MGMT 2103 Exam 2 slides
Liu has a goal to work hard and eventually apply for a promotion at the Great Grain Company. Liu is most likely to exhibit positive emotions if:
** A.The emotions are congruent with his goal B.He has emotional intelligence C.The emotions are incongruent with his goal D.He feels inadequate E.He had a bad experience being promoted at his former company
What are values?
-Abstract ideals that guide one's thinking and behavior across all situations -One's moral compass when making decisions -Our values make us who we are -Values are relatively stable
Job Satisfaction
-An affective or emotional response toward various facets of one's job -The extent to which an individual likes his or her job Need Fulfillment: Understand and meet employees' needs Met Expectations: Meet expectations of employees about what they will receive from job Value attainment: Structure the job and its rewards to match employee values Equity: Monitor employee perceptions of fairness and interact with them so they feel fairly treated Disposition/Genetic Components: Hire employees with an appropriate disposition
Implications of Individual Differences for Managers
1.Managers have little or no impact on fixed Individual Differences: •Intelligence •Personality 2. Managers can help employees manage: •Attitudes •Emotions 3. Managers have more influence on relatively flexible IDs that influence individual-level work outcomes: •Performance •Job satisfaction
Components of Executive Compensation
1.Salary/Bonuses 2.Stock Options -Right to buy company stock at discounted price (not obligatory) -CEO pay varies with performance of stock market 3.Stock Grants -Stock given to employee as compensation/part of compensation -Walmart awards Restricted Shares of Stock, which "vest" over time.
Pay Links to Individual Behaviors
3 Theories Explain Compensation's Effects: Reinforcement Theory: E. L. Thorndike's Law of Effect states that a response followed by a reward is more likely to recur in the future. The implication for compensation management is that high employee performance followed by a monetary reward will make future high performance more likely. Expectancy Theory: Focuses on effects of incentives Intrinsic motivation -naturally satisfying to the individual, makes you happy Extrinsic motivation - obvious external rewards Behaviors: a function of ability and motivation Motivation: function of expectancy, instrumentality and valance perceptions. Agency Theory: Theory explaining when one party in the organization determines the work of others. Motivation could be self interest Goals may not be aligned & conflict could ensue
Area Wage Rates
A firm's formal wage structure of rates is influenced by those being paid by other area employers for comparable jobs.
David, an accountant with Brighter Future Corporation, is experiencing job dissatisfaction due to comparing how hard he works and how much he gets paid versus his perception of a co-worker's effort and reward. David's dissatisfaction can be explained by:
A.Disposition/genetic components model ** B.Equity Theory model C.Need fulfillment model D.Value attainment model E.Met expectations model
Martha would like to hire employees who will be strong performers in her organization. Which of the Big Five personality dimensions should she try to make sure the new employees score high on?
A.Extraversion B.Agreeableness ** C.Conscientiousness D.Emotional Stability E.Openness to Experience
Joe was terminated from his job and believed the reason was his boss did not like him and his hard work was not appreciated. Joe likely has:
A.High emotional stability B.An internal locus of control C.Low self-efficacy ** D.An external locus of control E.Low self-esteem
Which of the following statements is NOT true about personal values?
A.In general, values are relatively stable across time and situations. B.Values tend to vary across generations. C.Schwartz's value theory can be generalized across cultures. ** D.Values are not motivational in nature. E.Not all values are compatible.
Jose is considering volunteering to help his company with its annual food drive. Which of the following is NOT an indicator of whether he will do so?
A.Jose thinks the food bank is a great way to help his community. ** B.Jose is already volunteering at the animal shelter. C.Jose's boss expects him to volunteer. D.Jose's company gives employees a day off to volunteer. E.The food bank is located close to Jose's home.
Maria is a manager for Greens and Grits. Maria would like to improve job satisfaction for her employees. She can accomplish this by implementing different policies dealing with:
A.Personality B.Intelligence C.Cognitive ability ** D.Emotions and attitudes E.All of the above
George does not score particularly well on standard IQ tests yet he has a unique ability to deal with complex interpersonal situations. What would explain this phenomenon?
