Comprehensive Analysis of the Compensation Plan at Dell

This report provides a comprehensive analysis of the compensation plan implemented at Dell, a multinational computer technology company. It explores the strategic value of the plan, highlighting its role in attracting and retaining employees, fostering productivity, and gaining a competitive advantage. The report delves into the internal alignment structure, emphasizing fairness perceptions and consistency in standards. It examines the external strategies employed by Dell, including external competitiveness and the use of incentives to drive performance. Furthermore, the report discusses the function of benefits, cost management techniques, and methods of communicating the plan to employees. The analysis covers various aspects of Dell's compensation strategy, including its impact on employee motivation, team structure, and overall organizational success. The report emphasizes how Dell's compensation plan is designed to align with its business goals, promote innovation, and ensure the company's continued success in the market.

Running head: COMPENSATION PLAN AT DELL
COMPENSATION PLAN AT DELL
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1COMPENSATION PLAN AT DELL
Table of Contents
Introduction:...............................................................................................................................2
Strategic Value of Plan:.............................................................................................................2
Internal Alignment Structure:....................................................................................................3
Fairness Perception:...............................................................................................................4
Less Exposure to Discrimination:..........................................................................................4
Consistency in Standards:......................................................................................................4
Structure of the Team:............................................................................................................5
External Strategies Used:...........................................................................................................5
Use of Incentives:.......................................................................................................................6
Function of Benefits:..................................................................................................................7
Cost Management:.....................................................................................................................7
Ways of Communicating the Plan:............................................................................................8
Conclusion:................................................................................................................................9
References:...............................................................................................................................10

2COMPENSATION PLAN AT DELL
Introduction:
Dell is a multinational computer technology company which originated from America
and is known to develop, sell, repair and support computer and every computer related
product. The founder Michael Dell founded this company which in the present day has
become one of the best and largest technological corporation in the whole wide world. The
company is known to employ around 145,000 workers in USA and also across the world. The
company of Dell is most known for its innovations in the arena of supply chain management
and also in electronic commerce; this company has direct sales model and the approach to
manufacturing is “configure to order” and so they deliver PCs which are individualized in
accordance to the configurations of the specifications that was provided by the customers.
Being such a well-known multinational company, it is evident that Dell would have to have a
compensation plan that is making their employees retain and increasing their productivity.
Compensation packages that consists of good pay and advantages will help attract as
well as retain quality workers. A manager is well aware of the fact that a compensation plan
is essential for an organization not because it costs money to bring productivity, but because
it is the main reason that most of the workers commit themselves to the firm. This policy
would help the organization to allure and keep qualified staff in the firm and appraise their
performance through rewards and recognition. Dell company’s compensation plan is also
formed with strategic values and structure that helps the company to gain a competitive
advantage in the market.
Strategic Value of Plan:
A competitive advantage that is sustained is one advantage that is rare, valuable and
most importantly, very difficult to imitate as well as organize. Hence any competitive

3COMPENSATION PLAN AT DELL
advantage which fulfils the criteria of VRIO framework turns to be a sustained competitive
advantage which is able to provide the company with a competitive edge over their
competitors. Dell has a competitive advantage which is its system of performance
management and this system is valuable to the employees and the organization; this
advantage is rare since it is founded on the four pillars of Dell and this advantage cannot be
easily imitated since the organization has a business mode that is very unique which supports
PMS with an organized systems and processes.
The company Dell is known to make utilization of performance management system
which helps the organization to be successful and this system of performance management
utilizes the compensation plan in a highly effective manner. The system of the company’
performance management helps in promotion of the interests of their customers and hence
they take into account the training and development of their employees. This is why the
performance system of Dell makes sure that there is innovation and growth constantly among
their employees and thus they support the succession planning and talent management. Every
company needs a strategic performance and a system of reward since both of it is effective
for retaining the company’s top- quality performers and grow profits. What Dell needs is a
balanced compensation plan and also an ownership plan which will incentivize performance
of their workers and also improve recruitment, efforts of retention and also help the company
to position it in such a way that it is able to achieve its goals. Incentive pay, bonuses,
compensation at risk, variable compensation and more such methods are good processes for
enhancing positive behaviour and at the same time preventing it from regressing.
Internal Alignment Structure:
Internal alignment that is also known as the internal equity involves relationship
between the competencies and skills and the job in the company. Hence an effective

