Compensation Exam II

taylor differential piece rate system

1 rate goes into place when an employee exceeds the time and the second rate is establish for below standard work

describe how supply and demand influence impact the number of people an org employs

ability of the organization to change what it charges for its products or services. if prices cannot be changed without decreasing sales, then the ability of the employer to set a higher pay level is constrained

weighted mean

add means together and divide by # of means

marginal product of labor

additional output associated with the employment of one additional person, with other production factors held constant

marginal revenue of labor

additional revenue generated when the firm employs one additional person, with other production factors held constant

standard rating scales

adjective anchors ED Average A Average PR Average E Good V Average

behaviorally anchored rating scales

anchoring with concrete behaviors...exceeds expectations etc. ED Good A Good PR Good E Average V Good inter rater reliability

halo error

appraiser giving favorable ratings to all job duties based on impressive performance in just one job function

pay forms

are the various types of payments, or pay mix, that make up total compensation

supervisors raters

assign what work are to perform so they are knowledgeable about the job. prior experience in rating employees. more reliable. prone to halo and leniency errors

mean

average

create bands

average bands out

pay level

average of the array of rates paid by an employer (base + bonuses + benefits + value of stock holding)/number of employees)

central tendency error

avoiding extremes in ratings across the employees

risk sharing

base pay is reduced by some amount

aging or trending survey data?

because employers are raising employee pay at various times during the year, survey data must be updated using a process

which jobs should you include in survey

benchmark job approach

work/life

benefits are a huge piece of the pie. balanced oriented benefits to work/life

what are some different types of compensation data you might collect when doing a wage survey?

benefits vs. wage

pro/cons to broad banding

bigger band means wider range for employees

performance driven

bonus is bigger than any other pie, contingent pay dont just automatically get the pay you have to meet a performance threshold

validity criterion

by far the most research has been done on eliminating errors and improving accuracy

goal setting theory

challenging performance goals influence greater intensity and duration in employee performance. line of sight is important performance targets should be communicated in terms of specifics feed back is important performance based pay should be contingent upon goal achievement

subordinate raters

chance to both see strengths and weaknesses. attaining candid reviews and also in counseling the ratee on how to deal with the feedback

gain sharing

company is getting gains and they are going to share with the individuals in that group

who would an employer ever pay more than the market determined rate

compensating differentials -negative work characteristics require higher wage efficiency wage - pay for good employees signaling - signal behaviors employer wants

who should be involved in a market survey process?

compensation manager and managers that will be impacted. employees that will be impacted. outside help maybe

what is an employer of choice/shared choice policy

compete on their overall reputation of their work. personality characteristics because of their work. some degree of choice to employees about their benefits - good thing until a point

why would you market price

competitive with the market

self raters

complete knowledge about ratee's performance. more lenient and possibly more unreliable than rating from other sources

leniency error

consistently rating someone higher than is deserved

spillover error

continuing to downgrade an employee for performance errors in prior rating periods

describe how industry and technology, employer size, people's preferences, and organization strategy influence external competitiveness

depending on the industry is how much and how much the element is used determines the price

how do pay level and pay mix decision affect efficiency, fairness, and compliance

depends on how the employee views their work and if they are getting compensated for their work efficiently, fairly, and depending on that whether or not they'll do their job in time

how do you set pay mix

depends on the work the employees are doing and what your company is looking for

scanlon plan

designed to lower labor costs without lowering the level of a firms activity. incentives are dervved as a function between labor costs/sales of production(SVOP) SVOP includes revenue and value of goods in inventory

first impression error

developing a negative or positive opinion of an employee early in the review period and allowing that to negatively or positively influence all later perceptions of performance

pay grade?

different jobs but considered equal for pay purposes all jobs within a single grade will have the same pay grade

how would you go about identifying an anomaly or outleir in your survey results?

does any one company dominate? doe all employees show similar patterns if not where.

cost criterion

does the evaluation form initially require a long time to be developed? expensive to use?

personnel research criterion

does the instrument lend itself well to validating employment results?

employee development criterion

does the method communicate the goals and objectives of the org

why do companies use pay grades and ranges

easier

success sharing plans

employee base pay is constant

herbergs two factor theory

employees are motivated by two types of motivators: hygiene factors and satisfiers pay level is important must meet minimum security plans will induce minimum. success sharing plans will be motivating other conditions in working relationship influence the effectiveness of performance based pay

equity theory

employees are motivated when perceived outputs are equal to perceived inputs performance measures must be clearly defined payouts do not match expectations, employees will act negatively fairness and consistency employees evaluate their pay effort balance in comparison to others

performance dimension training

exposes supervisors to the performance dimensions to be used in rating (quality of work, job knowledge) thus making sure everyone is on the same page when thinking about a specific performance dimension

rucker plan

expresses the value of production required for each dollar of total wage bill labor costs/value added

pay for performance - equity/fairness

fair to employees both on employer and employee side

performance plans

feature corporate performance objectives for a time three years in the future. driven by financial earnings or return measures, and they pay out for meeting or exceeding specific goals

profit sharing

focuses on a predetermined index of profitability and company should specify the funding formula. company shares profits with employees

profit sharing

focuses on predetermined index of profitability and company should specify the funding formula

group incentive plan or group bonus

gain sharing, profit sharing, earning at risk like a lump sum but based on team performance

similarity error/clone error

giving better ratings to individuals who are like the rater in behavior and or personality

employee stock ownership plans?

