Exam 1

Correlation Coefficient

A common measure of association that indicates how changes in one variable are related to changes in another.

Fair Labor Standards Act of 1938 (FLSA)

A federal law governing minimum wage, overtime pay, equal pay for men and women in the same types of jobs, child labor, and record-keeping requirements.

Job Family

A group of jobs involving work of the same nature but requiring different skill and responsibility levels (e.g., computing and account recording are a job family; bookkeeper, accounting clerk, and teller are jobs within that family).

Point (Factor) Method

A job evaluation method that employs (1) compensable factors, (2) factor degrees numerically scaled, and (3) weights reflecting the relative importance of each factor. Once scaled degrees and weights are established for each factor, each job is measured against each compensable factor and a total score is calculated for each job. The total points assigned to a job determine the job's relative value and hence its location in the pay structure.

Alternation Ranking

A job evaluation method that involves ordering the job description alternately at each extreme. All the jobs are considered. Agreement is reached on which is the most valuable and then the least valuable. Evaluators alternate between the next most valued and next least valued and so on until the jobs have been ordered.

Interval Scaling

A particular numerical point difference has the same meaning on all parts of a scale.

Criterion Pay Structure

A pay structure to be duplicated with a point plan.

Person-Based Structure

A person-based structure shifts the focus to the employee: the skills, knowledge, or competencies the employee possesses, whether or not they are used in the employee's particular job.

National Metal Trades Association (NMTA) Plan

A point factor job evaluation plan for production, maintenance, and service personnel.

National Electrical Manufacturers Association (NEMA) Plan

A point factor job evaluation system that evolved into the National Position Evaluation Plan sponsored by NMTA associates.

Career Path

A progression of jobs within an organization.

Benchmark (Key) Job

A prototypical job, or group of jobs, used as a reference point for making pay comparisons within or without the organization. Benchmark jobs have well-known and stable contents; their current pay rates are generally acceptable, and the pay differentials among them are relatively stable. A group of benchmark jobs, taken together, contains the entire range of compensable factors and is accepted in the external labor market for setting wages.

Paired Comparision

A ranking job evaluation method that involves comparing all possible pairs of jobs under study.

Flat Rate

A single rate, rather than a range of rates, for individuals performing a certain job. Ignores seniority and performance differences.

Position Analysis Questionnaire (PAQ)

A structured job analysis that classifies job information into seven basic factors: information input, mental processes, work output, relationships with other persons, job context, other job characteristics, and general dimensions. The PAQ analyzes jobs in terms of worker-oriented data.

Job Description

A summary of the most important features of a job. It identifies the job and describes the general nature of the work, specific task responsibilities, outcomes, and the employee characteristics required to perform the job.

Just Wage Doctrine

A theory of job value that posits a "just" or equitable wage for any occupation based on that occupation's place in the larger social hierarchy. According to this doctrine, pay structures should be designed on the basis of societal norms, customs, and tradition, not on the basis of economic and market forces.

Ranking Format

A type of performance appraisal format that requires that the rater compare employees against each other to determine the relative ordering of the group on some performance measure.

Cost Containment

An attempt made by organizations to contain benefit costs, such as imposing deductibles and coinsurance on health benefits or replacing defined benefit pension plans with defined contribution plans.

Line of Sight

An employee's ability to see how individual performance affects incentive payout. Employees on a straight piecework pay system have a clear line of sight--their pay is a direct function of the number of units they produce; employees covered by profit sharing have a fuzzier line of sight--their payouts are a function of many forces, only one of which is individual performance.

Ability

An individual's capability to engage in a specific behavior.

Motivation

An individual's willingness to engage in some behavior. Primarily concerned with (1) what energizes human behavior, (2) what directs or channels such behavior, and (3) how this behavior is maintained or sustained.

Merit Bonuses

Are based on a performance rating, but unlike merit increases, are paid in the form of a lump sum rather than becoming (a permanent) part of the base salary.

Merit Increase

Are given as increments to base pay and are based on performance.

Compliance

As a pay objective means conforming to federal and state compensation laws and regulations.

Supply Chain Analysis

As applied to work flow analysis, supply chain analysis looks at how an organization does its work: activities pursued to accomplish specific objectives for specific customers.

The well-defined jobs at McDonald's and their small differences in pay are an example of a(n) ________ internal pay structure.

Closely Tailored

Employee Contributions

Comparisons among individuals doing the same job for the same organization.

Policy Capturing

Compensable factor importance weights are inferred using statistical methods such as regression analysis.

Competency-Based Pay System

Compensation approach that links pay to depth and scope of competencies that are relevant to doing the work. Typically used in managerial and professional work where what is accomplished may be difficult to identify.

