The Case Scenario

Question: Explain The case scenario of Strong Built Construction Company. Answer: The case scenario of Strong Built Construction Company elucidates a detailed understanding of the intertwined nature of work environment, employee motivation and compensation policies that together triggers organisational success. The companys profitability as well as compensation has also been analysed to understand its present as well as future prospects of growth and sustainability perspectives in the global world. When other companies under construction industry were suffering from massively declining revenues, Strong Built Construction Company seemed to be in a better position, although a massive fall was witnessed in its profit before tax. According to the case study, the employees of the company lacked motivation by a large extent. One of the most significant steps taken by the CEO to reward efficient employees and motivate them under the scenario was to provide them with the companys shares as a basic compensation. Typical Elements of Compensation Packages Compensation packages emerged with the principle purpose of retaining potential employees within the work environment. According to the case study, it has been evaluated that Strong Built Construction Company was suffering from fall in profit before tax, which could have been the result of lack of employee motivation. To motivate employees, the company needs to implement an effective compensation plan for the existing workers. The typical compensation packages mostly rely on the increase of base salary, annual bonus, long-term incentives, perquisites and employee benefit programs among the most prominent ones (Beaudoin, Cianci Tsakumis, 2015; Gerhart, Minkoff Olsen, 1995). These packages offer certain benefits, as illustrated below in the table: Elements of Compensation Packages Description Base Salary It refers to the compensation for day to day performance of the employees, which differs on the basis of employees skills, experiences and accomplishments Annual Bonus It is a variable performance based pay to motivate the employees current status and performance, besides giving them a feeling of recognition Long-Term Incentives This reward is offered to employees, who are willing to be loyal to the company in the long term Employee Benefit Programs These rewards are offered as health, disability and life insurance planning and retirement programs (savings and pensions) benefits to the employees Perquisites It is a non-monetary reward system offered to recognise employees skills, performance and contribution towards the company through extra benefits beside monetary payments Assumptions of Traditional Agency Theory and its Influence on Compensation The traditional agency theory indicates a set of financial statistics, which focuses on the conflicts of interests observed between assets and people in the work-environment. This agency theory can define the relationship between principals (higher authority), agents (managers) and employees of a company. The relationship between principals and agents is considerably complex as compared to that of the other contractual corporate relationships. In terms of ethicist point of view, agency theory can assume principals and agents actions according to their own interests, which might get influenced due to their personal motives. Moreover, the agency theory focuses on conflicting interests as well as goals of the companys stakeholders and the manner in which it aligns with the employees compensation process as well (Foss Stea, 2014; Forbes-Pitt, 2011; Kosnik Bettenhausen, 1992). Contextually, as per the traditional theory there are several assumptions that can affect the compensation procedure of the company, as depicted in table below: Assumptions Description and Influences Human Assumption: Self Interest Bounded Rationality Risk Aversion In a hierarchical work environment, when agents (managers) and principals (higher authority) both concentrate on their personal interests rather than employees interests and motivation needs When the work environment mostly circles around the agents and principals, the employees information does not enter the hierarchical circle, and therefore results in informational conflicts There are agents and principals, who are not capable enough to take risks, which inhibits their decisions regarding compensation and benefits Organisational Assumptions Partial goals Decision making Individual goals gain more significance than collaborative goals of the organisation Communication gap may give rise to lack of information and therefore, lead towards biased decisions of principals and agents that can affect employees morale at large Differences between Extrinsic and Intrinsic Motivation Differences Extrinsic Motivation Intrinsic Motivation Description When somebody attempts to insist a person to perform a task When the individual wants to perform the task with own interest Behaviors It is based on power to influence It is entirely based on an individuals interests and willingness Typology Related to monetary influences Related to self-esteem, job satisfaction and self-awareness of the individual Extrinsic and intrinsic motivations are two different perspectives of motivating people. Intrinsic motivation deals with peoples passions, self-esteem and job satisfaction, while extrinsic motivation deals with the monetary and subjective factors. Although both the perspectives are able to motivate people, for long term effectiveness, it is the intrinsic ways that help in enriching individuals performances, as compared to the extrinsic motivating factors (Ims, Pedersen Zsolnai, 2014). Employees Attitudes towards Risks and Its Influence on Compensation Package Employees attitude is a key aspect for a companys work environment and motivational factors as well. There are certain risks associated to the work atmosphere of a company that the employees have to face in order to deal with their allotted job roles. With respect to this context, there are two types of employees attitudes observable in an organisational environment, which indicates to their risk aversion or risk seeking nature. Risk-averse employees try to avoid the risks, while