MQM 354 Midterm

The range is a control device

External competitiveness perspective on range

Relative labor costs and productivity

Job losses (or gains) in a nation over time are party influenced by ____ across nations

True

T or F: Consultant surveys are often presented as studies that reveal cause and effect.

low-high approach

§Wages of lowest- and highest-paid benchmark jobs used as anchors for skill-based structures.

false

T or F: The reliability and validity of the quantitative methods of job analysis have significantly reduced the importance of human judgment in job analysis.

true

T or F: Human capital theory assumes that people are paid at the value of their marginal product.

False

T or F: In a high-performance system, pay strategy always plays a lead role.

false

T or F: Skill-based structures pay employees only for the skills they use while performing the work assigned to them.

false

T or F: Adjustments to the different forms of pay competitors use and the relative importance they place on each form occur more frequently than adjustments to overall pay level.

True

T or F: All organizations that pay their employees have a compensation strategy even though it may not be stated or written.

True

T or F: An organization defines its strategy through the trade-offs it makes in choosing what to do and what not to do

topping out

situation in which employees in a skill-based compensation plan attain the top pay rate in a job category by accumulating and/or becoming certified for the top-paid skill block

job specification

specifications that can be used as a basis for hiring are knowledge, skills, and abilities required to adequately perform the tasks *focuses on the person

job-based structure

structure that relies on work content- tasks, behaviors, responsibilities

Total Compensation

the complete pay package for employees, including all forms of money, bonuses, benefits, services, and stock

incentive affect

the degree to which pay influences individuals and aggregate motivation among employees at any point in time

tournament theory

the notion that larger differences in pay are more motivating than smaller differences

False

T or F: As a measure of compensation, base pay includes performance incentives, and therefore it gives a true picture if competitors offer low base but high incentives.

true

T or F: In a labor market, the demand side focuses on the actions of the employers.

true

T or F: In some organizations, analyzing work content is now conducted as part of work flow and supply chain analysis.

true

T or F: In virtually all the studies on job evaluation, job-based evaluation is treated as a measurement device.

false

T or F: The most common way of allocating weights to factors is regression modeling.

quoted price market

stores that label each item's price or ads that list a job's opening starting wage are examples of quoted-price markets (Amazon)

innovater

stresses new products and short response time to market trends

true

T or F: Analyses for designing pay grades and pay ranges focus on the basic value of the work in consideration rather than the performance levels of employees.

1.Decide how many pay structures to construct 2.Determine a market pay line 3.Define pay grades 4.Calculate pay ranges 5.Evaluate results

steps in constructing a pay structure (5)

Lag pay-level policy

a wage structure that is set to match market rates at the beginning of the plan year only. The rest of the plan year, internal rates will lag behind market rates. Its objective is to offset labor costs, but it may hinder a firm's ability to attract and retain quality employees

exchange value

The price of labor (wage) determined in a competitive market; in other words, labor's worth (the price) is whatever the buyer and seller agree on

The marginal revenue of labor

the additional revenue generated when the firm employs one additional unit of human resources, with other factors held constant

The ease of collecting the information The stability of the job

Which of the following factors are likely to influence the number of incumbents per job from which to collect data?

utility theory

the analysis of utility, the dollar value created increasing revenues and/or decreasing costs by changing one or more human resource practices. It has typically been used to analyze the payoff to making more valid employee hiring/selection decisions

•Efficiency - improving performance, increasing quality, delighting customers and stockholders, and controlling labor costs. •Fairness - recognizes both employee contributions and needs. •Procedural fairness is the process used to make pay decisions. •Compliance - means following federal and state regulations and laws. •Ethics - means the organization cares about how it achieves results.

the basic objectives include

Bourse Market

a market that allows haggling over terms and conditions until an agreement is reached (eBay)

1. The compensation objectives 2. The policies that form the foundation of the compensation system 3. The techniques that make up the compensation system

3 basic building blocks of the pay model

Low wage, no services strategy Low wage, high services High wage, high services

3 different types of organizational wage/service strategies

Step 1: Assess Total Compensation Implications Step 2: Map a Total Compensation Strategy Step 3: Implement Step 4: Reassess

4 Keys Steps in Formulating a Total Compensation Strategy

Selling the present value of the future stream of earnings

A company that justifies the comparatively low starting offers with assurances of large future pay increases is

benefit

Allowances are a type of ___

Identification of core competencies Identification of competency sets Identification of behavioral descriptions

Arrange the steps involved in the determination of a competency-based internal structure in the order of their occurrence. (3)

Job analysis Job description Job evaluation

Arrange the steps involved in the determination of an internally aligned job structure in the order in which they occur.

trying to control costs via training and certification

As opposed to managers whose employers use job-based plans, managers following person-based plans focus on _____.

lack of attention given to pay mix decisions

Changes to the pay mix of an organization occur less frequently than changes to the pay level probably because of the _____.

broad banding

Collapsing a number of salary grades into a smaller number of broad grades with wide ranges

All forms of financial returns and benefits employees receive for employment

Come up with your own compensation definition

rent sharing

Companies with higher profits than competitors can share this success with employees by leading competitors' pay levels and/or through bonuses that are tied to profitability. Academics view this as _____.

More productive Better trained More innovative Less likely to quit

Company may pay its employees more because their employees are

It's differentiated itself on nonfinancial returns More challenging and interesting projects Possibility of international assignments Superior training More rapid promotions Greater job security

Company may pay less because

teate

Compensation that fulfils employees financial needs

Mission Statement

Core competencies for a company develop as a result of a company's _____.

pay grade

Different jobs in an organization that are considered substantially equal for pay purposes are grouped into a _____ to build flexibility into the organization's pay structure.

has access to a progressively smaller portion of other factors of production

Diminishing marginal productivity for each new employee added to a firm arises from the fact that each new employee _____.