Best-Pay Practices

Compensation practices that allow employers to gain preferential access to superior human resource talent and competencies (i.e., valued assets), which in turn influence the strategies the organization adopts.

Procedural Justice/Fairness

Concept concerned with the process used to make and implement decisions about pay. It suggests that the way pay decisions are made and implemented may be as important to employees as the result of the decisions.

Eight steps in the design of a point plan

Conduct job analysis Determine compensable factors Scale the factors Weight the factors according to importance Select criterion pay structure Communicate the plan and train users Apply to non-benchmark jobs Develop online software support

Troubled Asset Relief Program (TARP)

Congress and the President put into place the legislation, TARP, to avoid financial crisis. This includes restrictions on executive pay that were designed to discourage executives from taking "unnecessary and excessive risks."

Scaling

Determining the intervals on a measurement instrument.

Pay Discrimination

Discrimination usually defined as including (1) access discrimination, which occurs when qualified women and minorities are denied access to particular jobs, promotions, or training opportunities; and (2) valuation discrimination, which takes place when minorities or women are paid less than white males for performing substantially equal work. Both types of discrimination are illegal under Title VII of the Civil Rights Act of 1964. Some argue that valuation discrimination can also occur when men and women hold entirely different jobs (in content or results) that are of comparable worth to the employer. Existing federal laws do not support the "equal pay for work of comparable worth" standard.

Delayering

Eliminating some layers or job levels in the pay structure.

Entitlement

Employee belief that returns and/or rewards are due regardless of individual or company performance.

The decison to implement pay for performance, flat rate pay, and profit sharing are examples of _______ policy decisions.

Employee contribution

Nonexempt

Employees who are subject to the provisions of the Fair Labor Standards Act.

Which of the following is an example of a relational return?

Employment security

Distributive Fairness

Fairness in the amount of reward distributed to employees.

T/F: Customer-focused pay strategies are most likely to use market-based pay.

False

Strategy Perspective

Focuses on those compensation choices that help the organization gain and sustain competitive advantage.

Team Incentive

Group incentive restricted to team members, with payout usually based on improvements in productivity, customer satisfaction, financial performance, or quality of goods and services directly attributable to the team.

Job Evaluation Committee

Group that may be charged with the responsibility of (1) selecting a job evaluation system, (2) carrying out or at least supervising the process of job evaluation, and (3) evaluating the success with which the job evaluation has been conducted. Its role may vary among organizations, but its members usually represent all important constituencies within the organization.

The alignment test

Helps ensure passing the differentiation test

External factors are dominant influences on jobs filled via

Hiring graduates

Marginal Productivity

In contrast to Marxist "surplus value" theory, a theory that focuses on labor demand rather than supply and argues that employers will pay a wage to a unit of labor that equals that unit's use (not exchange) value. That is, work is compensated in proportion to its contribution to the organization's production objectives.

Incentive

Inducement offered in advance to influence future performance.

Task (Work) Data

Information on the elemental units of work (tasks), with emphasis on the purpose of each task, collected for job analysis. Work data describe the job in terms of actual tasks performed and their output.

Job Content

Information that describes a job. May include responsibility assumed and/or the tasks performed.

Whole Foods' shared-fate philosophy of limiting executive salaries to no more than 19 times the average pay of full-time employees is an example of which strategic pay decision?

Internal Alignment

Base Wage

Is the cash compensation that an employer pays for the work performed.

Job Analysis

Is the systematic process of collecting information that identifies similarities and differences in the work.

Which of the following is true of internal alignment?

It addresses relationships inside an organization

Which of the following is a disadvantage of the point method?

It can become bureaucratic and rule-bound.

Which of the following statements about the reliability of job analysis is true?

It is a necessary condition for validity

Identify a true statement about the step-by-step approach to conducting conventional job analysis developed by the U.S. federal government.

It is recommended that the same first-level supervisor-interviewee conduct the second tour of the work site.

Which of the following is true about a job specification?

It is the list of knowledge, skills, and abilities that are necessary for an individual to have to perform a specific job.

Research shows that ____________ will effectively shift an organization in a downward performance spiral into an upward one.

It is unclear what compensation practice

A benchmark job has the following characteristics

Its contents are well known and relatively stable over time. The job is common across a number of different employers. It is not unique to a particular employer. A reasonable proportion of the workforce is employed in this job.

Quantitative Job Analysis (QJA)

Job analysis method that relies on scaled questionnaires and inventories that produce job-related data that are documentable, can be statistically analyzed, and may be more objective than other analyses.

Compensable Factor

Job attributes that provide the basis for evaluating the relative worth of jobs inside an organization. A compensable factor must be work-related, business-related, and acceptable to the parties involved.

