compensation © nancy brown johnson, 2000 why do we have follies? we like objective measures visible...
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COMPENSATION© Nancy Brown Johnson, 2000
Why do we have follies?
We like objective measures Visible behaviors Hypocrisy Emphasize morality or equity
rather than efficiency
©a Times Mirror Higher Education Group, Inc., company, 1997a Times Mirror Higher Education Group, Inc., company, 1997
IRWIN
OUTCOMEINPUTS
OUTCOMEINPUTS
?
the samemore or less
A person evaluates fairness by comparing their ratio with others.
Pay, benefits,opportunities, etc.
effort, ability,experience etc.
< = >
Equity Theory
Equity Theory
Workers compare their compensation with others
If unequal workers attempt to restore equity
Workers Restore Equity by Reducing input Attempting to get raise Quitting Psychological Adjustment
Compensation Equity Model
Equity Compensation Tool
Objective
Individual (Pay for Perf.)
Seniority, Performance
Motivation
Internal (Pay Structure)
Job Evaluation Retention
External (Pay Level)
Market Surveys Attraction
Procedural Justice (Pay Administration)
Communication, Appeals
Commitment
Internal Equity
Comparison of Jobs Jobs worth to the Employer
Similarities and differences in work content
Relative contribution to organization objectives
Accomplished through job evaluation
Point Factor Method
Compensable factors - what the organization wants to pay for
Each factor is weighted Jobs are assessed on the value of
each factor Points are summed and used to
rank jobs
©a Times Mirror Higher Education Group, Inc., company, 1997a Times Mirror Higher Education Group, Inc., company, 1997
IRWIN
Job Title Experience Education Complexity PointsTotal
Compensable Factors
Computer operator
Computer programmer
Systems analyst
40
40
65
30
50
60
40
65
85
110
155
210
Three Factor Compensation System
External Equity
Value of the job to the labor market
Assessed through wage surveys
©a Times Mirror Higher Education Group, Inc., company, 1997a Times Mirror Higher Education Group, Inc., company, 1997
IRWIN
Market Pay Surveys - Benchmarking
Identify key jobs Identify labor market competition Identify product market
competition From this select firms to be
surveyed
Benchmark or Key Jobs
Contents are known and stable Supply & demand stable Represent entire job structure Represent large number of
employees
Identify Product & Labor Market Competition Product Market Labor Market
local regional national
©a Times Mirror Higher Education Group, Inc., company, 1997a Times Mirror Higher Education Group, Inc., company, 1997
IRWIN
Approaches to Developing a Pay Structure
•Market survey data
•Job evaluation data
•Pay policy line
•Combines Internal & external equity
•Pay grade
PAY
Job Evaluation Points
©a Times Mirror Higher Education Group, Inc., company, 1997a Times Mirror Higher Education Group, Inc., company, 1997
IRWIN
80 120 160 200 240 280 320
monthlysalary($000)
8
7
6
5
4
3
2
1
40
Line of Best Fit :using Market-Survey datain Table 15.5
Developing a pay policy line
PAY
Job Evaluation Points
©a Times Mirror Higher Education Group, Inc., company, 1997a Times Mirror Higher Education Group, Inc., company, 1997
IRWIN
80 120 160 200 240 280 320
monthlysalary($000)
8
7
6
5
4
3
2
1
40
Job Evaluation Points = 315
Predicted Salary = $6,486
Developing a Pay Policy Line
PAY
Job Evaluation Points
©a Times Mirror Higher Education Group, Inc., company, 1997a Times Mirror Higher Education Group, Inc., company, 1997
IRWIN
100 150 200 250 300 350
monthlysalary(000)
8
7
6
5
4
3
2
1
Pay Structure
Organizational Justice
Perceived fairness of the systemOutcomesProcess IssuesInteractions
Influences Commitment
©a Times Mirror Higher Education Group, Inc., company, 1997a Times Mirror Higher Education Group, Inc., company, 1997
IRWIN
Process Issues
•Participation in Compensation System design
•Communication
•Employees need to understand the system
•Employees need to keep managers aware of changes
•Managers need to explain system changes
©a Times Mirror Higher Education Group, Inc., company, 1997a Times Mirror Higher Education Group, Inc., company, 1997
IRWIN
Current Challenges
JOB BASED STRUCTURE
•Rigid
•Retards change
•Does not reward change
•Discourages lateral moves
©a Times Mirror Higher Education Group, Inc., company, 1997a Times Mirror Higher Education Group, Inc., company, 1997
IRWIN
New Approaches
•Delayer & Debanding
•Skill based pay
•Increased flexibility
•Increased workforce skill