In LO5447 on Pay increases, Roxanne asks who is the customer of the
Compensation Department, the stockholder, or the employee.
I think the customer of the Compensation Department is the customer of the
company. In today's 'normal' environment in which there is 3% inflation
more or less, raises can equal 3% pretty much only if the customer is
willing to pay 3% more for the product. Beyond that, raises can go higher
only if productivity has increased so that employees can accomplish more
in the same amount of time. In this case, the increased pay does not
increase the sale price of the goods.
By the way, compensation should go down when productivity decreases. As
complexity increases, as it is in many service industries, productivity
tends to decline, thus resulting in a need to reduce wages in order to
keep prices competitive.
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