MGMT 355 exam #3
Job Attitudes Impacting Retention:Employee Engagement
Degree to which employees are fully involved in their work and the strength of their commitment to their job and company. -vigor: enhanced energy and resilience to overcome challenges -dedication: deep involvement and commitment to one's work -absorption: pleasurable feelings and immersion with work
What characteristics are in the control of the immediate manager?
Job characteristics rather than ppl characteristics Jc such as: tasks, time requirements, authority/responsability, social opportunities, policies/procedures, working conditions, tools, variety, stress
Total rewards approach Components
Three Components: 1.Compensation: base and merit/variable pay 2.Benefits: typical plus extras (e.g., education, work-life balance) 3.Performance/Talent Management: -Performance feedback -Recognition -Training -Career Development Balances costs of employer and needs of employees
Formal Education
Workshops, short courses, lectures, simulations, business games, experiential programs Many companies operate training and development centers
Career Plateau
a position from which someone is unlikely to move to a higher level of responsibility. -Progressive employers seek ways to engage plateaued employees.
Career Path
a sequence of jobs held over time during a career.
Career Development: Career
a sequence of jobs that constitute what a person does for a living.
Job Attitudes Impacting Retention: Organizational Commitment
(Loyalty) The degree to which employees believe in and accept organizational goals and desire to remain with the organization. -continuance commitment: "have to work here" (money) -affective commitment: "want to work here" (positive feelings) -normative commitment: "should work here" (obligation)
4 types of direct compensation
*Base Pay: the basic monetary compensation that an employee receives, usually as a wage or salary. -Wages: payments calculated on the amount of time worked. -Salary: consistent payments made each period regardless of the number of hours worked in the period. *Variable (Merit) Pay: compensation linked to individual, team, or organizational performance.
Traditional compensation approach Vs
*Compensation is primarily base pay *Bonuses/perks are for executives only *Fixed benefits are tied to long tenure *Paygrade progression is based on orga. promotions *One org.-wide pay plan exists for all employees
Types of Variable Pay Plans : Group/Team Level
*Group/team results *Gainsharing/Goalsharing(the gains of improvind productivity is then distributed) *Quality improvement *Cost reduction i.e. gainsharing= Scanlon Plan: when labor costs are lower than sales value of production, under a certain standard
Types of Variable Pay Plans : Invidual Level
*Piece-rate systems *Bonuses *Special incentive programs (trips, marchandise, awards) *Sales compensation
Types of Variable Pay Plans : Organizational Level
*Profit sharing *Employee stock plans *Executive stock plans *Deferred compensation
Vs Total Rewards Approach
*Variable pay is used in addition to base pay *Annual/Long-term incentives are provided to executives, managers and employees *Flexible and portable benefits are offered *Knowledge/skill-based broadbands determine pay grades *Multiple plans consider job family, location, and business unit
Employer absenteeism control actions
+Disciplinary actions (increasingly severe disciplinary action leading eventually to dismissal) +Illnes verification +"No fault" policies (reasons for absence do not matter) -Paid time-off programs (time-off is not categorized by type. Absences in excess of employerpaid time-off are unpaid) -Unused leave buy back -Attendance reward programs (positive reinforcement) -Combination approach (Use of both discipline and rewards to motivate employee attendance)
Effective Incentive Plans
-Does the plan fit the organization? -Does the plan reward the appropriate actions? -Is the plan administered properly?
Job Attitudes Impacting Retention:Psychological Contract
-Employers provide: competitive compensation and benefits career development opportunities flexibility to balance work and home life -Employees contribute: continuous skill improvement reasonable time with the organization extra effort when needed
Common Executive Compensation Issues
-Executive compensation often does not reflect the company's performance -Boards give sizable rewards no matter the executive's performance -Executives should not get rewards or bonuses for laying off much of the workforce -Total compensation packages are excessive -Many ppl contribute to the success of the company, not just executives
Objectives of a Strategically Supportive Compensation System
-Legal compliance with all appropriate laws and regulations -Cost effectiveness for the organization -Internal, external, and individual equity for employees -Performance enhancement for the organization
Other benefits that organizations may offer employees
-Relocation expenses -Family oriented benefits -Credit unions, purchase discount, stock investments -Life, disabilities, legal insurances -Educational Assistance -Social and recreational
Successful Variable Pay/Incentive Plans Requirements
-The development of clear, understandable plans that are continually communicated. -The use of realistic performance measures. -Strong links among performance results and payouts that truly recognize performance differences. -Clear identification of variable pay incentives separately from base pay.
