MOS 3342: Final Exam

Three elements of an effective communications package

1. An organization must spell out its benefit objectives and ensure that any communications achieve these objectives. 2. The message must be matched with the appropriate medium. 3. The content of the communications package must be complete, clear, and free of the complex jargon

Five ways that high wages increase efficiency and lower labour costs

1. Attract higher-quality applicants 2. Lower turnover 3. Increase worker effort 4. Reduce shirking (slacking off) 5. Reduce the need to supervise employees

Wage components

1. Base-pay 2. Cost-of-living adjustment 3. Merit increase 4. Lump sum bonus 5. Individual incentive 6. Group incentive 7. Gain-sharing plans 8. Profit-sharing plans 9. Risk-sharing plans

Motivation theories

1. Content theories 2. Process theories 3. Reinforcement theories

Cost-effectiveness of benefits

1. Cost advantage is that most employee benefits are not taxable 2. Many group-based benefits can be obtained at a lower rate than could be obtained by employees acting on their own 3. Benefit premiums and pension contributions are tax deductible up to limits specified in the Income Tax Act

Two types of pension plans

1. Defined benefit plan 2. Defined contribution plan

Factors influencing benefits planning

1. Employer preferences; Relationship to total compensation costs. Costs relative to benefits. Competitor offerings. Role of benefits in attraction, retention, and motivation. Legal requirements, vesting. Absolute and relative compensation costs 2. Employee preferences; Determined by individual needs. Fairness. Personal needs of employees

Process theories

1. Expectancy theory 2. Equity theory 3. Agency theory

Factors leading raters to inaccurate appraisals

1. Guilt 2. Embarrassment about giving praise 3. Taking things for granted 4. Not noticing 5. Halo effect 6. Dislike of confrontation 7. Spending too little time on preparation of the appraisal

Three comparison of male and female job classes

1. Job to job method 2. Proportional value/wage line method 3. Proxy comparison method

Governments effects on supply of labour

1. Licensing requirements legally restrict the amount of people legally able to offer a service 2. Legislation aimed at protecting specific groups also tend to restrict that groups participation in the labour market 3. Ex. compulsory schooling restrict the availability of children available to sell hamburgers

Content theories

1. Maslow's hierarchy of needs 2. Herzberg's two factory theory

Differences in occupations, qualifications and experience

1. Occupational Segregation (Womens Work vs Mens Work) 2. Qualifications (More men in Engineering & Sciences) 3. Women less likely to seek full time positions

Two steps of broadbanding

1. Set the number of bands; Usually bands are established at the major "breaks" or differences in work or skill/competency requirements 2. Price the bands references market rates; Include multiple job families within each band. The challenge is how much to pay people who are in the same band but in different functions performing different work

Administration issues

1. Who should be protected or benefited? 2. How much choice should employees have among an array of benefits? 3. How should benefits be financed?

Legally required benefits

1. Workers' compensation 2. Canada/Quebec pension plan 3. Employment insurance 4. Supplementary unemployment benefits (SUB) plan and work-sharing programs

Word of mouse

A click of the mouse makes a wealth of data available to everyone. This ease of access means that managers have to be able to explain and defend the salaries paid to employees

Market pay line

A graph that links a company's benchmark jobs on the horizontal axis (internal structure) with market rates paid by competitors (market survey) on the vertical axis

Canada/Quebec pension plans

A mandatory government-sponsored pension plan for all employed Canadians, funded equally by employers and employees

Employment insurance

A mandatory government-sponsored plan for all employed Canadians that provides workers with temporary income replacement as a result of employment interruptions due to circumstances beyond their control; funded by employer and employee compensation

Workers' compensation

A mandatory, government sponsored, employer-paid, no-fault insurance plan that provides compensation for injuries and diseases that arise out of, and while in the course of, employment

Pay for performance plan

A pay plan that links individual pay to some measure of performance on this job

Selecting relevant labour markets and competitors

A relevant labour market includes employers who compete in one or more of the following areas; the same occupation or skills required, qualified individuals in the same geographic area, the same products and services. As the importance and complexity of qualifications increase, the geographic limits also increase. Competition tends to be national for managerial and professional skills, but local or regional for clerical and production skills. From the perspective of cost control and ability to pay, including competitors in the product/service market is crucial. The pay rates of competitors will affect both costs of operations and financial condition

Aging/trending survey data

Adjusting survey data to represent pay at the current or future date when the pay decisions will be implemented

Total reward system

All financial and nonfinancial rewards provided by organizations to their employees

Product demand

Although labour market conditions put a floor on the pay level required to attract sufficient employees, the product market puts a ceiling on the maximum pay level that an employer can set

Benchmark conversion approach

An alternative approach to job-matching difficulties is to apply the job evaluation plan used to create internal alignment to the descriptions of survey jobs. The magnitude of difference between job evaluation points for internal jobs and survey jobs provides guidance for adjusting the market data

Lump sum bonus

As with merit pay, granted for individual performance. Does not add into base pay in subsequent years

Goal-setting theory

Challenging performance goals influence greater intensity and duration in employee performance. Goals serve as feedback standards to which employees can compare their performance. Individuals are motivated to the extent that goal achievement is combined with receiving valued rewards. Line-of-sight is important; employees must believe they can influence performance targets. Performance targets should be communicated in terms of specific difficult goals. Feedback about performance is important. Performance-based payouts should be contingent upon goals achievement

