MGMT 434 Compensation Ch 5

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.

Accountability

the requirement for and ability to achieve desired results

Problem solving

the requirement for and ability to use know-how effectively to develop solutions that improve effectivenes

job-based structure

Structure that relies on work content tasks, behaviors, responsibilities

Point advantage

Compensable factors call out basis for comparisons. Compensable factors communicate what is valued.

Three common characteristics of point method.

(1) compensable factors (2) factor degrees numerically scaled (3) weights reflecting the relative importance of each factor.

Compensable Factors - How Many Factors?

*"Illusion of validity" ***Sometimes factors are redundant *"Small numbers" - If even one job has a certain characteristic, it must be a compensable factor *Research results ***Skills explain 90% or more of variance ***Three factors account for 98 - 99% of variance *****Skills, effort, responsibility (and working conditions)

Determine Compensable Factors

*Compensable factors - characteristics in the work that the organization values, that help it pursue its strategy and achieve its objectives *To be effective, compensable factors should be: --Based on strategy and values of organization --Based on work performed ----Documentation is important ----If not based on work performed, then...? Provide rationale for (and diminish likelihood of) challenges arising --Acceptable to the stakeholders ----If not, then...

Conduct job analysis

*Point plans begin with job analysis *A representative sample of jobs (benchmark jobs) is drawn for analysis *Content of these jobs is basis for: ***Defining compensable factors ***Scaling compensable factors ***Weighting compensable factors

Characteristics of a benchmark job:

1. Contents are well-known and relatively stable over time 2. Job not unique to one employer 3. A reasonable number of employees are involved in the job

What would the compensable factors be in your organization?

???

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.

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.

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 comparison ranking

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

Position Analysis Questionnaire (PAQ)

A structured job analysis technique 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.

Compensable factors and weights were derived using a sample of benchmark jobs. A) True B) False

A) True

Compensable factors are scaled to reflect the degree to which they are present in each job and weighted to reflect their overall importance to the organization. A) True B) False

A) True

People who work in hospitals, nursing homes, and child care centers feel that responsibility for people should be used less often as a compensable factor. A) True B) False

A) True

Recruitment and Retention of High Performers

Again, goal of JE is to increase fairness Thought to increase positive job attitudes and, hence, performance But perceptions of fairness differ across indvls. JE pays for the job - not indvl performance Larger the share of compensation pool that is job-based, less incentives for indvl. performance/rewards Need to be "balanced"

Two ranking approaches

Alternation ranking & Paired comparison method

Designing a point plan: Six steps

Conduct job analysis Determine compensable factors Scale the factors Weight the factors according to importance Communicate the plan, train users: prepare manual Apply to nonbenchmark jobs

Practical Problems with Job Evaluation

Consistency with external Market Paying the "job" vs. paying the "person" Movement within ranges Recruitment/retention of high performers

Ranking advantage

Fast, simple, easy to understand and explain Initially, the least expensive method

Apply to Nonbenchmark Jobs

Final step involves applying plan to remaining jobs Could involve both designers and/or employees trained in applying the plan Tool for managers and HR specialists once plan is developed and accepted Trained evaluators will evaluate new jobs or reevaluate jobs whose work content has changed May also be part of appeals process

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.

job content

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

Communicate the Plan and Train Users

Involves development of manual containing information to allow users to apply plan Describes job evaluation method Defines compensable factors Provides information to permit users to distinguish varying degrees of each factor Involves training users on total pay system Includes appeals process for employees Employee acceptance is imperative Communication

Consistency with External Market

JE usually combined with market data Do not always provide consistent info. Comparable internal worth paid differently in market Esp. "difficult" when related to gendered work Three decisions Stick with internal OR external OR blend Practically, many orgs. "go market" Raises serious questions about commitment to internal equity and value of JE

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.