Why health care is expensive in the US?
-Uninsured workers -Retirees -Older generations in the workplace -FDA rules versus pharmaceutical ROI -Lawsuits
Components of Executive Compensation Packages
1. Base salaries + Regular Benefits 2.Perks + Suplemmental Benefits 3.Annual Incentives and Bonuses 4.Long-term Incentives
Four Approaches to Development
1. Formal Education 2. Assessment 3. Interpersonal Relationships 4. Job Experiences
Nature of Compensation Types of Rewards VS.
1. Intrinsic intangible, psychological and social effects of compensation 2.Extrinsic tangible,monetary and nonmonetary effects of compensation
5 Drivers of retention
1. Job design and work Job/person matching Time flexibility Work/life balancing 2. Characteristics of the employer Culture and values Mgmt Job Security 3.Career Opportunities Training/dvlp and mentoring Career planning/advancement 4. Rewards Competitive pay and benefits Performance and compensation Recognition 5.Employee relationships Fair, non-discriminatory treatment Supervisory/mgmt support Co-worker relations
2 types of employee stock plans.
1. Stock OPTION Plan: gives employees the right to purchase a fixed number of shares of company stock at a specified price for a limited period of time. -If market price of the stock is above the specified option price . employees can purchase the stock and sell it for a profit. -If the market price of the stock is below the specified option price, . the stock option is "underwater" and is worthless to employees. 2.Employee Stock Ownership Plan (ESOP): employees gain significant stock ownership in the organization for which they work. -Advantages: *favorable tax treatment for ESOP earnings *employees motivated by their ownership stake in the firm -Disadvantages: *retirement benefit is tied to the firm's future performance *management tool to fend off hostile takeover attempts.
What factors impact job satisfaction and organizational commitment?
1. The individual (ability, motivation, support) + 2.The job (design, elements) = Job satisfaction and Organizational commitment IMPACT Absenteeism and Turnover
(IR) What do Executive Coaches provide?
1.Assessment: how you see yourself, others see you, personal talents and strengths, shortcomings that can be improved, work-life balance, life satisfaction 2.Challenges: plans for overcoming obstacles (SMART Goals) 3. Support: listening, accountability, encouragement, consultation, celebrate progress
Types of Compensation
1.Direct the employer exchanges monetary rewards for work done 2.Indirect employer-provided benefits-like health insurance-that are provided to emplyees for being a member of the organization
Components of a Compensation System
1.Direct Base pay (wages, salaries) + Variable Pay (bonuses, incentives, stock options) 2. Indirect Benefits (-health/medical insurance -life/disability insurance -paid time off -retirement/pension plans -educational assistance)
Perceptions of Pay Fairness
1.Equity:the perceived fairness between what a person does (inputs) and what the person receives (outcomes). -Internal Equity: employees receive compensation in relation to the knowledge, skills, and abilities they use in their jobs as well as their responsibilities and accomplishments. -External Equity:employee compensation viewed as equitable in relation to the compensation of employees performing similar jobs in other organizations. 2.Procedural Justice: perceived fairness of the process and procedures used to make decisions about employees. 3.Distributive Justice: perceived fairness in the distribution of outcomes. 4.Pay Openness/ Secrecy: the degree of openness or secrecy that an organization allows regarding its pay system.
2 Framework Choices for a Profit-Sharing Plan
1.Funding Choices -fixed % of profits -sliding % based on sales or return on assets -unit profits -some other formula 2.Allocation Choices -equally to all employees -based on employee earnings, on years of service OR contribution and performance
Questions that impact HR decisions affecting benefit design
1.How much total compensation? ¤ Lag, Meet or Lead the Market 2.What part of total compensation should benefits comprise? 3.What expense levels are acceptable for each benefit? 4.Which employees should get which benefits? ¤ Legal, Ethical and Business reasons for decisions 5.What are we getting in return for the benefit? (ROI) 6.How will offering benefits affect turnover, recruiting, and retention of employees? 7.How flexible should the benefits package be? ¤ Flexibility is high today due to the different familial structure in U.S. families than has been historically prevalent ¤ What happens to ROI when the plan is more flexible?
Three 3 compensation strategies to address market competitiveness
1.Meet the Market attempting to balance employer costs and the need to attract and retain employees. 2.Lag the Market paying all that the firm can afford. Taking advantage of the abundant supply of potential employees in a loose labor market. 3.Lead the Market paying for higher qualified, more productive workers.
