Costa Vida: A Baja Inspired Restaurant Chain on a Rapid Rise - Essay Sample

Introduction

Costa Vida is a chain of rapidly growing restaurants that primarily offers fresh Mexican meals. It derives its inspiration from the Baja Coast in Mexico, and as such, their meals are often Baja inspired. Since its inception, Costa Vide has expanded to over fifty restaurants across more than eight states in the United States of America (USA). Nathan Gardner, the Chief Executive Officer (CEO) of Costa Vide, is concerned about the fierce competition for customers and employees from the equally well-established competitors. As such, Nathan seeks to establish a strategy that would enable Costa Vida's franchises and Costa Vida, in general, to attract and retain the right employees and, at the same time, attract more customers and gain their loyalty.

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Nathan acknowledges that having the right employees in all areas of a business is critical since the business is dependent on the employees. Thus, mistreating the employees in terms of under-compensation and harsh working environment negatively impacts on the employees' motivation, which is the transferred to how the employees treat the customers. While good and quality services offered to the customers helps to retain and attract more customers, inferior and substandard services do the opposite; it reduces customer loyalty and decreases the chances of attracting new ones (Condon, 2017). Even though Nathan is aware of the impact of compensating and treating the employees right, his efforts are limited since he can only give advice to the owners and managers of the fifty franchises and leave it for the franchise owners to decide whether to change their compensation strategies to be better than those of their competitors or not (Snell et al., 2015).

Employees' wages and compensations must be externally fair for the overall well-being of the business. An externally fair compensation plan is one that takes into account of wage competitiveness of the company compared to other similar businesses in the market (Newman et al., 2016). To ensure that a company's wage compensation plan is externally fair, the company needs to conduct thorough research that involves data collection and analysis so that they can establish the best competitive wage range for their employees. An externally fair compensation strategy plays a critical role in helping the company to attract highly-skilled, brilliant, and reliable employees. Additionally, it enables the company to retain employees, and thus employees would hardly leave the company. In the case of In-N-Out Burger Company, which is the benchmark of Costa Vida, their compensation plan is strategic enough, and it enables the company to retain its employees and maintain profitability.

On top of the highly competitive wage of ten dollars per hour their new employees, In-N-Out Burger has additional benefits for new employees such as flexible schedules that accommodates and enhances personal growth of employees in various aspects such as education, free meals, vacations and the 401k retirement plan (Snell et al., 2015). The full-time and older employees have additional competitive benefits of medical, life, dental, and vision and travel insurance packages (Snell et al., 2015). Due to the high compensation and the significant benefits that employees acquire at In-N-Out Burger, their employees hardly leave. In-N-Out Burger has a record of almost 100% in retaining their employees (Condon, 2017). Nathan, the CEO of Costa Vida, even acknowledges that while other companies in the market, including Costa Vida, often experience employees leaving their companies, employees hardly leave In-N-Out Burger. The externally fair compensation strategy of In-N-Out Burger has not only enabled it to attract and retain the right employees; it has, over time, helped it to become more profitable.

An internally fair compensation plan is as equally critical in business as the externally fair wage plan. An internally fair wage plan is one that requires companies to pay their employees equally for equal work or services offered (Newman et al., 2016). An internally fair compensation plan is critical in ensuring that all employees are motivated and satisfied at all times, which helps to increase the productivity of the employees and ultimately help to improve the overall well-being of the company. Studies show that wage systems, such as the two-tier wage system that allows employers to compensate employees who do equal work differently, tend to demotivate the employees (Newman et al., 2016).

Moreover, the two-tier wage system has been reported to increase the rates of employee dissatisfaction and reduces their productivity in the long run (Newman et al., 2016). While internally unfair wage systems such as the two-tier system may be efficient and useful in the short term, such systems have adverse effects in the long run, especially when employees realize that they are compensated lower than other employees with the same qualifications as theirs and does equal work as they do (Newman et al., 2016). Therefore, incorporating an internally fair compensation plan is crucial in enhancing the employees' motivation and satisfaction rates, which then translates to higher productivity.

Costa Vida's compensation strategy should be able to integrate employee compensations and benefits to the company's goals and objectives. Like Nathan, the CEO, the owners, and managers of Costa Vida's franchises must appreciate the importance of relating the overall goals and objectives of the company to the objectives of their competitors and in turn formulate a compensation plan that would give them a competitive edge (Madhani, 2014). Some of the most significant objectives of Costa Vida is to offer a unique customer experience, achieve strong financial returns, and to attain the smooth running of the company's day-to-day operations (Condon, 2017).

