MGT 470 Compensation Exam 2

Three pay-level policies

(1) To lead (2) To meet or match (3) To follow competition, lag - newer policies emphasize flexibility - many employers go beyond a single choice

which of the following is a disadvantage of the ranking method of job evaluation?

it fails to tell employees about their jobs

Supply slides

looks at the potential employees: their qualifications and the pay they are willing to accept in exchange for their services

Market match (pay mix alternative)

mimics the market average pay mix

In the context of job evaluation methods, which of the following is a common way of ranking?

paired comparison

self-serving bias

people interpret facts and resolve ambiguities in ways that favor their own self-interests

develop grades (single v different grades)

- organizational job evaluation results - each grade will have its own pay range, and all the jobs within a single grade will have the same pay range - jobs in different grades should be dissimilar in terms of their relative value and importance

Product market factor: product demand

- sets max pay level - if organization pays above max, it must either: a: pass on higher costs to customers (price) b: allocate a great share of total revenue to cover labor cost (low margin)

market pay line definition

- summarizes the distribution of going rates paid by competitors in market - a line on a gragh that links a company's benchmark job evaluation points on the horizontal axis (internal structure) with market rates paid by competitors (market survey) on the vertical axis

Expectancy Theory: Valence

- values employees attach to the organization rewards, received for job performance - avoiding the outcome, indifferent to the outcome, welcomes the outcome, etc. - "It's important to get an A in this course to me because..."

In cases where the content of an organizations jobs does not sufficiently match that of the jobs in the salary survey, an effort can be made to quantify the difference via

Benchmark conversion

According to efficiency wage theory, employee motivation at work is driven largely by their sense of fairness

False

Overlap (high v low) (implications)

HIGH DEGREE - small differences in value of jobs in adjacent grades - moving grades: title change, but not much change in pay LOW DEGREE - large differences in value of jobs in adjacent grades - Promotion: title change and larger pay increase

Work/Life balance (WLB) (pay mix alternative)

Increases employees WLB

Security (pay mix alternative)

Increases employees perceived security and psychological safety

Performance-driven (pay mix alternative)

Increases the link between employee performance and pay level

Compensable factors

Job attributes that provide the basis for evaluating the relative worth of jobs inside an organization. A compensable factor must be work-related, business-related, and acceptable to the parties involved.

in the context of internal alignment, which of the following is the correct sequence?

Job description > job evaluation > job structure

If Company A raises its pay rate by one dollar per hour to hire additional workers and competitors immediately match the increase, what will be the most likely result?

The labor costs for Company A will increase, but it will be unable to hire additional workers.

An employer offering lower base pay with high bonuses is a likely signal that it is seeking risk taking employees.

True

When constructing a market lay line, the internally aligned structure is shown on the horizontal (x) axis

True

Pay range

a range of pay rates from min to max established for pay grade or class

Job Description

a summary of the most important features of a job. It identifies the job and describes the general nature of the work, specific task responsibilities, outcomes, and the employee characteristics required to perform the job.

Efficiency wage theory

a theory that explains why firms are rational in offering higher-than-necessary wages 1. attract higher quality applicants 2. lower turnover 3. increase worker effort 4. reduce shirking behavior 5. reduce the need to supervise employees

The point in time at which an outcome is assessed

assessment of whether pay was fair might have been different before the WNT won the 2015 world cup and 2019 world cup

Interactional justice

being treated with dignity and respect "whether the interaction between employees and their employer is conducted with openness and respect"

Pay grades

classes or groups into which jobs of the same or similar values are groups for compensation purposes

benchmark conversion

content of an organizations job does not sufficiently match that of the jobs in the salary survey, this effort can be made to quantify the difference

philosophical differences

differences in their focuses and values-which one is more important

Distributive Justice

fairness of outcomes "whether an employees compensation is proportional to that employees contribution"

Demand

is the sum of all employers' hiring preferences for business graduates at various pay level

Market pay rate determination

is where the lines for labor demand and labor supply cross

Expectancy Theory

suggests motivation is the product of three perceptions: - expectancy - instrumentality - valence

Relationship between pay level and labor cost

the higher the pay level, the higher the labor costs

Job Analysis

the systematic process of collecting information related to the nature of a specific job. It provides the knowledge needed to define jobs and conduct job evaluation.

Signaling theory

theory that employers are willing to pay more for people with certificates, diplomas, degrees, and other indicators of superior ability

paired comparison and alternate ranking methods may be more reliable, than simple ranking

true

Benchmark Job Characteristics

well-known and stable contents; their current pay rates are generally acceptable, and the pay differentials among them are relatively stable. Contains the entire range of compensable factors and is accepted in the external labor market for setting wages.