Classification

Job evaluation method that involves slotting job descriptions into a series of classes or grades that cover the range of jobs and that serve as a standard against which the job descriptions are compared.

Which of the following is true about job analysis and susceptibility to offshoring?

Jobs are most susceptible to outsourcing when inputs are outputs can be easily transmitted electronically

Entry Jobs

Jobs that are filled from the external labor market and whose pay tends to reflect external economic factors rather than an organization's culture and traditions.

Americans with Disabilities Act (ADA)

Legislation passed in 1990 that requires that reasonable accommodations be provided to permit employees with disabilities to perform the essential elements of a job.

Reengineering

Making changes in the way work is designed to include external customer focus. Usually includes organizational delayering and job restructuring.

Factor Weights

Measures that indicate the importance of each compensable factor in a job evaluation system. Weights can be derived through either a committee judgement or a statistical analysis.

Factor Scales

Measures that reflect different degrees within each compensable factor. Most commonly five to seven degrees are defined. Each degree may be anchored by typical skills, tasks and behaviors, or key job titles.

Appeals Processes

Mechanisms are created to handle pay disagreements. They provide a forum for employees and managers to voice their complaints and receive a hearing.

Conventional Job Analysis

Methods (e.g., functional job analysis) that typically involve an analyst using a questionnaire in conjunction with structured interviews of job incumbents and supervisors. The methods place considerable reliance on analysts' ability to understand the work performed and to accurately describe it.

In the context of the impact of internal structures, which of the following statements is true?

More egalitarian structures are related to greater performance when close collaboration and sharing of knowledge are required.

Offshoring

Offshoring refers to the movement of jobs to locations beyond a country's borders.

Conventional methods of collecting job information are

Open to bias and favoritism

Differentials

Pay differences among levels within the organization, such as the differences in pay between adjacent levels in a career path, between supervisors and subordinates, between union and nonunion employees, and between executives and regular employees.

Wage

Pay given to employees who are covered by overtime and reporting provisions of the Fair Labor Standards Act. Pay for workers who are nonexempt usually is calculated at an hourly rate rather than a monthly or annual rate.

Salary

Pay given to employees who are exempt from regulations of the Fair Labor Standards Act and hence do not receive overtime pay (e.g., managers and professionals). Exempt pay is calculated at an annual or monthly rate rather than hourly.

Variable Pay

Pay tied to productivity or some measure that can vary with the firm's profitability.

Commission

Payment tied directly to achievement of performance standards. Commissions are directly tied to a profit index (sales, production level) and employee costs; thus, they rise and fall in line with revenues.

Trying to measure a ROI for any compensation strategy implies that

People are "human capital," similar to other factors of production

When organization performance declines

Performance-based pay plans do not pay off

Egalitarian pay structures have all but which of the following characteristics?

Preference for individual performance over team performance

James says, "I don't trust the way the company determines pay rates in my department." If James feels this way despite being happy with his current salary, he is most likely concerned about

Procedural Justice

In a contemporary job description of a specific job, the job summary section

Provides an overview of the job.

Pay Mix (or Pay Forms)

Relative emphasis among compensation components such as base pay, merit, incentives, and benefits.

Market Pricing

Setting pay structures almost exclusively through matching pay for a very large percentage of jobs with the rates paid in the external market.

Most unions prefer which of the following?

Small pay differences among jobs and seniority-based promotions

Job-Based Structure

Structure that relies on work content--tasks, behaviors, responsibilities.

Validity

The accuracy of the results obtained; that is, the extent to which any measuring device measures what it purports to measure.

Pay Structure

The array of pay rates for different jobs within a single organization; they focus attention on differential compensation paid for work of unequal pay.

Competitive Position

The comparison of the compensation offered by one employer relative to that paid by its competitors.

Total Compensation

The complete pay package for employees, including all forms of money, bonuses, benefits, services, and stock.

Reliability

The consistency of the results obtained, that is, the extent to which any measuring procedure yields the same results of repeated trials. Reliable job information does not mean that it is accurate (valid), comprehensive, or free from bias.

Cost Cutter

The cost cutter's efficiency-focused strategy stresses doing more with less by minimizing costs, encouraging productivity increases, and specifying in greater detail exactly how jobs should be performed.

Customer-Focused

The customer-focused business strategy stresses delighting customers and bases employee pay on how well they achieve this.

Incentive Effect

The degree to which pay influences individual and aggregate motivation among the employees we have at any point in time.

Surplus Value

The difference between labor's use and exchange values. According to Marx, under capitalism wages are based on labor's exchange value--which is lower than its use value--and thus provide only a subsistence wage.

