Compensation Strategy Analysis and Recommendations for John Lewis

This report provides a comprehensive analysis of John Lewis's compensation strategy, addressing key issues and offering recommendations for improvement. The report begins with an executive summary and introduction, providing an overview of the company and the challenges it faces, including declining sales, competition from online retailers, and issues with employee satisfaction. The analysis section delves into specific problems with the current compensation strategies, such as the use of pre-departure training, external competitiveness, internal equity, executive compensation, employee recognition, and the 'one size fits one' approach. The report then offers a series of recommendations, including customized training, budget allocation, the development of salary ranges, compensation audits, benefit packages, a performance management system, and structured administration. Each recommendation is accompanied by a discussion of potential risks and contingencies. The report concludes by summarizing the key findings and reinforcing the need for John Lewis to adapt its compensation strategies to improve employee satisfaction, attract talent, and ensure long-term financial success.

Investigate John Lewis's
compensation strategy

TABLE OF CONTENTS
1. EXECUTIVE SUMMARY.........................................................................................................4
2. INTRODUCTION.......................................................................................................................1
2.1 Company overview...............................................................................................................1
2.2 Overview of the issues faced by John Lewis........................................................................1
2.3 Aims and objectives..............................................................................................................1
3. ANALYSIS OF THE ISSUES FACED BY JOHN LEWIS.......................................................2
3.1 The current use of pre departure training:.............................................................................2
3.2 External Competitiveness:....................................................................................................2
3.3 Internal Equity:......................................................................................................................2
3.4 Executive compensation:......................................................................................................3
3.5 Recognising and rewarding employees:................................................................................3
3.6 One size fits one:...................................................................................................................3
4. RECOMMENDATIONS ............................................................................................................4
4.1 Customised training:.............................................................................................................4
4.2 Budget allocation:.................................................................................................................4
4.3 Develop salary ranges:..........................................................................................................4
4.4 Compensation audits:............................................................................................................5
4.5 Benefit Package:....................................................................................................................5
4.6 Performance Management System:.......................................................................................5
4.7 Legal Compliances:...............................................................................................................5
4.8 Structured Administration:....................................................................................................6
5. RISK AND CONTINGENCIES..................................................................................................6
5.1 Contingencies in customised training:..................................................................................6
5.2 Risks in Budget allocation:...................................................................................................6
5.3 Risk in developing salary ranges:.........................................................................................7
5.4 Contingencies related to Compensation audits:....................................................................7
5.5 Risks inclined with benefit packages:...................................................................................7
5.6 Contingencies lies with Performance management system:.................................................8
5.7 Contingencies related to Legal Compliances:.......................................................................8

5.8 Contingencies related to structured administration:..............................................................8
6. CONCLUSIONS..........................................................................................................................8
7. REFERENCES..........................................................................................................................10

1. EXECUTIVE SUMMARY
This report consider the current market scenario of John Lewis and its compensation
strategies. This report also include the study and evaluation of all the compensation strategies
used by John Lewis to attract new talents and retain its employees. This report also consists of
issues faced by John Lewis in its compensation strategies. There are also recommendations and
suggestions made by myself on the basis of my research. This report also includes the risks and
contingencies in my recommendations.
John Lewis is facing issues because of constant changes in the market conditions. The
compensation strategies of John Lewis are not that effective in terms of satisfying their
employees. Considering this, this report has included various measures to improve the
compensation strategies adopted by John Lewis. This report also include measures to satisfy the
employees of John Lewis, and why there is a downfall in the satisfaction level of employees at
John Lewis. This report also include the new market threats which are currently faced by John
Lewis, like the entry of Amazon the e-commerce giant of United States of America into the
British food home delivery market.

2. INTRODUCTION
2.1 Company overview
John Lewis founded in 1864, is a high end departmental store based in London UK. This
chain is owned in partnership by John Lewis. The company is having their slogan as “Never
knowingly undersold”. This has been in use since 1925. The organization is having total 46
stores in England, Scotland and Wales (Buckley, 2017). 31 stores of the company are traditional
departmental stores and 10 are John Lewis home stores. The company is having more than
38,000 employees and the revenue generated was around 4.06 billion GBP. There is John lewis
partnership which is operating the departmental stores of the company. The company is also
running in partnership with Waitrose and their success rate shows that their entire value chain is
running smoothly and they are using innovative technologies, so that the consumer's needs and
demands can be fulfilled.
