EXAM 1 Chapter 1,2,3,5,7

Job Evaluation Methods: Classification

-A series of classes covers the range of jobs. Job descriptions are compared to class descriptions to determine class level. -Greater specificity of the class definition improves the reliability of the evaluation. -It also limits the number of jobs easily classified. Jobs within each class are considered equal and will be paid equally EX: Putting in a different class - Counter help (They all get paid the same level) -Shift leader (They all get paid the same) -GM (They all get paid the samE) Chap 5: pp 17

efficiency wages

-Attracts higher-quality applicants -Lowers turnover -Increases worker effort -Reduces "shirking" -Reduces the need for supervision -You pay people higher,it becomes efficient EX: Costco: they pay higher in the market, it attract higher quality applicant, lower turnover, increases worker effort, reduces shirking, and reduces the need for supervision -An organization's *ability to pay* means firms with greater profits than competitors can share this success with employees. -*Rent* is a return (profits) received from activities in excess of the minimum (pay level) needed to attract people to those activities. Chap 7 PP21-22

Job Evaluation Methods: Point Method/Step 3: Scale the Factor

-Common characteristics of point methods: 1.Compensable factors based on: >the strategic direction of the business, and >how the work contributes to the objectives and strategy. 2. Factor degrees numerically scaled. 3.Weights reflect the relative importance of each factor. EX: -Compensable Factor: skills, Certification, Years of Experience, Level of risk, More responsibilities, KSA, if you speak second language Why people get higher pay than others or why some position pay so high than others. -Step 3: Scale the factors. Most factor scales are 4 to 8 degrees, if equidistant, called *interval scaling* EX: Education 1-degree high school degree 2- degree Associate Degree 3-degree Bachelor Degree 4-degree Master Degree Chap 5: PP18

Sorting and Signaling

-Designing pay levels and mix as a strategy that signals to employees what is sought. -Employer signals include pay level and mix. -Employee signals include better training, education, and work experience. EX: Different major, their pay are different. Signal: For the gov, they don't offer a bonus; so the signal is don't work hard Chap 7 pp23

Major Decisions: Single versus Multiple Plans (Benchmark Kay Jobs)

-Firms may start with a sample of benchmark (key) jobs. Characteristics include: >Its contents are well known and relatively stable. >The job is common across employers, not unique to one employer. >A reasonable proportion of the work force is employed in this job. EX: Bank Teller -Nurse -Burger Flipper -Sales associates Chap 5: PP11

Compensating Differentials

-If a job has negative characteristics, then employers must offer higher wages. -Such compensating differentials explain the presence of various pay rates in the market. >Difficult to document. EX: When job have negative characteristics you will get higher pay Graveyard shift, Nurse, Oil rig, piolet Chap 7 PP20

Total Return for work (Relations Return)

-Mental and psychological as a payment. -Recognition status -Employment security -Challenging work -learning opportunity Chapter 1

Job Evaluation Methods: Ranking

-Orders job descriptions from highest to lowest based on relative value. EX: Server to busboy to host. OR GM to AM to Lead Counter to Counter help Chap 5: PP14

compensation of employees

-Pay is usually a major source of financial security. -Employees may see compensation as: >a return in an exchange, >an entitlement for being an employee of the company, >an incentive to take/stay in a job and invest in performing well, or as a reward for having done so. -Pay can influence employee motivation and behavior in two ways: >The "incentive effect" is the degree to which pay influences individual and aggregate motivation. >The "sorting effect" is the effect that pay can have on the composition of the workforce. +How an organization pays can result in sorting effects. Chapter 1

Guidance from the Evidence Equity Theory: Fairness

-People compare the ratio of their own outcomes to inputs with that of others. -Employees judge fairness by comparing: >to jobs similar to their own, >their job to others at the same employer, or >their pay against external pay levels. Chapter 3: PP 24

Virtuous and Vicious Circles

-Research indicates that: >how you pay matters as much as how much you pay. >*Performance-based pay:* +improves performance when combined with high-performance practices, and +can be the best practice under the right circumstances. Virtuous: When the company is doing good this option is good. EX: Car dealer, restaurant, Sales. Pay for performance goes up Vicious: When the company is doing bad, this is a good option. You cannot pay by performance or commission. EX: Macy's (They were booming and paid by commission) Now Macys is bad. So you cannot pay for performance. Pay for performance goes down Chapter 2

Comparison of Job Evaluation Methods (Ranking) ,(Classification point), (Point) PRO AND CONS

1. Ranking -Pro: Fast, simple, easy to explain, least expensive -Con: Cumbersome as a number of job increases. The basis for comparison is not called for. Ranking criteria becomes subjective as evaluators must be knowledgeable on every job. Results are difficult to defend and costly solutions may be required. 2. Classification Point -Pro: Can group a wide range of work together in one system. Compensable factor calls out for comparisons. -Con: Description may leave too much room for manipulation. 3. Point Method -Pro: Compensable factor communicates what is valued. -Con: Can become bureaucratic and rule-bound. Chap 5: PP13

Strategic Choices in Designing Internal Structures

1. Tailored -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. 2. Loosely Coupled -Requires constant innovation. -Pay structures are more loosely linked to the organization to provide flexibility. Chapter 3: PP20

Guidance from the Evidence : Tournament theory (and pay dispersion) & (Institutional model)

1. Tournament theory (and pay dispersion): motivation and performance. >The greater the differential between your and your boss's salary; the harder you work. >Does not directly address turnover. 2. Institutional model: copy others and conform. >Organizations use "best practices". >What aligns with the strategy of one organization may not align with that of another. Chapter 3:PP 25

Use Value and Exchange Value

1. Use Value: The value of goods/services an employee produces in a job. >EX: Use Value: How much is it worth -Experience, ability -if the market is hot then you will get a higher pay. 2. Exchange Value: The wage agreed upon by the employer and employee. EX: Exchange value: The people are willing to buy. - You are willing to take a lower pay because living might be cheaper or you just got out of college Chapter 3: PP #9

Internal Alignment (First-->Last)

: Work relationships within the 1. Organization (First) 2. Job Analysis 3. Job Description 4. Job Evaluation 5. Job structure (Last) Chapter 5: PP 9

What is HR strategy?

=pay as a supporting player or catalyst for change? EX: >MCD= Pay as supporting player >In N out= Catalyst for change Chapter 2

What is compensation?

All forms of financial returns and tangible services and benefits employees receive as part of an employment relationship. Forms of Pay >"Total compensation": is pay received directly as cash and indirectly as benefits. >"Relational returns": are psychological. Chapter 1

Labor Demand Theories and Implications

Chap 7 PP18-19,24 Study the chart

(Labor Demand) Who is in the supply side or demand side

Demand side: Employers Supple side: applicant and labor

I have an ice cream company and I have 5 employees right now. What will happen when I hire another person. Will the productivity go up, down or equal.

Diminishing marginal productivity =each additional employee has a progressively smaller share of production factors to work with. ANS: Productivity will go DOWN! Chap 7 PP 12

Support HR Strategy (Boxall and Purcell use the "AMO theory" )

P (Performance) = ƒ(A, M, O) Ability, Motivation, Opportunity Chapter 2