Recognize the individual performance differences with pay Meet employees' expectations that their pay will increase over time, even in the same job Encourage employees to remain with the organization

Employer may offer different pay rates to employees on the same job, pay range provides managers the opportunity to

Supports organization strategy Supports workflow Is fair to employees Motivates behavior toward organizational objectives

Establish purpose of evaluation

matching all jobs to market survey jobs directly is usually impossible

Even organizations that rely primarily on market pricing probably also use job evaluation because _____.

market pay lines

For determining the pay level of nonbenchmark jobs, _____ are useful.

AMO Theory, Performance (P) is a function (f) of three factors: ability (A), motivation (M), and opportunity (O).

HR systems will be most effective when employee ability is developed through selective hiring and training and development, when the compensation system motivates employees to act on their abilities, and when roles are designed to allow employees to be involved in the decision and have an impact

conventional methods and quantitative methods

How Can the Information Be Collected?

Managers believed that difficulties with attracting and retaining people were the result of poor management and not inadequate compensation.

How did the study on managers' approaches to pay decisions in light of varying unemployment, profitability, and labor market conditions directly contradict the efficiency-wage theory?

They blend them into the pay structure created by external market rates.

How do market pricers approach nonbenchmark jobs?

By integrating each job's pay with its relative contributions to the organization By setting pay for new, unique, or changing jobs

How does job evaluation support the work flow in an organization?

Pay differences are justified on the basis of inferred personal competencies.

Identify a disadvantage of competency-based internal structures.

These structures can lead to increased labor costs in a firm with labor-intensive products.

Identify a disadvantage of skill-based pay structures.

Evaluations are subjective opinions that cannot be rationalized in work-related and strategic terms.

Identify a drawback of the ranking method of job evaluation.

Both have the same underlying purpose.

Identify a similarity between job- and person-based work structures.

They run the risk of potential bureaucracy.

Identify a similarity between job-, skill-, and competency-based plans.

Define scales and compensable factors to include the content of jobs held mostly by women Apply the plans in as bias-free a manner as possible Ensure that factor weights are not consistently biased against jobs held mostly by women

Identify the recommendations for minimizing bias in job evaluation plans

Total compensation Base pay Total cash

Identify the three most commonly used measures of compensation in a pay survey

acceptability to the employees involved

Important factor influencing internal pay structures

materialists than for the risk-averse

In a study conducted to determine the effects of sorting and signaling strategies, it was determined that pay level held more significance for _____.

employers; job applicants

In both the quoted-price market and the bourse, _____ function as the buyers and _____ function as the sellers.

The range reflects the differences in performance that an employer wishes to recognize with pay

Internal alignment perspective on range:

The number of levels of work The pay differentials between the levels The criteria or bases used to determine those levels and differentials

Internal pay structure can be defined by

Verify data for accuracy and anomalies Statistical analysis

Interpret Survey Results and Construct a Market Line by

compensable factors

Job attributes that provide the basis for evaluating the relative worth of jobs inside in organization

•Easily routinized. •Inputs or outputs easily transmitted electronically. •Little need for interaction with other workers. •Little need for local knowledge. Other factors to consider are lower average productivity, risks to intellectual property, customers' reactions, and sustainability of the cost advantage.

Job characteristics than can increase susceptibility to offshoring.

identifying the way in which the job adds value

Job evaluation supports an organization's strategy by _____.

internal structure

Levels, Differentials, Criteria

Specify pay-level policy Define purpose of survey Specify relevance of market Design and conduct survey Interpret and apply result Design grades and ranges or bands

Major Decisions in Setting Externally Competitive Pay

This strategy is most likely to appeal to people who just want to show up and are risk-averse.

Matching the market wage and offering no performance-based pay

factor weights

Measures that indicate the importance of each compensable factor in a job evaluation system. Weights can be derived through either a committee judgment or statistical analysis

cost leadership strategy and differentiator strategy

Michael Porter's framework includes these two strategies

fuzzy

New organizations and unique jobs may fuse diverse factors making relevant markets

contributions to 401k retirement plans

One of the common cuts companies make in times of high unemployment is decreasing _____.

employee's knowledge

Pay is based on _____ in both specialist and generalist skill plans.

a set of best practices that have universal applicability exist

People who disagree with the idea of strategic fit in terms of compensation believe that _____

1. "Say on pay" that makes it obligatory for public companies to submit their executive compensation plan to vote by shareholders 2. Clawback provisions designed to allow companies to take back compensation from executives in some instances

Provision of the Dodd-Frank Wall Street Reform and Consumer Protection Act

Supports the Strategy and Objectives Supports Work Flow Is fair to employees Motivates Behavior toward Organization Objectives

Purpose of the Skill-Based Structure (4)

hourly wage level

Research has proven that in manufacturing, productivity has a positive correlation with _____.

numerical

Some researchers believe that job evaluation can be judged according to technical standards if it can be made sufficiently _____.

true

T or F: There is far less uniformity in the use of terms in person-based plans than there is in job-based plans.

false

T or F: Tradition does not influence whether or not the compensable factors used to slot jobs into the pay structure are accepted.

True

T or F: Traditional job analysis that makes fine distinctions among levels of jobs has been accused of reinforcing rigidity in organizations.

false

T or F: Typical data collected for a job analysis would not include relationships with suppliers and customers.

True

T or F: When there is an unusual level of turnover in a job, an employer is likely to conduct a market survey.