How is the typical benefits dollar spent?
25% Insurance Payments (medical premiums, vision care, dental care, life insurance,etc.) 25% Payment for Time Not Worked (leaves, vacation, holidays,etc.) 20% Legally Required Contributions (social security, unemployment, and worker' compensation) 15% Retirement plans (pensions, 401(k),etc.) 10%Paid Rest Periods (coffee breaks, lunch perios, travel time,etc.) 5% Miscellaneous Benefits (educational assistance, severance pay, child care,etc.)
Reasons for unscheduled absences What aspects are in control of management? Out of control of management?
36% personal illness 22% family issues 18% personal needs 13% entitlement mentality (believing that previleges are instead rights) 11% stress
(IR) Executive Coaching
A coach is someone who helps another person reach higher levels of effectiveness by creating dialogue that leads to awareness and action. -Coaches may be internal or external to the organization
(IR) Mentoring
A mentor is an experienced, productive, senior employee who helps develop a less-experienced employee. -Mentors offer "psychosocial" support for personal and professional development, plus career help that includes advice and coaching -Organizations can link mentoring to development goals by establishing a formal mentoring program. -Mentoring programs tend to be most successful when they are voluntary and participants understand program details.
Pension: Portability
A pension plan feature that allows employees to move their benefits from one employer to another.
Flexible Benefit Plan
A plan (flex or cafeteria plan) that allows employees to select the benefits they prefer from groups of benefits established by the employer
Job Attitudes Impacting Retention: Job Satisfaction
A positive emotional state resulting from evaluating one's job experience. About: -job -company -career -work group -manager
Pay compression and Inversion
A situation in which pay differences among individuals with different levels of experience and performance in the organization becomes small.
Organizational Incentives: Profit Sharing
A system to distribute a portion of the profits of the organization to employees in addition to base salary. Objectives: *Increase productivity and organizational performance * Attract or retain employees *Improve product/service quality *Enhance employee morale CONS: *Disclosure of financial information *Variability of profits from year to year *Profit results not strongly tied to employee efforts
Pension: Non-contributory Plan
All pension benefits funding is paid by the employer.
Benefits
An indirect compensation given to an employee or group of employees as a part of organizational membership. -Health benefits in the U.S. are provided by employers ¤ This is unique ¤ Benefit costs are being shifted even more on employers by state and federal governments
Absenteeism
Any failure to report for work as scheduled or to stay at work when scheduled. ◦ Involuntary: unavoidable with understandable cause (e.g., actual illness) ◦ Voluntary: avoidable without justifiable cause (e.g., feigning illness)
Continuum of Compensation Philosophies
Based more on performance rather than entitlement
Protean Career
Based on self-direction, with the goal of psychological success in one's work -that is driven by the individual and not by the organization. that frequently changes based on changes in the person's interests, abilities, and values and in thework environment.
Individual Incentives: Bonuses
Bonus: a one-time payment that does not become part of the employee's base pay. Spot Bonus: a special type of bonus used is a "spot" bonus, so called because it can be awarded at any time.
Pension: Contributory Plan
Both employer and employee pay money into the retirement fund.
Assessment
Collecting information and providing feedback to employees about their behavior, communication style, or skills Information for assessment may come from the employees, their peers, managers, and customers.
Job Experiences
Combination of tasks, relationships, problems, demands and other features of an employee's jobs. -Most employee development occurs through job experiences -"70-20-10 rule"...70% of development comes from experience, 20% from social learning, 10% from formal training or educational programs
Variable Pay
Compensation linked to individual, group/team, and/or organizational performance. Basic Assumptions: -Some jobs contribute more to organizational success than others. -Some people perform better and are more productive than others. -Employees who perform better should receive more compensation. -Some of employees' total compensation should be tied directly to performance.
Interpersonal Relationships (IR)
Employees can also develop skills and increase their knowledge about the organization and its customers by interacting with a more experienced member -Mentoring -Executive Coaching -Sponsorship
Difference between exempt and non-exempt jobs
Employees who qualify as "exempt" are not subject to OVERTIME regulations (and minimum wage laws), whereas "nonexempt" employees must be paid for every hour of overtime they work.