To be able to offer unique customer experience, Costa Vida's franchise managers need to formulate a compensation strategy that first addresses the needs of the employees. The compensation strategy to be designed should be internally and externally fair for all employees. Additionally, other than offering a competitive wage, the franchises need to provide competitive benefits such as insurance coverage and flexible work schedules to all their employees. The competitive salaries and benefits will then help to keep the employees motivated and satisfied, which would then be translated into unique and quality services received by the customers. Further, since highly motivated and satisfied employees tend to be highly productive, it is highly likely that the implementation of a competitive compensation plan would enable the franchises and the company to acquire strong financial returns. Motivated and satisfied employees require little to no supervision, and they often surpass expectations. Thus, a wage system that continually keeps the employees motivated would help the company to achieve a smooth running of their day-to-day operations.

Costa Vida's pay structure should closely relate to the pay structure of other companies in the similar field, such as the In-N-Out Burger. The minimum wage per hour for In-N-Out Burger is ten dollars for new employees, and therefore, Costa Vida should design a pay structure that is within the range of ten dollars per hour for new employees (Snell et al., 2015). Formulating a pay structure that is within the scope of its competitors would enable Costa Vida to attract and retain the right employees who would continuously be motivated and satisfied. With almost equal or better wages and benefits, employees would hardly leave the company, the rates of employees' dissatisfaction would be lower, and their productivity would be higher. Further, as a way of motivating their employees, Costa Vida should implement a pay mix that would provide incentives to their employees. Incentives such as target earnings play a vital role in ensuring that employees remain productive at all times since they are always assured of their meeting their higher-order and lower-order needs (Newman et al., 2016).

To communicate a new compensation strategy to the owners and managers of the franchises, Nathan should use a written document that clearly states the advantages and disadvantages of the new compensation strategy. The written document should include a few compensation strategies used by their various competitors and then suggest the compensation strategy to be adopted by Costa Vida. Additionally, Nathan should organize a one-on-one meeting with the owners and managers where he should make a presentation of the new compensation strategy. The meeting should also act as a platform for the owners and managers to air their fears and opinions concerning the new approach.

In the short term, paying higher wages would harm the financial health of Costa Vida. While paying higher wages would help the company to increase motivation and job satisfaction, it would abruptly increase production costs and decrease the profits of the company. Since the implementation of the new compensation strategy to increase the employees' wages is a revolutionary change that is intended to happen within a short period rather than gradually, the overall production costs of the company would increase abruptly. The rapid increment in the initial stages of the strategy implementation would cause a financial strain to Costa Vida, who might be forced to source for more capital. Moreover, while the implementation of the new strategy would be quick and fast, its impact on customer satisfaction and profits would be gradual, and this would further have a negative effect on the company's finances.

In the long term, paying higher wages would positively impact the financial status of Costa Vida. With the higher payments, employees' motivation and job satisfaction would be maintained, the employees' turnover rates would significantly be reduced, quality and unique customer service would be attained, and ultimately, the company's profits would increase. Over time, the high quality and exceptional services offered by the highly motivated and satisfied employees would help the company to retain their current customers, acquire referrals from their existing customers, attract new ones and pull back the customers who had changed the preference of the restaurant citing poor customer service.

From Costa Vida's case study, it is evident that an internally and externally fair compensation strategy helps to keep the employees motivated and satisfied, which then translates to happy and satisfied customers and consequently results in higher profits and a stronger financial status. As such, the motivation and satisfaction of the employees is a significant pillar of any business without which; the business would ultimately fail or become unprofitable.

References

Condon, K. (2017). How Regional Fast Food Restaurants Build Brand Identity to Reach Local Consumers. Elon Journal of Undergraduate Research in Communications, 8 (1).http://www.elon.edu/docs/web/academics/communications/research/vol8no1/08_Katie_Condon.pdf

Madhani, P. M. (2014). Aligning compensation systems with organizational culture. Compensation & Benefits Review, 46(2). https://journals.sagepub.com/doi/abs/10.1177/0886368714541913

Newman, J. M., Gerhart, B., & Milkovich, G. T. (2016). Compensation. McGraw-Hill Higher http://mcbwr.esy.es/compensation-milkovich-11th-edition.pdf

Snell, S., Bohlander, G. W., & Morris, S. (2015). Managing human resources. Nelson Education. https://trove.nla.gov.au/work/7072408