A.Practical Intelligence ** B.Multiple Intelligences C.Reasoning ability D.Emotions and attitude E.All of the above
Catherine is walking through the employee parking lot on her way to her office. She notices someone left an empty fast food bag in the parking lot. Catherine goes out of her way to pick it up and dispose of it. What behavior is Catherine exhibiting?
A.Psychological contract B.Green behavior C.Withdrawal cognitions D.Counterproductive Work Behavior ** E.Organizational Citizenship Behavior
Sandra manages the Marketing Department for the Greener Grass Corporation. In an effort to increase employee engagement, Sandra could try all the following EXCEPT:
A.Redesign jobs so that workers have variety and feedback B.Take a class to learn how to be a charismatic leader C.Try to limit the stressors in the workplace ** D.As staff leave, replace them with new hires who score high in pessimism on a personality test E.Provide recognition to employees who perform well
The organizing framework for understanding and applying OB is based upon
A.a systems approach. B.using person and environmental factors as inputs. C.processes including individual level, group/team level, and organizational level. D.outcomes organized into individual level, group/team level, and organizational level. E.The framework is based on all of these.
Outcomes Linked with Job Satisfaction
Attitudes Motivation Job Involvement Withdrawal Cognitions Perceived Stress Behaviors Job Performance Organizational Citizenship Behavior (OCB) Counterproductive Work Behavior (CWB) Turnover
Labor market Condition
Availability and quality of potential employees is affected by economic conditions, government regulations and policies, and the presence of unions.
2 Components of Labor Costs
Average cost per employee + Staffing level = Labor cost
Responses To Problems With Job-Based Pay Structures
Delayering and Banding Skills Based Competency Based
Internal Factors Affecting the Pay Mix
Employer's Compensation Strategy Worth of Job Employee's Relative worth Employer's ability to Pay
Collective Bargains
Escalator clauses in labor agreements provide for quarterly upward cost-of-living (COLA) wage adjustments for inflation to protect employees' purchasing power. Unions bargain for real wage increases that raise the standard of living for their members. Real wages are increases larger than rises in the consumer price index; that is, the real earning power of wages
Worth of job
Establishing the internal wage relationship among jobs and skill levels
Executive Pay
Executive pay accounts for a small proportion of labor costs. ▪ Executives have a disproportionate ability to influence organizational performance. ▪Issues include not only how much executives are paid but how they are paid.
External and Internal Equity
External Employee movement, labor costs; employee attitudes Pay structure decision: Pay level Admin Tool: Market pay surveys Focus of Comparison: External Equity Internal employee movement; cooperation among employees; employee attitudes Pay structure decision: Job structure Admin tool: Job evaluation Focus of Comparison: Internal Equity
Four categories of a Balanced Scorecard
Financial Customer Internal Learning & Growth Some companies find it useful to design a mix of pay programs: * Relying exclusively on merit pay or individual incentives may result in high levels of work motivation but unacceptable levels of individualistic and competitive behavior. •Too little concern for broader plant or organization goals. A mix of measures may motivate improvements in a balanced set of key business drivers.
OCB's are linked to many benefits
For the Individual Improved job satisfaction Improved performance ratings Reduced intention to quit Lower absenteeism Lower turnover For the Organization Higher productivity/efficiency Lower costs Improved customer satisfaction Higher unit-level satisfaction Lower turnover
Employer's Ability to Pay
Having the resources and profits to pay employees.
Characteristics of Merit Pay Programs
Identify individual differences in performance Majority of information on individual performance is collected from the immediate supervisor Policy links pay increases to performance appraisal results. Feedback under such systems tends to occur infrequently Flow of feedback tends to be largely unidirectional, from supervisors to subordinate
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In the workplace, one of the simplest levers managers can use to change behavior is information. Management provides information to employees daily. Standard organizational information that can affect motivation includes: • Reports on the organization's culture. • Announcements of new training programs. • News on key managers. • Updates to human resource programs and policies. • Announcements of new rewards of working for the company. All such messages reinforce certain beliefs, and managers may consciously use them to influence behavior.
Chapter 10
Individual Differences & Emotions
Developing a Job Structure
Job structure - relative worth of various jobs based on internal comparisons.