1. To adjust the pay level in response to changing rates paid by competitors 2. To set the mix of pay forms relative to that paid by competitors 3. To establish or price a pay structure 4. To analyze pay-related problems 5. To estimate the labor cost of the product/service market competitors

The Purpose of a Survey (5)

do an analysis of them alone

The best way to answer questions on anomalies while analyzing pay survey data is to _____.

the strategic direction of business and the way in which the work contributes to the strategy

The compensable factors used in the designing of a point plan are based on _____.

unemployment rates are low

The concept of upward sloping supply in theories of labor markets assumes that as wage rates increase, more people are willing to take a job. However, offers of increased pay may not boost labor supply when _____.

comparing each pay form to the market

The dashboard form of reporting the mix of pay forms of a company focuses on _____.

flexibility

The disagreement on the need for job analysis centers on the issue of _____.

variation

The distribution of rates around a measure of central tendency Tells us how the rates are spread out in the market Standard deviation is the most common measure Quartiles and percentiles are the most common measure in salary survey analysis

the wages for the lowest- and highest-paid benchmark jobs for the relevant skills in the market

The easiest way to convert market data to fit a skill or competency structure is to use _____ as anchors for the competency-based structures.

group difference jobs that are considered substantially equal for pay purposes into a grade

The first step in building flexibility into the pay structure

the extent of similarity or dissimilarity between jobs

The level at which job analysis begins influences _____.

effort

The underlying assumption of efficiency-wage theory is that pay level determines _____.

1. Employees always seek to maximize profits 2. People are all the same and therefore interchangeable; a business school graduate is a business school graduate 3. The pay rates reflect all costs associated with employment (e.g., base wage, bonuses, holidays, benefits, even training) 4. The markets faced by employers are competitive, so there is no advantage for a single employer to pay above or below the market rate

Theories of labor markets usually begin with four basic assumptions

occupation or skills required the geography (willingness to relocate or commute) employers that compete in the product market

Three factors commonly used to determine the relevant markets

Is it aligned? Does it differentiate? Does it add value?

Three tests determine if a pay strategy is a source of advantage

the factors that are of importance to the business environment in the present and in the future

To deal effectively with turbulent competitive dynamics, an organization should first focus on _____.

true

Tor F: In the context of developing an internal pay structure, employee involvement is almost built into skill-based plans.

How specifically tailored to organization's design and workflow to make the structure How to distribute the pay throughout the levels in the organization

Two strategic choices are involved in designing an internal structure

a total salary budget that limits managers

Unlike grades-and-ranges approaches to designing pay structures, broad-banding approaches have controls in the form of _____.

high standards of reliability and validity

Unlike job evaluations, market surveys lack _____.

is anchored by the company's external competitive position

Unlike the job structure of a company, the pay structure _____.

orders the organization's jobs according to internal factors

Unlike the pay structure of an organization, the job structure _____.

job data: (1) identification and (2) content and (3) employee data

What Information Should Be Collected?

Based on some judgement about how the ranges support career paths, promotions, and other organization systems Top level management = 30-60% above or below midpoint Entry to midlevel = between 15-30% Office and production work = 5-15%

What Size Should the Range be?

Conduct Job analysis Determine Compensable Factors Scale the factors Weight the factors according to importance Select criterion pay structure Communicate the best plan and train users Apply to non-benchmark jobs Develop online software support

What are the eight steps involved in a point plan?

A job structure with a sequence of classes, each having a number of similar jobs

What is the outcome of using the classification method of job evaluation?

external factors, organization factors, and internal factors

What shapes internal structures?

When they cause wages to be held down artificially When they cause interference with competitive prices

When are survey participants declared guilty of price fixing?

categorize firms by size, expressed in terms of revenues or sales

When collecting organizational data for a salary survey, financial data are typically used to _____.

When competitors quickly meet the employer's higher offer

When will an employer face no increase in labor supply even after raising its pay level?

A lag pay-level policy combined with the promise of increased future returns

Which combination may boost employee commitment and encourage teamwork, which may in turn improve productivity?

•Benchmark-Job Approach: •Low-high approach: •Benchmark conversion/survey leveling:

Which jobs should be included?

They believe that job evaluation allows the exchange of views. They view job evaluation as a method that helps pay differences among jobs get accepted.

Which of the following are true of the perspective of individuals who make pay decisions based on job evaluation?

The purpose of each elemental task or unit of work

Which of the following does job content emphasize?

Increased labor costs

Which of the following is a likely outcome of skill-based plans?

Pay increases follow the certification of new skills.

Which of the following is true of a multiskill pay system?

Its alignment with the overall HR strategy

Which of the following makes a company's compensation strategy difficult to imitate?

subjectivity

Which of the following makes competencies a "risky foundation for a pay system"?

Segmenting the source of labor

Which of the following options reduces labor expenses when people flow to the work?

Creates a sense of ownership and increases performance

Why do some stockholders support the use of stock to pay employees?

It helps gain acceptance by employees and managers. It can withstand a variety of challenges to the pay structure. It is easier to understand.

Why is it important to maintain some documentation to support the choice of compensable factors while developing a point plan?

