MANG 5568 T2

Probing

-Asks questions about what the communicator said -Used to gather information -Can appear that the communicator must justify what is happening

Measures of Compensation

-Base Pay -Total Cash (base + bonus) -Total Compensation (base + bonus + stock options + benefits)

Wage Components

-Base Wage -Lump Sum Bonus -Success Sharing Plans -Risk Sharing Plans

Pay Level Policy: Lead

-Maximizes the ability to attract and retain quality employees and minimizes employee dissatisfaction with pay. -May also offset less attractive features of work -If used only to hire new employees, may lead to dissatisfaction of current employees. -May mask negative job attributes that contribute to high turnover later on

Reflecting

-Mirror back to the communicator the message that was heard -Involves paraphrasing and clarifying -Could appear that the listener isn't llistening

Expectancy Theory

-Motivation is the product of three perceptions: expectancy, instrumentality, and valence -Expectancy is employees' assessment of their ability to perform required hob tasks -Instrumentality is employees' beliefs that requisite job performance will be rewarded by the organization -Valence is the value employees attach to the organization rewards offered for satisfactory job performance

Labor Market Factors

-Nature of Demand -Nature of Supply

Defensiveness

-One individual feels threatened or attacked as a result of the communication -Self-protection becomes paramount -Energy is spent on constructing a defense rather than on listening. -Aggression, anger, competitiveness, and/or avoidance as a result of the communication

Agency Theory

-Pay directs and motivates employee performance -Employees prefer static wages (i.e. a salary) to performance based pay -If performance can be accurately monitored, payment should be based upon satisfactory completion of work duties -If performance can't be monitored, pay should be aligned with achieving organization objectives

Herzberg's two-factor theory - So What?

-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 de-motivating -Other conditions in the working relationship influence the effectiveness of performance-based pay

Two Aspects of Pay Structure:

-Pay-policy Line -Pay Ranges

Maslow's need Hierarchy

-People are motivated by inner needs -Needs form a hierarchy from most basic (food and shelter) to higher order (self-esteem, love, self-actualization) -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

Segmented Labor Supply

-People flow to the work -Work flows t the people

Maslow's need hierarchy - So What?

-Performance based pay may be de-motivating 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

Agency Theory - predictions about performance-based pay

-Performance based pay must be tightly linked to organizational objectives -Employees dislike risky pay and will demand a wage premium (i.e. higher total pay) in exchange for accepting performance based pay -Performance based pay can be used to direct and induce employee performance

Reinforcement Theory - predictions about performance-based pay

-Performance based pay must follow closely behind performance -Rewards must be tightly couple to desired performance objectives -Withholding payouts can a way to discourage unwanted behaviors

Equity Theory - So What?

-Performance measures must be clearly defined, and employee must be able to affect them through work behaviors -If payouts don't 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

Agency Theory - So What?

-Performance-based pay is the optimal compensation choice for more complex jobs when monitoring employees' work is difficult -Performance targets should be tied to organization goals -Use of performance-based pay will require higher total pay opportunity

Goal Setting Theory - predictions about performance-based pay

-Performance-based pay must be contingent upon achievement of important performance goals -Performance goals should be challenging and specific -The amount of the incentive reward should match the goal difficulty

Advising

-Provides direction, evaluation, personal opinion, or instruction. -Creates listener control over the topic -Can produce dependence

Pay Range

-Recognizes individual performance differences with pay -Meet employees' expectations that their pay will increase over time, even in the same job -Encourage employees to remain with the organization

Supply Side Theories

-Reservation Wage -Human Capital

Reinforcement Theory

-Rewards reinforce (i.e. motivate and sustain) performance -Rewards must follow directly after behavior to be reinforcing -Behaviors that are not rewarded will be discontinued

Promotion Increases Matter

-Size of differentials between grades should support career movement through the structure. -Overlap ought to be large enough to induce employees to seek promotion into a higher grade. -Skill-based plans establish single flat rates for each skill level regardless of performance or seniority.

Ranges Support

-Some flexibility within controls -Relatively stable organization design -Recognition via titles or career progression -Midpoint controls, comparatives -Controls designed into system -Give managers "freedom with guidance" -150 percent range-speed

Major Decisions in Pay-Level Determination

-Specify pay-level policy -Define purpose of survey -Specify relevant market -Design and conduct survey -Interpret and apply result -Design grades and ranges or bands

Variable-Pay Plans

-Stock ownership or Options -Balanced Scorecard

Invalidating Communication

-Superiority -Rigidity -Indifference -Imperviousness

Deflecting

-Switches the focus from communicator's problem to on selected by the listener. -Appropriate if reassurance is needed. -Imply that the communicator's issues are not important

Equity Theory - predictions about performance-based pay

-The pay-performance link is critical; increases in performance must be matched by commensurate increases in pay -Performance inputs and expected outputs must be clearly defined and identified -Employees evaluate the adequacy of their pay via comparisons with other employees

Reinforcement Theory - So What?