Gain-sharing plans

Differs from profit sharing in that goal of plan is not financial performance of organization, but some cost index

Job to job method

Each female job class is compared to each male job class in equal or comparable value

Relevant markets

Each organization operates in many labour markets, each with unique demand and supply

Employee performance equation

Employee performance = f (A.M.E) A = ability M = motivation to perform E = supportive environment

Herzberg's two factor theory

Employees are motivated by two types of motivators; hygiene factors and satisfiers. Hygiene, or maintenance, factors in their absence prevent behaviours, but in their presence cannot motivate performance. They are related to basic living needs, security, and fair treatment. Satisfiers, such as recognition, promotion, and achievement motivate performance. Pay level is important - must meet minimum requirements before performance-based pay can operate as motivator. Security plans will induce minimum, but not extra, performance. Success sharing plans will be motivating. At-risk plans will be demotivating. Other conditions in the working relationship influence the effectiveness of performance-based pay

Whom to involve in information collection for skill-based pay?

Employees are the sources of information for defining the skills, arranging them into a hierarchy, bundling them into skill blocks, and certifying whether a person actually possesses the skills

Sick leave plans

Employer-sponsored plans that grant a specified number of paid sick days per month or per year

Short-term disability plans (salary continuation plans)

Employer-sponsored plans that provide a continuation of all or part of an employee's earnings when the employee is absent from work due to an illness or injury that is not work-related

Long-term disability plans

Employer-sponsored plans that provide income protection due to long-term illness or injury that is not work-related. The number of long-term claims has been rising sharply in Canada

Employee assistance plans

Employer-sponsored program that provides employees with confidential counselling and or treatment programs for personal problems including abduction, stress and mental health issues

Specify competitive pay policy

Employers decide on the basis of whether they want to; 1. be a market leader with respect to pay 2. match the average pay of competitors 3. lag behind the average market pay rates

Degree of competition

Employers in highly competitive markets such as manufacturers of automobiles are less able to raise prices without loss of revenues, this works opposite for luxury goods retailers

The spillover effect

Employers seek to avoid unionization by offering worker the wages, benefits, and working conditions won in rival, unionized firm's. Managers enjoy the freedoms of a non unionized workforce. Workforce enjoys the benefits that have spilled over from other unions and the rights they fought for

Market pricing

Establishing pay structure by relying almost exclusively on external market pat rates. Market pricing sets pay structures by relying almost exclusively on rates paid by competitors in the external market. Organizations that fill a large proportion of their job vacancies with hires from the outside may also become market pricers

Do employees more readily agree to develop job skills because of pay?

Evidence is starting to accumulate that pay for skill may not increase productivity, but that it does focus people on believing in the importance of quality and in turning out products of significantly higher quality

Broadbanding advantages over traditional approach

First, they provide flexibility to define job responsibilities more broadly. They support redesigned, downsized, or boundary-less organizations that have eliminated layers of managerial jobs. They foster cross-functional growth and development in these new organizations

Defining competencies

Focuses on 5 areas 1. Skills (demonstration of expertise) 2. Knowledge (accumulated information) 3. Self-concepts (attitudes, values, self-image) 4. Traits (general disposition to behave in a certain way) 5. Motives (recurrent thoughts that drive behaviours)

Pay grade

Grouping of jobs considered substantially equal for pay purposes

Errors in the actual evaluation

If the purpose of evaluation is to divide up a fixed pot of merit increases, ratings also tend to be less accurate

Administrative cost containment

Includes such things as seeking competitive bids for program delivery

Consequences of pay level and pay mix decisions

It affects operating expenses and employee attitudes and work behaviours. Competitiveness of compensation; 1. Contain operating expenses (labour costs) 2. Increase pool of qualified applicants 3. Increase quality and experience 4. Reduce voluntary turnover 5. Increase probability of union-free status 6. Reduce pay-related work stoppages

Errors in observation (attention)

It appears that raters are influenced by general appearance characteristics of the ratees. Researchers also look at change in performance over time to see if this influences performance ratings. Both the pattern of performance and the variability of performance influence performance ratings

Benefit maximum

It is not uncommon to limit disability income payments to some maximum percentage of income, and to limit medical/dental coverage for specific procedures to a certain fixed amount. Lifetime maximum payouts are sometimes used

What size should the range be?

Larger ranges in the managerial jobs reflects the greater opportunity for individual discretion and performance variations in the work. Jobs quickly learned may have minimums much closer to the midpoints. The maximum becomes the amount above the midpoint that the company is willing to pay for sustained performance on the jobs. The size of the range is based on judgment that weighs all these factors

Skill-based pay structure

Link pay to the depth of breadth of the skills, abilities and knowledge a person acquires that are relevant to the work

Probationary periods

New employees are excluded from benefits coverage until some term of employment is completed

Competency indicators

Observable behaviours that indicate the level of competency within each competency set

Peers as raters

One of the major strengths of using peers as raters is that they work more closely with the ratee and probably have an undistorted perspective of typical performance. First, peers may have little or no experience in conducting appraisals, leading to rather mixed evidence about the reliability of this rating source. Second, in a situation in which teamwork is promoted, putting the burden of rating peers on co-workers may create either group tensions or yield ratings second only to self-ratings in level of leniency

Performance appraisal

Process of evaluating or appraising an employee's performance on the job

Product market factors

Product demand and the degree of competition are the two key product market factors. Both affect the ability of the organization to change what it charges for its products and services