External Factors Affecting the Pay Mix
Labor market Condition Area Wage Rates Cost of Living Collective Bargains
Cost of Living
Local housing and environmental conditions can cause wide variations in the cost of living for employees. Inflation can require that compensation rates be adjusted upward periodically to help employees maintain their purchasing power. Consumer Price Index (CPI) •A Bureau of Labor Statistics measure of the average change in prices over time in a fixed "market basket" of goods and services
Conditions for Effective Gainsharing
Management Commitment Need to change to commitment to continuous improvement Management's acceptance and encouragement of employee input High cooperation and interaction Employment security Information sharing on productivity and costs Goal setting Commitment of all involved to the process Agreement on a performance standard and calculation that is understandable, fair, and related to managerial objectives
Job Satisfaction & Organizational Citizenship Behaviors
Organizational Citizenship Behavior (OCB) Represents discretionary individual behaviors that are: Typically not directly or explicitly recognized by the formal reward system And can, in the aggregate, promote effective functioning of the organization This behavior is voluntary OCBs help work groups and the organization to effectively achieve goals Examples: Positive statements about the org, suggestions for improvements, teaching and developing new people, RESPECT, caring for organizational property, shows up on time and with positive attitude
Chapter 7
Pay Structure Decisions
Developing Pay levels
Pay structure refers to the relative pay of different jobs (job structure) and how much they are paid (level). Pay level is the average pay in organizations, including wages, salaries, and bonuses. Job structure is the relative pay of jobs in organizations (i.e., the range of pay often expressed by salary grades). Policies standardizing the treatment of similar employees (those with similar jobs) can help greatly to make compensation administration and decision making more manageable and more equitable.
Equity Theory
People evaluate the fairness of their situations by comparing them with those of other people. People compare their own ratio of perceived outcomes (pay, benefits, working conditions) to perceived inputs (effort, ability, experience) to the ratio of a comparison other.
How are Personal Attitudes Different from Values?
Personal Values Global Scope Influence: Broad: All situations Affects Behavior: Variously Personal Attitudes Specific Scope Influenced Targeted Specifically Affects Behavior: Via Intentions
Benchmarking
Procedure by which an organization compares its own practices against the competition. Or their industry
Employee's Relative Worth
Rewarding individual employee performance
Sorting Effect and Incentive Intensity
Sorting Effect: •The effect a pay plan has on the composition of the current workforce (the types of employees attracted and retained). Incentive Intensity: •The strength of the relationship between performance and pay. A key decision in designing pay performance plans.
FLSA: Overtime
The FLSA requires that employees be paid at a rate of one and a half times their hourly rate for each hour of overtime worked beyond 40 hours in a week. The hourly rate includes base wage plus other components such as bonuses and piece-rate payments. Overtime pay is required for any hours beyond 40 in a week that an employer "suffers or permits" the employee to perform, regardless of whether the work is done at the workplace or whether the employer explicitly asked or expected the employee to do it.
What Is Employee Engagement?
The extent to which employees give it their all to their work roles. And includes the feeling of: Urgency Being Focused Intensity Enthusiasm
Some workplace attitudes are more potent than others
The following four attitudinal measures are especially powerful and savvy managers will track them to measure how the organization is doing: Organizational Commitment Employee Engagement Perceived Organizational Support Job Satisfaction Low job satisfaction and low engagement = Lower task performance and higher turnover
Developing Pay Levels-Market Pressures
There are several Competitive Market Challenges in Pay Decisions: •Product-market competition - sell goods and services at a quantity and price that will bring a return on investment. •Labor-market competition - amount an organization must pay to compete against other organizations that hire similar employees. Unless higher labor costs are offset by higher worker productivity or desirable product features that allow a higher product price, it will be difficult to sustain relatively high costs in a competitive product market.
Pay Systems - Market Pay Surveys & Job Evaluation
There are two methods for determining a range of pay for each job in the organization. 1) Market Based Pay 2)Job Evaluation Pay Systems •Job Ranking •Job grading or classification •Factor comparison •Point method •Once a company has a pay range for each job, they can then decide where inside the range each employee will be placed.