Global and local competitive pressures

_____ force managers to consider the affordability of of their compensation decisions

Signaling

a closely related process that underlies the sorting effect, employers deliberately design pay levels and pay mix as part of a strategy that signals to both perspective and current employees the kinds of behaviors that are sought

job family (ex. Computing and account recording are a job family; bookkeeper, accounting clerk, and teller are jobs within that family)

a group of jobs involving work of the same nature but requiring different skill and responsibility levels

skill-based pay

a pay structure in which workers are paid for the skills they are certified to have obtained

job evaluation

a systematic procedure designed to aid in establishing pay differentials among jobs within a single company. It includes classification, comparison of the relative worth of jobs, blending internal and external market forces, measurement, negotiation, and judgment

skill analysis

a systematic process to identify and collect information about the skills required to perform work in an organization Basic decisions

reservation wage

a theoretical minimum standard below which a job seeker will not accept an offer, no matter how attractive the other job attributes

just wage doctrine

a theory of job value that posits a "just" or equitable for any occupation based on that occupation's place in the larger social hierarchy

rent

amount by which payment to a factor of production (capital or labor) exceeds the payment needed to keep it employed and/or its productivity.

pay level (base + bonuses + benefits + value of stock holdings) / number of employees

an average of the array rates paid by an employer

human capital theory

an economic theory proposing that the investment one is willing to make to enter an occupation is related to the returns one expects to earn over time in the form of compensation

line of sight

an employee's ability to see how individual performance affects incentive payout.

merit bonuses

based on performance rating, but unlike merit increases, are paid in the form of a lump sum rather than becoming a permanent part of the base salary

What is the objective of the plan? What information should be collected? What methods should be used to determine and certify skills? Who should be involved? How useful are the results for pay purposes?

basic decisions in the skills analysis (5)

competencies

basic knowledge and abilities employees must acquire or demonstrate in a competency-based plan in order to successfully perform the work, satisfy customers, and achieve business objectives

skill block

basic units of knowledge employees must master to perform the work, satisfy customers, and achieve business objectives

base wage

cash compensation that an employer pays for the work performed, reflects value of work or employee's skills

Competency-based pay system

compensation approach that links pay to the depth and scope competencies that are relevant to doing the work. Typically used in managerial and professional work where what is accomplished may be difficult to identify

competency-based structure

compensation approach that links pay to the depth and scope of competencies that are relevant to doing the work. Typically used in managerial and professional work where what is accomplished may be difficult to identify

tacit

complex work

Demand = actions of the employers - How many new hires they seek - What they are willing and able to pay new employees Supply = potential employees - Their qualifications - Pay they are willing to accept in exchange for their services

demand and supply of labor

external factors

economic pressures, laws, stakeholders, cultures and customs

compensating differentials

economic theory that attributes the variety of pay rates in the external labor market to differences in attractive as well as negative characteristics in jobs. Pay differences in attractive as well as negative characteristics in jobs. Pay differences must overcome negative characteristics to attract employees

management

ensuring the right people get the right pay for achieving the right objectives in the right way.

distributive justice

fairness in the amount of reward distributed to employees

differentiator strategy

focuses on providing a unique and/or innovative product/service at premium prices.

cost leadership

focuses on reducing costs

1. internal alignment 2. external competitiveness 3. employee contributions 4. management of the pay system

four policy choices

merit increases

given as increments to base pay and are based on performance

job evaluation committee

group that may be charged with the responsibility of Selecting a job evaluation system Carrying out or at least supervising the process of job evaluation Evaluating the success with which the job evaluation has been conducted

prominence

how important total compensation is in the overall HR strategy (step 2)

Is the research useful? Does the study separate correlation from causation? Are there alternative explanations?

how to Be an Informed COMPENSATION Research Consumer

future

incentives looks at ______ behavior

compliance

influence by the basis used while making internal comparisons among employees

fairness

influenced by employees comparisons of their pay to the pay of others in the organization

task data

information on the elemental units of work (tasks), with emphasis on the purpose of each task, collected for job analysis. Work data describe the job in terms of actual tasks performed and their output

Quantitative job analysis (QJA)

job analysis methods that rely on scaled questionnaires and inventories that produce job-related data that are documentable, can be statistically analyzed and may be more objective than other analyzes

Point (factor) method

job evaluation method that employs (1) compensable factors (2) factor degrees numerically scaled (3) weights reflecting the relative importance of each factor. Once scaled degrees and weights are established for each factor, each job is measured against each compensable factor and a total score is calculated for each job. The totally points assigned to a job determine the job's relative value and hence its location in the pay structure

classification

job evaluation method that involves slotting job descriptions into a series of classes or grades that cover the range of the jobs and that serve as a standard against which the job descriptions are compared

(pay level) x (number of employees)

labor cost formula

nature of supply and demand

labor market factors include

Skill-based structures

link pay to the depth or breadth of the skills, abilities, knowledge a person acquires that are relevant to work

market line

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

•Employment Cost Index (ECI)

measures quarterly changes in employer costs for compensation

factor scales

measures that reflect different degrees within each compensable factor. Most commonly 5 to 7 degrees are defined. Each degree may be anchored by typical skills, tasks and behaviors, or key job titles

pay techniques

mechanisms or technologies of compensation management, such as job analysis, job descriptions, job evaluations, and the like, that tie the four basic pay policies to the pay objective

past

merit looks at _______ behavior

conventional job analysis

methods (ex. Functional job analysis) that typically involve an analyst using a questionnaire in conjunction with structured interviews of job incumbents and supervisors. The methods place considerable reliance on analysts' ability to understand the work and to accurately describe it

central tendency

midpoint in a group of measures

defenders and prospectors

miles and snow framework includes

wage

pay given to employees who are covered by overtime and reporting provisions of the Fair Labor Standards Act. Pay for workers who are nonexempt usually is calculated at an hourly rate rather than a monthly or annual rate

Pay-with-competition policy

policy that tries to ensure that a firm's labor costs are approximately equal to those of its competitors. It seeks to avoid placing an employer at a disadvantage in pricing products or in maintaining a qualified workforce

degree of competition and level of product demand

product market factors include

conventional method

questionnaires, interviews, and observation. •Employee involvement increases their understanding of the process, however, the results are only as good as the people involved.

zones

ranges of pay used as controls or guidelines within pay bands that can keep the system more structurally intact. Maximums, midpoints, and minimums provide guides to appropriate pay for certain levels of work. Without zones employees may float to the maximum pay, which for many jobs in the band is higher than market value

compensation

refers to all forms of financial returns and tangible services employees receive as part of an employment relationship

internal alignment

refers to comparisons among jobs or skill levels inside an organization.