Sorting Effect

The effect that pay can have on the composition of the workforce. Different types of pay strategies many cause different types of people to apply to and stay with an organization.

Common bases for modern pay structures include all but which of the following?

The extent of external competitiveness and equity

Strategy

The fundamental direction of the organization. It guides the deployment of all resources, including compensation.

Culture

The informal rules, rituals, and value systems that influence how people behave.

Innovator

The innovator stresses new products and short response time to market trends.

Job Specifications

The job specifications that can be used as a basis for hiring are knowledge, skills, and abilities required to adequately perform the tasks.

Rational Returns

The nonquantifiable returns employees get from employment, such as social satisfaction, friendship, feeling of belonging, or accomplishment.

Essential Elements

The parts of a job that cannot be assigned to another employee. The Americans with Disabilities Act requires that is applicants with disabilities can perform the essential elements of a job, reasonable accommodations must then be made to enable the qualified individuals to perform the job.

Internal Alignment

The pay relationship among jobs or skill levels within a single organization; focuses attention on employee and management acceptance of those relationships. It involves establishing equal pay for jobs of equal worth and acceptable pay differentials for jobs of unequal pay.

External Competitiveness

The pay relationship among organizations; focuses attention on the competitive positions reflected in these relationships.

Outsourcing

The practice of hiring outside vendors to perform functions that do not directly contribute to business objectives and in which the organization does not have a comparative advantage.

Exchange Value

The price of labor (the wage) determined in a competitive market; in other words, labor's worth (the price) is whatever the buyer and seller agrees upon.

Work Flow

The process by which goods and services are delivered to the customer.

Relative Value of Jobs

The relative contribution of jobs to organizational goals, to their external market rates, or to some other agreed-upon rates.

A structure based on value typically ranks jobs on

The relative contribution of skills

Apart from being reliable, a job analysis is also considered valid if:

The results converge among various sources of data and methods.

Use Value

The value or price ascribed to the use or consumption of labor in the production of goods and services.

Forms of Compensation

The various types of pay, which may be received directly in the form of cash (e.g., wages, bonuses, incentives) or indirectly through series and benefits (e.g., pensions, health insurance, vacations). This definition excludes other forms of rewards or returns that employees may receive, such as promotion, recognition for outstanding work behavior, and the like.

Content

The work performed in a job and how it gets done (tasks, behaviors, knowledge required, etc.).

Value

The worth of the work; its relative contribution to organization objectives.

Which of the following is true of incentives?

They are re-earned each pay period.

Which of the following is a characteristic of benchmark jobs?

They employ a reasonable proportion of the workforce.

The most common way to collect job information is

To ask incumbents to fill out a questionnaire.

T/F: A job structure based upon job value orders jobs on the basis of the relative contribution of the skills, duties, and responsibilities of each job to the organization's goals.

True

T/F: An organization defines its strategy through the trade-offs it makes in choosing what to do and what not to do.

True

T/F: Embedding compensation strategy within the boarder HR strategy affects results.

True

T/F: Paired-comparison and alternate-ranking methods may be more reliable than simple ranking.

True

T/F: The leadership of any organization is the best source of information on where the business should be going and how it is going to get there.

True

The U.S. federal government has developed a step-by-step approach to conducting conventional job analysis. Identify a true statement about the verification process in this approach.

Typed or legibly written copies of the job description are distributed to the first-level supervisors and the job incumbent interviewees.

If several incumbents, supervisors, and peers respond in similar ways to job analysis questionnaires, it suggests that the results are most likely to be

Valid

Pay Objectives

What an organization seeks to achieve through its compensation strategy. Basic objectives are efficiency, fairness, ethics, and compliance with laws and regulations.

Which of the following is a fundamental strategic choice at the corporate level?

What business should we be in?

In a study, causation can be best established by

accounting for competing explanations

A difference between incentives and merit increases is that incentives

do not increase the base wage, whereas merit increases increase the base wage

One of the reasons why the great majority of the uninsured in the United States are from working families is that

many small employers are much less likely than larger employers to offer health insurance to their employees.

You are an HR manager, and your boss has told you to find the best way to raise job performance. After some research, you find that ________ have the greatest instrumental value.

monetary incentives

Unlike merit increases, merit bonuses are

paid in the form of a lump sum.

Managers seek internal alignment within their organization by

paying on the basis of similarities among jobs.

Compensation

refers to all forms of financial returns and tangible services and benefits employees receive as part of an employment relationship.

The problem that is most likely to be faced by organizations using an egalitarian pay structure is

the difficulty in external recruitment

Incentives do not permanently increase labor costs because

they are one-time payments