Paired comparison performance ranking

Ranking each employee against all other employees, one pair at a time

Reinforcement theory

Rewards reinforce performance. Rewards must follow directly after behaviours to be reinforcing. Behaviours which are not rewarded will be discontinued. Timing of payouts is very important

People flow to the work

Segmented labour supply means using multiple sources of nurses from multiple employment relationships. The segmented supply means employees are working the same jobs side by side but earning different pay. This is a case of people flowing to the work because in some cases, like hospitals, cannot send their employees tasks off-site to other cities or offshore to other nations

Competency sets

Specific components of a competency

Marginal product of labour

The additional output associated with the employment of one additional human resources unit with other production factors held constant

Marginal revenue of labour

The additional revenue generated by each additional unit of human resources, with other production factors held constant. A manager using the marginal revenue of product model must do only two things; (1) determine the pay level set by market forces, and (2) determine the marginal revenue generated by the new hire. This will tell the manager how many people to hire

Gender wage gap

The amount by which the average pay for female workers is less than the average pay for male workers

Pay levels

The average of the array of rates paid by an employer; base + bonuses + benefits + stock options/number of employees

Benefits planning and design issues

The benefits planning process must address the vital question; "what is the role of benefits in a total compensation package?". The planning process also should include strategies to ensure external competitiveness of benefits. The benefit plan design must ensure that benefits are adequate

Empowerment as a form of reward

The dimensions of empowerment include empowerment as authority to make decisions, some control over factors that influence outcomes, and the autonomy to carry out decisions without over-monitoring by upper management

Government impetus of benefits

The government has played an important role in the growth of employee benefits. The three government-mandated employment-related benefits are; Workers' Compensation (provincial), Employment insurance (federal), and Canada/Quebec Pension Plan (federal and Quebec)

Control costs

The higher the pay level, the higher the pay costs. Labour costs = Pay level x Number of employees. The higher the pay level relative to what competitors pay, the greater the relative costs to provide similar products or services; the same work is paid differently

Reservation wage theory

The idea that job seekers have a reservation wage level below which they will not accept a job, no matter how attractive the other job attributes. The lowest wage an employee is willing to accept for a job. Affects the pay levels of the company. Threshold wage (market rate (minimum)

Person-based pay structure: skill plans

The majority of application of skill-based pay have been in manufacturing and assembly work where the work can be specified and defined. The advantage of a skill-based pay structure is that people can be deployed in a way that better matches the flow of work, thus avoiding bottlenecks as well as idle hands

Pay forms

The mix of the various types of that make up total compensation

Ranking vs rating

The second category of appraisal formats, ratings, is generally more popular than ranking systems. Ratings formats require raters to evaluate employees on some absolute standard rather than relative to other employees. Each performance standard is measured on a scale on which appraisers can check the point that best represents the employee's performance

Low-high approach

The simplest approach is to identify the lowest- and highest-paid benchmark jobs for the relevant skills in the relevant market and to use the wages for these jobs as anchors for the skill-based structures. Work at various levels within the structure then can be slotted between anchors

Compensation survey

The systematic process of collecting and making judgments about the compensation paid by other employers. Provides the data for translating that policy into pay levels, pay mix and structures

What information to collect for skill-based pay

There is far less uniformity in the use of terms in person-based plans than in job-based plans. Foundation skills include a quality seminar etc, all foundation skills are mandatory. Core electives are necessary to the facility's operations. Optional electives are additional specialized competencies ranging from computer applications to team leadership

Fuzzy markets

These new organizations and jobs fuse diverse knowledge and experience, so "relevant" markets look more like "fuzzy" markets. Organizations with unique jobs and structures face the double bind of finding it hard to get comparable market data while putting more emphasis on external market data

Competencies

Underlying broadly applicable knowledge, skills and behaviours that form the foundation for successful work performance

Subordinate as rater

Upward feedback has been viewed as countercultural. Feedback from subordinates allows the ratees the chance to see both their strengths and their weaknesses as leaders and to modify their behaviours

Risk-sharing plans

Variable pay in which employees not only share in the successes but also are penalized during poor performance years. Penalty is in form of lower total compensation in poor corporate performance years. Rewards, though, is typically higher than for group incentive programs in high-performance years

Profit-sharing plans

Variable pay linked to group performance relative to exceeding some financial goal

Group incentive

Variable pay that is tied to some measure of group performance, not individual performance. Not added into base pay. Employees share in any success but are not penalized for performance below standard

Supplementary unemployment benefits and work-sharing programs

Voluntary, self-insured employer plans to supplement benefits received under the EI plan

Merit increase

Wage increase granted to employee as function of some assessment of employee performance. Adds on to base pay in subsequent years

Proxy comparison method

When pay equity cannot be achieved through the above two methods, female job classes are compared to similar female job classes that have achieved pay equity with another employer; this method is controversial

When compensation differences between genders is allowed

1. A fair and formal seniority system 2. A temporary employee training or development assignment that is both equally accessible by male and female employees 3. A fair merit compensation plan based on formal performance ratings 4. Red Circling, that is maintenance of the compensation level of an employee who's job has been downgraded 5. A skills shortage

Approaches to selecting jobs for inclusion

1. Benchmark jobs approach 2. Low-high approach 3. Benchmark conversion approach

Other benefits

1. Childcare services 2. Eldercare services

Steps to creating a person-based pay structure

1. Collect and summarize information about the work 2. Determine what is of value to the organization 3. Quantify that value 4. Translate that value into internal structure