External Competitiveness

refers to pay comparisons with competitors and affect objectives in two ways. •Employees must perceive their pay as competitive or they may leave. Controlling labor costs keeps the company's products competitive

Pay-policy line

representation of the organization's pay level policy relative to what competitors pay for similar jobs

transactional

routine work

institutional theory

sees firms responding/ conforming to normative pressures in their environments so as to gain legitimacy and to reduce risk

person-based structure

shifts the focus to the employee: the skills, knowledge, or competencies the employee possesses, whether or not they are used in an employee's particular job

Paying employees above market can be an effective or ineffective strategy depending on what the company gets in return and whether the return translates into revenues that exceed the cost of the strategy

should you pay employees above or below market?

loosely coupled

strategic choice in designing an internal structure that Requires constant innovation. - Pay structures are more loosely linked to the organization to provide flexibility.

tailored

strategic choice in designing an internal structure that is Adapted by organizations with a low-cost, customer-focused strategy. - Has well-designed jobs with detailed steps or tasks. - Very small pay differentials among jobs.

Organization Factors

strategy, technology, human capital, HR policy, employee acceptance, cost implications

pay structures

the array of pay rates for different jobs within a single organization; they focus attention on differential compensation paid for work of unequal worth

competitive intelligence

the collection and analysis of information about external conditions and competitors that will enable an organization to be more competitive

sorting effect

the effect that pay can have on the composition of the workforce. Different types of pay strategies my cause different types of people to apply to and stay with an organization Higher pay levels may attract higher quality candidates

sorting

the effect that pay strategy has on the composition of the workforce- who is attracted and who is retained

labor demand

the employment level organizations require. An increase in wage rates will reduce the demand for labor, other factors constant. Thus, the labor demand curve (the relationship between employment levels and wage rates) is downward sloping

relational returns

the non quantifiable returns employees get from employment such as social satisfaction, friendship, feeling of belonging or accomplishment Psychological

pay range

the range of pay rates from minimum to maximum set for a pay grade or class. It puts limits on the rates an employer will pay for a particular job

ranges

the range of pay rates from minimum to maximum set for a pay grade or class. It puts limits on the rates an employer will pay for a particular job

survey

the systematic process of collecting and making judgments about the compensation paid by other employers

Job Analysis

the systematic process of collecting information related to the nature of a specific. It provides the knowledge needed to define jobs and conduct a job evaluation (identifies the job content)

relevant markets

those employers with which an organization competes for skills and products/services.

defenders

those who operate in stable markets and compete on costs

Benchmark conversion/survey leveling

§Differences are quantified when job content does not sufficiently match survey jobs.

prospectors

more focused on innovation and new markets

content

the work performed in a job and how it gets done (task, behaviors, knowledge required, etc)

range midpoint

A band in broad banding encompasses many positions of varying values, so a _____ is usually not used.

how to better satisfy individual needs and preferences

A crucial challenge in the design of next-generation pay systems is _____.

negative sorting effect

A disadvantage of egalitarian pay structures is that they may result in a _____.

alternative ranking

A job evaluation method that involves ordering the job description alternately At each extreme. All the jobs are considered. Agreement is reached on which is the most valuable and then the least valuable. Evaluators alternate between the next most valued and next least valued and so on until the jobs has been ordered

has skill-competency-based structures

A low-high approach to selecting jobs for inclusion in surveys is used to determine the pay level when an organization _____.

Determine the pay level set by market forces Determine the marginal revenue generated by each new hire

A manager using the marginal revenue product model must

internal alignment

A pure market pricing strategy carried to the extreme ignores _____ entirely.

paired comparison

A ranking job evaluation method that involves comparing all possible pairs of jobs under study

The same occupation or skills Employees within the same geographic area The same product or services

A relevant labor market must be defined that includes employers who compete in one or more of the following areas

the general pay budget

A study on how economic factors translated into wage decisions for managers found that the profitability of a company was viewed by managers as a factor for higher management in determining _____.

cultural or geographic distance is great

According to agency theory, companies must allot resources to systems that track employee output, which becomes more costly and difficult when _____.

Allocating a large share of total revenues to cover labor expenses Passing the higher pay level on to consumers by increasing prices

Due to restrictions placed by the product market on an employer's pay level, what strategies must an employer use to compensate for paying above the maximum?

Skills (demonstration of expertise) Knowledge (accumulated information) Self concepts (attitudes, values, self-image) Traits (general disposition to behave in a certain way) Motives (recurrent thoughts that drive behaviors)

Early conceptions of competencies focused on five areas

frequency distribution

Helps visualize information and highlight anomalies Shapes can vary Unusual shapes may reflect problems with job matches, widely dispersed pay rates, or employers with divergent pay policies

Attract higher-quality applicants Lower turnover Increase worker effort Reduce shirking behavior (screwing around) Reduce the need to supervise workers

High wages may increase efficiency and actually lower labor costs if they

A reservation wage may be more than or less than the market wage.

Identify an accurate statement about a reservation wage.

It is the least expensive method of job evaluation, at least initially.

Identify an advantage of the ranking method of job evaluation.

