MGT 404 Midterm

Pay Policy Line

a graphed line showing the mathematical relationship between job evaluation points and pay rate

Effectiveness of Job Analysis

• Reliability • Validity • Acceptability • Currency • Usefulness

Person-Based Structures: Competencies

• 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

The Purpose of a Survey

• To adjust the pay level in response to changing rates paid by competitors • To set the mix of pay forms relative to that paid by competitors • To establish or price a pay structure • To analyze pay-related problems • To estimate the labor costs of product, or service market competitors

Pay Mix Alternatives

- Performance Driven - Market Match - Work/Life Balance - Security

Two key aspects of setting a defining competitiveness

- Setting a pay level - Determining the pay mix

Skill Analysis

A systematic process of identifying and collecting information about skills required to perform work in an organization

Equity Theory

A theory that states that people will be motivated when they perceive that they are being treated fairly

Tournament Theory

A theory which states that people are highly motivated to receive extremely valuable rewards, even when the probability of receiving the reward is quite small -Best with individualistic environment

Living wage

At local levels provides a minimum wage tailored to living costs in an area • It may only cover city employees or those who do business with the city • It may only cover base wages, but may require health insurance, vacations, sick pay, job security, and incentives to unionize

Skill block

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

Compensable factors

Characteristics in the work that the organization values, that help it pursue its strategy and achieve its objectives Used to determine appropriate job compensation

Cost cutter compensation strategy

Encourages productivity increases

Overtime and Hours of Work

FLSA requires pay at one-and-a-half times standard pay for more than 40 hours/week Employers may bypass the law by classifying workers as "executives" The impact of FLSA depends on the degree of enforcement

Purpose of Job Evaluation

Helps establish an aligned pay structure

Pay Model Techniques

Internal Structure Pay Structure Pay for Performance Evaluation

What do job evaluations help to ensure?

Internal equity Organizational strategy Support work flow Motivation for employees

Purpose of benchmark jobs

Its contents are well known and relatively stable over time The job is common across employers A reasonable proportion of the work force holds this job A sample of benchmark jobs will capture the diversity of work Ideally have benchmark jobs at all levels of the job family

Job Vs. Person Based Structures

Job: Focuses on work content: tasks, behaviors, responsibilities Person: Skills, knowledge, competencies possessed

Hay Group Description

Know-how: Technical, human relational Problem solving: How to effectively develop solutions that improve effectiveness Accountability: The requirement for and ability to achieve desired results

Pay Policy Alternatives

Lead, lag, match

Skill-based structures

Link pay to the depth or breadth of the skills, abilities, and knowledge a person acquires that are relevant to the work Wage attached to the person

Decisions in Compensation Strategy

Pay Level Pay Mix (Base, Incentives, Benefits) Team vs. Individual Performance vs. Seniority Hierarchical vs. Flat• Communication / Transparency Employee Choice

The greater the alignment between a businessstrategy and the compensation system, the moreeffective the organization

True

Hay Group Method

Uses three universal compensable factors to measure the relative size of jobs

Market Pay line

Using INTERNAL job evaluation points and EXTERNAL compensation data, we create a market payline

Why conduct a job analysis?

Workforce Planning • Hiring Standards and Requirements • Internal Promotions • Training Needs • Essential Job Functions (e.g. for ADA) • Performance Expectations and Evaluation • Compensation • Establish similarities/differences in the work content of jobs • Establish an internally fair job structure

Job based pay vs. Skill based pay

A job-based plan pays employees for the job, regardless of the skills they possess

Skill based pay

A pay system that rewards employees for the job skills they can demonstrate Common in manufacturing Avoids bottlenecks/idle hands

AMO Theory (Boxall & Purcell)

Compensation is key to attracting, retaining, and motivating employees Central to successful business strategy execution Performance (P) is a function (f) of three factors: ability(A), motivation (M), and opportunity (O)

Valuation Discrimination

Discrimination that focuses on the pay women and minorities receive for the work they perform

Pay Model Objectives

Efficiency (Performance, Quality, Customer and Stockholder, Cost), Fairness, Compliance, Ethics

Innovator compensation strategy

Emphasis on incentives encouraging innovation

Who cares about compensation?