the risk-seekers tend to accept the challenges associated to their job-process. Contextually, risk-seeker employees are capable enough to productively use their abilities, skills and advancements through their performance in front of the managers and higher authorities, while risk-averse employees depict a higher degree of reluctance in taking up responsibilities and accept changes in their job roles. As a result, managers as well as the higher authorities are often observed to build their trust on risk seek ers rather than on risk-averse employees, reflected apparently from the compensation structure offered to both these groups (Pepper Gore, 2014). Financial Benefits and Time Period Financial benefits, such as bonus, increase of wages, medical facilities and insurances are offered to employees to enhance their financial abilities and help them raise their living standards. With respect to the financial benefits, it can be stated that if these facilities are provided at a certain time-being, such as at the time of different festivals (Christmas), retirement and starting of a vacation among others, it might effectively motivate the employees to work efficiently. Due to the appropriate timings of financial benefits, employees can be influenced more towards the completion of their allotted job roles and thereby, satisfying their additional financial needs (Pepper Gore, 2014; Cheng and Warfield, 2005; Gjesdal, 1982). Fairness Considerations Roles in Compensation Fairness consideration reflects an equal deliberation among all the employees for similar allotted job roles within a work environment. This situation is not only applicable for same kind of work, but for the compensation policies as well. Job-related risk adherence, complicated situation handling associated with allotted job roles can be referred as some of the effective conditions for employee compensation or remuneration. At these conditions, employees are liable for compensation benefits according their skills, experiences and performances. For certain compensation incorporation, the management of the company has to implement a fair consideration among those employees, who are capable for compensation standards in terms of their motivational purposes (Pepper Gore, 2014; Jolls, 2002). Executive Compensation Committee Strong Built Construction Company requires incorporating an executive compensation committee, which will be responsible to act according to its compensation philosophy. The executive committee will be capable of recommending a compact planning for employee compensation and re-examining the procedures for assured employee benefits. The executive committee can support the organisations overall mission, attract and retain potential employees through shared objectives and values in alignment with the companys goals, which would allow the employees to obtain the required compensation opportunities, as per their skills and performances and in a reasonable manner (WPI, 2015; OReilly et. al. 2014; Hermanson et. al., 2012; Suh Han, 2003; Xie, Davidson, DaDalt, 2003). Structure of an Executive Compensation Committee To build an effective executive committee, Strong Built Construction Company will require a potential structure, through which it can re-examine the drawbacks of companys compensation policies and reinforce new policies within it. The following aspects are needed to construct the committee: Fields Descriptions / Requirements Members of Committee Seven qualified members, who are segregated according to their qualifications in the allotted job roles Segregation of Work Base salary: Members, who examine existing employees base salary according their performances Annual Bonus: Members, who justify bonus with employees salary as per their skills Incentives: Members, who identify the employees performing efficiently for providing them with incentives Benefit Programs: Members, who select employees according to their performances for providing assured benefits Perquisites: Members, who are allowed to provide extra perks to the deserving employees Selection Procedures Three managers, who are experienced and qualified Four members from outside of the organisation , who have equivalent experiences in the industry Conclusion From the analysis of the companys present scenario, it was observed that Strong Built Construction Company was suffering from lack of employee motivation. Thus, based on the above discussion related to the different compensation policies and executive compensation committee, it can be recommended that implementation of effective compensation systems are most required for motivating existing employees of the company. Through the executive compensation committee, the company can re-examine its existing policies and can introduce new remuneration systems for employee benefits. In addition to it, the assistance of intrinsic motivation from committee members will enable the employees to enhance their loyalty and morale towards their assigned job roles and attain job satisfaction in the long run. Paper by Gold, Gronewold and Pott (2012) Aim of the Research The research by Gold, Gronewold Pott (2012), aims at testing the explanations officially proposed as per the revised version of the ISA 700 report by the auditor for the evaluation of its expected gaps. Result Table All participants were requested to read the short description detailing about a fictitious stock-listed company and its financial information for two successive years, with their results listed in the following table: Complete Unqualified ISA 700 Auditors Report An Unqualified Opinion-Only Version of Report Auditors The complete auditors report on ISA 700 was disclosed along with detailed explanation provided by the auditors Only the opinions of the auditor were read Financial Analysts Complete reports with explanations were disclosed Were only interested in going through the auditors opinions rather than on the entire report Students The entire report mandated by ISA 700 was disclosed completely Only the opinions, as presented by the auditors in the report were read Purpose of Manipulation Checks The purpose of conducting the manipulation checks was to analyse, if manipulation was effective in bringing