4COMPENSATION PLAN AT DELL
employee compensation plan must know how to balance work motivation and the cost of
labour. Whilst designing the compensation plan of Dell, both external equity and internal
equity must be considered; where external equity will ensure to compare the competitive pay
structures of other companies; the internal equity will make sure that there is fairness in the
payment for the workers who work similar jobs.
Fairness Perception:
For success in the business, the culture of an organization is a significant strategic
factor; if the company wants to maintain and develop a culture surrounding fairness, the
company would have to strongly focus on internal equity. Dell has ensured that when their
workers look at other similar jobs, they will see equal pay and thus they will realize that the
organization and its leaders are fair. When the workers would respect the company and its
leaders as a fair entity, there are increased chances that they will pay heed to the direction and
guidance provided by the company.
Less Exposure to Discrimination:
It is true that a market -based approach would attract most of the talented workers, but
it is also true that internal equity would offer a better protection to the employees against any
discrimination lawsuits. Internal equity mitigates any such risks of discrimination of the
employees in the workplace.
Consistency in Standards:
Paying the workers in a consistent manner ensures the achievement of opportunity to
maintain a consistency in the standard of their performance. A job analysis that includes clear
description of the abilities, duties and responsibilities also provides the details about the
payment criteria; thus, when any employee falls short in terms of those standards, there will
be a tangible justification for their demotion or termination.

5COMPENSATION PLAN AT DELL
Structure of the Team:
With internal equity in the premises of the organization where every worker receives
similar compensation benefits, team structure is strengthened and they are seen to collaborate
more on their projects.
External Strategies Used:
External strategies include the external competitiveness which basically refers to the
level of pay which a company offers as compared with their competitors. This creates a great
impact on the attraction as well as retention of talents or workers along with the objectives of
the labour costs. When a company has a higher pay level, it will better in its ability to acquire
a workforce that is competent. And hence by increasing the level of pay, the total amount of
labour cost will increase yet it may also result in an enhanced labour cost per unit. Moreover,
the efficiency wage theory also states that paying to the workers above the market level can
promote the motivation of the employees and that would offset any kind of increment in the
costs of the labour.
Since the pay systems of most of the organizations are driven by market; therefor in
hope for attracting best workers, some companies might think of setting their pay levels
above what their competitors pay. For competing with the external market, Dell ensured that
the pay which they are offering is sufficient enough to attract as well as retain their best
workers. Dell has also ensured that they are in control of their labour costs so that the
company can supply their products and their services at a decent price and at the same time
remain competitive in the global market. In order to ensure that their external strategies will
work, the company prepared strategies of their business in a proper way and decide on how
they will choose to compete; they may compete on price, or distinguish themselves on the
basis of their services and products and so on.

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Use of Incentives:
The incentive compensation is a type of variable compensation in which an
employee’s earnings are directly linked to the amount of work they performed, or the success
of their team as a whole. The management of incentive compensation is the strategic
utilization of the incentives to drive better results in the business and align more with the
goals of the organization. Incentives in the incentive compensation plan can be of many
forms and might also include commissions, prizes, bonuses, recognition, SPIFs and more.
The plans of incentive compensation are designed in an ideal manner so that the workers can
maximize their rewards in the same pace that the company maximizes its revenues. In an
ideal situation, a company’s incentive in the compensation plan should be arranged such that
the company’s workers are able to earn most money after helping the company to achieve its
most significant business goals and objectives.
Incentives are the way of formally approaching to offer rewards and recognition to the
workers for being able to meet their established objectives and goals and move the company
towards success through their contribution. It is a motivational tool, as mentioned before and
it helps in pushing the workers to be able to achieve higher degrees of productivity that what
was achieved before by them or others. Hence it increases the earnings of the company;
employees realize that the more effort that they will put, they will be appreciated and
recognized through these incentives in the compensation plan and hence they will be more
committing to the organization thus helping in retention. Incentives also help in promoting
team work or any initiatives that are taken as a group since the workers would rely on their co
workers for receiving a bonus or an award.