Components of a total rewards system

1. Compensation 2. Benefits 3. Social interaction 4. Security 5. Status/recognition 6. Work variety 7. Workload 8. Work importance 9. Authority/control/autonomy 10. Advancement 11. Feedback 12. Work conditions 13. Development opportunity

The factors that affect a company's decisions on pay level and mix

1. Competition in the labour market for people with various skills 2. Competition in the product and service markets, which effects the financial condition of the organization 3. Characteristics unique to each organization and its employees, such as its business strategy, technology, and productivity and experience of its workforce

Factors influencing the gender wage gap

1. Differences in occupations, qualifications, and experience 2. Differences in industries and firm's 3. Differences in union membership 4. The presence of discrimination

Labour market factors

1. Employers always seek to maximize profits 2. People are homogenous and therefore interchangeable; for example, a business school graduate is a business school graduate is a business school graduate 3. The pay rates reflect all costs associated with employment (base wage, bonuses, holidays, benefits, even training) 4. The markets faced by employers are competitive, so there is no advantage for a single employer to pay above or below the market rate

Types of formats

1. Evaluation format 2. Alternation ranking 3. Paired comparison performance ranking 4. Behaviourally anchored rating scale (BARS) 5. Management by objectives (MBO)

The impact of unions on wage determination

1. General wage and benefit levels 2. The structure of the wages 3. Non-union firm's 4. Wage and salary policies and practices in unionized firm's

Governments effects on demand of labour

1. Government affects demand mainly as being a major employer. 2. They can also influence labour through their purchases and the people required to make the products they purchase

Medical insurance

1. Health care: cost control strategies. There are two general strategies available to benefit managers for controlling the rapidly escalating costs of health care. First, organizations can motivate employees to change their demand for health care through changes in either design or the administration of health insurance policies; (1) deductibles, (2) coinsurance rates, (3) maximum benefits, (4) coordination of benefits. Second, involves the promotion of preventive health or wellness programs 2. Dental insurance: Dental care plans typically cover the full cost of basic-preventive maintenance such as check-ups and fillings 3. Vision care: This benefit has spread throughout the private and public sectors

Strategies to better understand and measure job performance

1. Improve evaluation formats 2. Select the right raters 3. Understand how raters process information 4. Train raters how to avoid common errors in appraising performance

Types of benefits

1. Legally required benefits 2. Retirement pension plans 3. Life insurance 4. Medical insurance 5. Income security: disability plans 6. Pay for time not worked

Employment standards act

1. Minimum Wage; Intended to provide and income floor to those in the lowest jobs in society. Adjusted to account for cost of living 2. Paid Vacation; Each jurisdiction recognizes vacations are required to ensure continued employee health and productivity 3. Paid Holiday 4. Standard Hours of Work & Overtime; Employment standards set out the standard hours of work for employees and provides for overtime pay when these hours are exceeded. Overtime is 1.5 of the hourly wage. Overtime is currently the least costly option. Contemporary employers face a more skilled workforce with higher training costs and higher benefit costs as well. 5. Pay on Termination of Employment; Employer must provide notice of termination or payment in lieu of notice. Additionally Ontario and Federal require severance to be paid 6. Minimum Wage of Employment 7. Equal Pay for Equal Work

How to; competency analysis

1. Objective: Competencies may have value for personal development and communicating organization direction 2. What information to collect?: Personal characteristics, Visionary (highest level competencies), Organization specific 3. Whom to involve?: Competencies are derived from the executive leadership's beliefs about the organization and its strategic intent. Not all employees understand that connection

Purpose of the competency-based structure

1. Organization strategy: Each competency has three levels; (1) exhibiting the competency affects the team, (2) has an impact across teams, and (3) has an impact on the entire location 2. Workflow: Competencies are chosen to ensure that all the critical needs of the organization are met. Competencies apply more loosely to work requiring more tacit knowledge and behaviour such as in managerial and professional work 3. Fair to employees: Advocates of competencies say they can empower employees to take charge of their own development. Trying to justify pay differences based on inferred competencies creates risks that need to be managed 4. Motivate behaviour towards organization objectives: Competencies provide guidelines for behaviour and keep people focused. They also can provide a common basis for communicating and working together

The performance appraisal process

1. Performance dimensions should be relevant to the strategic plan of the company 2. It is important to involve employees in every stage of developing performance dimension and building scales to measure how well they perform on these dimensions 3. Raters need to be trained in use of the appraisal system, and all employees need to understand how the system operates and what it will be used for 4. Raters must be motivated to rate accurately 5. Raters should maintain a diary of employee performance, both as documentation and to jog the memory 6. Raters should attempt a performance diagnosis to determine in advance whether performance problems arise because of motivation, skill deficiency, or external environmental constraints 7. The actual appraisal process should provide; a) A clear sense of direction b) An opportunity for employees to participate in setting the goals and standards for performance c) Prompt, honest, and meaningful feedback d) Immediate and sincere reinforcement e) Coaching and suggestions for improving future performance f) Fair and respectful treatment g) An opportunity for employees to understand and to influence decisions that affect them

Cost containment

1. Probationary periods 2. Benefit maximum 3. Coinsurance 4. Deductible 5. Coordination of benefits 6. Administrative cost containment