2.2 Overview of the issues faced by John Lewis
The compensation strategy of John lewis is based on increasing the sales profit. The
organization have to address major problems related to their falling sales rates. The departmental
stores are facing the threat of internet because people now prefer online shopping more. This has
caused the sales fall in the departmental stores (Lynd, 2017). The company have to rebuild their
profits which has been collapsed in the first six months of this year. The company was keep on
making the changes in their strategies because they have to meet their slogan values. This is the
reason they are suffering huge financial problems in last couple of years. There are other retailer
companies who are slowly grabbing the entire market of John Lewis. The issues are also there
with the human resource management, because they are investing and paying more money to
their staff. This is reducing their profitability.
2.3 Aims and objectives
The aim of this report to investigate the compensation strategy of John Lewis. Over the
past couple of years, the company's funds has fallen down to the lowest level. Therefore, it is
essential that the organization must improve their offers and attract more number of consumers
towards their retail stores (Storey, 2017). This will help them in increasing their profitability.
The objective of investigating this strategy is to improve the financial condition of the
organization. They have to build their new business stores in high growth areas, so that they
keeps on growing their market shares.
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3. ANALYSIS OF THE ISSUES FACED BY JOHN LEWIS
With the falling profits and concerns over its online operations, a new strategy is required
by John Lewis's new managing director Paula Nickolds because John Lewis is facing many
critical issues and is loosing its market share every year. The managing director need to help
increase the morale and she also needs to find a way to maintain John Lewis's quality and
services while cutting cost, mainly in the stores where sales are falling. John Lewis is facing
issues in their compensation strategies because recently the retailer admitted that there will be a
“steady reduction” in staff members. Below are some of the issues John Lewis is facing in order
to sustain its position in the market (Dingwall, 2017).
Critical issues faced by John Lewis in their compensation strategy:
3.1 The current use of pre departure training:
Pre Departure training is very important for the employees who will be sent abroad for
their international assignments. Pre Departure training is given to the employees to train them to
adjust with the new environment and perform well in their tasks. However, this kind of
compensation strategy would fail if it is the only method of compensation adopted by the
company (Paranque and Willmott, 2016). John Lewis provides only Pre departure training as
compensation to its employees who are going on off-shore assignments. It is very clear from the
relevant evidence and literature, that employees are not happy with this current compensation
strategy used by John Lewis.
3.2 External Competitiveness:
Human Resource Department professionals try to establish pay scale for employees so
the company can attract and retain the right talent. These Human Resource professionals of John
Lewis compare their compensation rates to the rates of other companies to evaluate their
competitiveness (Eggebrecht, 2017). Since all the employees of John Lewis are having
partnership in the company and because of downfall in the sales of John lewis, the employees are
also not getting proper compensation.
3.3 Internal Equity:
Human Resource Professionals of John Lewis who manage compensation programs also
have to consider legal issues that are to be consider while establishing compensation programs. If
they have to gain competitive advantage over the market, then they must pay equitable internally
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in the organisation. Companies generally pays rewards to high performing employees to create
pay differences between high performing employee and others. But, it is forbidden by Law that a
company pay more to those employee who works differently at the same level. John Lewis needs
to establish new ways of giving rewards so there will be no issues related to internal equity.
These ways include fair and transparent assessment methods to evaluate employees on the basis
of their work performance (Yusuf, 2016).
3.4 Executive compensation:
Executive compensation is a critical issue faced by many companies. Also, with John
Lewis that it also have to disclose its compensation details of five highest paid employees in the
company. The compensation plan has to be made in accordance to the policies and rules so that it
wont be criticized by the media, share holders and the government. John Lewis' compensation
plans has faced issues in this compensation method because it did not strike a balance between
its compensation plans and that are acceptable by the public (Mebazaa, 2016). Executive
compensation plans should be made in accordance with the public interest.
3.5 Recognising and rewarding employees:
In John Lewis the Human Resource Professionals design programs to increase employee
motivation so that they perform at their best and based on their performance they are recognised
and rewarded in a ways that is affordable to the company. However, due to the decrement in the
sales of John Lewis, employees are not getting their occasional rewards and recognitions
(Richards, 2016).
3.6 One size fits one:
Currently John Lewis provides the same type of pre-departure training programs to all of
its employees. There are some evidence to suggest that the organisation employs a combination
of diversified employees. Given the different needs of these individuals, same type of training is
a big issue for the survival of John Lewis (Salaman, 2016).
