Risks overall the plan has been beneficial to intel

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risks, overall the plan has been beneficial to Intel, which remains lucrative in the competitive technology industry. External equity is found in organizations in which an employee in an organization’s pay is equal to prevailing rate in that organizations industry or sector. ( Lederer & Weinberg, 1995). Both PepsiCo and Coca Cola utilize external equity compensation analysis. The process of developing a pay scale based on external equity requires a detailed and updated study on market wages and compensation. In addition to wages, other aspects to compensation, such as employee stock options must also be considered. (Singer & Francisco, 2009). This has given both companies the advantage of being able to retain highly qualified employees over time, as a pay structure based on external equity will find employees less attracted to other companies, as compensation packages will be similar across the market. (Heneman, 2002). Additionally, by creating equity in relation to the market, companies have a higher retention rate, which can lead to employee loyalty (Mathis & Jackson, 2008). The disadvantage to this system is that it can lead to inflated wages that do not take into account the economic environment as a whole, and can also lead to internal dissatisfaction if there are wage discrepancies between individuals working at the same level in the organization. While this may be sustainable short term, should an organization’s performance fall in the market, whether due to internal factors or market
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  • Spring '11
  • Management, Intel, Chief Executive Officer, external equity

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