Man 4330 Rockmore Exam 2 Compensation Administration UCF

Performance Management Process

1. Establish expectations. 2. Coaching & Development. 3. Feedback. 4. Review 5. Rewards and Recognition.

50% Spread

80 minimum 120 maximum

Reasons for Conducting Pay Surveys

Adjusting Pay Levels Adjusting Pay Mixes Adjusting Pay Structures Analyze Special Situations Estimate Competitors' Labor Costs

Reasons for Compensating Differentials

Agreeableness work environments Expense of learning the business Constancy/Employment Stability Level of Trust placed in employees Likelihood of success in employment Cost of living associated with particular geographic areas.

Individual Pay Plan: Lump Sum Bonuses

Alternative to merit pay. Reduced costs associated with compounding.

Pay Level in respect to External Competitiveness

Average of the array of rates paid by an employer.

Job Evaluation is based on what?

Based on Job Content, Skills Required, and value added to the company.

Adv/Dis of Market Pricing

Based on market pay data, but subject to rater bias and basically market driven

Key Pay Structure (Job Pricing) Decisions

Based on whether structure supports org strategy and supports work flow

Issue of Designing Pay Surveys: Lvl Product Demand

Caps Maximum Pay level

Causes of Wage Differentials

Characteristics of the Industry P/S Market Profitability or Performance of the Industry Capital intensity of the industry Union Density

Job Evaluation and Comparable Worth

Comparable Worth: A Title VII action for pay discrimination based on gender. Jobs held mostly by women compared with comparable jobs held mostly by men. Used to determine if there is gender discrimination.

Adv/Dis of Point Factor System

Compensable factors call out basis for comparisons, but can become bureaucratic and rule-bound. Subject to bastardization.

Performance Management

Continuous process where employees and managers work together.

Sources of Pay Survey Information

Custom Designed Surveys Federal Govt Professional Associations Internet

Product Market Factors

Degree of competitiveness and Product demand

Labor Market Factors

Demand and Supply

Steps for Designing, Developing and Applying the Point Factor System (Determining Point Value and Job Grade)

Determine exemption status with JA Determine compensable factors Numerically scale factors Weight the compensable factors according to importance Communicate the plan, train users, etc. Apply to key, non-benchmark, and unique jobs.

Types of Justice

Distributive, Procedural, Interactional

Pay Grades Spread/Width

Dollar amount between min and max.

Risk Sharing Plan

Employee base pay is varied and base pay/bonuses are both dependent on company successes or failures.

Success Sharing Plan

Employee has static base pay and gets bonuses dependent on company success in the market.

Adv/Dis of Maturity Curves

Employees acceptance, experience contribution, but rewards flatten over the years and performance issues ensue.

Gain Sharing

Employees earn bonuses tied to unitwide performance.

Impact of Motivation on Pay Structure Decisions

Employees who dont get paid what they think they ought to, dont perform as well as employees who believe themselves to be paid equitably.

How do Labor Markets work in Perfect Competition?

Employers Maximize profits Production reaches efficiency Development of a Homogeneous labor force Jobs offered by employers are identical Employers and Employees have perfect knowledge of labor market wages and opportunities Capital and labor are fully employed Jobs in the Market area are open competition.

Issue of Designing Pay Surveys: Degree of Competition

Employers are less able to raise prices without loss of revenue in highly competitive markets.

Compensation Objectives

Encourage Training Increase Experience Reduce Turnover Facilitate Career Progression Enhance Job Performance Reduce Pay-Related Grievances Reduce Pay-Related Work Stoppages

Goals of Labor Market and Product Market Surveys

Ensure equitable compensation (both direct and indirect) so that individuals are motivated to join and remain with the organization. Ensure compensation costs do not exceed the organization's ability to pay.

Why do raters make mistakes

Errors in Rating Process Errors in Observation/Attention Errors in Storage and Recall Errors in Actual Evaluation

Key Decisions concerning Job Evaluation

Establishing Purpose of the job (Does it support org. strategies, work flow, is it fair to employees, does it motivate behavior, etc) Single vs Multiple Plans Choosing Methods (Ranking, classification, factor comparison or Point Factoring) Obtain involvement of relevant stakeholders Evaluate Plan's Usefulness

International Labor Markets search for?

Executives SOMETIMES

Direct-Market Price Approach

External Pay information is the primary approach for unique jobs.

Adv/Dis of Ranking System

Fast and simple but only good for small # of jobs.

Types of Pay Structures

Flat - single pay rate for a job Ranged - range has a min, med, and max pay. Step - defined increases in pay based on time in job or performance.

Disadvantages of Individual Pay Plans

Greater conflict. Fear of Increased Production Standards. Increased complaints that equipment is poorly maintained. Employees discouraged by unwillingness of experienced workers to cooperate in training newbies.

Efficiency Wage

Higher wages will increase efficiency and actually lower labor costs if they: attract higher quality applicants Lower turnover Increase employee effort Reduce shirking Reduce monitoring

Types of Individual Pay Plans

Incentive Plans Merit Pay Lump Sum Bonuses One Time or SPOT Awards Mixed Reward Systems

RLM (Relevant Labor Market) is...

Includes employers who compete for: Same occupations or skills Employees in RLM area for specific KSA's With Like Sales, Revenues, or Profits With Same Products or Services

Organizational Factors

Industry Strategy Geographic Region Geographic Size Philosophy Culture Executives

Compression Issues

Internal pay rate movement. Equity is sometimes at stake here.

The Outcome of Job Evaluations

JOB STRUCTURE! Develops an ordered list of jobs based on their value to the organization, as well as a hierarchy of work and a structure supporting the policy of internal alignment. Tells which jobs are most and least valued, and the relative amount of difference between jobs.

