470 exam 2

Broad banding

A technique that collapses salary grades into only a few broad bands, each with sizeable range. It consolidates as many as four or five traditional grades into a single band with one minimum and one maximum. Range midpoint not used.

Shared choice policy

Begins with the traditional alternatives of lead, lag and meet. Then it adds a second part to offer employees choices in the pay mix. "employee as customer". Ex: health insurance and retirement

Classification (job evaluation methods)

Classifying jobs with similar features.

Two objectives of pay-level and pay-mix decisions

Control costs and increase revenues Attract and retain employees

Benchmark jobs

Def: preliminary process of job evaluation. A prototypical job or group of jobs used as a reference point for making job and pay structure. Characteristics: contents well known and relatively stable over time, job is common across a number of different employers, and reasonable portion of workforce is employed in this job. EX: cashier

Demand vs. supply

Demand: Focuses on the actions of the employers. Pay/wage increase causing a reduction in demand (downward) Supply: Looks at potential employees. Pay/wage increase causing an increase in supply (upward) Market rate: the lines for demand & supply cross

Organizational justice - distributive vs. procedural vs. interactional justice

Distributive: fairness of outcome. "whether an employee's compensation is proportional to that employee's contribution." Did they receive what they deserve? Procedural: fairness of outcome process. "Whether the policies that determine compensation apply impartially to all employees." Having the same opportunities as others Interactional: being treated with dignity and respect. "whether the interaction between employees and their employer is conducted with openness and respect." Employee and manager autonomy

Develop grades

Each grade will have its own pay range, and all the jobs within a single grade will have the same pay range. Jobs in different grades should be dissimilar in terms of their relative value and importance.

Three factors used to determine the relevant labor market

Economic, efficiency wage, and signaling effects.

Efficiency wage theory and signaling theory (suggest & predict)

Efficiency wage theory: Above market wage/pay level may improve efficiency by attracting higher-ability workers any by discouraging shirking because of risk of losing high wage job. (lead) Signaling theory: Pay policies signal to applicants the attributes that fit the organization. Applicants may signal their attributes (abilities) by the investments they have made in themselves.

Equity Theory (what this theory suggests)

Employees experience equity and will be motivated to perform when the ratio of their perceived outputs (pay) to perceived inputs (effort, performance) is equal to the perceived outputs/inputs of a comparison person. If the two ratios are above or not equal, perceived inequity results and the person is motivated to take action to restore equity. Some actions employees take (lower effort) to restore perceived equity are not helpful to organizations.

Expectancy (three components of this theory)

Expectancy (effort) Instrumentality (performance) Valence (reward)

Expectancy Theory (what this theory suggests)

Expectancy is employees' assessment of their ability to perform required job tasks.

Grades vs. ranges

Grade: classes or groups into which jobs of the same or similar values are grouped for compensation purposes. Range: range of pay rates from minimum set for a pay grade or class. Group characteristics, not individual based.

Overlap

High degree of overlap (a): small differences in the value of jobs in the adjacent grades. Move from a grade to another: the title change but not much change in pay. Low degree of overlap (b): large differences in the value of jobs in the adjacent grades. Promotion: title change and larger pay increase.

ADES

Job Analysis Job Description Job Evaluation Job Structure

Job analysis vs. job description vs. job evaluation

Job Analysis: collecting info on jobs. Job Description: summarizing the info and serving as input for job evaluation. Job Evaluation: evaluating the relative importance and usefulness of jobs. Based on job contents, skill requirements, value to organization, organizational culture and external market.

Efficiency wage theory and signaling theory (vs labor economic theories)

Labor economic theories Reservation wage: job seekers won't accept jobs if pay is below certain wage, no matter how attractive other job aspects. Human capital: general and specific skills require an investments in human capital. Firms will invest in firm-specific skills, but not general skills. Workers must pay for investment in general skills.

Pay level vs Pay mix (external competitiveness)

Pay level: above, below, or equal to that of competitors. Pay mix: relative to those of competitors.

