MGT 336 Midterm II

Forms of pay - relation returns

learning opportunities, status, challenging work (psychological)

Job description

list of tasks, duties, and responsibilities that make up a job - observable actions.

Job-based structures

look at what people are doing and the expected outcomes

lead pay-level policy

maximizes the ability to attract and retain quality employees and minimizes employee dissatisfaction with pay.

Differentials

pay differences among levels

Salary

pay is given to those who are exempt from regulations of the Fair Labor Standards Act and exempt from overtime pay.

work flow

process by which goods and services are delivered to the customer

Criteria of internal pay structure - job based structure

relies on work content (tasks, behaviors, responsibilties)

Hierarchical structures

send the message that the differences in work content, individual skills and contributions to the organization are valued.

Criteria of internal pay structure - person based structure

shifts focus to the employee (their skills, knowledge, compentencies)

Number of levels

some are hierarchical with many levels and others are compressed with fewer

Quoted Price Market

stores that label each item's price or ads that list a job's opening starting wage are examples of this (Meijer)

Compensable factors should be based on:

strategy and values of the organization, work performed and acceptable to the stakeholders affected by the resulting pay structure

Marginal product of labor

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

Sorting effect

the effect a pay plan has on the composition of the current workforce (the types of employees attracted and retained)

Job evaluation

the process of systematically determining the relative worth of jobs to create a structure for the organization (based on a combo of job content/skills required/ value to the org/org culture/external markets)

Survey

the systematic process of collecting and making judgments about the compensation paid by other employers

pay-with-competition policy (match)

tries to ensure that an organization's wage costs are approximately equal to those of product competitors.

marginal productivity

unless and employee can produce a value equal to the value received in wages it will not be worth while to hire that employee

Criteria of internal pay structure - use value

value of goods and services an employee produced in a job

Criteria of internal pay structure - exchange value

whatever wage is agree on for a job

A pay range exists:

whenever two or more rates are paid to employees in the same job.

Criteria of internal pay structure - content

work performed in a job and how it gets done

Criteria of internal pay structure - value

worth of the work

Pay level and pay mix decisions focus on two objectives

-Control costs and increase revenues. -Attract and retain employees.

Strategy

-Fundamental direction that an organization chooses -Defined through trade offs it makes in choosing what or what not to do n

Importance of HR strategy as it relates to compensation

-Internal alignment -Line of sight to show employees how we are paying them for the tasks and things we are asking from them

External competitiveness is made up of

-Labor market factors -Product market factors -Organization factors

An internal pay structure can be defined by:

-The number of levels of work, -The pay differentials between the levels, and -The criteria or bases used to determine those levels and differentials.

Incentives

-Tie pay increases to performance but differ from merit adjustments in that they rely on an objective measure of performance. -They do not increase base wages and must be re-earned each period.

Internal alignment

-addresses relationships inside the organization -The pay relationships among different jobs/skills/competencies within a single organization.

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. -Purpose: evaluate using the objectives already specified for an internally aligned structure.

Competency-based structure

-must be some way of demonstrating competency -the main appeal - directly links to organization strategy

Compensation - Employee

-source of financial security (vital to social/economic well being) -an exchange between employers and themselves

Pay can influence motivation in 2 ways

1.) affect motivation intensity, direction, and persistence of current employees 2.) it is now about how much they are paid but the results of the sorting effect

Two critical uses of job analysis

1.) establishes similarities and differences in the work content 2.)Helps establish internally fair and aligned job structure

Two strategic choices used to fit the pay structure

1.) how specifically tailored to the organization design and workflow to make the structure (closely tailored: well defined with detailed tasks - McDonald's) 2.) how to distribute pay through the levels in the structure

Compensation - Managers

1.) major expense that needs to be managed 2.) a major determinant of employee's attitudes and behaviors

lag pay-level policy

A policy of paying below-market rates may hinder a firm's ability to attract potential employees

"line of sight"

Employees should be able to "see" the links between their work, the work of others, and the organization's objectives.

Point method

Has compensable factors, with factor degrees numerically scaled, and weights reflecting the importance of each factor.

Egalitarian structures

Have fewer levels and/or smaller differentials between adjacent levels and between the highest- and lowest-paid workers.

Alternation ranking

Orders job descriptions alternately at each extreme.

Procedural justice

Procedures for determining the pay structure

Distributive justice

Results of those procedures - the pay structure itself

Incentive plans

Reward people for developing "innovative" new financial investment vehicles and for taking risks to earn themselves and their firms a lot of money.

Pay structure

The array of pay rates for different work or skills within a single organization. The number of levels, the differentials in pay between the levels, and the criteria used to determine those differences describe the structure.

Pay level

The average of the array of rates paid by an employer.

Base wage

The cash compensation an employer pays for work performed.

Job specification

The knowledge, skills, abilities, and other characteristics necessary for an individual to perform the job.

External competitiveness

The pay relationships among organizations—the organization's pay relative to its competitors.

Pay mix

The various types of payments, or payment forms, make up total compensation.

Paired comparison

Uses a matrix to compare all possible pairs of jobs.

Bourse Market

a market that allows haggling over terms and conditions until an agreement is reached (Ebay)

Compensation

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

Heart of skill based:

assumes that possessing these skills will make it easier to match work-flow

Optimal overlap

between grades ought to be large enough to induce employees to seek promotion into a higher grade.

Compensable factors

characteristics in the work that the organization values, that help it pursue its strategy and achieve its objectives

External alignment

comparisons OUTSIDE the organization, comparing with other employers that hire people with the same skills

Compliance:

conforming to federal and state compensation laws and regulations

Broad banding

consolidates traditional grades into a single band with one minimum and one maximum - there are several advantages.

COLA

cost of living adjustment; base wages may be made due to changes in what employers are paying for the same work (change in cost of living, change in skills, change in experience)

Surplus value

creates the difference between use and exchange value

Market pricing

directly matching as many of your own organization's jobs as possible to jobs described in external pay surveys

Heart of person-based plan

employees get paid for the relevant skills and competencies they posees (whether or not they are used)

Grades and ranges offer:

flexibility to deal with pressures from external markets and differences among organizations.

Why perform job analysis?

internal based on job-related info provides both managers and employees a work-related rationale for pay differences