Ch. 8: Designing Pay Levels, Mix and Pay Structures - MGT 461

Use pay ranges for?

** recognize individual performance ** meet employee's expectations ** encourage employees to remain with the organization

What steps involved in broad branding?

- Price the bands - Set the number of bands

Employers belonging to a labor market must compete against:

- The same services and products - Employees situated in the same geographic area - The same skills or occupations

Rank the jobs in an organization's hierarchy in decreasing order of the sizes of their pay ranges, beginning with the positions that have the largest percent above and below their range midpoint.

1. Top-level management positions 2. Entry to midlevel professional and managerial positions 3. Office and production work

The amount of cash each job and incumbent is worth

Base Pay

Competition for these skills is usually local or regional.

Clerical and production skills

Survey data are used by employers to gather _____ _____ in order to better understand how competitors achieve their market share and price their products and services.

Competitive Intelligence

Pay range is a control device because a range maximum is the highest an organization is willing to pay for the work and the range minimum is the lowest

External Alignment Perspective

Pay range reflects the variations in experience or performance that an organization wishes to acknowledge with pay

Internal Alignment Perspective

Competition for these skills is usually national or international.

Managerial and professional skills

Instead of reconciling an internal and external pay structure, some employers directly use _____ to determine their internal pay structures and mimic competitors' structures.

Market Surveys

Which of the following approaches determines pay structures almost entirely on external market rates?

Market pricing

In a pay survey, a _____ is calculated by summing up the base wages of all organizations in the survey and dividing by the number of organizations.

Mean

Jobs in an organization that are seen as considerably equal for pay purposes are grouped into a _____ to build flexibility into the organization's pay structure.

Pay Grade

A(n) _____ is the systematic process of collecting and making judgements about the compensation paid by other employers.

Survey

Which of the following statements is true regarding broad bands?

They foster cross-functional growth.

The amount of cash each job and incumbent is worth plus bonus

Total Cash

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.

benchmark conversion

In an organization that uses a pure market pricing strategy, the pay structure is completely determined by _____.

competitor's pay decisions

Broad banding leaves an organization vulnerable to charges of _____.

inconsistent or illegal practices and favoritism

The optimal overlap between the pay grades of employees and managers should be large enough to _____.

induce employees to seek promotion into a higher grade

The _____ pay strategy emphasizes external competitiveness and deemphasizes internal alignment. - job structure - broad banding - reference rate - market pricing

market pricing

Size of pay differentials between grades should _____. be based upon differentials in market surveys be approximately 15 percent support career movement through the pay structure be between 10 and 25 percent

support career movement through the pay structure

Adjustments made by employers to workers' pay levels on a regular basis can be based on the overall movement of wage rates caused by _____.

the competition in for labor in the market

The process of multiplying survey data by some factor judged to reflect the difference between a survey benchmark job and a company job is called _____. - updating - point factor adjustment - lead/lag policy adjustment - survey leveling

- survey leveling

The _____ publishes extensive information on various occupations in different geographic areas. It is a major source of publicly available compensation data. Chamber of Commerce Bureau of Labor Statistics Compensation Association Department of Economics

Bureau of Labor Statistics

Gramhold Inc., a pharmaceutical company, reduces its 10 salary grades to just three broad bands. Which of the following statements is most likely to be true in this case? Gramhold will face difficulty in defining job responsibilities broadly with the new structure. Gramhold will find that the new structure hinders cross-functional growth. Gramhold will experience career moves within bands more than career moves between bands. Gramhold will offer recognition via titles rather than through cross-functional experience and lateral progression.

Gramhold will experience career moves within bands more than career moves between bands.

The amount of cash each job and incumbent is worth plus bonus, stock options, and benefits

Total Compensation

The distribution of rates around a measure of central tendency is called _____.

Variation

A(n) _____ _____ links a company's benchmark jobs on the horizontal axis with market rates paid by competitors on the vertical axis.

market line

A survey conducted in January 2013 found that the median pay effective January 1, 2013, for a clerk was $22,000 and that the forecast rate of wage increases in the market for 2013 was 5 percent and another 5 percent for 2014. An employer choosing to follow a lead strategy of 4 percent above the market for the plan year will need to _____. multiply the salary by 105 percent and then by 109 percent increase the clerk salary by $2,200 multiply the salary by 109 percent multiply the salary by 114 percent

multiply the salary by 105 percent and then by 109 percent

_____ _____ is a technique that collapses salary grades into only a few broad bands, each with a sizable range.

Broad Banding

An organization has an employee with performance ratings that are consistently high. According to the salary increase matrix of the organization, the pay of the employee should be _____.

above the pay range midpoint

When are survey participants declared guilty of price fixing? - When they outlaw conspiracies in restraint of trade - When they cause interference with competitive prices - When they cause wages to be held down artificially - When they uphold Section 1 of the Sherman Act

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

What do unusual shapes of frequency distributions in a pay survey reflect? - Companies with very different pay policies - Issues with job matches - Consistency across all organizations - High level of match between all companies' jobs and the survey job - greatly dispersed pay rates

- greatly dispersed pay rates - Companies with very different pay policies - Issues with job matches

Which of the following statistical measures shows how similar or dissimilar the market rates are from each other? - weighted mean - mean - standard deviation - median

- standard deviation

Which of the following jobs would most likely fall into a fuzzy market? The position of English professor that was filled by a Ph.D. holder in English Language and Literature with five years of teaching experience The position of Sound Engineer that was filled by a graduate with a degree in audio engineering The position of Senior Director of Future Vision Services that was filled by a software engineer with e-commerce, marketing, and theater experience The position of Vice-President of a marketing firm that was filled by a marketing manager with 15 years of experience in the marketing field

The position of Senior Director of Future Vision Services that was filled by a software engineer with e-commerce, marketing, and theater experience

Which of the following statements is true about market pricers? They align pay structures with the business strategy. Their pay structures are unique and difficult to imitate. They assume that little value is added through internal alignment. They emphasize pay structures based on unique technology or the way work is organized.

They assume that little value is added through internal alignment.