Types of Benefits: Retirement Benefits Significance of the Social Security Act of 1935
Gov mandated--> *Social Security: established a system providing old age, survivor's, disability, and retirement benefits. n Federal payroll tax (7.65%) on both the employer and the employee. n Medicare taxes are 2.9% n Benefit payments are based on an employee's lifetime earnings. Administered by the Social Security Administration. Employer voluntary--> Pension plans 401(k), 403 (b), 457 plans Early retirement options Individual Retirement Accounts (IRAs) Health care for retirees
Types of Benefits: Security Benefits
Gov mandated--> ¨ Worker's Compensation: benefits provided to persons injured on the job. ¨ Unemployment Compensation: a Federal/state payroll tax that funds state unemployment systems. -involuntary unemployment and actively seeking work is required for persons to claim benefit. ¨ Supplemental Unemployment Benefits (SUB): a union-negotiated benefit provision that pays a supplemental amount to laid-off employees who are drawing unemployment compensation. ¨Severance Pay: voluntarily offered by employer to employees who lose their jobs. -payments are determined by the employee's level within the organization and years of employment. -other benefits (e.g., outplacement and continued health insurance) may be offered in lieu of cash severance payments.
Which is the largest benefit payment?
Health Insurance
Compensation
How much salary, wages, commissions and other perfomance-related pay to offer. -determining which benefits to offer -developing a system for administrating earnings and benefits
Conditions for Successful Group/Team Incentives
IF: 1. Teamwork is neccesary to do the jobs 2.Individual performance cannot be identified 3.Mgmt wants teamwork 4.The reward system is seen as fair 5.Employees participate in the creation of the incentive plan
Traditional Vs. Contemporary careers
In modern organizations, the concept of a career is fluid - a protean career changes along with changes in a person's interests, abilities, and values and changes in the work environment. To plan and prepare for a protean career requires active career management, which includes planning for employee development.
Functional Turnover
Lower-performing or disruptive employees leave
How do we know if turnover is a problem?
Measure and dollarize
3 Steps to managing retention: 1. Measurement and assessment
Measure: Absence/turnover Employee surveys (attitude surveys) Exit interviews (the "real story") Data analysis
Pros & Cons of Market Pricing
PROS: -Ties organizational pay levels to what is actually occurring in the market, without being distorted by "internal" job evaluation. -Communicates to employees that the compensation system is "market linked," rather than distorted by internal issues. CONS: -It relies on market survey data that is limited or may not have been gathered in methodologically sound ways. -The responsibilities of a specific job in a company may be somewhat different from those of the "matching" job identified in the survey. -The market data's scope (range of sources) is another concern. -Tying pay levels to market data can lead to wide fluctuations based on market conditions...may lead to pay compression (differentials seen as unfair)
Types of Benefits: Pension Plans
Pension Plans ¤ Retirement benefits established and funded by employers and employees. ¤ Traditional Benefit Plans -Defined-benefit plans: employees are promised a definite pension amount based on age and length of service. -Defined-contribution plans: employer makes an annual payment to an employee's account + benefit payout is determined by the financial performance of the employee's retirement.
Individual Incentives: Special Incentive Programs
Performance Awards: cash or merchandise used as an incentive reward. Recognition Awards: recognition of individuals for their performance or service to customers in areas targeted by the firm. Service Awards: rewards to employees for lengthy service with an organization.
Broadbanding
Practice of using fewer pay grades with much broader ranges than in traditional compensation systems. Benefits: -Encourages horizontal movement and competency development -Creates more flexible and flatter organizations -Emphasizes career development
Fair Labor Standards Act (FLSA) of 1938
Provisions of the Act -Minimum wage requirement sets wage floor -Child labor (under 14 years old) is prohibited -Requires overtime pay for hourly and non-exempt EEs -Exempts Certain Jobs (executives, professionals, etc) -Requires compensatory overtime (1½) pay for hours over 40 hours (higher pay after the 40th h)
3 Steps to managing retention: 2. Managing retention
Recruiting and selection (i.e. realistic job previews) Orientation and training Compensation and benefits Career dvlp and planning Employee relations
3 Steps to managing retention: 3.Evaluation and Follow-Up
Regular review of turnover data Tracking of intervention results Adjustments of intervention efforts
Individual Incentives: Sales Compensation Plans
Salary-Only: all compensation is paid as a base wage with no incentives. Commission: -straight commission: compensation is computed as a percentage of sales in units or dollars. -salary-plus-commission or bonuses: compensation is part salary for income stability and part commission for incentive.
