Chapter 11 - Final Exam - MIE 330

Key Jobs

Benchmark jobs, used in pay surveys, that have relatively stable content and are common to many organizations.

Equity Theory

Equity theory suggests that people evaluate the fairness of their situations by comparing them with those of other people.1 According to the theory, a person (p) compares her own ratio of perceived outcomes O (pay, benefits, working conditions) to perceived inputs I (effort, ability, experience) to the ratio of a comparison other (o).

_____ refers to the relative pay of different jobs and how much they are paid.

Pay structure Salary-level decisions can be broken into two areas: pay structure and individual pay. Pay structure refers to the relative pay of different jobs (job structure) and how much they are paid (pay level).

Internal equity pay comparison is:

focused on what employees within the same organization but in different jobs are paid.

Labor Market Competition

Essentially, labor market competition is the amount an organization must pay to compete against other companies that hire similar employees. These labor market competitors typically include not only companies that have similar products but also those in different product markets that hire similar types of employees. If an organization is not competitive in the labor market, it will fail to attract and retain employees of sufficient numbers and quality. For example, even if a computer manufacturer offers newly graduated electrical engineers the same pay as other computer manufacturers, if automobile manufacturers and other labor market competitors offer salaries $5,000 higher, the computer company may not be able to hire enough qualified electrical engineers. Labor market competition places a lower bound on pay levels.

Product-Market Competition

they must be able to sell their goods and services at a quantity and price that will bring a sufficient return on their investment. Organizations compete on multiple dimensions (quality, service, and so on), and price is one of the most important dimensions. An important influence on price is the cost of production.

Pay Policy Line

A mathematical expression that describes the relationship between a job's pay and its job evaluation points.

Comparable Worth

A public policy that advocates remedies for any undervaluation of women's jobs (also called pay equity)

Efficiency Wage Theory

A theory stating that wage influences worker productivity. For example, organizations that emphasize decentralized decision making may need higher-caliber employees. Another circumstance where higher pay may be warranted is when an organization has difficulties observing and monitoring its employees' performance

Job Evaluation

An administrative procedure used to measure internal job worth.

Benchmarking

Comparing an organization's practices against those of the competition.

Which of the following pays is similar to pay structures based on individual characteristics such as skill or knowledge but usually refers to a plan that covers exempt employees?

Competency-based pay One of the responses to job-based pay structure problems has been to move away from linking pay to jobs and toward building structures based on individual characteristics such as skill or knowledge. Competency-based pay is similar but usually refers to a plan that covers exempt employees (such as managers).

Rate Ranges

Different employees in the same job may have different pay rates. permits a company to recognize differences in employee performance, seniority, training, and so forth in setting individual pay (discussed in the next chapter). For some blue-collar jobs, however, particularly those covered by collective bargaining contracts, there may be a single rate of pay for all employees within the job.

Pay Communication and Participation

Employee participation in compensation decision making can take many forms. For example, employees may serve on task forces charged with recommending and designing a pay program. They may also be asked to help communicate and explain its rationale. Communication is likely to have other important effects. We know, for example, as emphasized by equity theory that not only actual pay but the comparison standard influences employee attitudes

Exempt

Employees who are not covered by the Fair Labor Standards Act. Exempt employees are not eligible for overtime pay

Which of the following best describes a broad band in job-based pay structures?

It refers to the wider grouping of jobs accomplished through delayering In response to the problems caused by job-based pay structures, some organizations are delayering, or reducing the number of job levels to achieve more flexibility in job assignments and in assigning merit increases. These broader groupings of jobs are also known as broad bands. One possible disadvantage of delayering and banding is a reduced opportunity for promotion. Therefore, organizations need to consider what they will offer employees instead.

Which of the following is an administrative procedure used to measure internal job worth using measurable factors?

Job evaluation Job evaluation is an administrative procedure for measuring internal job worth. A job evaluation system is composed of compensable factors and a weighting scheme based on the importance of each compensable factor to the organization.

Pay Grade

Jobs of similar worth or content grouped together for pay administration purposes.

Skill based Pay

Pay based on the skills employees acquire and are capable of using. research demonstrates that workforce flexibility is significantly increased under skill-based pay.26 For example, in a production environment, workers might be expected not only to operate machines but also to take responsibility for maintenance and troubleshooting, quality control, even modifying computer programs.27 Toyota concluded years ago that "none of the specialists [e.g., quality inspectors, many managers, and foremen] beyond the assembly worker was actually adding any value to the car. What's more ... assembly workers could probably do most of the functions of specialists much better because of their direct acquaintance with conditions on the line

Which of the following is the most widely used method in job evaluation that yields scores for each compensable factor?

Point-factor system Although there are numerous ways to evaluate jobs, the most widely used is the point-factor system, which yields job evaluation points for each compensable factor. After generating scores for each compensable factor on each job, job evaluators often apply a weighting scheme to account for the differing importance of the compensable factors to the organization.