Train raters to rate more accurately

1. Rater-error training, in which the goal is to reduce psychometric errors by familiarizing raters with their existence 2. Performance dimension training, which exposes supervisors to the performance dimensions to be used in rating 3. Performance-standard training, which provides raters with a standard of comparison or frame of reference for making appraisals

Work flows to the people; on-site, off-site, offshore

1. Reality is complex; theory abstracts. It is not that our theories are useless, they simply abstract away the detail, clarifying the underlying factors that help us understand how reality works. 2. The segmented sources of labour mean that determining pay levels and mix increasingly requires understanding market conditions in different locations worldwide 3. Managers also need to know the jobs required to do the work, the tasks to be performed, and the knowledge and behaviours required to perform them so that they can bundle the various tasks to send to different locations

Reinforcement theories

1. Reinforcement theory 2. Goal-setting theory

Income security; disability plans

1. Short-term disability plans (salary continuation plans) 2. Sick leave plans 3. Long-term disability plans

Types of skill plans

1. Specialist depth: The result can be that two teachers may receive different pay rates for doing essentially the same job. The pay is based on the knowledge of the individual doing the job rather than on job content or output. The presumption is that teachers with more knowledge are more effective and more flexible - able to teach many grades 2. Generalist/multiskill based; breadth: Pay increases come with certification of new skills, rather than with job assignments. The advantage to employees is that the more they learn, the more they earn. The system at Balzer differs from the system for teachers in that the responsibilities assigned to an employee in a multiskill system can change drastically over a short period of time, whereas teachers' basic job responsibilities do not vary from day to day

Major decisions for designing pay levels, pay mix and pay structures

1. Specify pay level policy --> 2. Define relevant market --> 3. Design and conduct survey --> 4. Draw policy lines --> 5. Merge internal and external pressures --> 6. Competitive pay levels, mix and structures

Purpose of the skill-based structure

1. Supports the strategy and objectives: The skills on which a structure is based should be directly related to the organization's objectives and strategy 2. Supports workflow: One of the main advantages of a skill-based plan is that it can more easily match people to a changing workflow 3. Is fair to employees Employees like the potential of higher pay that comes with learning and by encouraging employees to take charge of their own development, skill-based plans may give them more control over their work lives. However, favouritism and bias may play a role in determining who gets first crack at the training necessary to become certified at higher paying skill levels 4. Motivates behaviour toward organization objectives: Person-based plans have the potential to clarify new standards and behavioural expectations. They encourage employees to take responsibility for the complete work process and its results, with less direction from supervisors. If less direction from supervisors is needed, then fewer supervisors are likely to be needed

The presence of discrimination

1. The most common form of discrimination reported by women was men being chosen for promotions over them 2. Discrimination ultimately affects pay

The purpose of a compensation survey

1. To adjust internal pay level in response to changing competitor pay rates. Adjustments may also be based on performance, ability to pay, or terms specified in a contract 2. To set the internal mix of pay forms relative to those provided by competitors. Adjustments to the different forms of pay competitors use (base, bonus, incentives, benefits) and the relative importance they give to each form occur less frequently than adjustments to overall pay levels. The mix of forms and their relative importance makes up the "pay package" 3. To establish or "price" the internal pay structure. Many employers use market surveys to validate their own job evaluation results. The job structure that results from internal job evaluation may not match the pay structures found in the external market. Reconciling these two pay structures is a major issue. Market pricing 4. To analyze pay-related problems. Unusual increases in an employer's turnover in specific jobs may require focused market surveys to find out if market changes are occurring 5. To estimate the labour costs of product market competitors. Survey data are used as part of employers' broader efforts to gather "competitive intelligence". Companies are also examining competitors' pay practices

Union impact on general wage levels

1. Unions do make a difference in wages 2. The size of the gap varies from year to year

Major skill analysis decisions

1. What information should be collected? 2. What methods should be used? 3. Who should be involved? 4. How useful are the results for pay purposes?

Governments interest in compensation and corporations

1. Whether procedures for compensation are fair 2. Safety nets for the unemployed and disadvantaged are sufficient 3. Employees and whether they are protected from exploitation

Designing a compensation survey

1. Who should be involved in the survey design?; The responsibility for managing the survey lies with the compensation manager. Hiring a third-party consultant instead of managing the survey internally buys expertise, but it may trade off some control over the decisions that determine the quality and usefulness of the data 2. How many employers should be included?; There are no firm rules about how many employers to include in a survey. Large firms with a lead-policy may only exchange information with only a few top-paying competitors. A small organization in an area dominated by two or three employers might decide to survey only smaller competitors 3. Which jobs should be included?; Keep things as simple as possible. Select as few employers and jobs as necessary to accomplish the purpose 4. What information should be collected?; The three basic types of data collected in a survey are (1) the information about the nature of the organization (2) information about the total compensation system (3) specific pay data on each incumbent in the jobs under the study. Total compensation data; three alternatives; (1) base pay, (2) total cash and (3) total compensation, are the most commonly used

External competitiveness is a combination of

1. labour market factors; nature of demand and nature of supply 2. product market factors; level of product demand and degree of competition 3. organizational factors; industry and technology, employer size, employees' preferences and organization's strategy

Broadbanding

A large band of jobs containing several pay grades. Consolidates as many as four or five traditional grades into a single band with one minimum and one maximum. Because the band encompasses so many jobs of differing values, a range midpoint is not usually used

Motivation

A process involving the determination of what is important to a person, and offering it in exchange for desired behaviour