They help to match people to a changing work flow. They can cause substantial reductions in labor costs by reducing the need for supervisors.

Identify the advantages of skill-based pay structures

Skills required Customer contacts

Identify the aspects of job content whose values depend on their relationship to market wages

marginal productivity

In contrast to Marxist "surplus value" theory, a theory that focuses on labor demand rather than supply and argues that employers will pay a wage to a unit of labor that equals that unit's use (not exchange value). That is, work is compensated in proportion to its contribution to the organization's productions objectives

greater scope for performance variations and individual discretions

In managerial jobs, larger pay ranges reflect _____.

information on the external market

In order to translate an external competitive pay policy into practice, an employer needs _____.

Offering more choices

In the context of compensation, which of the following is a way to better satisfy employees' individual needs and preferences?

It supports organizations that have eliminated levels of managerial positions. It allows job responsibilities to be defined more broadly and flexibly than when using ranges. It fosters cross-functional growth and development in downsized or boundary-less organizations.

In the context of salary grades, identify the advantages of broad banding

eases mergers and acquisitions

In the context of salary grades, one of the advantages of broad banding is that it _____.

Because the organization's financial performance is directly related to compensation for these positions

In the context of surveys for determining pay levels, why do surveys of upper-level and executive positions in an organization include reporting relationships and financial data?

the content of benchmark jobs

In the point method of job evaluation, defining, scaling, and weighting the compensable factors is based on _____.

Inalterable

In the short term, a company's factors of production are _____, which causes each new hire to have lower marginal productivity than the previous hire.

Entitlement for being an employee of the company Reward for having done well in the job Return in an exchange between the employer and employee In incentive to take or stay in job and perform well in job

In what ways can employees view compensation?

When it alienates employees When it prompts government investigation

In which of the following situations can performance-based pay be a "worst practice"?

This strategy is most likely to appeal to risk-takers who seek flexible schedules, more interesting projects, or more opportunities for promotion

Paying below the market for base pay yet offering generous bonuses

specify a percent below or above the market line that an organization intends to match

One of the methods used to translate pay policy determined through a pay survey into practice is to _____.

They are consistently applied to all employees If employees participated in the process If appeal procedures are included If the data used is accurate

Pay procedures are more likely to be deemed at fair if

Skill shortages

Pay structures undergo changes due to external factors such as _____.

false

T or F: All job incumbents can easily complete the Position Analysis Questionnaire as the reading level required for it is relatively low.

true

T or F: A disadvantage of the ranking method is that the criteria on which the jobs are ranked are usually poorly defined.

true

T or F: Defining the compensable factors and scales to include the content of jobs held predominantly by women is one of the methods to ensure that job evaluation plans are bias-free.

false

T or F: Egalitarian pay structures send the message that an organization values differences in work content, individual skills, and contributions to the organization.

false

T or F: Evidence from various studies supports the proposition that job evaluation is susceptible to gender bias.

False

T or F: Exchange value is always higher than use value.

Employee skills are specific to the product market Labor costs are a large share of total costs Product demand is responsive to price changes The supply of labor is not responsive to changes in pay

The data from market competitors are likely to receive greater weight when:

appropriately positioned relative to the market

The goal of using a salary increase matrix is to keep adjusting employee pay so that it is _____.

greater the costs to provide comparable products or services

The higher the pay level of an organization relative to what its competitors pay, the _____.

competitive rates for the future date when the pay decisions will be implemented

The pay data for a salary survey are usually updated through a process called trending or aging to predict the _____.

Reduced vacancy rates and training time Reduced turnover and absenteeism

What are the effects of offering high wages in a lead pay-level policy?

Calculate the marginal revenue generated by each new hire Calculate the pay level set by market forces

What are the only things that a manager using the marginal revenue product model must do?

A midpoint, a minimum, and a maximum

What are the salient features of a pay range?

Details of skill blocks, competencies, and certification methods Definitions of compensable factors

What information is required for the administration of a job-based or a person-based plan?

Information about the organization Information about the total compensation system Specific pay data on each incumbent in the jobs under the study

What information should be collected?

Personal characteristics Highest level of competencies Organization Specific

What information to collect when Classifying competencies?

An internal structure of work in the company

What is the final outcome of a person-based plan?

verify the accuracy of the resulting job description

What is the final step of the job analysis?

labor market conditions; product market conditions

While _____ put a floor on the pay level needed to attract sufficient employees, _____ put a lid on the highest pay level than an employer can set.

benchmark conversion

While verifying pay survey data, if a company job is found to be sufficiently similar to the survey job, particularly on the most fundamental aspects, an analyst can use _____ to multiply the survey data by a factor determined to be the difference between the two jobs.

Analysis is best done by someone trained for such analysis and thoroughly familiar with the organization and its jobs.

Who Collects and Who Provides the Information?

Compensation managers, other managers, employees, task forces

Who should be involved in the survey design?

Market data are usually perceived as more objective.

Why are market data weighed more heavily than internal job evaluation data when reconciling differences in pay structures?