Key Phases in Implementing a Pay Plan

Job analysis = External Pay Survey or Internal Job Evaluation Requires a consistent Ability to Pay and Equitable administration.

Benchmark (Key) Job Characteristics

Job contents are well known and relatively stable over time. Job is common across several different employers. Sizeable proportion of work force employed in job.

Individual Pay For Performance Plans

Jobs are not interdependent, performance measures are STABLE, commitment to the org is individually based, and its a NON union.

Interactional Justice

Justice in the Interpersonal nature of how outcomes are implemented.

Distributive Justice

Justice in the actual determination of outcomes.

Procedural Justice

Justice in the process used to determine outcomes.

Factors influencing External Competitiveness

Labor Market Product Market Organization

Value of Labor (What constitutes Total Cost of Labor?)

Labor is valued only by an employing organization to the extent that the labor is combined with other factors of production to product a product/good/service.

Issues of Designing a pay survey

Level of Product Demand Degree of Competition

Wage Employer Ranks and Comparisons

Low Wage Employers (LAG) Match Wage Employer (MATCH) High Wage Employers (LEAD)

Regional Labor Markets search for?

Managerial Professional Scientists & Engineers Technicians

Wage Theory: Labor Demand

Marginal Product of Labor (Marginal Productivity Theory) and Marginal Revenue Theory

Integrated-Market Price Approach

Market & Job Evaluation

Pay Level

Open Ranges vary as to the number of levels. Few or compressed ranges mean more levels of work.

Group Pay for Performance Plans

Output is collaborative, and individual contributions are assessed. Standards fluctuate to meet environmental pressures, high commitment to org, and can be Union or NON union.

Individual Pay Plan: Merit Pay

Pay adjustments to base salary as determined by performance (theoretically)

Pay Differentials

Pay differences among levels. (Flat/open pay ranges based on state criteria such as a job requirement)

Factors Affecting Pay Structure and Organizations

Pay level and Pay Differentials

Pay Level vs Pay Rate

Pay level applies to the 'notion' of an average wage, whereas Pay Rate refers to the actual amount of money paid for a specific job.

Local Labor Markets search for?

Production Office & Clerical Technicians

Profit Sharing Plans

Profit Sharing Gain Sharing Success Sharing Risk Sharing

Methods of Job Evaluation

Ranking Factor Eval. System Market Pricing Maturity Curves Point Factor

Categories of Performance Appraisal Formats

Ranking Rating MBO/MBR

Categories of Performance Appraisal Formats: RANKING

Rater Compares employees against each other.

Categories of Performance Appraisal Formats: RATING

Rater evaluates employees on some absolute standard.

Categories of Performance Appraisal Formats: MBO/MBR

Rater evaluates performance on measures relative to mutually agreed upon results.

External Competitiveness

Refers to pay relationship of an organization's pay relative to its RLM competitors (pay equity)

National Labor Markets search for?

Scientists & Engineers Managerial Professional Executives

Novel Reward Behaviors (NRBs)

Spontaneous, infequently provided, and relate to a specific performance activity (NOT GENERAL TREND OR LEVEL OF PERFORMANCE). Usually awarded for exceptional performance on a special project.

Individual Pay Plan: Incentive Plan

Standard hourly pay plan, Piece-Rate

Advantages of Individual Incentive Plans

Substantial contribution to raising productivity, lower production costs, and increasing earnings of workers. Less direct supervision. Systems of Payment by Results.

Purpose of a Salary (Pay) Survey

Systematic process of collecting and making judgments about compensation paid by other employers. Provides data for setting pay policy and translating policies into levels and structure.

What is a Pay Structure?

The ordering of pay rates or ranges for an organization's jobs.

What is Job Evaluation?

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

Understanding why managers do not like performance appraisals

Time Consuming. Subjectivity. Performance expectations may not be known by or may be vague to employees. Supervisors are not awarded for their PA efforts. Perception that there is a minimum relationship between performance and rewards.

Individual Pay Plan: One time/Spot Awards

Vacation trips, appliances/gifts, dinners, generally non-monetary

Interindustry relationship to wages

Wage differentials among comparable employee skill sets in different industries.

Equity Theory

What I get VS what I believe I deserve, compared to What others get vs what I believe others deserve.

Pay Line Formula

Y=a+b(x) Y=Midpt rate a=the y intercept b=slope or x coefficient x=job value or job grade midpt value.

Marginal Revenue Theory

additional revenue generated from when the organization employs one additional person (with other production factors held constant)

Supply and Demand Theory

aka Assumption of Perfect Competition

Internal Labor Markets

all positions, jobs, and job families within an organization and their relationship to the external RLM.

Different pay Levels/Pay Philosophy means?

attraction of quality employees and increased productivity

Adv/Dis of Factor Evaluation System

can group a wide range of work together but descriptions leave too much room for manipulation.

Individual Pay Plan: Mixed Reward Systems

combination of the various types of rewards.

Compa-ratio

employee salary/midpt rate

Profit Sharing

employees recieve annual bonus or shares in the company based on COMPANY WIDE PERFORMANCE.

Marginal Productivity Theory

increment in productivity from the employment of one additional employee.

Reservation Wage

people will not accept a job with pay below a certain wage, regardless of attractive job attributes

Signaling

strategically designed pay mix indicating to present and future employees expected work behaviors.

Product/Service P/S Demand

the effect change in product/service price as on demand.

Captial/Labor Ratio

total operating cost relative to labor v capital investment cost

Human Capital

value on KSAs and time/expense to obtain