-Timing of payouts is very important

Conducting the Feedback Session

1. "Tell-and-Sell" 2. "Tell-and-Listen" 3. "Problem-Solving"

Attributes of Supportive Communication

1. Congruence 2. Descriptive 3. Problem-oriented 4. Specific 5. Conjunctive 6. Validates 7. Owned 8. Active Listening

External Competitiveness

1. Pay Relationships Among Organizations 2. Specify Pay 3. Select Market 4. Design Survey 5. Draw Policy Lines 6. Merge Internal and External Pressures 7. Competitive Pay Levels, Mix, and Structures

Pay Range

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

Market Line or Trend Line

A ____________ links company's benchmark jobs on the horizontal axis with market rates paid by competitors on the vertical axis; summarizes the distribution of going rates paid by competitors in the market

Success Sharing Plans

A generic category of incentive pay (not base) that is tied to group performance. Employees shares in successes but not penalized for failures. -Gainsharing -Profit Sharing

-Determine pay level set by market forces -Determine marginal revenue generated by each new hire

A manager using the marginal revenue product model must:

Links a company's benchmark job with market rates paid by competitors

A market pay line _________.

Congruence

A match between what an individual is thinking and feeling

High performers prefer bonuses

Changing base pay

Balanced Scorecard Advantages

Communicates organizational priorities.

Coaching

Giving advice, direction or information to improve performance. Focuses on abilities.

Base Pay

Guaranteed portion of employees wage package. -Cost of Living Adjustment -Merit Raise

Counseling

Helping someone understand and discover a problem. Focuses on attitudes.

Organization Strategy

Higher pay levels may be well-suited to particular strategies such as higher value-added customer segments

-Setting a pay level that is above, below, or equal to that of competitors. -Determining the mix of pay forms relative to those of competitors.

How is external competitiveness expressed?

-For same occupations or skills -For employees in same geographic area -With same products and services

In a relevant labor market, what do employees compete for?

Degree of Competition

In highly competitive markets, employers are less able to raise prices without loss of revenues. Single sellers are able to set whatever price they choose.

Labor Demand

In the Short run, an employer cannot change any factor of production except human resources.

Risk Sharing Plans

Incentive pay that has a higher upside when times are good but employees could share the burden in bad times (e.g. temporary cut in pay)

Stock Ownerships or Options Disadvantages

Indirect pay/performance link. Employees may be required to put up money to exercise grants.

Individualist

Individual not group pay

Reservation Wage

Job seekers will not accept jobs with pay below a certain wage, no matter how attractive other job aspects Pay level will affect ability to recruit.

Pay Level Policy: Lag

Paying below-market rates may hinder a firm's ability to attract potential employees. This pay level policy coupled with the promise of higher future returns: -May increase employee commitment -Foster teamwork -May possibly increase productivity

Balanced Scorecard Disadvantages

Performance criteria may be met, but if financial targets are not met, there may be a reduced payout at all. Can be complex.

Product Demand

Puts a lid on maximum pay level an employer can set

Rater Bias

Raters often let their opinion of one quality color their opinion of others -Halo Error -Horns Error

External Competitiveness

Refers to the pay relationships among organizations - the organization's pay relative to its competitors

Active Listening

Requires ____________ and responding effectively to someone else's statements. -In skills important for managers, effective listening was ranked highest. -Individuals usually understand about a fourth of what is communicated.

Rating

Requires evaluating employees on some absolute standard rather than relative to other employees. Each performance standard is measured on a scale whereby appraisers can check the point that best represents the employee's performance. -Examples: behaviors; attributes; management by objectives (MBO).

People Flow to the Work

Same location different sources of employees

Supportive Communication

Seeks to preserve or enhance the current relationship while providing information that is not complimentary or while resolving an uncomfortable issue with another person.

Base Pay

Tells how competitors are valuing the work in similar jobs. Fails to include performance incentives and other forms, so will not give true picture if competitors offer low base but high incentives.

Total Cash (base + bonus)

Tells how competitors are valuing work; also tells the cash pay for performance opportunity in the job. All employees may not receive incentives, so it may overstate the competitors' pay; plus, it does not include long-term incentives.