Grades and ranges offer flexibility to deal with pressures from external markets and differences among organizations Differences in quality among individuals applying for work Differences in productivity or value of these quality variations differences in the mix of pay forms competitors use

Why bother with grades and ranges?

consumer price index

a measure of the changes in prices in a fixed market basket of goods and services purchased by a hypothetical average family. Not a absolute measure of living costs; rather, a measure of how fast costs are changing. Published by the Bureau of Labor Statistics, U.S. Department of Labor

Benchmark (key) jobs

a prototypical job, or group of jobs, used as a reference point for making pay comparisons within or without the organization.

regression

a statistical technique for relating present-pay differentials to some criterion, that is, pay rates in the external market, rates for jobs held predominantly by men, or factor weights that duplicate present weights for all jobs in the organization

Position analysis questionnaire (PAQ)

a structured job analysis technique that classified job information into 7 basic factors: information input, mental processes, work output, relationships with other persons, job context, other job characteristics, and general dimensions.

job description

a summary of the most important features of a job. It identifies the job and describes the general nature of work, specific task responsibilities, outcomes, and the employee characteristics required to perform the job *focuses on the job

efficiency wage theory

a theory that explains why firms are rational in offering higher-than-necessary wages

ranking format

a type of performance appraisal format that requires that the rater compare employees against each other to determine the relative ordering of the group on some performance measure (simple, fast, easy to understand)

Lead pay-level policy

a wage structure that is set to lead the market throughout the plan year. Its aim is to maximize a firm's ability to attract and retain quality employees and to minimize employee dissatisfaction with pay

shared choice

an external competitiveness policy that offers employees substantial choice among their pay forms

Core competencies are not unique for each company. However, the way in which core competencies are applied does differ among companies.

are core competencies unique for each company?

Competency indicators

observable behaviors that indicate the level of competency within each set, anchor the degree of a competency required at each level of complexity of the work

pay grades

one of the classes, levels, or groups into which jobs of the same or similar values are grouped for compensation purposes. All jobs in a pay grade have the same pay range (maximum, minimum, and midpoint)

A structure based on job value

orders jobs on the basis of the relative contribution of the skills, duties, and responsibilities of each job to the organization's goals

best pay data

Analyses for the purpose of designing pay grades and pay ranges are usually done with _____.

be knowledgeable about all jobs under study

A drawback of the ranking method of job evaluation is that evaluators using this method must _____.

the cross-fertilization of ideas within an organization

According to supporters of broad banding, the principal benefit of this technique is _____.

marginal product

According to the theory of human capital, improving productive skills by making investments in training will raise one's _____.

internal alignment and external competitiveness

After the results of a pay survey have been interpreted and a market line constructed, two components of the total pay structure of an organization merge. These components are _____.

changes in wages in the labor markets

An analyst of a pay survey should avoid using the Consumer Price Index (CPI) for updating salary survey data because the CPI does not measure _____.

Task Position Job Job family

Arrange the units of job analysis according to size, starting with the smallest.

Set the number of bands Price the bands: reference market rates

Banding takes two steps

inconsistency and favoritism

Broad banding leaves an organization vulnerable to charges of _____.

1. they are tied to objective performance measures (ex. sales) usually in a formula based way, Merit increase program = subjective rating 2. Incentives do not increase the base wage so must be re-earned each pay period 3. The potential size of the incentive program will generally be known beforehand

Incentives are different from merit adjustments bc

Large overlap between pay grades

What can make it difficult to maintain manager-employee differentials among pay grades?

The competitiveness of pay will affect the organization's ability to complete its compensation objectives

What difference does the pay-level policy make?

Greatly dispersed pay rates Issues with job matches Companies with very different pay policies

What do unusual shapes of frequency distributions in a pay survey reflect?

The competency-based structure

Which of the following types of internal structures attempts to isolate the underlying, broadly applicable knowledge, skills, and behaviors that form the base for success at any level or job in the organization?

institutional theory

Which theory sees organizations as responding or conforming to normative pressures in their environments in order to gain legitimacy and to minimize risk?

procedural justice

concept concerned with the process used to make and implement decisions about pay. It suggests that the way pay decisions are made and implemented may be more important than the results of the decisions

essential elements

the parts of a job that cannot be assigned to another employee. The ADA requires that if applicants with disabilities can perform the essential elements of a job, reasonable accommodations then must be made to enable the qualified individuals to perform the job

Internal alignment (internal equity)

the pay relationships among jobs or skill levels within a single organization; focuses attention on one employee and management acceptance of those relationships. It involves establishing equal pay for jobs of equal worth and acceptance pay differentials for jobs of unequal worth

External Competitiveness

the pay relationships among organizations; focuses attention on the competitive positions reflected in these relationships

shirking behavior

the propensity of employees to allow the marginal revenue product of their labor to be less than its marginal cost; to be lax

range midpoint

the salary midpoint between the minimum and maximum rates of a salary range. The midpoint rate for each range is usually set to correspond to the pay-policy line and represents the rate paid for satisfactory performance on the job

value

the value of the work; its relative contribution to organization objectives Focuses on the relative contribution (and external market value) of these skills, tasks, and responsibilities to the organization's goals

use value

the value or price ascribed to the use or consumption of labor in the production of goods and services

employer of choice

the view that a firm's external wage competitiveness is just one facet of its overall human resource policy and that competitiveness is more properly judged on overall policies. Challenging work, great colleagues, or an organization's prestige must be factored into an overall consideration of attractiveness

market pay line

using key/benchmark jobs, a market pay policy line can be constructed that shows external market pay survey data as a function of internal job evaluation points. In many cases, the market pay policy line is obtained by using regression analysis, which yields an equation of the form "market pay = intercept + slope x job evaluation points." By plugging the job evaluation points fo any job (both benchmark and non benchmark jobs) into the equation, the predicted pay for each job can be obtained

labor market factors product market factors organization factors

what shapes external competitiveness

•No firm rules on how many to include. •Publicly available data - Bureau of Labor Statistics (BLS). •Online salary information - highly suspect. •Many surveys but few are validated.

§How many employers?

false

T or F: Market pricers emphasize any unique or difficult-to-imitate aspects of an organization's pay structure.

True

T or F: Most firms do not have generic strategies but use a blend of cost and innovation.

