Compensation by nikeborome


    Employee’s Perspective

   What compensation do you seek?

        Direct       Indirect
        Money         Benefits
    Employer’s Perspective

   What do you compensate?
          Job:            Characteristics:
     • Responsibility         • Ability
    • Critical function      • Training
      • Job content         • Education
    Employer’s Perspective
   What factors influence your
    compensation policy?
        • Supply and demand skills
        • Unions
        • Ability to pay
        • Cost of living increases
        • Government (FLSA, min. wage)
        • Strategy
Influence of Equity

  wages         Internal
  Develop a Job Hierarchy
A. Job Evaluation
  1. Preliminary planning

  2. Select a plan

  3. Develop the plan

  4. Evaluate jobs, NOT PEOPLE
 Factor 8: Decision Making /
 Supervision Required
                                   1st Degree (36 points)
Limited decision making by the incumbent. Progress of work is checked by others most of
the time, and/or 60-90 percent of activities are defined by other than incumbent.

                                   2nd Degree (89 points)
Routine decision making bases on specific criteria. Progress of work is often checked by
others, and/or 40-60 percent of activities are defined by other than incumbent.

                                  3rd Degree (112 points)
Significant decision making based on established guidelines and experience. Progress of
work is check by others some of the time, and/or 25-40 percent of activities are defined by
others than the incumbent.

                                  4th Degree (180 points)
Extensive decision making based on broad policies, procedures, and guidelines. Progress of
work is seldom checked by others, and/or less than 25 percent of activities are defined by
other than the incumbent.
        Example of One Factor in a Point Factor System
        (Complexity/Problem Solving)
 The mental capacity required to perform the given job as expressed in
 resourcefulness in dealing with unfamiliar problems, interpretation of data,
 initiation of new ideas, complex data analysis, creative or developmental work.

Level   Point Value       Description of Characteristics and Measures

 0           0            Seldom confronts problems not covered by job
                          routine or organizational policy; analysis of data is
                          negligible. Benchmark: General secretary,
                          switchboard / receptionist.

 1          40            Follows clearly prescribed standard practice and
                          demonstrates straightforward application of readily
                          understood rules and procedures. Analyzes
                          noncomplicated data by established routine.
                          Benchmark: Statistical clerk, billing clerk.
 Example of One Factor in a Point Factor System
 (Complexity/Problem Solving) (cont’d)

Level   Point Value   Description of Characteristics and Measures

 2         80         Frequently confronts problems not covered by job
                      routine. Independent judgment exercised in making
                      minor decision where alternatives are limited and
                      standard policies established. Analysis of standardized
                      data for information of or use by others. Benchmark:
                      Social worker, executive secretary

 3         120        Exercises independent judgment in making decision
                      involving nonroutine problems with general guidance
                      only from higher supervision. Analyzes and evaluates
                      data pertaining to nonroutine problems for solution in
                      conjunction with others. Benchmark: Nurse,
                      accountant, team leader
 Example of One Factor in a Point Factor System
 (Complexity/Problem Solving) (cont’d)

Level   Point Value   Description of Characteristics and Measures

 4         160        Uses independent judgment in making decisions that
                      are subject to review in the final stages only. Analyzes
                      and solves nonroutine problems involving evaluation of
                      a wide variety of data as a regular part of job duties.
                      Benchmark: Associate director, business manager,
                      park services director.

 5         200        Uses independent judgment in making decisions that
                      are not subject to review. Regularly exercises
                      developmental or creative abilities in policy
                      development. Benchmark: Executive director.
Pricing Jobs

"The acceptability of job evaluation
hinges in large part on whether the
results are consistent with the ranking
of the same jobs in the external labor
  Pricing Jobs
A. Use key or benchmark jobs
       Jobs that are relatively stable in content
        and found in many organizations
       Compare your internal analysis to
        external wages

B. Conduct wage survey to examine
    external wages
  Pricing Jobs

C. Use points from job evaluation as a
       Use predictor to determine wages for
        non-key positions
       Non-key positions: jobs that have no
        similar “comparison job” outside of the
   Develop a Pay Structure