Total Compensation (base + bonus + stock options + benefits)

Tells the total value competitors place on this work. All employees may not receive all the forms. Be careful: Don't set base equal to competitors' total compensation. It risks high fixed costs.

Reinforcement Theory

This theory of motivation highlights the importance of the timing of rewards

Profit Sharing

Tied to organization's profits.

Lump Sum Bonus

Tied to performance but not added to base pay so must be re-earned

Gainsharing

Tied to saving or lowering an anticipated cost often labor costs.

-Ranking -Rating

Two Evaluation Formats

True

Use aging or trending updates to forecast rates for future dates.

Work Flows to the People

Using people strategically from different locations

Pay Bands

Using this approach requires one minimum and one maximum, midpoints are often not used, and increases flexibility but could make an organization vulnerable to lawsuits.

Cost of Living Adjustment

Wage increase granted to all employees

Merit Raise

Wage increase tied to employees job performance

-Labor Market Factors -Product market Factors -Organization Factors

What 3 Factors Shape External Competitiveness?

Maslow's Need Hierarchy Herzberg's two-factor theory

What are the 2 motivational theories of need?

-To Lead: above average -To Meet (match): average -To Follow Competition (lag): below average

What are the 3 conventional pay-level policies?

-What is important to a person? -Offering it in exchange for some -Desired behavior

What are the 3 elements involved with motivation?

-Occupation -Geography -Competitors

What are the 3 factors that determine relevant labor markets?

Expectancy Equity Reinforcement Agency

What are the 4 motivational theories of exchange?

1. Elaboration 2. Clarification 3. Repetition 4. Reflection

What are the 4 types of Probing?

Resupply Retrain Refit Reassign Release

What are the 5 tools for improving Ability?

-The ability to diagnose and recognize your own emotions. -The ability to control your own emotions. -The ability to recognize and diagnose the emotions of others. -The ability to respond appropriately to emotional cues.

What are the components of emotional intelligence?

-Level of Pay -Pay System Characteristics

What are the key factors influencing a person's decision to join a firm?

-Positively influence recruiting and selection (attraction) -Good employees stay with the company (retention) -Motivate employees to perform well on their jobs

What behaviors need to be reinforced?

-Pay based on individual performance poor performers leave -Group incentive plans good performers leave -Level of employee satisfaction with pay -Changing base pay

What factors impact turnover?

-Guide compensation decisions (merit raises, bonuses, etc) -Administrative decisions such as layoffs and development -Strategic as it can direct employees' behavior

What functions do performance evaluations serve?

Goal Setting Theory

What is the motivational theories of behavior?

External Competitiveness

What refers to the pay relationship among organizations, which is the organization's pay relative to its competitors?

Resupply

When poor performance is due to an employee's lack of ability, what is the least threatening option?

True

When possible demonstrate empathy NOT sympathy.

Horns Error

When the bias involves negative ratings. This can cause employees to feel frustrated and defensive

Halo Error

When the bias is in a favorable direction. This can mistakenly tell employees they don't need to improve in any area.

-Lack of ability and insufficient information -Subordinate must understand the problem

When to Coach?

-Personality clashes -"I can help you recognize that a problem exists"

When to Counsel?

To increase turnover rates

Which of the following is NOT a reason a company might pay base wages above market?

Design the Survey

Who should be involved? How many employers? Which jobs to include? What information to collect?

Offers flexibility to deal with pressures from external markets and differences among firms. -Differences in quality among individuals applying for work -Differences in the productivity or value of these quality variations -Differences in the mix of pay forms competitors use

Why bother with grades and ranges?

Compensating Differentials

Work with negative characteristics requires higher pay to attract workers. Job evaluation and compensable factors must capture these negative characteristics.

Owned

________ and acknowledges the source of the idea. Ownership conveys responsibility for one's statements. -While disowned communication results in the listener never being sure of whose point of view the message represents.

Validates

________ and helps others feel recognized, understood, accepted, and valued.

Conjunctive

________ and joined to a previous message

Behavior

________ is a function of motivation, ability, and environment.

Empathy

_________ denotes the ability to understand and share the feelings of another (having shared the same, or a similar, experience).