The evaluation is based on a combination of:

Job content Skills required Value to the organization Organizational culture External market

point (factor) method

Job evaluation method. Most commonly used approach to establish pay structures in U.S. Differ from other methods by making explicit the criteria for evaluating jobs - compensable factors

hierarchies (job structures)

Jobs ordered according to their relative content and/or value,

Factors in the Hay Plan

Know-how Problem solving Accountability

Who Should be Involved?

Managers and employees with a stake in the results should be involved Can include representatives from key operating functions, including nonmanagerial employees Organizations with unions find including union representatives helps gain acceptance Extent of union participation varies Design process matters Attending to fairness of design process and approach chosen likely to achieve employee and management commitment, trust, and acceptance of results Appeals/review procedures Inevitable that some jobs are incorrectly evaluated Requires review procedures for handling such cases and helping to ensure procedural fairness

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.

Ranking

Orders job descriptions from highest to lowest based on a global definition of relative value or contribution to the organization's success

The Final Result: Structure

The final result of the job analysis - job description - job evaluation process is a structure, a hierarchy of work

relative value of jobs

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

Once a criterion structure is agreed on, statistical modeling techniques are used to determine the weight for each factor and the factor scales that will reproduce, as closely as possible, the chosen structure. The statistical approach is often labeled: A) benchmarking. B) policy capturing. C) committee a priori approach. D) weighted average approach.

The statistical approach is often labeled: B) policy capturing.

content

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

Which of the following best represents the correct sequence of the job evaluation process? a) job description > job evaluation > pay structure b) job evaluation > job description > job structure c) job analysis > job description > pay structure d) job description > job evaluation > job structure e) none of the above are good representations

d) job description > job evaluation > job structure

The statistical approach is often labeled:

policy capturing

job evaluation

process of systematically determining the relative worth of jobs to create a job structure for the organization

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,

Point disadvantage

Can become bureaucratic and rule-bound.

Classification advantage

Can group a wide range of work together in one system.

Representative sample of benchmark jobs for the entire domain of work being evaluated

Capture the depth and breadth of work

committee a priori judgment approach

Compensable factor importance weights are assigned by a committee based on judgment.

Criteria for scaling factors

Ensure number of degrees is necessary to distinguish among jobs - most have 4 to 8 Use understandable terminology Anchor degree definitions with benchmark-job titles and/or work behaviors

Most factor scales consist of six to twelve degrees. A) True B) False

B) False

The final result of the job analysis-job description-job evaluation process is an internal pay structure. A) True B) False

B) False

A benchmark job has all the following characteristics except: A) A reasonable proportion of the work force is employed in this job. B) It is usually the entry-level job in the job hierarchy. C) The job is common across a number of different employers. D) Its contents are well known and relatively stable over time.

B) It is usually the entry-level job in the job hierarchy.

policy capturing

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

Hay factor know-how is first measured on two dimensions: _____ and _____. A) scope; depth B) intensity; cross-functionality C) speed; versatility D) turnaround time; error ratio

A) scope; depth

Know-how

the sum total of what a person must have the capabilty to do to be effective

Ranking disadvantage

Cumbersome as number of jobs increases. Basis for comparisons is not called out. Can be misleading - Often based on subjective criteria - Need to be familiar with all jobs being ranked!

Which of the following is not a requirement for compensable factors to be useful? A) Based on the strategy and values of the organization B) Based on the work performed C) Acceptable to the stakeholders affected by the resulting pay structure D) Compliant to NEMA guidelines

D) Compliant to NEMA guidelines

Research suggests that focusing on all of the following except _____ is likely to achieve employee and management commitment, trust, and acceptance of the results. A) the fairness of the design process B) job evaluation and skill/competency-based plan C) market pricing D) the internal pay structure

D) the internal pay structure

Classification disadvantage

Descriptions may leave too much room for manipulation.

Weight the Factors According to Importance

Different weights reflect differences in importance attached to each factor by the employer Determination of factor weights Usually determined by an advisory committee Can use a statistical, policy-capturing approach Weights are determined vis a vis a criteron pay structure e.g., benchmark jobs

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,