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4. RECOMMENDATIONS
Based on the analysis provided in the previous section, in this section I will present some
recommendations or suggestions to help John Lewis to deal with their issues involving
inadequate training and development for their employees/ expatriates and also to allocate their
resources in best possible use to increase the profit of John Lewis. Some recommendations are
also given below in accordance to the administration structure of the John Lewis (Cardenete,
2017).
4.1 Customised training:
John Lewis should provide specially designed training that will develop new skills which
are required by the employer. Customised training are cost efficient and very effective when
provided with best attitude. Through customised training the employees of John Lewis will learn
different skill so as to gain competencies and the over all profit of the company will increase.
Through this compensation strategy the company can save a lot of cost and it can invest that cost
in giving compensation to the employees when the company is making low profit (Čekmeová,
2016).
4.2 Budget allocation:
John Lewis should include a new approach to allocate compensation rewards into salary
and benefits for the employees. The Human Resource professional will decide how much of the
total compensation will be given in the salary and what percentage will be given in the form of
rewards, benefits and incentives. By allocating specific budget compensation process, John lewis
can control its miscellaneous cost benefits (Buttner, 2017).
Budget allocation is a very crucial decision to be made, it should be done after a complete
research and analysis of resources and company's present and future needs (Mahmood, 2017).
4.3 Develop salary ranges:
John Lewis should develop salary ranges to ensure its employee pay is competitive with
other organisations in order to attract and retain new talents in the organisation (Bradler, 2016).
John Lewis can use their Human Resource professionals to conduct the internal research, to look
at all the jobs and determine the pay scale depending upon their job description. The process of
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assessing the job description should be based on industrial standards and it should be a fair
assessment to decide salary range.
4.4 Compensation audits:
Because of regularly changing environment John Lewis should perform routine
compensation audits to ensure its compensation range must reflect current compensation trends
in its segment. While conducting the audit, the goal is to determine how competitive are those
jobs are and what is the external market's demand (Andreeva, 2017).
It is very important to consider market changes while planning compensation strategy,
because failing to keep up with the market change or competition can lead to the loss of valuable
employees (Castanheira, 2016).
4.5 Benefit Package:
John Lewis should also provide benefit packages to its employees, along with salary, to
attract and retain employees (Mason-Suares, 2016). Benefit package includes healthcare benefits,
retirement plans, tuition reimbursement and other benefits related to employee welfare.
Sometimes employee tends to retain in an organisation because the benefits are too good to walk
away.
4.6 Performance Management System:
John Lewis should adopt a structured performance management system to ensure
employees are meeting corporate objectives and are evaluated on a regular basis. The
organisation should also include performance appraisal on an annual basis, and a systematic and
structured system for coaching and mentoring employees in its performance management system
(Thibodeau, 2016). This will definitely improve compensation strategy of John Lewis which will
ultimately improve employee productivity.
4.7 Legal Compliances:
The retail giant John Lewis should also define its compensation strategy to incorporate
legal requirements to make sure that the retail giant is in compliance with all required Country
Laws. Legal compliance is very necessary for adopting any compensation strategy, because
media, public and government these are the three forces that can demolish any organisation if it
is not conducting it's business in compliance with the Law (Fernando, 2017).
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4.8 Structured Administration:
John Lewis should also incorporate processes like salary audit, review process, annually
raise process and make sure that someone is there to administer all areas of administration for
successful compensation management (Lovata, 2016).
Finally, a successful compensation strategy can become the foundation for creating the
environment that recognises and rewards employees on their performance and help to establish a
strong employee retention environment (Zheng, 2016).
5. RISK AND CONTINGENCIES
I acknowledge that recommendations sometimes may not work and are subject to market
risks, because of that we may not yield desired results. Because of these reasons, this section will
cover few risks that may be related with the recommendations provided in the above section.
5.1 Contingencies in customised training:
The process of customised training may be expensive and time consuming because in
customised training every employee is provided with special training process as per his/her needs
(Mononen, 2016). For providing customised training an organisation must assess the training and
development need of the employees and after the assessment, organisation must plan structured
and systematic process for providing customised training. While providing customised training
the organisation must also concentrate on the retention of the employees, because if any
employee leaves the organisation after attending the customised training process, then it will be
a loss for the organisation. It is also an expensive process because each and every employee has
different needs or requirements for training and development.