Compensable factors

Which of the following terms refers to the criteria used for evaluating jobs in the point method?

1. develop preliminary job information 2. conduct initial tour of work site 3. conduct interviews 4. conduct second tour 5. consolidate job information 6. verify job description

CONVENTIONAL JOB ANALYSIS PROCEDURES

the executive leadership's views about the organization and its strategic purpose

In an organization, competencies are derived from _____.

Determine the pay for the different jobs within a single organization Allocate those employees among those different jobs

Internal labor markets consists of the rules and procedures that

Whether there are any outliers Whether all employers show similar patterns Whether a single company dominates

What are the anomalies in pay survey data that an analyst should look for when verifying the survey data?

Variations in the value of quality differences Variations in the mix of pay forms competitors use Variations in quality among job applicants

What are the differences among organizations that pay grades and pay ranges offer flexibility to deal with?

marginal product of labor

An employer cannot alter most factors of production, such as technology, capital, or natural resources, in the short term. Thus, it can only alter its level of production if it alters the level of human resources. In these conditions, a single employer's labor demand coincides with the _____.

expenses associated with employing that person

An employer will keep hiring until the marginal revenue generated by the last hire equals the _____.

True

T or F: Compensation strategy, HR strategy, and business strategy ultimately seek to decrease costs or increase revenues, relative to competitors.

false

T or F: Fundamental skills include familiarity with company forms and procedures, basic product knowledge, safety, basic computer usage, and so on.

False

T or F: Greater pay dispersion is related to lower turnover among executives.

true

T or F: Job content does not have intrinsic value if its value depends on what it can command in the external market.

False

T or F: Management and HR research has conclusively shown that goal setting and job enrichment produce the largest and most reliable increases in job performance.

true

T or F: Most firms allow managers to request a reanalysis of their job and/or a skills reevaluation, but few extend the process to all employees unless it is part of a union-negotiated grievance process.

true

T or F: One of the pitfalls of competency systems is trying to do too many things with ill-suited systems.

True

T or F: Organizations design their pay structures around jobs and job levels.

true

T or F: Skill-based pay plans can focus on both the depth and breadth of work.

false

T or F: Skill-based plans become increasingly economical as the majority of employees become certified at the highest pay levels.

May force the employer to increase wages of current employees too to avoid internal misalignment and murmuring

negative affects of the lead pay-level policy

Internal alignment based on content

orders jobs on the basis of the skills required for the jobs and the duties and responsibilities associated with the jobs

industry strategy, size, individual manager

organization factors include

total returns

total compensation and relational returns

may not match the pay structures of competitors

An issue encountered while adjusting an organization's pay structure is that the job structure that emerges from internal job evaluation _____.

False

T or F: The content of a job refers to the worth of the job and its relative contribution to the organization's objectives.

True

T or F: The difference between exchange value and use value surfaces when one firm acquires another.

false

T or F: The different functions or groups within bands are usually priced the same due to external market differences.

true

T or F: The marginal product and the marginal revenue of a new hire are not directly measurable quantities.

false

T or F: The most influential theory explaining pay-level differences is marginal revenue productivity.

Employees should be able to view the way in which their work is linked to the work of others and the organization's objectives. It should be fair to employees.

Which of the following requirements should be met by an organization's pay structure?

competency sets

translate each core competency into action

Control costs and increase revenue Attract and retain employees

Both pay level and pay mix decisions focus on two objectives

Reanalyzing the job evaluation or market data for the job

Identify the best solution to the differing pay structures for a job that arise out of differences between market structures and rates and job evaluation rankings.

When the work can be routinized When the electronic transmission of inputs and outputs is simple When only limited interaction with other workers is required

Identify the conditions under which jobs are susceptible to outsourcing.

It would be difficult to design and manage. It would not be approved by the U.S. Internal Revenue Service. It may confuse employees.

Identify the disadvantages of offering employees unlimited choice in terms of compensation

There are practically important differences in salary when different evaluators assign job evaluation points. There is high agreement when different evaluators rank-order jobs.

Identify the true statements about the findings of most studies on the reliability of job evaluations

Major expense that must be managed Major factor determining employees attitudes and behaviors and thus organization performance

Identify the ways in which compensation affects the success of managers

cost cutter

efficiency- focused strategy doing more with less by minimizing costs, encouraging productivity increases, and specifying in greater detail exactly how jobs should be performed

Establish purpose of evaluation Decide whether to use single or multiple plans Choose among alternative approaches Obtain involvement of relative stakeholders Evaluate plan's usefulness

major decisions in Determining an Internally Aligned Job Structure

1. why perform job analysis? 2. what information is needed? 3. how to collect information? 4. who to involve? 5. how useful are the results?

major decisions in designing a job analysis

Establishes similarities and differences in the work contents of the job Helps establish an internally fair and aligned job structure

major uses of job analysis

salaries

pay given to employees who are exempt from regulations of the Fair Labor Standards Act and hence do not receive overtime (managers and professionals). Exempt pay is calculated at an annual or monthly rate rather than hourly.

pay mix

refers to the various types of payments, or pay forms, that make up total compensation

customer-focused

stresses delighting customers and bases employee pay on how well they achieve this

multi-skill system

systems that link pay to the number of different jobs (breadth) an employee is certified to do, regardless of the specific job he or she is doing

ability to pay

the ability of a firm to meet employee wage demands while remaining profitable; a frequent issue in contract negotiations with unions

The marginal product of labor

the additional output associated with the employment of one additional human resource unit, with other factors held constant

surplus value

the difference between labor's use and exchange values. Under capitalism, wages are based on labor's exchange value- which is lower than its use value- and thus provide only a subsistence wage