7COMPENSATION PLAN AT DELL
Function of Benefits:
Dell is well aware of the fact that how important it is to keep quality employees and
thus they are smart enough to know that they require the right compensation and benefits
package in order to do so. Compensation that includes wages, bonuses, salaries and
commission structures are heeded upon, but at many times the benefits portion of the
compensation plan is not given as much importance as it should be; it must be kept in mind
that benefits makes the employment contracts better with priorities that most of the
employees are in dire need of.
Benefits attract to talent in the market since workers are always in search for jobs that
would put them in the best position possible in terms of finance. The workers who are well
aware of their worth will easily search for job that provides the same salary; what is
important is to research on the competitor’s compensation and benefit package so that the
employees are attracted to the company as well. Benefits package are also used in increasing
the employee motivation since these benefit plans show how the company values and
appreciates the workers and their contribution to the company. When the employees get to
know that there are bonuses and commissions as benefits, they feel morally boosted to work
for the company and deliver positive and productive outcomes. Thus, it shows that benefits in
the compensation plan is a focal point in the success of the company. Along with boosting the
motivation of the company, benefits are also used to make employees more loyal to the
organization; loyalty means that the employers do not have to spend much on the hiring of
new talents and training them frequently.
Cost Management:
An effective compensation plan and strategy is utilized to motivate the employees and
is also used as a medium to attract new ones. Hence it is wrong to think of compensation as

8COMPENSATION PLAN AT DELL
merely a salary. However, the total amount of cost used for employee compensation involves
every aspect of the benefits for the employees. This also consists of the cost of health
benefits, benefits for retirement, tuition reimbursement, any kind of bonuses or any non -
salary benefit which is considered as a pert of the total package of compensation. An
effective compensation strategy includes a proper planning around the budget allocation. It
should include the company’s approach to allocation of compensation dollars into the
benefits and salaries. This allocation of budget will help in determining how much of the total
of the compensation package will be spent on the salary and how much of it will be spent on
the benefits or other types of incentives. For instance, Dell would use a particular amount for
compensation, from which 90% would be put in salary and the other 10 % will be spent
accordingly in the benefits; like 7% of it can be spent of health benefits and the other 3% on
retirement savings and so on. Allocation of specific budget and cost management to pay for
benefits will help in controlling labour, health care and also other miscellaneous benefits.
Ways of Communicating the Plan:
Communicating the established compensation plan to the organization and its
members is the most important task that needs to be done properly for having the
compensation plan to achieve success. Firstly, the company should establish realistic
expectations whilst providing benefits to their workers; any mismatch in expectation would
create dissatisfaction and thus it may lead to quitting of some top -quality performers. Next,
the company should assure the workers that the decision for compensation that were made by
the evaluators are fair and the employees should also be informed how these decisions are
made. The company must remember to emphasize the connection between the performance
of their workers and the rewards that will be provided in accordance to their compensation
plan. Every worker must have a clear idea about the process that decides how a particular

9COMPENSATION PLAN AT DELL
person will receive compensation so as to avoid any kind of conflict in the work premises. It
is also the responsibility of the HR head that they clarify the opportunities that lead to the
achievement of the compensation plan and growth.
Due to the growth of internet, every employee can easily access to the compensation package
of the competitors as thus they might leave the company’s compensation plan and join the
competitor by being impressed by their plan more. Hence the company must explain their
competitive pay positioning along with the incentives and the benefit plans in the
organization, so that the employees stay loyal and motivated to work harder than before.
Conclusion:
It can be concluded that Dell has a well framed compensation plan, that has strategies
which will help the company to retain their top- quality workers and best performers. Their
incentive plans are framed with such strategies that it will help the workers to get motivated
and also make them aware of the fact that being loyal to this organization will be beneficial
for them. The benefit plan also is created in such a way keeping in line with internal
alignment and external competitiveness that it makes hard for the employees to quit and join
their competitors. The employees would prefer the compensation package that this company
provides; the company is successful in motivating the workers and boosting their morality
which makes them perform better than before. The incentive structure and the benefit
package also is increasing their loyalty towards the organization and thus helping the
company to retain some of their best workers and saving costs on new hiring or training of
employees. The company should just adopt a proper way to communicate their compensation
plan to the members of the organization since it is also a significant part of the whole process
of motivating and reta9ining the employees.

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