Executive Pay and Dr. Pepper Snapple Group, Essay Example

Some evidence suggests that there is a direct and positive relationship between a firm’s size and its top-level managers’ compensation. Explain what inducement you think that relationship provides to upper-level executives.

As the size of a firm increases, the compensation of the top-level managers’ compensation also increases. This pattern encourages upper-level executives to become more directly involved with the management of their team, including not only higher level managers, but individuals at every level. For a firm to be successful, it is important for top-level managers to put in a lot of work to ensure that operations are being carried out appropriately. Since top-level managers in large firms have more work to do, they are being compensated for it more appropriately.

Recommend what can be done to influence the relationship so that it serves shareholders’ interests.”Dr Pepper Snapple Group 2011: Fighting to Prosper in a Highly Competitive Market”.

To support the interests of shareholders, this relationship could be altered so that the income of top-level managers reflects the profitability of the company. The current payment relationship defines size rather than success, so it would be beneficial for shareholders to have a model in place that ensures the accountability of top-level managers as well.

The case study outlines six specific strategies that the firm has chosen to support its strategic direction. Determine which strategy is most likely to benefit the firm. Explain your rationale.

Improving operating efficiency is most likely to contribute to benefit. If operating efficiency increases, then the profitability of the company will increase as well; waste will be reduced and all workers will be putting forth effort to increase income. Since achieving a profit increase is a primary goal of the organization, improving operating efficiency is the best way to do so directly under the current business model.

Briefly outline at least one other strategy the firm could take to support its strategic direction. Illustrate why this new strategy would be successful.

To support this strategic direction, the implementation of lean manufacturing practices should be put in place (Ker et al., 2014). It is important for the company to analyze its overhead costs and determine where waste could be eliminated. Engineering efficiency is a necessary component of strategy, but additional analyses must be done to determine how waste could be reduced while maximizing growth.

References

Ker, J.I., Wang, Y., Hajli, M.N., Song, J., Ker, C.W. (2014), Deploying Lean in Healthcare: Evaluating Information Technology Effectiveness in US Hospital Pharmacies. International Journal of Information Management, 34(4).