“150 Top Places”, 2018). Before turning to outsiders, these providers call on their existing employees to apply for positions. There is no mention in the case study that Medtronic hires internally. By failing to prioritize internal recruiting, Medtronic commits a blunder that could be fatal. It is understood that internal recruitment is among the measures that incentive employees to work harder and become more committed (Turner, 2018). If Medtronic witnesses an increase in employee turnover and a decrease in productivity, its failure to recruit internally will undoubtedly be among the factors to blame.
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The firms in the US healthcare industry understand the importance of a diverse workforce. Some of the best employers in the industry have taken steps to ensure that their workforces reflect the racial, ethnic, gender diversity of the United States. It is unfortunate that Medtronic does not prioritize diversity. In the case study, no mention is made of any steps that the company has taken to boost diversity. By failing to focus on diversity, this firm sabotages its own growth. This is because diversity has been linked to higher levels of employee engagement and improved company image (Garnero, Kampelmann & Rycx, 2014). If Medtronic is to achieve its goal of sustainable success, it needs to hire employees with different social, ethnic and racial heritages.
Strengths and Weaknesses
A review of Medtronic’s compensation and benefits program reveals various strengths and weaknesses. Among the main strengths of the program lies in its scope. The company offers a wide range of benefits. These benefits include employee development and the provision of opportunities that enable the employees to achieve work-life balance. Moreover, the company also offers numerous medical insurance options (Herzlinger, Hurwich & Bokser, 2014). These benefits are strengths because of the impact that they have on employee performance and satisfaction. Researchers have established that extensive total rewards programs have an incentivizing impact on employees (Yan & Sloan, 2014). This means that thanks to its compensation and benefits package, Medtronic should expect its employees to maintain their high levels of engagement and performance.
Providing employees with the information that they need to select the medical insurance options that are best aligned with their needs is yet another strength of the compensation package that Medtronic has developed. It is stated in the case study that this company works with a wide range of healthcare providers. To aid the employees in deciding the provider with whom to work, Medtronic provides them with information (Herzlinger, Hurwich & Bokser, 2014). This is crucial as it allows the employees to make informed and wise decisions. Another strength is that the compensation package promotes work-life balance. In a bid to enable the employees to work unhindered, Medtronic provides such facilities as child-care centers. Moreover, the company designs flexible work schedules (Herzlinger, Hurwich & Bokser, 2014). The efforts that Medtronic has undertaken to promote work-life balance are undeniably among the forces driving the high levels of employee engagement and productivity.
From the discussion above, it is evident that Medtronic’s employee compensation package is designed with employee needs and satisfaction in mind. However, there are some weaknesses that could hamper the effectiveness of the package. The costs that employees incur and the fact that the package does not match the industry standard are among the weaknesses. Such employees as Judith are forced to make out-of-pocket payments when they receive treatment (Herzlinger, Hurwich & Bokser, 2014). This fact suggests that the medical insurance benefits that Medtronic offers are not adequate. The company’s failure to implement such measures as recruiting internally also lessens the impact of its compensation package.
Components to be Increased/Stay the Same
Since it is mostly effective, Medtronic’s total rewards program should largely remain unchanged or the firm should increase components that have had the most profound impact on employee performance. The health benefits are among the components of the rewards program that should either be increased or left unchanged. This is because the benefits are popular with employees. It is noted in the case that in its first year after being rolled out, the health insurance scheme attracted 13% of the employees (Herzlinger, Hurwich & Bokser, 2014). In the years that followed, more employees were enrolled. The high enrollment rate indicates that the health benefits are effective. Stock ownership is another element of the firm’s compensation package that should be increased or stay the same. The company allows its employees to share in its financial success. Stock ownership options are among the most effective compensation programs since they reward employees for their input (Blasi, Freeman & Kruse, 2015). As it increases the amount of employee stock ownership and its medical insurance cover, Medtronic will be positioning itself for accelerated growth.
Components to be Reduced
Medtronic’s compensation and benefits package is not perfect. There are some components that the company needs to reduce. The out-of-pocket payments that employees make when seeking medical services are among these components. It is true that Medtronic has implemented measures aimed at providing employees with peace of mind. However, these measures are not adequate. Some of the employees have to make significant payments out of pocket. For example, Judith worries that when she seeks treatment, the medical insurance cover that Medtronic offers will be unable to pay for all her medical expenses (Herzlinger, Hurwich & Bokser, 2014). To spare such employees as Judith of worry, Medtronic needs to reduce the burden that its employees bear. It can do this by increasing its contributions to the insurance scheme.
Impact of Proposed Changes
Before implementing the changes recommended above, Medtronic should first conduct an impact analysis. Through the analysis, the company will be able to establish the impact that the changes will have on its own performance and the welfare of its employees. Among the employees who will be most affected when the changes take effect are those with large families. Medtronic has developed medical insurance plans targeted at its employees who have families. The main problem with these plans is that they are rather costly. For example, the deductible amount for the family option of the Definity Health plan is $7,000. This figure is too high and many employees may be unable to sign up for the plan. When the company increases its share of the contribution to such plans as Definity Health, it will offer reprieve to its employees with families. Another group of employees who will be profoundly affected by the changes are those who are young. These employees will enjoy the greatest benefit since they will receive rewards from the company over a longer period. For example, an employee who is 30 years old and hopes to work for Medtronic until he is 60 would enjoy such benefits as stock ownership and extensive medical coverage over 30 years. Overall, while it is true that the proposed changes will benefit some employees more than others, all employees will witness some positive change. Therefore, Medtronic should take all necessary steps to ensure the full implementation of the changes.
In conclusion, Medtronic’s compensation and benefits package is as competitive as it is generous. Furthermore, the package is largely in line with the industry standard. However, there are some areas of misalignment. The firm’s failure to promote leadership development through internal recruiting is among these areas. The high out-of-pocket payments that Medtronic’s employees make are another issue that could erode the company’s progress. For this firm to sustain the growth that it has registered, it should move with speed and address the flaws in its compensation package. As it does this, it will create a motivated workforce while attracting talent.
References
150 top places to work in healthcare. (2018). Becker’s Hospital Review. Retrieved August 5, 2018 from https://www.beckershospitalreview.com/lists/150-top-places-to- work-in-healthcare-2019.html
Blasi, J., Freeman, R., & Kruse, D. (2015). Do broad-based employee ownership, profit-sharing and stock options help the best firms to do even better? BJIR, 54 (1), 55-82.
Garnero, A., Kampelmann, S., & Rycx, F. (2014). The heterogeneous effects of workforce diversity on productivity, wages and profits. Industrial Relations, 53 (3), 430-77.
Herzlinger, R. E., Hurwich, J. E., & Bokser, S. (2014). Consumer-driven health care: Medtronic’s health insurance options. Harvard Business Review .
Turner, P. (2017). Attraction, recruitment and resourcing of talent. In talent management In healthcare. New York: Springer.
Yan, W., & Sloan, M. F. (2014). The impact of employee compensation and financial performance on nonprofit organization donations. The American Review of Public Administration, 46 (2). DOI: https://doi.org/10.1177/0275074014554000