Skill analysis

A systematic process to identify and collect information about skills required to perform work in an organization

Competency analysis

A systematic process to identify and collect information about the competencies required for successful work performance

Policy line as a percentage of market line

A third approach to translate pay level policy into practice is simply to specify a percentage above or below the regression line that an employer intends to match and then draw a new line at this higher (or lower) level

Understand how raters process information

A third way to improve job performance ratings is to understand how raters think. First, the rater observes behaviour of a ratee. Second, the rater encodes this behaviour as part of a total picture of the ratee. Third, the rater stores this information in memory, which is subject to both short- and long-term decay - simply put, raters forget things. Fourth, when it comes time to evaluate a ratee, the rater reviews the performance dimensions and retrieves stored observations/impressions to determine their relevance to the performance dimensions

Top 20 competencies

Achievement orientation, concern for quality, initiative, interpersonal understanding, customer-service orientation, influence and impact, organization awareness, networking, directiveness, teamwork and cooperation, developing others, team leadership, technical expertise, information seeking, analytical thinking, conceptual thinking, self-control, self-confidence, business orientation, and flexibility

Applying Daniel Pink's philosophy on motivation to compensation mix design

Autonomy, mastery and purpose are the basic factors of intrinsic motivation. Autonomy = independence, mastery = practice, purpose = why. ROWE is results only work environment and in a ROWE people don't have schedules, they just have to get their work done. ROWE is an appropriate level of extrinsic. London life is an example of ROWE, it is a differentiated and hybrid approach. Best Buy did not have success with ROWE. Pay attention to the link between Daniel Pink and Herzburg and their thoughts on motivation. Rewards only work in narrow circumstances, if then rewards destroy creativity, and the secret to high performance is the unseen intrinsic vibe. The first consideration when designing a system is cost, the second is fairness, motivation, needs, justice, and the third is meeting extrinsic outcomes (attitude, empowerment)

Differences in union memberships

Belonging to union leads to higher wages

Flexible benefits plan

Benefit plans in which the employee is provided with a specified amount of money and then chooses which benefits to spend the money on, according to their attractiveness and cost

Employee benefits communications

Benefits communication, particularly regarding retirement plans, is increasingly important because a large number of employees in a timely manner. The most frequent method for communicating employee benefits is still the employee benefits handbook, usually available in both paper and online versions

Broadbanding and flexibility

Broadbanding encourages employees to move cross-functionally to increase the cross-fertilization of ideas. Hence, a career move is more likely within a band and less likely between bands. The principal payoff of broadbanding is flexibility. Flexibility is one of the coins, chaos, and favouritism the other

Evaluating performance evaluation formats

Can be evaluated on four different dimensions; 1. Employee development potential 2. Administrative value 3. Cost 4. Validity Different organizations will attach different weights to these criteria

Daniel Pink's motivation theory

Candle stick problem, given candles, thumbtacks and matches and your job is to attach the candle to the wall so that the wax doesn't drip. The solution to this is to tack the box of tacks to the wall and put the candle in it and light it so the wax drips into the box. An experiment using the candle problem showed the power of incentives, he times different groups for how long they took to solve the problem. To the second group he offered rewards, and to the first group he offered nothing. The second group took 3 and half minutes longer even with the incentives than the first group. Contradicted the theory that incentives increase performance. In this experiment, the incentives dulls creative thinking and efficiency. There's a mismatch between what science knows and what business does. Business is built around extrinsic methods using carrots and sticks. Rewards work really well for tasks with a simple set of rules and procedures to get it done, but for difficult tasks they don't work well because rewards narrow our focus and restrict thinking. Larger rewards lead to poorer performances proved by experiments as found in America. London found that higher incentives can have a negative impact on production. Rewards work better when they're built around intrinsic motivations such as autonomy, mastery and purpose

Core competencies

Competencies required for successful work performance in any job in the organization

Person-based pay structures; competencies

Core competencies --> competency sets --> competency indicators --> competency-based pay structure. Not all would be expected to reach the highest level in all competencies. The competency indicators anchor the degree of a competency required at each level of complexity of the work. Sealed competency indicators are similar to job analysis questionnaires and degrees of compensable factors

Do people stay in a firm (or leave) because of pay?

Equity theory research in the 1970s has documented that workers who feel unfairly treated in pay react by leaving the firm for greener pastures. Group incentive plans may lead to more turnover of better performers - clearly undesirable outcome. Recent efforts to use different types of compensation as a tool for retaining workers have focused on what is called scarce talent. One way to retain these workers is to develop a variable pay component for each project. Roughly one-half of the productivity increase was due to individual employees becoming more productive, while the other half of the productivity gain was explained by the fact that less productive workers were less likely to stay under such incentive plan because it was less favourable to them

Proportional value/wage line method

For female job classes with no male comparable class, the wage line for male job classes is applied for female pay

Differences in industries and firms

Gender wage gap comes from the pay of industries that women and men are more likely to go into

Why bother with grades and ranges?