A. Pay on the basis of individual jobs
     or grades?

B. Utilize single rates or a rate range?

   Comparable worth

   Salary compression
         Pricing Managerial and
            Professional Jobs

   Not easy because there are fewer
    quantifiable factors

   Managers are often compensated for long
    term performance

   Are executives overpaid?
        Evaluate People Not Jobs

   Skill Based Pay
        Skill-Based Compared to Job-Based
        Structures Job-Based       Knowledge-Based

Pay Structure         Based on job performed   Based on skills possessed
                                               by the employee
Manager’s focus       Job carries wage         Employee carries wage
                      Employee linked to job   Employee linked to skill
Employee focus        Job promotion to earn    Skill acquisition to earn
                         greater pay              greater pay
Procedures required   Assess job content       Assess skills
                      Value jobs               Value skills
Advantages            Pay based on the value   Flexibility
                         performed             Reduced work force
Limitations           Potential personnel      Potential personnel
                           bureaucracy            bureaucracy
                      Inflexibilities          Cost controls
 Financial Incentives

"The basic aim of an incentive should be
to encourage good performance by
linking performance and rewards, and
this in turn requires valid, accurate
performance appraisals.”
        Incentives for Production

   Piecework

   Group incentive plans

   Attendance

   Annual bonus
      Other Incentives for
     Mangers, Executives and
        Other Employees

   Stock options

   Long-term incentives
    Organization Incentive Plans

   Profit sharing plans
      •   ESOP – Employee Stock Options Plan
      •   Cost savings plan

   SCANLON and Gainsharing
         Potential Incentive Plan

   Worker doesn’t believe that plan will lead
    to rewards.

   Unfair standards – too high or unattainable

   Changing standards – obtain top
    management commitment to maintain
1. Ensure that efforts and rewards are
  directly related.
2. Incentive rewards are understandable and
3. Use accurate and effective standards.

4. Guarantee those standards.
Performance Evaluation
    Performance Measurement

A. Administrative decisions
   • Promotion

   • Training

   • Compensation

   • Transfer, demotion, and separation
   Performance Measurement

B. Employee feedback and development
  • Roles

  • Strengthens E  P and P  O relationships

  • Allows behavior change
    Performance Measurement

C. Evaluations of policies and programs
  • Selection and promotion decisions
  • Aiding in validation of selection tools
  • Helping to determine if programs are effective
        (e.g. training)

D. Defense of policies
   • Use to show job relatedness (performance)
    Performance Measurement

A. Identifying performance dimensions
  • Most jobs are multi-dimensional
  • Use job analysis to assess performance
  • Errors similar to job analysis

B. Establish performance standards
  • Determine legitimate standards
  • Don’t set standards too high or low
  Performance Measures
A. Comparative methods
  1. Ranking

  2. Forced distribution

  3. Problems with comparative evaluations:
     • No indication of potential performance
     • Little specific feedback
     • No feedback about where to improve
  Performance Measures
B. Absolute methods
  1. Trait rating scale
      • Central tendency problems
      • Doesn’t capture specific behaviors
  2. BARS (Behaviorally Anchored Rating Scales)
      • Complex and costly
      • Not applicable to a broad group of jobs
      • Avoids contamination and deficiency errors
  3. MBO – set for individuals, not jobs
Measures of Physical Output
  Administrative Challenges
A. Components that influence the
    performance appraisal process
  1. Appraiser (rater)
  2. Appraisee (ratee)
  3. Method
  4. Purpose of evaluation
  5. Motivation to appraise
  Administrative Challenges
B. Rater errors
   1. Unreliability
   2. Leniency
   3. Severity
   4. Central tendency
   5. Recency
   6. Halo
  Administrative Challenges
  • Not only for your selection
  • Show that method isn’t discriminating

  • Validate performance appraisal procedures
   Trends in PA Research

1. Focused on the accuracy of appraisal and
  improving method.

2. Focused on rater errors and reduction of
3. Current focus: cognitive processes and
  interpretation and evaluation of

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