about any kind of difference between the presence as well as absence of the explanations, as provided by the auditors. This was possible only with the support of the responses gathered regarding the issue of concern (Gold, Gronewold Pott, 2009). Study of Agyei, Aye Owusu-Yeboah (2013) and Okafor Otalor (2013) Researches Aims The aim of the research conducted by Agyei, Aye Owusu-Yeboah (2013) is to examine the presence of expectation gaps in the audit reports of Ghana. In addition, the research also aimed at the assessing the roles played by the professional auditors in reducing the audit expectation gaps. Measurement of Audit Expectation From both the studies, it can be highlighted that gaps in audit expectation has evolved due to over-expectations in respect to the auditors functional roles and inadequate knowledge of people regarding auditors job roles and responsibilities. Audit expectation is however a changing element that is often critical to measure. In this context, to gain an in-depth understanding regarding the projected aim of the research, Agyei, Aye Owusu-Yeboah (2013) selected qualitative methodology, through which they gathered and analysed primary and secondary data. The researchers utilised five-point Likert scale for assessing the primary data through questionnaire survey, which were then analysed with the help of the SPSS tool. On the other hand, Okafor Otalor (2013) utilised hypotheses to gain a comprehensive understanding regarding the objective of the research and test the validity of the assumptions made. The study has utilised a mixed method for analysing the primary as well as the secondary data. Comparatively, the research conducted by Okafor Otalor (2013) was more in-depth than the research by Agyei, Aye Owusu-Yeboah (2013). Further to be noted in this regard, Okafor Otalor (2013) analysed the gathered data with the assistance of ANOVA, logit coefficient, z-statistics, probit coefficient, t-ratio and so forth. These statistical analysis tools largely contributed in making the research approach feasible and retaining the reliability as well as validity of the data gathered. Research Participants and Sampling Techniques Agyei, Aye Owusu-Yeboah (2013) had utilised purposive as well as convenience sampling technique in their study to select the respondents among stockbrokers and auditors of Ghana. The purposive sampling technique had assisted the researchers in their selection of financial statement user groups, while the convenience sampling technique helped them in selecting the specific respondents from the user groups. From this perspective, it can be stated that both the sampling techniques of this research implied a high dependence on the researchers perspectives and their present skills. However, Okafor Otalor (2013) selected their respondents through random sampling technique from the groups of accounting teachers along with their students. These respondents were accessed from the University of Benin, Benson Idahosa University and Ambrose Alli University. The process of random sampling has enabled the researchers in considering 94 self-administered questionnaires among 130 responses for dete rmining the reliability of gathered data. From both the above stated perspectives, it can be inferred that purposive as well as convenience sampling techniques reflect biasness in samples and information, while random sampling technique is free from partiality. In this context, unbiased, feasible sampling technique of Okafor Otalor (2013) was more appropriate as compared to Agyei, Aye Owusu-Yeboah (2013). Response Rate Agyei, Aye Owusu-Yeboah (2013) used hundred questionnaires among the selected groups of respondents. The researchers had distributed fifty questionnaires, each among the auditors as well as among stockholders. From both the groups, researchers had returned thirty and thirty-five questionnaires respectively. Ultimately, from those returned questionnaires, researchers found a total of forty questionnaires useful for the research. Okafor Otalor (2013) conducted questionnaire survey among 130 respondents and lastly selected 94 questionnaires for the research. Among these two researches, the study by Okafor Otalor (2013) was able to obtain satisfying data range, while Agyei, Aye Owusu-Yeboah (2013) conducted their research based on only 40 responses. From this perspective, it can be inferred that Okafor Otalor (2013) had based the research on a larger and sufficient data range but Agyei, Aye Owusu-Yeboah (2013) lacked a comprehensively valid range. Analysing the Collected Data Agyei, Aye Owusu-Yeboah (2013) had utilised a descriptive data analysis tool, such as SPSS in their research, to attain the projected goals. On the other hand, Okafor Otalor (2013) conducted a descriptive statistical analysis through SPSS. In this research, to accomplish the objective of the research, Okafor Otalor (2013) implemented the techniques of ANOVA test, logit coefficient, z-statistics, probit coefficient and t-ratio. From the discussion of both the researches, it can be inferred that the approach taken by Okafor Otalor (2013) was better than the approach used by Agyei, Aye Owusu-Yeboah (2013). Significant Flaws Flaws in the research by Agyei, Aye Owusu-Yeboah (2013): The study has only utilised selected stockbrokers as users of the published financial statements The method implemented in the study was based on only descriptive statistics on a relatively small data range, which might have produced bias results in the course of attaining the determined objective Flaws in the research by Okafor Otalor (2013) study: The study has used accounting students and teachers of different universities as samples, whose responses cannot be considered reliable enough to determine the results as per the issue of expectation gaps observed in the auditors report The result might be strong enough as per the descriptive and statistical analysis shown in this study, but it cannot be compared with the collected secondary information, which fails to enhance the validity of the results obtained References Agyei, A, Aye, B, K Owusu-Yeboah, E 2013, 'An assessment of audit expectation gap in Ghana', Int. 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