Broad banding

when businesses set a wider-than-normal salary band, or pay range, for a job level (fewer, broader pay ranges)

The pay-mix policy alternative in which the percentage of benefits is likely to be the highest is known as a

work/life balance policy

Pay with competition (match)

"most common" - firm's labor costs are equal to those of its competitors - avoid labor market disadvantages but may not have competitive advantage

What is the value that appears the most often in a set of data values

Mode

Pay mix

Relative emphasis among compensation components such as base pay, merit, incentives, and benefits.

Two ranking methods

alternative ranking & paired comparison

Narrow Framing

people often apply principles of equity theory to only a subset of the dimensions of a compensation arrangement. stepping back to consider the "full picture" would lead to the opposite conclusion

procedural justice

perceived fairness of the process used to determine the distribution of rewards "whether the policies that determine compensation apply impartially to all employees"

Job Evaluation

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

Fairness inconsistencies

psychological sources of inconsistencies in fairness perceptions, Categories: philosophical differences, the point in time at which an outcome is assessed, narrow framing, self-serving motives

range spread and how to calculate it

(max pay/ min pay) -1 "the size of range"

Equity Theory (Pay Equity)

** pay differences perceived to be unfair can negatively affect behaviors and attitudes** - people compare the ratio of their own outcomes (rewards) to inputs (job value, individual contribution) to those of others to determine whether rewards are distributed fairly - perceived equity results if ratios are very similar

Lag Pay-Level Policy

- A wage structure that is set to lag behind market rates - objective is to offset labor costs - may hinder firm's ability to attract and retain quality emplpoyees - other workplace quality can complement the drawbacks

Four pay-mix policies

- Performance-driven - Market match - Work/Life balance - Security

Lead Pay-Level Policy

- a wage structure that is set to lead the market throughout the plan year - can have competitive advantage - negative effects include: labor cost (may force employer to increase wages of current employees to avoid internal misalignment

Expectancy Theory: Expectancy

- assessment of their ability to perform required job tasks - effort/ability --> performance - "If I study hard, I will get a good mark at the test"

Shared pay policy

- begins with traditional alternatives of lead, meet, or lag - then adds, offering employees choices in the pay mix - "employee as customer" - Netflix: > performance evaluation > then each employee chooses pay mix (cash v stock options)

Expectancy Theory: Instrumentality

- beliefs that higher job performance will be rewarded by the organization - performance --> pay - "If I get a good mark at this test, I will get an A in the course"

How product market factors influence pay decisions in general

- determine what the organization can afford to pay Two key product market factors 1. Product demand (product market sets max pay level) 2. Degree of competition (competitive market- less able to raise prices w/o loss of revenue

Three factors to determine the relevant labor market

- emplooyees within the same geographic area - same products or services - same occupations or skills

Two objectives of pay-level and pay-mix decisions

1.control costs and increased revenues 2. attract and retain employees

Career moves w/in v between bands after broad banding

?

Point Method

A job evaluation method that employs (1) compensable factors, (2) factor degrees numerically scaled, and (3) weights reflecting the relative importance of each factor. Once scaled degrees and weights are established for each factor, each job is measured against each compensable factor and a total score is calculated for each job. The total points assigned to a job determine the job's relative value and hence its location in the pay structure.

Alternative ranking

A job evaluation method that involves ordering the job description alternately at each extreme. All the jobs are considered. Agreement is reached on which is the most valuable and then the least valuable. Evaluators alternate between the next most valued and next least valued and so on until the jobs have been ordered.

Benchmark Jobs

A prototypical job, or group of jobs, used as a reference point for making pay comparisons within or without the organization.

Paired comparison

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

Rich nichols, who was the legal counsel for the WNT, noted that WNT had to perform well, while the men were "paid just got showing up." What does determine mr. Nichols fairness perception?

Distributive justice

Pay level

An average of the array of rates paid by an employer.

which of the following is a job evaluation method that can group a wide range of work together in one system but leave too much room for manipulation?

Classification

Marie hired on with a tech company offering the usual benefits but paying below market rates. She took the job because the company was promising generous stock options and hefty yearly bonuses if goals are met. Plus, they are paying her to relocate to Hawaii! Marie's new employer is using a

Lag pay level policy

Factor weights

Measures that indicate the importance of each compensable factor in a job evaluation system. Weights can be derived through either a committee judgment or a statistical analysis.

Ranking

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

Rich nichols, who was the legal counsel for the WNT, argued that the WNT had to play some on their matches on lower quality artificial turf, which is much harder that grass , whereas the MNT always played on grass. What does determine Mr. nichols fairness perception ?

Procedural justice

Which of the following is an example of the demand side of labor?

The pay level offered by an employer

organizational justice

The perception of fairness in workplace practices.Three categories are distributive, procedural, and interactional justice

Classification

The process of grouping things based on their similarities