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Broadbanding: Various Opportunities to Businesses

Organizations tend to use different salary structures depending on their size, available resources, the industries they operate in, and other factors. Monetary reward is one of the primary motivational tools that help companies hire, develop, and retain the labor force. The traditional approach, salary ranges, are often replaced with more recent options (Pande & Basak, 2015). Broadbanding is one of these structures and offers various opportunities to businesses. This paper includes a brief description of the advantages and disadvantages of broadbanding.

First, it is necessary to define the term and identify the peculiarities of this salary structure. Broadbanding is a salary structure consolidating “a large number of pay grades into a few broad bands” (Azmi, 2019, p. 253). One of the advantages of broadbanding is its potential to reduce hierarchy. The major difference between salary ranges and broadbanding is that in the former case, salaries may change by 30-40% while the latter implies a much wider range up to 100% (Lussier & Hendon, 2017). Instead of a range of positions and payment plans, the company offers a set of opportunities that make the hierarchy more linear. Internal mobility is also enhanced as career development is central to this approach as compared to job promotion typical of salary ranges (Pande & Basak, 2015). People may be motivated to take up new roles and responsibilities and be sure that they will be properly rewarded for their effort and professionalism. It is possible to note that broadbanding provides more flexibility, which is associated with gaining a higher competitive advantage.

When choosing the most appropriate approach, it is important to consider the disadvantages related to the use of this salary structure. Broadbanding provides no insights regarding the market midpoint, and it is difficult to determine the exact salary for an employee if bands are utilized (Lussier & Hendon, 2017). This strategy may also result in inequities as the ranges are too broad, and managers decide on the exact payment plans, which can be linked to a certain bias. Broadbanding provides considerable freedom to managers, so the company may lack cost control. Therefore, it is important to pay specific attention to these aspects to mitigate potentially adverse effects of the use of this salary structure.

Broadbending can be appropriate for the financial institution I work for as it is not highly hierarchical and needs a considerable degree of flexibility. My position is within a broad band that encompasses grades 9-15 (U.S. Office of Personnel Management, 2020). An appropriate benchmark for my position can be the financial analyst. In order to gain insights into the possible payment plan for the band mentioned above, it is possible to the United States Internal Revenue Service (2020) where helpful details regarding salaries and financial opportunities for employees are illustrated. The U.S. Office of Personnel Management is another valuable source of data as it provides information concerning salary structures utilized in different industries and segments of the economy.

On balance, it is necessary to note that broadbanding is a viable approach to salary structures because it can help companies to win a competitive advantage. It provides flexibility and encourages employees to take up responsibility, which contributes to the development of the strong organizational culture and proper working atmosphere. At that, this approach also requires a significant degree of control staff development to ensure that adverse outcomes of the use of this salary structure will not hinder the development of the organization.

References

Azmi, F. (2019). Strategic human resource management: Text and cases. New York, NY: Cambridge University Press.

Lussier, R., & Hendon, J. (2017). Human resource management: Functions, applications, and skill development (3rd ed.). Thousand Oaks, CA: SAGE Publications.

Pande, S., & Basak, S. (2015). Human resource management: Text & Cases (2nd ed.). New Delhi, India: Vikas Publishing House.

United States Internal Revenue Service. (2020). Pay & leave. Web.

U.S. Office of Personnel Management. (2020). Salary & financial. Web.

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Essay4Business. (2022) 'Broadbanding: Various Opportunities to Businesses'. 14 April.

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