Employees Managers Stockholders Society Competitors

The Hay Group Summary

perhaps the most widely used - this method considers work to be a process in which knowledge/skill/ability is applied to various issues and challenges in order to create an output that is of value to the organization. Compensable factors are: accountability, problem-solving, and know-how.

Scaling

What we did in Phase I with the 1-5 and descriptions

Access discrimination

When people are denied employment opportunities, or "access" to jobs, based on their race, sex, age, or other factors not related to productivity.

Job Analysis

the process of getting detailed information about jobs

Data submitted to a survey includes:

• Base salary (of each incumbent) • Years of service • Commissions (target/actual) • Bonus (target/actual) • Stock award eligible? • Overall benefit levels? (There are also benefits surveys for specific benefit offerings.)...and other things like shift differentials, company size, standard #of hours in a work week... Nothing to identify an employee.

Person based structure: cons

• Complexity to create • May pay for skills not being utilized • Expensive if employees 'top out' • Certification and Recertification required • Obsolescence of skills or competencies

FLSA's major provisions

• Minimum wage • Hours of work, including overtime • Child labor FLSA requires that records be kept of employees,their hours worked, and their pay

What time is covered in work/overtime?

• OSHA specifies the number of breaks to provide in an 8-hour workday • The Portal-to-Portal Act provides that time spent on activities before beginning the "principal activity" is not compensable

How to Collect Information for Job Analysis

• Observation • Questionnaires • Internally produce • External templates • Interviews • Employee performing the job • Manager - one/two levels

Person based structure: pros

• Perceived as Fair • Supports a learning organization • More talented/productive employees • Enhances workforce flexibility - work flow

How the government affects compensation

• Procedures for determining pay are fair (pay discrimination) • Safety nets for unemployed and disadvantaged are sufficient • Employees are protected from exploitation

Differences in pay are legal for these factors:

• Seniority • Merit or quality of performance • Quality or quantity of production • Some factor other than sex

Product Market Factors

-Degree of Competition -Level of product demand (puts a lid on maximum pay level)

Labor Market Factors

-Nature of demand -Nature of supply

Formulating a Total Compensation Strategy

1 - Assess total compensation implications 2 - Map a total compensation strategy 3 - Implement strategy 4 - Reassess

Civil Rights Act of 1964 (Title VII)

Prohibits discrimination on the basis of sex, race, color, religion, or national origin in any employment condition

Executive Order 11246

Requires affirmative action in hiring women and minorities

Job Matching

Survey participants match their own job descriptions from "benchmark jobs" to standard job descriptions created by the survey designer (typically an HR consulting firm)

Total Compensation

The complete pay package for employees, including all forms of money, income, benefits, cash compensation, work/life balance etc.

Relational Returns

recognition and status, employment security, challenging work, learning opportunities

Minimum wage

2.2 million workers are estimated to be paid at minimum wage Opposition to minimum wage argue it cause higher labor costs Enacted in 1938 at a rate of 25 cents per hour, now at $7.25

Data Collected for Job Analysis

Data related to job: tasks, roles etc. Data related to employee: written skills, verbal skills etc.

What shapes internal structures?

-External Factors Economic pressures Government Stakeholders: Unions and Shareholders Cultures and Customs -Organizational Factors Strategy Human Capital Work Design Technology HR Policies Employee Acceptance Procedural and Distributive justice

Point methods have three common characteristics:

1. Compensable factors 2. Factor degrees are numerically scaled 3. Weights reflect the relative importance of each factor Points are attached to each factor weight

Source of competitive advantage

1. Is it aligned?- Is it aligned with the business strategy? With external conditions? Internally with the overall HR system? 2. Does it differentiate?- How is the pay system managed?- Each strategy is woven into the company's overall HR strategy. 3. Does it add value?- Calculate the return on (pay) investments (ROI).

What shapes external competitiveness?

1. Labor Market Factors 2. Product Market Factors 3. Organization Factors

Pay Model Policies

1.) Internal alignment (Inside org.) 2.) External competition (Outside org.) 3.) Employee contributions (joint inside/out) 4.) Management (right people=right pay

Equal Pay Act (EPA) 1963

1963, part of FLSA, forbids wage discrimination on the basis of gender for equal work

Broad branding strategy

Consolidates a number of traditional grades into a single band with a minimum and maximum

Customer focused compensation strategy

Customer satisfaction incentives