•Attitudes Affect Behavior via Intentions
Three key general motives predict or at least influence intention and behavior. 1.Attitude toward the behavior. -The degree to which a person has a favorable or unfavorable evaluation or appraisal of the behavior in question. 2. Subjective norm. -A social factor representing the perceived social pressure for or against the behavior. 3. Perceived behavioral control. -The perceived ease or difficulty of performing the behavior, assumed to reflect past experience and anticipated obstacles. For instance: Giving Blood 1.Attitude toward the behavior. -You are favorable because you feel it is the right thing to do, valuable for society. 2. Subjective norm. -Your friends are doing it and are going to join you. 3. Perceived behavioral control. -If you have the time to do it.
Employer's Compensation
Tied to the jobs, not the individuals. They must determine what their approach to compensation is going to be. Establishes the internal wage relationship among jobs and skill levels Sets organization compensation policy to lead in a market, lag behind in a market or to match competitors' pay. Rewards employee performance Guides administrative decisions concerning elements of the pay system such as overtime premiums, payment periods, and short-term or long-term incentives
Chapter 9
Values Vocabulary and Terminology
Schwartz's Value Theory
Values are motivational & Represent broad goals over time These 10 values have been found to predict behavior as outlined in the theory They also generalize across cultures. Schwartz proposes that values that are in opposing directions from the center conflict with each other.
The Differences Matter
What Are Individual Differences (IDs)? •Broad category used to collectively describe the vast number of attributes that describe a person. How we differ has been shown to influence how we approach each of the following: Work Solving problems Conflict Interactions with co-workers
What are the implications of Schwartz's Theory?
Workplace Application •Managers can better manage their employees when they understand an employees' values and motivation •Pursuit of incongruent goals may lead to conflicting employee actions and behaviors • Personal Application •Employees will derive more meaning from work by pursuing goals that are consistent with their values
Equity Theory
when the employee compares their compensation to those around them. Negative perceptions will lead to quitting, reduced productivity, poor morale, low engagement and bad attitudes
What Do We Know About Values?
•A person's values are stable over time but personal values vary across generations and cultures. Attracting employees whose personal values align with those of the organization yields many benefits. •Lower employee turnover •Higher employee retention •Higher employee engagement •Increased customer satisfaction
Employees as a Resource
•A philosophy that considers employees to be an investment that will yield valuable returns. •Controlling costs through noncompetitive pay can result in low employee productivity and quality. •Pay policies and programs are important HR tools for encouraging desired employee behaviors and discouraging undesired behaviors. • •Behaviors defined as attitude and motivation.
Research tells us that job satisfaction and performance
•Are moderately related •Indirectly influence each other •Are more effective when considering the relationship at the business unit level versus at the individual level
Efficiency wage theory - Theorizes that wages influence worker productivity.
•Compensation equity issues: -Individual equity compares the pay of individuals doing the same job in the same organization and judges if it is fair. An example: A retailer has two assistant managers (2 people) doing the same job in the same organization. -If they are paid the same, is that perceived as being fair? -If they are paid differently, is the gap perceived as being fair? -Internal equity compares the pay of different jobs in the same organization and judges if it is fair. An example: A retailer has an assistant manager and a store manager (2 different jobs in the same organization) -If they are paid the same, is that perceived as being fair? -If they are paid differently, is the pay difference perceived as being fair? -External equity compares the pay of the same job in different organizations and judges if it is fair. An example: If one retailer "C" has a store manager and retail store "W" has a store manager (the same job in two different organizations) -Do the two companies pay their managers the same or not?