Instrumentality

Performance = pay. having to do with the final outcome. "what work outcomes will be perceived as a result of performance?" Belief that higher job performance will be rewarded by the organization Pay must be perceived as strong = increase instrumentality. procedure of fairness

Four pay-mix policies

Performance driven: increases the link between employees performance and pay level. Ex: 50% base, 17% benefits, 17% bonus, and 16% options. Market match: mimics the market average pay mix. Ex: 70% base, 20% benefits, 6% bonus, and 4% options. Work/life balance: increases employees work/life balance. Ex: 50% base, 30% benefits, 10% options, and 10% bonus. Security: increases employees' perceived security and psychological safety. Ex: 80% base and 20% benefits.

Fairness inconsistencies - philosophical vs. narrow framing vs. self-serving

Philosophical: differences in their focuses and values. Differences in the weight that individuals place on process vs outcomes. Narrow framing: people often apply principles of equity to only a subset of the dimensions of a compensation arrangement. Stepping back to consider the "full picture" would lead to the opposite conclusion. More about entire perspective. Self-serving: people interpret facts and resolve ambiguities in ways that favor their own self interest. Will always have a clear self interest- it is intentional.

Range spread

Ranges set upper and lower pay limits for all jobs in each grade. A range has a midpoint, a minimum, and a maximum. (maximum pay / minimum pay) -1 the size of range

Factor weight (point method)

Reflect the relative importance of each factor to the overall value of a job. Weights often determined through an advisory committee &/or statistical analysis.

Compensable factors (point method)

Reflects how work adds value to organizations. To be useful, compensable factors should be based on strategy and values of the organization and based on work performance. 4 generic groups: skill (education, experience, amd expertise) effort (physical, mental, sensory efforts) responsibility (impact, span of control, supervision) working conditions (hazards/risks)

Factor scale (point method)

Scales reflecting different degrees (levels) within each factor should be constructed. Most scales are 4 to 8.

Market line

Summarizes the distribution of going rates paid by competitors in the market. A line on a graph that links a company's benchmark job evaluation points on the horizontal axis (internal structure) with market rates paid by competitors (market survey) on the vertical axis.

Benchmark conversion

When the content (job description) of an organization's job does not sufficiently match that of jobs in the salary survey, use benchmark conversion to quantify the differences.

Pay mix with highest bonuses

Work/life

job contribution

about different employees doing the same/similar job. primary focus is on determining the worth of employees and compensating them based on their contributions.

internal alignment

about job characteristics. primary focus on determining the worth of jobs.

Rankings (job evaluation methods)

alternation ranking & paired comparisons Alternation ranking: orders job descriptions alternatively at each extreme. (best & least, 2nd best & 2nd least, 3rd best & 3rd least) Paired comparisons: use matrix to compare all possible pairs of jobs.

Point methods (job evaluation methods)

compensable factors, factor scale (degree), and factor weights.

Expectancy

effort/ability leads to performance. Assessment of their ability to perform required job tasks. "can i achieve the desired level of task performance? Job tasks and responsibilities should be clearly defined = increasing expectancy employees input, capability and relationship with proximate outcome.

X axis

job evaluation (internally aligned)

3 market factors (external competitiveness)

labor, product & service, and organizational.

Three pay-level policies

lead: maximizes the ability to attract and retain quality employees and minimize employee dissatisfaction with pay. High wages can lead to ease of attraction, reduced vacancy rates and training time, reduced turnover, and absentiness, and better quality employees. may force the employers to increase wage of current employees too, to avoid internal misalignment. may mask high turnover. meet (match): pay with competition policy to ensure that an organization's wage costs are approximately equal to fellow competition. Avoids placing an employer at a disadvantage in pricing products, it may not provide a competitive advantage in its labor market. lag: may hinder a firm's ability to attract potential employees. If coupled with higher future return may increase employee commitment and teamwork = increase productivity. Offers offer things like relocations instead of more pay.

Y axis

market pay rates (external competitiveness)

How product market factors influence pay decisions in general

product demand & degree of competition Product demand: The product market sets the maximum pay level. • If an organization pays above the maximum, it must either (a) pass on higher costs to the customers (high price), or (b) allocate a great share of total revenues to cover labor costs (low margin). Degree of competition: Competitive market - less able to raise prices without loss of revenues.

Valence

rewards. what your own values are towards pay. Whether you value the final outcome or not. values employees attach to the organization rewards received for job performance.

Lower base wage with high bonuses is a _______ employee

risk taking

Market pay rate determination

supply and demand

Paired and alternative more reliable than simple

true