5.2 Risks in Budget allocation:
While allocating budgets to different functions of the organisation, managers should
consider or be prepare for any contingencies like, after the budget allocation if the sales of the
organisation falls then the organisation must have to incur losses because of unnecessary budget
allocations in compensation for employees (Desender, 2016).
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Therefore, budget allocation should always done after considering all market risks and
contingencies.
5.3 Risk in developing salary ranges:
By creating salary ranges the organisation may divide its employees and there may be a
change in the behaviour of employees, because some employees are paid more than the others.
This division in the employees is very critical, because it leads to weaken the employee retention
ability of the organisation. Also, if the salary range is falling behind the line in comparison to
other organisation then also the employees will tend to leave the organisation.
Developing salary range is a very critical process because it needs to incorporate every
attribute of the market and a detailed study of job description for which the salary range is being
developed (Lynd, 2017).
5.4 Contingencies related to Compensation audits:
Compensation audits are must for every organisation but it could lead to raise a major
problem if the audit is not performed with fairness and complete honesty. Contingencies in
compensation audits arise when the audits are done with any sort of biassed behaviour. If the
audit is conducted with biased behaviour then it will be useless because the compensation plan is
made after the audit would not be having any competencies in comparison to other companies of
the same segment. It leads to weaken the employee retention strategy of the organisation (Storey,
2017).
5.5 Risks inclined with benefit packages:
By providing benefit packages the organisation is allocating its scarce resources to the
employees, and if the employee decided to leave the organisation even after enjoying the benefit
packages then it is a loss incurred only by the organisation itself. The organisations must adopt
proper employee retention programs to retain its employee so they would not leave the
organisation. Organisations must allocate resources in attracting employees and new talents by
providing benefit packages and consequently it should also adopt strategies to retain them
(Andreeva, 2017).
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5.6 Contingencies lies with Performance management system:
It requires a huge amount of financial resource to install a successful performance
management system. First of all it requires Human Resource professionals to determine the
evaluation criteria and then the period for which the evaluation will be done. While they are
conducting this evaluation if any personnel decided to leave the organisation on account of
misconduct of performance management system, then it becomes organisations liability to make
sure that the image of the organisation must not get stained (Castanheira, 2016).
5.7 Contingencies related to Legal Compliances:
While establishing compensation programs, the organisation must incorporate all the
legal policies which are to be considered while making a compensation plan. But contingencies
arises when there is a change or modification in the national laws related to the employees. Then
the whole process of planning, evaluating, implementing and control and feedback of
compensation plan has to be done again. Which require a huge amount of financial as well as
human resource (Thibodeau, 2016).
5.8 Contingencies related to structured administration:
In a structured administration contingencies arises when there is no one to monitor and
evaluate the administration of the compensation plan. Without proper evaluation and feedback
process the the compensation strategy will never be implemented successfully. Therefore, an
organisation must appoint a senior executive person to monitor all the administrative functions
without any biased behaviour (Buckley, 2017).
6. CONCLUSIONS
The purpose of this report was to critically analyse and evaluate the compensation
strategies adopted by John Lewis and to discuss issues and recommendations related to their
strategy. In doing so , I have discussed and explained key areas of concerns and I have also
provided recommendations and also the risks related to those recommendations.
In this report I have also discussed the problems related to the planning and execution of
successful compensation strategies. The current scenario of John Lewis is that, there is no doubt
in the quality of its in-store offers, but this is not balancing up to their E-commerce experience.
With Amazon entering into the British market with their efficient and reliable food home
delivery services, John Lewis is will need to understand what are the fundamental pillars of its
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existence and reinforce those pillars into market place. As per a confidential online survey
conducted, people who responded they were satisfied with their jobs in John Lewis last year
were 71 percent which went down by one percent this year, and 81 per cent said John Lewis was
a good place to work this year, which went down from 86 per cent last year.
This report also include the issues faced by the compensation strategy adopted by John
Lewis. These issues are very critical and need to be addressed effectively. Apart from discussing
issues I have also analysed the compensation strategy of the John Lewis and made required
recommendations where they are facing problems.
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7. REFERENCES
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does a performance management system perform?.Transport Policy.45. pp.230-239.
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the John Lewis Partnership. In Finance Reconsidered: New Perspectives for a
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