Delayering

Reducing the number of job levels within an organization. Pratt and Whitney, for example, changed from 11 pay grades and 3,000 job descriptions for entry-level through middle-management positions to 6 pay grades and several hundred job descriptions.22 These broader groupings of jobs are also known as broad bands. Table 11.8 shows how banding might work for a small sample of jobs.

Fair Labor Standards Act

The 1938 law that established the minimum wage and overtime pay. The FLSA also permits a subminimum training wage that is approximately 85% of the minimum wage, which employers are permitted to pay most employees under the age of 20 for a period of up to 90 days.

Pay Level

The average pay, including wages, salaries, and bonuses, of jobs in an organization.

Compensable Factors

The characteristics of jobs that an organization values and chooses to pay for. compensable factors are the characteristics of jobs that an organization values and chooses to pay for. These characteristics may include job complexity, working conditions, required education, required experience, and responsibility.

Minimum Wage

The lowest amount that employers are legally allowed to pay; the 1990 amendment of the Fair Labor Standards Act permits a subminimum wage to workers under the age of 20 for a period of up to 90 days.

Pay Structure

The relative pay of different jobs (job structure) and how much they are paid (pay level).

Job Structure

The relative pay of jobs in an organization. In Organization 1, jobs A and B are paid an annual average compensation of $40,000 and $60,000, respectively. In Organization 2, the pay rates are $45,000 and $55,000, respectively. Organizations 1 and 2 have the same pay level ($50,000), but the job structures (relative rates of pay) differ.

Which of the following is true of key jobs?

They can be used in pay surveys. Key jobs are benchmark jobs that have relatively stable content and—perhaps most important—are common to many organizations. Therefore, it is possible to obtain market pay survey data on them.

Which of the following is an example of an equal employment opportunity regulation that prohibits sex- and race-based differences in employment outcomes such as pay, unless justified by business necessity?

Title VII of the Civil Rights Act

Which of the following refers to a procedure in which an organization compares its own practices against those of the competition?

benchmarking To compete for talent, organizations use benchmarking, a procedure in which an organization compares its own practices against those of the competition. In compensation management, benchmarking against product market and labor market competitors is typically accomplished through the use of one or more pay surveys, which provide information on going rates of pay among competing organizations.

_____ is a public policy that focuses primarily on advocating remedies for any undervaluation of women's jobs.

comparable worth Comparable worth (or pay equity) is a public policy that advocates remedies for any undervaluation of women's jobs. The idea is to obtain equal pay, not just for jobs of equal content (already mandated by the Equal Pay Act of 1963) but for jobs of equal value or worth, on the basis of Title VII of the Civil Rights Act.

External equity pay comparisons focus on what:

employees in other organizations are paid for doing the same general job.

Job-based pay structure:

encourages a lack of initiative on the part of employees. The job description sets out specific tasks and activities for which the incumbent is responsible and, by implication, those for which the incumbent is not responsible. Although this facilitates performance evaluation and control by the manager, it can also encourage a lack of flexibility and a lack of initiative on the part of employees.

According to the _____, a person compares her own ratio of perceived outcomes to perceived inputs to the ratio of a comparison other.

equity theory Equity theory suggests that people evaluate the fairness of their situations by comparing them with those of other people. According to the theory, a person (p) compares her own ratio of perceived outcomes O (pay, benefits, working conditions) to perceived inputs I (effort, ability, experience) to the ratio of a comparison other (o).

The Fair Labor Standards Act (FLSA):

established a minimum wage for jobs. The 1938 Fair Labor Standards Act (FLSA) establishes a minimum wage for jobs, which now stands at $7.25 per hour. State laws may specify higher minimum wages.

Which of the following statements is true about the Fair Labor Standards Act (FLSA)?

it exempts executive, professional, and administrative occupations from FLSA coverage.

Under the _____ approach, jobs of similar worth or content are grouped together for pay administration purposes.

pay grade Under the pay grade approach, jobs of similar worth or content are grouped together for pay administration purposes. Each job within a grade would have the same rate range (i.e., would be assigned the same midpoint, minimum, and maximum).

The average compensation—including wages, salaries, and bonuses—of jobs in an organization is called the _____.

pay level Pay level refers to the average pay, including wages, salaries, and bonuses, of jobs in an organization. Both pay level and job structure are characteristics of organizations and reflect decisions about jobs rather than about individual employees.

The _____ is a mathematical expression that describes the relationship between a job's pay and its job evaluation points.

pay policy line The pay policy line is a mathematical expression that describes the relationship between a job's pay and its job evaluation points. Organizations develop a market pay policy line based on the key jobs (for which there are both job evaluation and market pay survey data available). This line can be generated using a statistical procedure (regression analysis).

Which of the following concepts addresses the fact that different employees in the same job may have different pay rates?

rate ranges The concept of rate ranges addresses the fact that different employees in the same job may have different pay rates. The use of rate ranges permits a company to recognize differences in employee performance, seniority, training, and so forth in setting individual pay.

Compensable factors are employee's job characteristics that:

the company is willing to pay for. A job evaluation system is composed of compensable factors and a weighting scheme based on the importance of each compensable factor to the organization. Simply stated, compensable factors are the characteristics of jobs that an organization values and chooses to pay for.