(IR) Sponsorship
Sponsors go beyond giving feedback and advice; they advocate for their mentees and help them gain visibility in the company. -Sponsors fight to get their protégés promoted to the next level -Without sponsorship, a person is likely to be overlooked for promotion, regardless of his or her competence and performance, particularly at mid-career and beyond, when competition for promotions increases.
Individual Incentives: Piece-Rate Systems
Straight Piece-Rate Systems: wages are determined by multiplying the number of pieces produced by the piece rate for one unit. Differential Piece-Rate Systems: Employees are paid one piece-rate for units produced up to a standard output and a higher piece-rate wage for units produced over the standard.
Turnover
The process in which employees leave the organization and have to be replaced. Impact: q Inability to achieve business goals q Loss of "image" to attract other individuals q High costs of turnover and replacement
Pension: Vesting
The right of employees to receive certain benefits from their pension plans. Guarantee that when employees become paticipants in a pension plan and work a specified number of years, they will receive a pension at retirement age, regardless of whether they remained with the employer.
How do we retain employees? Why do people stay or leave?
Three components: Links, Fit, and Sacrifice ways to foster: 1. Culture and Values: positive, distinctive company that is well-managed, and offers exciting challenges. 2.Attractive Job: freedom and autonomy, exciting challenges, and career advancement and growth 3.Compensation and lifestyle: differentiated pay package, high total compensation, geographic location, and respect for lifestyle
Training Vs. DEVELOPMENT
Training: A planned effort to enable employees to learn job-related KSAs (e.g., orientation) VS Development: Acquisition of KSAs that will improve an employee's ability to meet changes in job requirements (e.g. socialization, job training) n Development tends to be a longer term shift in thinking and "being" n Development is broader in scope, focusing on individuals gaining new capabilities useful for future jobs n Development encompasses formal education, job experiences, relationships, and assessment of personality and abilities to help employees prepare for the future of their careers
Market Pricing
Use of pay survey data to identify the relative value of jobs based on what other employers pay for similar jobs.
Contemporary work-life issues
Work-life Balance -Many organizations foster a competitive advantage by supporting employee pursuits of healthy work-life balance -Contemporary work-life balance issues: Single parent concerns Dual-career couples concerns Family-friendliness as screening criterion used by candidates
Career Planning
matching career goals and individual capabilities with opportunities for their fulfillment.
How job experience facilitates employee development?
a. Job enlargement: horizontal expansion of TDRs (tasks, duties, responsabilities) Employee enlargement: with promotions, job rotations, tranfers, downward mood, temporary assignment to another organization. b. Job enrichment: vertical expansion of TDRs
Boundaryless Career
careers which are meant to span across a set of different organizations, sectors, domains & not a single organization. The people following such careers have no specific scope of operation & their jobs range across several parameters.
Voluntary Turnover
employees leave by choice
Uncontrallable turnover
employees leave for reasons outside the control of the organization. (Ex. environmental jolts)
Succession planning + steps in the process.
is the process of identifying and tracking high - potential employees who will be able to fill top management positions Steps: 1.Identify position to plan for 2.Identify employees to include 3.Define job requirements 4.Measure employee potential 5. Review and plan to meet development needs 6.Link succession planning with other HR systems 7.Provide feedback to employees 8.Measure the plan effectiveness
Dysfunctional Turnover
key individuals and high performers leave at critical times.
Suggestions for Improving Retention
n Provide realistic job previews during the recruiting process n Improve the selection process so that there is a better person-job fit for new hires n Conduct effective job orientation and initial training n Offer competitive, fair, and equitable compensation n Provide an adequate benefits package n Offer career development and training (not enough to have this in place, employees have to "see it") n Engage in fair and nondiscriminatory employee relations
Controllable turnover
occurs due to factors that could be influenced by the employer.
Problems with Flexible Plans
q Inappropriate benefits package choices q Adverse selection and use of specific benefits by higher-risk employees q Higher administrative cost
Measuring Turnover
q Job and job levels q Department, units, and location q Reason for leaving q Length of service q Demographic characteristics q Education and training q Knowledge, skills and abilities q Performance ratings/levels.
Involuntary turnover
terminations for poor performance or work rule violations.
Self-Assessment for career
the use of information by employees to determine their career interests, values, aptitudes and behavioral tendencies.
Strategic Perspectives on Benefits
¤ Benefits vs. Salaries- which is preferred for addition or subtraction? ¤ Benefits influence employee decisions about employers -Retention -Absenteeism -Recruitment ¤ Benefits are increasingly seen as entitlements. ¤ Benefit costs average over 40% of total payroll costs.