Compensation Strategy
•Compensation is one of the highest costs in an organization and approvals come from the highest levels of leadership. •Comp strategy is driven by the HR strategy. •It defines the position of the company within the market. (Think of the 13 companies for example) •It determines the total cash being budgeted for compensation. It sets guidelines for the pay market, the positioning on pay, all the components of the compensation and all the rules
Merit Pay Criticisms
•Edward W. Deming, a critic of merit pay, argued that it is unfair to rate individual performance. Deming's solution was to eliminate the link between individual performance and pay. ➢Criticisms of merit pay include: ▪Focus on merit pay discourages teamwork. ▪Measurement of performance is unfair and inaccurate. ▪Too much emphasis on individual performance ▪Merit pay does not really exist - high performers paid more than marginal and poor performers
Key Workplace Attitudes-Engagement
•Employee Engagement -The harnessing of organizational members' selves to their work roles -Where people employ and express themselves physically, cognitively, and emotionally during role performance •What contributes to engagement? -A mix of Organizational Level Factors, Person Factors and Environmental Characteristics. •Person Factors -Personality -Positive psychological capital -Human and Social capital •Situation Factors -Job characteristics - variety, timely feedback -Leadership - trusting relationship, open communication, positive -Organizational climate - stable, productive (tons of layoffs?) -Stressors - environmental characteristics which cause stress •Increase employee engagement by: -Measuring -Tracking -Responding to employee surveys
Personal Attitudes
•Encompass our feelings or opinions about people, places, and objects Comprised of three components: 1.Affective — Feelings "I feel" 2.Cognitive — Beliefs "I believe" 3.Behavioral — Intentions "I intend" Ranging from positive to negative Important because they impact behavior
Agency Costs
•Example of Agency - (Principles) Owners or Shareholders -They have their own interests and expectations. •Company leadership (Agents) - Tasked with delivering on these expectations. - What is best for the agent, may not be the best for the owner. - Agency costs can be incurred. e.g. Owners may be focused on personal profit and ROI and therefore seeks expense control. - Agents may spend inappropriately or not in alignment with owner. •Agency costs can arise from two factors: - Principals and agents may have different goals - (goal incongruence). - Principals may have less than perfect information on the degree to which the agent is pursuing and achieving the principal's goals - (information asymmetry) •Agency costs may be minimized by principal choosing a contracting scheme that aligns agent's interests with principal's interests.
Group Incentives and Team Awards
•Group incentives measure performance in physical output •Team award plans may use a broader range of performance measures •Individual competition may be replaced by competition between groups or teams •Risks not recognizing differences in individual performance
Gainsharing
•Group or Team compensation •Gainsharing - programs under which both employees and the organization share financial gains according to a predetermined formula. (usually measures productivity, profitability, quality etc.) •Form of compensation based on group or plant performance rather than organization-wide profits that does not become part of the employee's base salary. •Offers a means of sharing productivity gains with employees. •Improves performance Examples: •Scanlon Plan - Rewards come from improving productivity and reducing costs •Rucker Plan - Shared rewards come from the difference between labor costs and sales value of production
How to develop pay ranges
•Have a clear compensation strategy and philosophy •Job Analysis to gather, document and describe the jobs performed. •Job description outlines the essential functions, tasks, responsibilities, competencies needed. •Create levels by grouping jobs together e.g. merchandising, marketing, operations, technology, etc. •Jobs get ranked based on evaluation methods •Market Research, including benchmarking •Create job grades or pay bands •Create a salary range based on research findings
Incentive Pay
•Individual incentives reward individual performance but payments are not rolled into base pay. Performance is measured as physical output rather than by subjective ratings. •Individual incentives are rare because: •Most jobs have no physical output measure. •Many potential administrative problems. •Employees may only do what they get paid for. •Do not fit in with team approach. •May be inconsistent with organizational goals. •Some incentive plans reward output over quality or service.
Job Evaluation
•Job evaluation is the systematic process for assessing the relative worth of jobs within an organization. •A comprehensive analysis of each position's tasks, responsibilities, knowledge, and skill requirements is used to assess the value to the employer of the job's content and provide an internal ranking of the jobs. ▪The job evaluation process should be conducted after completing a job analysis but before creating a compensation program. ▪The job evaluation process is composed of compensable factors, which are characteristics of jobs that an organization values and chooses to pay. ▪Job evaluators often apply a weighting scheme to account for differing importance of compensable factors to the organization.
Current Challenges
•Job-based pay structures can create problems: •reinforces top-down decision making as well as status differentials. • •bureaucracy, time and cost required to generate, and update job descriptions can become a barrier to change. • •job-based structure may not reward desired behaviors, where the knowledge, skills, and abilities needed yesterday may not be helpful today and tomorrow. • •system encourages promotion-seeking behavior but discourages lateral movement.
Merit Pay
•Merit Pay is a traditional form of pay in which base pay is increased permanently. •Merit pay or pay-for-performance programs link performance-appraisal ratings to annual pay increases. •A merit increase grid combines an employee's performance rating with employee's position in a pay range to determine size and frequency of his or her pay increases. • •Merit Bonus - Merit pay paid in the form of a bonus, instead of a salary increase. •Differs from merit pay raise in that bonus is paid once. Raise is a permanent salary increase. •Some organizations provide guidelines regarding percentage of employees who should fall into each performance category.