Grades and ranges offer managers the flexibility to deal with pressures from external markets and within the organization. Ranges permit managers to recognize other differences, including differences in quality, differences in the productivity or value of these quality variations and in the mix of pay forms competitors use. Ranges provide managers the opportunity to; 1. Recognize individual performance differences with pay 2. Meet employees' expectations that their pay will increase over time, even while holding the same job 3. Encourage employee commitment to remain with the organization From an internal alignment perspective, the range reflects the differences in performance or experience the employer wishes to recognize with pay. From an external competitiveness perspective, the range also acts as a control device. A range maximum sets the ceiling on what the employer is willing to pay for that work; the range minimum sets the floor

Efficiency wage theory

High wages may increase efficiency and lower labour costs by attracting higher-quality applicants who will work harder. Reduces shirking. Negative relation to labour demand; wages increase, efficiency increase and needed workforce decrease. Meaningfulness increases. Just noticeable differences.

Shared choice theory

Hybrid of signalling, efficiency wage, reservation wage, human capital and compensating differentials theories. Rewarding employee contribution. Employee flexibility in choosing rewards. Different people value different benefits based on the employees life cycle

Benchmark jobs approach

If the company's purpose in conducting the survey is to price the entire structure, then benchmark jobs can be selected. To ensure getting at the right information, the degree of match between jobs can be selected. To ensure getting company's benchmark jobs needs to be accessed

Security as a form of reward

It used to be fairly well established that employees would make more this year than they did last year, and employees counted on such security to plan their purchases and other economic decisions. Risky is defined in terms of stability of income, or the ability to inaccurately predict income level from year to year. Some research suggests employees may need a risk premium (higher pay) to stay and perform in a company with pay-at-risk

Pay equity legislation

Legislation intended to redress the unexplained portion of the gender wage gap by requiring employers to proactively pursue equal pay for work of equal value between female-dominated and male-dominated jobs

Competency-based pay structure

Links pay to work-related competencies

Three types of structures

Managers whose employers use job-based plans focus on placing the right people in the right jobs, a switch to skill/competency-based plans reverses this procedure. Skill/competency-based plans pay employees for the highest level of skill/competency they have achieved, regardless of the work they perform. In addition to potentially higher rates and higher training costs, skill/competency plans may have the additional disadvantage of becoming as complex and burdensome as job-based plans. The best approach may be to permit flexibility to adapt to changing conditions. An internally aligned pay structure, whether strategically loosely coupled or tightly fitting, can be designed to (1) help determine pay for the wide variety of work in the organizations and (2) ensure that pay influences peoples' attitudes and work behaviours and directs them toward organization objectives

Employer impetus of benefits

Many of the benefits in existence today were provided at employer initiative which can be traced back to pragmatic concerns about employee satisfaction and productivity

Agency theory

Motivation theory stating that employees and management owners both will act opportunistically to obtain the most favourable exchange possible. Performance-based pay is the optimal compensation choice for more complex jobs where monitoring employees' work is difficult. Performance targets should be tied to organizational goals. Use of performance-based pay will require higher total pay opportunity

Equity theory

Motivation theory stating that people are concerned about fairness of the reward outcomes exchanged for employee inputs. Performance measures must be clearly defined, and employees must be able to affect them through work behaviours. If payouts do not match expectations, employees will react negatively. Fairness and consistency of performance-based pay across employees in an organization is important. Since employees evaluate their pay-effort balance in comparison to other employees, relative pay matters

Expectancy theory

Motivation theory stating that people cognitively evaluate potential behaviours in relation to rewards offered in exchange. Larger incentive payments are better than smaller ones. Line of sight is critical - employees must believe they can influence performance targets. Employee assessments of their own ability are important - organizations should be aware of training and resource needs required to perform at target levels

Survey levelling

Multiplying survey data by a numerical factor to adjust for differences between the company job and the survey job

Life insurance

One of the most common employee benefits offered by organizations is some form of life insurance. Two other common forms of life insurance are dependent life and accidental death and dismemberment insurance

Pay for time not worked

Paid rest periods, lunch periods, wash-up times, travel time, clothes-change time, and get-ready time benefits. Paid vacations. Paid holidays. Other (jury duty allowances, bereavement pays etc)

PTO Bank

Paid time off bank. Pooling sick days. Base pay, benefits, incentives, stock options, paid time off are all shared components between the employer and the employee in order to make their goals congruent

Employee benefits

Part of the total compensation package, other than pay for time worked, provided to employees in whole or in part by employer payments, such as life insurance, pension plan, worker's compensation, vacation and so on. However, there is little evidence regarding whether effective employee benefits complement organization strategy and performance

Pay policy line

Pay line representing an adjustment to the market pay line to reflect the company's external competitive position in the market

Reference rates

Pay rates from market data used in pricing broad bands

Person-based pay structures

Pay systems that support continuous learning and improvement, flexibility, participation and partnership are essential to achieving competitive advantage today. The logic supporting them is that structures based on differences in people's skills or competencies will be more flexible and thus encourage agility

Defined benefit plan

Pension plan in which an employer agrees to provide a specific level of retirement pension, the exact cost of which is unknown. Provides an explicit benefit which is easily communicated. Company absorbs risk associated with changes in interest rates and investment returns, which affect cost. More favourable to long-service employees. Employer costs unknown. Pension funds surplus, but not deficit must be shared with employees if plan is wound up

Defined contribution plan

Pension plan in which an employer agrees to provide specific contributions, but the first benefit is unknown. Unknown benefit level is difficult to communicate. Employees assume risks from changes in interest rates and investment returns which affect benefits. More favourable to short-term employees. Employer costs known up front. No surplus or deficit in pension fund to manage