Problem-Oriented

__________ and does not focus on personal traits which cannot be changed

Specific

__________ and identifies something that can be understood and acted upon

Sympathy

__________ denotes feelings of pity and sorrow for someone else's misfortune.

Pay Level

__________ is the average rates paid by an employer: (base + bonuses + benefits + value of stock) / # of employees

Descriptive

___________ and reduces the tendency to evaluate and cause defensiveness 1. Describes objectively the event, behavior or circumstance 2. Focus on the behavior and your reaction 3. Focus on solutions

The marginal product of labor

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

Job Candidates

___________ look for organizations with reward systems that fir their personalities.

Pay Forms

____________ are the various types of payments, or pay mix, that make up total compensation

Broad Banding

____________ involves collapsing salary grades into a few broad bands. -One minimum and one maximum -Range midpoint often not used -Increase flexibility but could make organization vulnerable to lawsuits

Merit Raises

____________ is an individual level form of performance pay.

Behavioral Appraisal Instruments

_____________ ask managers to assess a worker's behaviors. -More specific and easier to defend -Not generalizable to other position but very objective -Time consuming to make -Behavior may not always match exactly to scale

Trait Appraisal Instruments

_____________ ask the supervisor to make judgements about worker characteristics -Traits such as reliability and loyalty -Very generalizable to other positions but very subjective -Too ambiguous and hard to defend

Performance

_____________ must be accurately measured to tell if compensation efforts are working.

Grades

_______________ enhance an organization's ability to move people among jobs with no chance in pay. Each one will have its own pay range. All the jobs within a single one will have the same pay range.

Organizational Strategy

________________ is the guiding force.

Herzberg's two-factor theory - predictions about performance-based pay

-Base pay must be set high enough to provide individuals with the economic means to meet hygiene needs, but it cannot motivate performance -Performance is obtained through rewards - payments in excess of that required to meet basic needs -Performance based pay is motivating to the extent it is connected with meeting employees' needs for recognition, pleasure attainment, achievement, and the like -Other factors such as interpersonal atmosphere, responsibility, type of work, and working conditions influence the efficacy of performance-based pay

Maslow's Need hierarchy - predictions about performances-based pay

-Base pay must be set high enough to provide individuals with the economic means to meet their basic living needs -An at-risk program will not be motivating since it restricts employees' ability to meet lower-order needs -Success-sharing plans may be motivating to the extent they help employees pursue higher-order needs

Competitiveness of Total Commpensation

-Certain Operating Expenses (labor costs) -Increase Pool of Qualified Applicants -Increase Quality and Experience -Reduce Voluntary Turnover -Increase Probability of Union-Free Status -Reduce pay-related work stoppages

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

Attract and Retain the Right Employees

-Companies often set different pay level policies for different job families -How a company compares to the market depends on what competitors it compares to and what pay forms are included -Organizations vary in how closely they match the "going rate" -There is no single "going mix" of pay forms

Labor Demand Theories

-Compensating Differentials -Efficiency Wage -Signaling

Obstacles to Supportive Communication

-Defensiveness -Disconfirmation

Product Market Factors

-Degree of Competition -Level of Product Demand

Validating Communication

-Egalitarian -Flexible -Two-way -Based on Agreement

Bands Support

-Emphasis on flexibility within guidelines -Global organizations -Cross-functional experience and lateralprogression -Reference market rates, shadow ranges -Controls in budget, few in system -Give managers "freedom to manage" pay -100-400 percent spread

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 behaviors, 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

Equity Theory

-Employees are motivated when perceived outputs (i.e. pay) are equal to inputs (i.e. efforts, work behaviors) -A disequilibrium in the output-to-input balance causes discomfort -If employees perceive that other are paid more for the same efforts, they will react negatively (i.e. shirk) to correct the output-to-input balance

Disconfirmation

-Individual feels incompetent, unworthy, or insignificant as a result of the communication -Attempts to reestablish self-worth take precedence -Energy is spent trying to portray self-importance rather than on listening -Showing off, self-centered behavior, withdrawal, and/or loss of motivation are common reactions

Organizational Factors

-Industry and Technology -Employer Size -People's Preferences -Organization Strategy

Organization Factors

-Industry, Strategy, Size -Individual Manager

Two Parts of the Total Pay Model have Merged:

-Internally Aligned Structure - Horizontal Axis -External Competitive Data - Vertical Axis

Improving Motivation

-Job Design -Person-job "fit" -In the end, we cannot motivate others but only create an environment conducive to motivation

Expectancy Theory - predictions about performance-based pay

-Job tasks and responsibilities should be clearly defined -The pay-performance link is critical -Performance based pay returns must be large enough to be seen as rewards -People choose the behavior that leads to the greatest reward

Performance Management Process

-Knowing what activities and outputs are desired -Observing whether they occur -Providing feedback to help employees meet expectations

Controlling Costs and Increase Revenue

-Labor costs = (pay level) x (# of employees) -Higher the pay level, the higher the labor costs -Matters most when compared to competitors

Expectancy Theory - So What?

