1 - Compensation Management: A Strategic Approach Flashcards
Views concerning the importance of compensation vary depending on perspective.
Five perspectives on compensation are:
- (1) Society perceives compensation as a measure of ________.
- (2) Stockholders view executive pay as excessive if it is not related to the __________ of the company.
- (3) Managers view compensation as both an ______ and an influence on employee work behavior and ultimately on the organization’s performance.
- (4) Employees may see compensation as a return/reward for their services, and others as an _______ for being an employee of the company, or as a reward for a job well done.
- (5) In English, the word compensation means to _________, to offset, to make up for. A look at the origin of the word in different languages gives a sense of the richness of the meaning, which can combine entitlement, return and reward.
- justice
- performance
- expense
- entitlement
- counterbalance
The __________ returns, which include learning opportunities, status, opportunities to belong and challenging work, are the psychological returns people believe they receive in the workplace.
__________ includes pay received directly as cash such as base and merit increases and cost-of-living adjustments and indirectly as employee bene ts such as pensions and health care.
relational
Total compensation
Cash compensation is composed of several components. The first component is _______ which is the cash compensation that an employer pays for the work performed.
_________ is given as an increment to the base pay in recognition of past work behavior while ________ adjustments are the same increases to everyone.
_________ are received if performance goals are met. They differ from merit adjustments in two ways.
- First, they do not increase the base wage. Essentially, they must be re-earned each pay period.
- Second, the potential size of the payment is generally known at the start of the performance period. They may be short- or long-term. Long-term of these typically are in the form of stock ownership or options to buy stock at a fixed price.
base wage
merit pay
the cost-of-living
Incentives
One major type of benefit includes ________ programs. Some of these programs are legally required while others are voluntarily provided by employers. Medical insurance, retirement programs, life insurance and savings plans are common examples.
A second type includes ___________ benefits. Programs that help employees better integrate their work and life responsibilities include time away from work, access to services to meet specific needs and exible work arrangements.
The third type of benefit includes allowances such as _______ or _________ allowances. Allowances often grow out of whatever is in short supply.
income protection
work/life balance
housing
transportation
Compensation has been treated as something paid or received at a moment in time. But compensation decisions have a temporal effect. A __________ perspective shifts the choice from comparing today’s initial offers to a consideration of future bonuses, merit increases and promotions.
present-value
the pay model serves as both a framework for examining pay systems and a guide for the remainder of the course. this pay model contains three basic building blocks;
- they are the compensation ________,
- the ________ that form the foundation of the compensation system,
- and the _______ that comprise the compensation system. (p. 18)
objectives
policies
techniques
The four basic compensation objectives that shape the pay system and serve as a standard for evaluating the pay system are:
- (1) _________: defined as improving performance, increasing quality, delighting customers and stockholders, and controlling labor costs
- (2) ________: defined as attempting to ensure fair treatment for all employees by recognizing both employee contributions and needs
- (3) ________: definedas conforming to various federal and state compensation laws and regulations.
- (4) ________: defined as considerations concerning how results are achieved.
Efficiency
Fairness
Compliance
Ethics
The four policy choices involved in a pay system are:
- (1) Internal _________—refers to comparisons among jobs or skill levels inside a single organization. Pay for different jobs in the organization should re ect the relative similarities and differences in content of work or skills required for the job as well as the differences in the relative contribution of the work or skills to the overall organizational objectives.
- (2) External __________—refers to compensation relationships external to the organization, its comparison with competitors. Since employees will make comparisons with others doing similar jobs, or with similar skills or competencies outside the organization, pay must be high enough to attract and retain a motivated workforce. On the other hand, pay cannot be too high because the employer must control labor costs to remain competitive.
- (3) ___________—refers to the relative emphasis placed on performance. This is considered when employers want to differentiate pay among employees in the same job or with the same skills based on differences in performance or seniority.
- (4) __________—is a policy regarding administration of the pay system. It is through management that the employer will be able to determine if objectives are being met and, if not, what changes need to be made for the system to work as it was intended.
alignment
competitiveness
Employee contributions
Management
Pay techniques are the procedures through which _____ choices are set in motion. They are the mechanism used to link the policy choices to the overall compensation objectives.
- Job ______ and job ______ are techniques used to establish a pay structure to achieve internal consistency in the pay system.
- Pay ______ are one technique used to establish external competitiveness.
- ______ plans or performance-based pay increases are techniques used to distinguish employee contributions.
policy
- analysis
- evaluations
- surveys
- Incentive
The concept of caveat emptor raises the following three questions:
- (1) Is the research _______?
- (2) Does the study separate correlation from ______? (Just because the best-performing companies are using a practice does not mean that the practice is causing the performance.)
- (3) Are there alternative _______?
useful
causation
explanations
______ refers to the fundamental directions that an organization chooses. An organization defines this through the tradeoffs it makes in choosing what (and what not) to do.
Strategy
Questions that a manager should ask with regard to strategic choices are:
- (a) What ______ should we be in?
- (b) How do we gain and sustain _______ in this business?
- (c) How should __________ help this business gain and sustain competitive advantage?
- business
- competitive advantage
- total compensation
All organizations that pay people have a compensation strategy. Some have written or stated compensation strategies; others do not. The unstated compensation strategies emerge from the _____ decisions that the organizations have made. The strategy is inferred from compensation practices.
pay
Five factors to be considered in assessing total compensation implications are:
(1) Business strategy and ________
(2) ________
(3) Social and political ______
(4) _______ preferences
(5) _______ preferences
- competitive dynamics
- Culture/values
- context
- Employee
- Union
summarize the other three steps involved in developing a total compensation strategy.
Step 2 involves _______ a total compensation strategy. A total compensation strategy is formulated using the five decisions outlined in the pay model. The decisions entail setting objectives and specifying the four policies on alignment, competitiveness, contributions and management.
Steps 3 and 4 involve _______ the strategy and then ______ and _______ it to close the loop.
mapping
implementing
reassessing
realigning