giving stock as a reward - effect are long term

rater error training

goal is to reduce psychometric errors (leniency, severity, central tendency, halo) by familiarizing raters with their existence

base pay

guaranteed portion of an employee's wage package

bourse market

haggling over a price

merrick multiple piece rate system

high - exceed 100% standard medium - exceed 83%-100% low - anything below 83%

how do you use regression to determine what pay would be benchmark and nonbenchmark jobs according to market survey data?

horizontal - internally aligned vertical - externally aligned

administrative criterion

how easily can evaluation results be used for administrative decisions concerning wage increases, promotions, demotions, terminations, and transfers?

standard deviation

how far away from the market

what are some examples of organizational data that you might collect when doing a wage survey?

how many employees, how big of a company they are, how their industry is doing, benefits vs. wage

does market pricing make sense?

in some sense but its not unique but fairness is presumed to be reflected

customer raters

increased interest is ratings from customers

how many employees should you collect data from?

isnt really an answer

job vs. pay structure

job - orders jobs on the basis of internal factors pay - anchored by external competitive position

straight ranking

just that...employees ranked relative to one another

why is it important to identify the purpose of a market survey?

know what you are going to adjust your pay level, pay mix, pay structure.

which type of error is the most difficult to eliminate

leniency

what type of training work best

longer training programs to reduce halo errors and improve accuracy

meet strategies

match with competition, no competitive advantage to attracting talent

lead strategies

maximizes the change that true talent is acquired by high wages 1. minimizes dissatisfaction with pay 2. advantages - high wages, less vacancy rates, reduce training time, reduced turnover and absentee rates 3. disadvantages - may force employer to increase wages of current employees too, higher turnover

median

middle of data

market match

mimics pay mix of competitors

expectancy theory

motivation is the product of three perceptions: expectancy, instrumentality, and valence. larger incentive payments are better line of sight is critical employee assessments of their own are important

lump sum bonus

not built into base pay and less of an entitlement. Done know if you will get or not less expensive and employees don't like it because it is not guaranteed

recency error

opposite of first impression error. allowing performance either good or bad, at end of the review period to play too large a role in determining an employee's rating for the entire period

broad based option plans

stock grants. gives employees shares of stock over a designated time period.

horn error

opposite of halo error. downgrading an employee across all performance dimensions exclusively because of poor performance on one dimension

severity error

opposite of leniency error. rating individuals consistently lower than is deserved.

quartiles/perentiles

orders all data points from lowest to highest then convert in to percentiles

standard hour plan

paid per hour less competitive work

straight piecework plan

paid per piece you complete

agency theory

pay directs and motivates employee performance performance based pay is optimal compensation choice performance targets should be tied to org goals use of performance based pay will require higher total pay oppurtunity

labor costs

pay level * number of employees

how is a market line different than a pay policy line

pay policy is the line that protrays an organization's respect to the market line

merit pay

pay will increase by 2% each year based on performance reviews and it is built into base pay.

follow strategies

paying below market rates - can lag on base pay but lead on benefits - how long can you survive on a promise -disadvantage - hinder company's way to get new talent

maslow hierarchy of needs

people are motivated by inner needs - most basic to higher order. performance based pay may be domotivating incentive pay is motivting

what have they been most successful in improving in rater training

performance dimension training and performance standard training combined

how are performance appraisals used to make compensation decisions?

performance metrics to help with compensation decisions regarding bonuses, raises ect

pay for performance - efficiency

strategy - support corporate objectives Structure - org structure sufficiently decentralized to allow different operating units to create flexible variations Standards- objectives, measures, eligibility, funding

gain sharing plans

strength of reinforcement productivity standards sharing the gains scope of the formula perceived fairness of the formula ease of administration production variability

key elements of gain sharing

strength of reinforcement productivity standards sharing the gains scope of the formula perceived fairness of the formula ease of administration production variability

earning at risk plans

success sharing pan - employee base pay is constant but if you do well then you get more risk sharing plan - base pay is reduced by some amount

essay

supervisors answer open ended questions describing employee performance ED Unknown A Poor PR Poor E Average V Unknown

how do you go about creating a pay policy line?

take the regression equation and put your organization's numbers in

halsey 50-50 method

tasks less in standard time buyt if you complete faster than they will give you a 50% gain of what company saved. uses time studies

significance of the brito vs. zia company case

their performance evaluations which were used for layoffs resulted in a disproportionate number of minorities being discharged

pay range?

two or more rates are paid to employees in same job allows managers to recognize individual performance differences with pay need max, min, midpoint