Attitudinal outcomes of job satisfaction
•Motivation -psychological process that arouses interest in doing something, and it directs and guides behavior •Job involvement -the extent to which an individual is personally involved with his or her work role •Withdrawal cognitions -Really the process when an employee begins to think and feel like they should quit an organization •Perceived stress -negative effects on many different OB-related outcomes (absenteeism, health-related issues, workalike balance)
Market Pay Surveys
•NWA - Benchmarking needed to include suppliers. •3 issues to consider before using pay surveys: 1. Which employers should be included in the survey? 2. Which jobs are included in the survey? 3. If multiple surveys are used, how are all rates of pay weighted and combined?
Key Workplace Attitudes-Organizational Commitment
•Organizational Commitment -The extent to which an individual identifies with an organization and commits to its goals. -Researchers often refer to commitment as a "force that binds an individual to a course of action..." -e.g. you can be committed to your job, to your relationship, to your faith, to your organization •Drivers of Organizational Commitment -Your personality -Meaningful work -Organizational culture -Leader behavior -Organizational climate
Key Workplace Attitudes
•Outcomes of organizational commitment -Continued employment -Greater motivation •Increase organizational commitment by: -Hiring people whose personal values align with the organization -Making sure management does not breach psychological contracts -Treat employees fairly and foster trust between managers and employees
Ownership
•Ownership encourages employees to focus on organization's success but may be less motivational to the larger organization. •Stock options - plan that give employees the opportunity to buy company stock at a previously fixed price. •Employee stock ownership plans (ESOPs) give employers certain tax and financial advantages when stock is granted to employees. •ESOPs can carry significant risk for employees. •Less diversification in investments overall.
Employer's View
•Pay is a powerful tool in attaining strategic goals. •Pay impacts employee attitudes & behaviors. •Can help recruit talented employees •Can help with retention •Employee compensation is significant organizational cost.(it can run anywhere from 9% to 46%, depending on the company.)
How pay influences productivity
•Pay plans are typically used to: •Energize the individual •Direct •Sustain level of performance/behaviors •Control the behavior
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•Perceived Organizational Support -Reflects the extent to which employees believe that the organization •Values their contributions •Genuinely cares about their well-being •When employees perceive organizational support: -They are willing to work hard and commit to the organization. -This results in: •Increased organizational commitment •Job satisfaction •Organizational citizenship behavior •Task performance •Lower turnover
Employee's View
•Policies regarding wages, salaries & other earnings affect their overall income and standard of living. •Both level of pay & fairness compared with others' pay are important. •Often considered a sign of status / success. •Incredibly important to individuals and strongly influences relationship with the organization.
Agency Theory
•Principal - A person who seeks to direct another person's behavior. •Agent - A person who is expected to act on behalf of a principal.
Programs for Recognizing Employee Contributions
•Programs differ by payment method, payout frequency and ways of measuring performance. •Potential consequences include employees' performance motivation and attraction, culture and costs. •Management style and type of work influence whether a pay program fits the situation. •Examples: Merit Pay (pay for performance) Incentive Pay Profit Sharing Ownership Gain Sharing Skill Based
End Chapter 8 Recognizing Employee Contributions with Pay
•Programs vary as to whether they link pay to individual, group, or organization performance. Often, it is a choice between different combinations of programs that seek to balance individual, group, and organization objectives. •Wages, bonuses, and other types of pay influence an employee's standard of living. Pay can be a powerful motivator. •An effective pay strategy can substantially promote an organization's success; conversely, a poorly conceived pay strategy can have detrimental effects. •The most effective compensation strategy may differ from one organization to another. •Employees care about the fairness of the pay process.
Survey considerations
•Rate ranges - different employees in same job that may have different pay rates. •Key jobs - benchmark jobs that have relatively stable content and are common to many organizations so that market-pay survey data can be obtained. (in retail - store management, buyers) •Non-key jobs are unique to organizations and cannot be directly valued or compared through the use of market surveys. (specialty areas, maybe some HR or Training)
Skill based pay
•Skill based pay - is based on the skills employees acquire and are capable of using. •It is not based on the job they are performing at a particular point in time. •Skill based pay systems fit well with the changes technology is bringing. •Promotes workforce flexibility and a more diversified multi-skill set in the workforce. •Appeals to employees seeking a continual learning environment. •Downsides: What happens if an employee learns all the skills they can and no longer has compensation growth. •Skill set needs change rapidly, certification processes can be costly.