Maslow's hierarchy of needs

People are motivated by inner needs. Needs form a hierarchy from most basic to higher-order. Needs are never fully met; they operate cyclically. Higher-order needs become motivating after lower-order needs have been met. When needs are not met, they become frustrating. Performance-based pay may be demotivating if it impinges upon employees' capacity to meet daily living needs. Incentive pay is motivating to the extent it is attached to achievement, recognition, or approval

Coinsurance

Percentage of insurance premiums paid for by the employer

360-degree feedback

Performance appraisal method that includes feedback from up to five sources; supervisors, peers, self, customers, and subordinates

Management by objectives (MBO)

Performance rating method based on meeting objectives set at the beginning of the performance review period

Behaviourally anchored rating scale (BARS)

Performance rating scales using behavioural descriptions as anchors for different levels of performance on the scale. The BARS format addresses a major criticism of standard rating scales - different raters carry with them into the rating situation different definitions of the various scale levels

Pension plan

Plan that provides income to an employee at retirement as compensation for work performed now

Establish range midpoints, minimums, and maximums

Ranges group salary data on the vertical axis. Pay ranges set an upper and lower limit between which all wages for all jobs in a particular grade are expected to fall. A range has three salient features; a midpoint, a minimum, and maximum of the pay range for that grade

Alternation ranking

Ranking the best employee, then the worst employee, then the next-best and next-worst and so on

Coordination of benefits

Reduction of benefits by any amount paid under a spouse's plan

External competitiveness

Refers to the pay relationships among organizations - the organization pay relative to its competitors. It is expressed in practice by pay levels and pay forms. Both pay levels and pay forms focus on two objectives; (1) to control costs and (2) to attract and retain employees

Self as rater

Self-ratings are generally more lenient and possibly more unreliable than ratings from other sources

Determining the internal skill-based structure

Skill analysis --> skill blocks --> skill certification --> skill-based pay structure

Outcomes of skill-based pay plans

Skill-based plans are generally well accepted by employees, because it is easy to see the connection between the plan, the work, and the size of the paycheque. Consequently, the plans provide strong motivation for individuals to increase their skills; "learn to earn". Skill-based plans become increasingly expensive as the majority of employees become certified at the highest pay levels. As a result, the employer may have an average wage higher than competitors who are using conventional job evaluation. Unless the increased flexibility permits leaner staffing, the employer may also experience higher labour costs. Some employers are combatting this by requiring that employees stay at a rate for a certain length of time before they can take the training to move to a higher rate. In a firm with labour-intensive products, the increased labour costs under skill-based plans may also become a source of competitive disadvantage. Percentage of firms using skill-based pay has been declining. More skills may not necessarily improve productivity, instead, there may be an optimal number of skills for any individual to possess. Beyond that number, productivity returns are smaller than the pay increases. Skill-based approaches may be only short-term initiatives for specific settings.

Defining the relevant markets

So depending on its location and size, a company may be deemed a relevant comparison even if it is not a product market competitor. The data from product market competitors are likely to receive greater weight when; 1. Employee skills are specific to the product market 2. Labour costs are a large share of total events 3. Product demand is responsive to price changes, that is, people won't pay $20 for a bottle of VQA wine, they'll have Fuzion instead 4. The supply of labour is not responsive to changes in pay

Establish certification methods for information collection for skill-based pay

Some organizations use peer review, on-the-job demonstrations and tests for certification, similar to the traditional apprentice/journeyman/master path. Leaders and peers are used in the certification process

Individual incentive

Sometimes this variable pay is an add-on to a fixed base pay. The incentive component ties increment in compensation directly to extra individual production

Errors in storage and recall

Specific instructions to recall information about the ratee, as for a performance review, elicit the trait lazy

Deductible

Specified dollar amount of claims paid by the employee each year before insurance benefits begin

Supervisors as raters

Supervisors are knowledgeable about the job and the dimensions to be rated. Supervisor ratings also tend to be more reliable than those from other sources

Customer as rater

The drive for quality means that more companies are recognizing the importance of customers

Human capital theory

The idea that higher earnings are made by people who improve their potential productivity by acquiring education, training and experience. Elasticity play a role because a company chooses the skills and behaviours and then seeks it

Compensating differentials theory

The idea that higher wages must be offered to compensate for negative features of jobs. They explain the presence of various pay rates in the market. If a job has negative characteristics, then the employer must offer higher wages to offset their negative factors. This is affected by price elasticity because if an employer decides to offer a higher wage, employees will be more willing to participate in the negative components of the job which will increase the supply of labour

Signalling theory

The idea that pay levels and pay mix are designed to signal desired employee behaviours. A policy of paying below the market for base pay yet offering generous bonuses or training opportunities sends a different signal, and presumably attracts different people than a policy of matching wage with no performance-based pay. A study of university students approaching graduation found that both pay level and mix affected their job decisions. Students wanted jobs that offered high pay, but they also showed a preference for individual-based pay, fixed pay, job-based pay and flexible benefits. Signalling works on the supply side of the model, too, as suppliers of labour signal to potential employers. Pros include motivating behaviour that fits with the organization strategy. Cons include it can reward bad behaviour

Evaluation format

The method used to evaluate an employee's performance either ranking against other employees or rating on one or more performance criteria

Pay range

The range between the upper and lower limits on pay for all jobs in a particular pay grade

Range spread

The size of a pay range, based on a judgment about how the ranges support career path's, promotions and other organization systems

Unions and benefits

Unions have fought for the introduction of new benefits and the improvement of existing benefits

Delphi technique

Using a consultant to gain industry knowledge