-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

Goal Setting Theory - So What?

-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 goal achievement

Performance

Ability * (Motivation/Effort) * Environment

Efficiency Wage

Above-market wages will improve efficiency by attracting workers who will perform better and be less willing to leave. Staffing programs must have the capability of selecting the best employees; work must be structured to take advantage of employees' greater efforts.

Equity

According to the _______ theory, relative pay is important as employees evaluate their pay-effort balance in comparison to other employees.

Purpose of a Survey

Adjust pay level-how much to pay? Adjust pay mix-what forms? Adjust pay structure? Estimate competitors' labor costs

Profit Margin

All of the below are factors that determine relevant labor markets except?

International Market Factors

All of the below shapes external competitiveness except?

Reduce Subjectivity

Although not all aspects fit neatly into these categories the overall goal is the same:

Ability

Aptitude * Training * Resources

Pay Level Policy: Match

Attempts to ensure that an organization's: 1. Wage costs are approximately equal to those of its product competitors 2. Ability to attract potential employees will be approximately equal to its labor market competitors

Pay Level Policy: Match

Avoids placing an employer at a disadvantage in pricing products -May not provide a competitive advantage in its labor markets

Stock Ownership or Options

Award of stock shares or options.

Balanced Scorecard

Awards that combine financial and operating measures for organization, business unit, and/or individual performance. Award pool based on achieving performance targets.

Adjust pay level-how much to pay?

Based on overall movement of pay rates caused by competition in the market

Motivation

Desire * Commitment

1. Lack of opportunity for others to speak 2. Extended pauses 3. Topic control

Dis-conjunctive communication occurs when:

True

Employers want employees to perform in ways that lead to better organizational performance.

True

Establish range midpoints, minimums, and maximums for grades and ranges.

Industry and Technology

Labor-intensive industries tend to pay lower than technology-intensive industries. New technology in an industry influence pay

Employer Size

Large organizations tend to pay more

Low self-esteem

Large, decentralized organization with little pay for performance

Too little, people leave (equity theory)

Level of employee satisfaction with pay

Risk Adverse

Little pay for performance

Problem-Solving

Managers and employees work together to solve performance problems.

Tell-and Sell

Managers tell employees their ratings and then justify those ratings.

Tell-and-Listen

Managers tell employees their ratings and then let the employee explain their side of the story.

People's Preferences

Markets involve employers' and employees' choices

Stock Ownerships or Options Advantages

Option awards have minimal impact on the financial statements of the company at the time they are granted. If properly communicated, can have powerful impact on employee behavior.

Fuzzy Markets

Organizations with unique jobs and structures find it hard to get comparable market data.

Risk Takers

Pay for performance

Materialistic

Pay level more important

Signaling

Pay policies signal the kinds of behavior the employer seeks. Pay practices must recognize desired behaviors with more pay, larger bonuses, and other forms of compensation.

True

Surveys provide the data for translating policy into pay levels, pay mix, and structures

Survey

Systematic process of collecting and making judgements about the compensation paid by other employers

Marginal Product of Labor

The additional output associated with hiring one additional person -Diminishing marginal productivity: each additional employee has a progressively smaller share of the other factors of production to work with

Marginal Revenue of Labor

The additional revenue generated from one additional person

Incentive Effect

The degree to which pay influences employee's motivation.

Person- and Problem-oriented communication

The difference between saying "You are stubborn" and "This is the second time we are unable to reach agreement" is the difference between what two types of communication?

Sorting Effect

The effect pay can have on the composition of the workforce through attraction and retention.

Specify a pay-level policy

The first step in setting competitive pay and designing a pay structure is to ______________.

Lag

The pay policy that is most closely associated with the decreased ability to attract employees is a(n) _____________ policy.

Lead Policy

The pay-level policy that is most likely to reduce pay dissatisfaction is a(n) ____________.

Performance Management

The process through which managers ensure that employees' activities and outputs contribute to the organization's goals.

Ranking

The rater compare employees against each other -Examples: simple ranking and forced distribution

Contrast Errors

The rater compares an individual, not against an objective standard, but against other employees.

Strictness

The rater favors lower rankings

Central Tendency

The rater puts everyone near the middle of the scale

Distributional Errors

The rater tends to use only one part of a rating scale. -Leniency -Strictness -Central Tendency

Leniency

The reviewer rates everyone near the top

Human Capital

The value of an individual's skills and abilities is a function of the time and expense required to acquire them Higher pay is required to induce people to train for more difficult jobs.