•Applying Knowledge about IDs
•Some differences are relatively stable over time and across situations and are difficult to change •Other differences are relatively flexible •Individual Differences can be arranged on a continuum based on their stability •Fixed or Stable - like intelligence •Flexible states - like emotions
Profit Sharing
•Under profit sharing, payments are based on a measure of organization performance (profits), and payments do not become a part of base pay. (Walmart did away with theirs in 2011, after 31 years to focus more on 401k and other cash/medical benefits). ▪Advantages- ▪profit sharing may encourage employees to think more like owners. ▪ labor costs are automatically reduced during difficult economic times, and wealth is shared during good times. ▪Disadvantage- ▪workers may perceive their performance has less to do with profit than top management decisions over which they have little control. ▪Vested over a long period of time (designed for retention) ▪Could only access upon retirement
Evaluating Different Pay Programs
•What are the costs of the program? •What is the expected return from such investments? •Does the program fit with the organization's human resource strategy and overall business strategy? •What might go wrong with the plan?
Pay Sorting Effects
•Workforce composition is affected by pay - Sorting effect - is the effect a pay plan has on the composition of the current workforce (types of people attracted and retained). •Linking pay to individual performance = high performers, willing to take risks •Linking pay to team performance = collaborative, okay in a matrix
When Attitudes and Reality Collide
•You experience... -Cognitive Dissonance •psychological discomfort experienced when simultaneously holding two or more conflicting cognitions (ideas, values, or emotions) •Cognitive dissonance is reduced by -Changing attitude, behavior, or both -Belittling the importance of the inconsistent behavior
Responses:
▪Delayering - reducing the number of job levels for more flexibility ▪Broadbanding - Collapses many traditional salary grades into a few wide salary bands. It creates large group of pay bands, but the downside is it reduces opportunities for promotion. ▪Skill based pay - encourages employees learn a number of skills, continual improvement ▪Competency pay - includes exempt employees
End of Chapter 7 Pay Structure Decisions
▪Equity theory - social comparisons influence how employees evaluate their pay. ▪Employees make external comparisons between their pay and pay they believe is received by employees in other organizations which may have consequences for employee attitudes and retention. ▪Employees make internal comparisons between what they receive and what they perceive others within the organization are paid which may have consequences for internal movement, cooperation and attitudes and play a role in the controversy over executive pay. ▪Pay benchmarking surveys and job evaluation are tools used in managing pay level and job structure components of the pay structure. ▪Pay surveys permit organizations to benchmark their labor costs. ▪Globalization is increasing the need to be competitive in labor costs and productivity. ▪Pay structure is moving to fewer pay levels to reduce labor costs and bureaucracy and shifting from paying employees for narrow jobs to giving broader responsibilities.
Comparable Worth(Equal Pay Act of 1963)
➢Comparable worth (or pay equity) is a public policy that advocates remedies for any undervaluation of women's jobs. ▪Based on the idea that individuals should obtain equal pay, not just for jobs of equal content, but for jobs of equal value or worth. ▪Courts have consistently ruled that using the going market rates of pay is acceptable defense in comparable worth litigation suits. Glass ceiling used to explain a perception of a barrier keeping upper level jobs out of reach for women and minorities.
Wage Laws
➢Fair Labor Standards Act (FLSA) of 1938 established a minimum wage and overtime pay rate. ➢Hourly Work - paid on an hourly basis. -Salary Work -compensation is computed on the basis of weekly, biweekly, or monthly pay periods. ▪Minimum wage is $7.25 an hour. It is the lowest hourly amount that employers are legally allowed to pay. (since 2009) ▪Exempt - those employees (executive, professional, administrative and outside sales) not covered by the FLSA and not eligible for overtime pay.
Reasons for Executive Pay Criticisms
➢Some executives are very highly paid. ➢U.S. executives - highest paid in the world. ➢Ratio of executive pay to average worker pay creates a "trust gap" - workers do not trust executives' intentions and resent their pay.