360s

using all or parts of different raters

how do you reconcile differences between job and pay structure

using both to make your market line with regression making your pay line combining the two

bedeaux plan

variation of straight piecework and standard hour plan

management by objectives

planning and appraisal tool. org objectives are identified from strategic plan. each successively lower level in the org hierarchy is charged with identifying work objectives that will support attainment of org goals. did they do that goal? ED Excellent A Poor PR Poor E Poor V Excellent

unusual shape in a frequency distribution may indicate...

problem with matches, widely dispersed pay rates, employers with widely divergent pay policies

describe survey leveling or benchmark conversation. how would you do it?

process of multiplying survey data by some factor judged to reflect the difference between a survey benchmark job and a company job

describe how product demand and degree of competition influence external competitiveness

product demand and degree of competition

performance standard training/frame of reference training

provides raters with a standard of comparison or frame of reference for making appraisals.

alternation ranking

recognizes that raters are better at rating people at extreme ends of distribution. best employee and then worst employees out of remaining employees

External Competitiveness

refers to the pay relationships among organizations - relative to their competitors

how do you create a market line - methods

regression

ranking

requires rater compare employees against each other to determine the relative ordering of group on some performance measure ED Poor A Poor PR Average E Good V Average

across the board increases

wage increase granted to all employees, regardless of performance. size related to some subjective assessment of employer about ability to pay. add on to base pay in subsequent years

what is the balanced scorecard approach?

way to look at what contributes value in an org

what employers should you collect market data from?

who compete for same occupation or skills, in same geographic area, same products and services

what determines how a job seeker will respond to offers

reservation wage = job seekers will not accept jobs with pay below a certain wage, no matter how attractive other job aspects human capital = value of an individual's skills and abilities is a function of time and expense required to acquire them

broad banding

wide salary bands and more encompassing.

pay for performance - compliance

with laws

peers raters

work more closely with others, distorted perspective of typically performance. little or no experience in conducting appraisals. group tension

reinforcement theory

rewards reinforce performance timing of payout is important

cost of living increases

same as across the board except magnitude based on change in cost of living - measured by the CPI

market pricing

sets pay structure almost exclusively on external market rates, competitive rates for jobs for which external market data are available are calculated, and remaining jobs are blended into pay hierarchy.

determine what jobs fit into a grade?

similar characteristics, or importance of duties

paired ranking

simplifies the ranking process by forcing raters to make ranking judgments about discrete pairs of people

quoted price market

specific item that is label a specific price

rowan plan

workers bonus increases as the time to complete the task decreases

combination plan? self funding plan?

specify that payouts only occur after the company reaches a certain profit target. Then variable payouts for individuals, teams, and company performance are triggered.

improshare

standard hour plan but four group=actual hours worked/total std hours develops standard to identify expected hours required to produce an acceptable level of output savings are shared by firms and workers easy to administer and to communicate

gnatt plan

standard time for a task is purposely set at a level requiring high effort to complete. if they do manage to complete it then employee gets 120% of time saved for a bonus

how do you establish a pay range?

%age below and above

advantages/disadvantages to group team incentive plans

+ do see that they increase performance, easier to develop performance measures for, send message that cooperation is important - line of sight, lose more of star employees

pay level and mix decisions focus on what two objectives

1. control costs and increase revenues 2. attract and retain employees

what are the six issues stressed by courts when it comes to setting up a performance appraisal system

1. disposed to appraisal systems that give specific written instruction 2. org tend to be able to support their case better when appraisal system incorporates clear criteria for evaluating performance 3. presence of adequately developed job descriptions provides a rational foundation for personnel decisions 4. approve of appraisals that require supervisors to provide feedback about appraisal results the the employees affected 5. like evaluation systems that incorporate a review of any performance rating by a higher level superior 6. suggest that the key to fair appraisal depend on consistent treatment across raters

four basic assumptions of labor markets

1. employers maximize products 2. people are homogeneous and therefore interchangeable 3. pay rates reflect all costs associated with employment 4. markets faced by employers are competitive, no advantage for a single employer to pay above or below the market

what determines external competitiveness

1. labor market factors 2. product & service market factors 3. organization factors

describe the best practices for the performance evaluation process

1. sound basis for establishing the performance appraisal dimensions and scales 2. involve employees in every step 3. make sure raters are trained in use of the appraisal system 4. make sure raters are motivated to rate accurately 5. raters should maintain diary of employee performance, both as documentation and a to job memor

can pay influence turnover? skill development? performance?

YES depends on employee

what are some factors that should be considered when considering offshoring and outsourcing

offshoring = different company outsourcing = having a different company make a part you need look at - labor costs agency theory, customer reactions, does it pay out

security approaches

only two things - benefits and base, no contingent pay. they get everything no matter what. promote creativity and risk taking

individual incentives

objective, pre-established level of performance and dimensions are which plans vary. leads to some payout

how can the relevant labor markets be determined

occupation geography competitors