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CMS 2 > A1 - Comp. Mgmt: A Strat. Approach and Analytical Framework > Flashcards

A1 - Comp. Mgmt: A Strat. Approach and Analytical Framework Flashcards

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1
Q

Base wage, merit pay and incentives are (3) components of this

A

Cash Compensation

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2
Q

Pay recieved directly as cash such as base and merit increases, cost-of-living adjmnts and indirectly as EEs benef., such as pensions and health care.

A

total compensation

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3
Q

approach that assumes that there is a universal best way for total compensation

A

best practices

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4
Q

improving perf, increasing quality, delighting custs, and stockholders, and controlling labor costs

A

efficiency

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5
Q

conforming to various fed’l and state compensation laws and regs.

A

compliance

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6
Q

psychological returns ppl believe they receive in the workplace

A

relational returns

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7
Q

Environment in which a total compensation package emphasizing perf-based pay works well

A

virtuous circle model

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8
Q

policy choice in a pay system that makes comparisons among jobs or skill levels inside a single org.

A

internal alignment

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9
Q

procedures through which policy choices are set in motion

A

pay techniques

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10
Q

Different perspectives of compensation

Society

A
  • some ppl see it as a measure of justice
    • earnings differentials b/w men and women
    • benefits as part of total comp. pkg
  • thoughts that pay increases may cause prices to increase
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11
Q

Different perspectives of compensation

Stockholders

A
  • view exec. pay as excessive if it isn’t related to perf. of the company
  • some believe that using stk to pay EEs creates a sense of ownership that will improve perf. = increase stockholder wealth
  • some believe that granting to much stk to EEs dilutes stockholder wealth
  • specifically interested in executive pay
    • aligned interests of execs. to those of shareholders = company perf will be higher
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12
Q

Different perspectives of compensation

Managers

A

influences their success

  • major expense:
    • competitive pressures force mgrs to consider the affordability of their comp. decisions
    • labor costs can acct for more than 50% of total costs
  • influences EE behaviors and improve org. perf.
    • affect EE willingness to be flexible, learn new skills, and suggest innovations
    • could push EEs who are not satisfied to unionize or legal action against their ER based on how they are paid
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13
Q

Different perspectives of compensation

Employees

A
  • source of financial security
  • vital role in a person’s econ. and social well-being
  • see comp as a return in an exchg. b/w their ER and themselves
  • entitlement for being an EE of the company
  • a reward for a job well done
  • influence EE motivation and behavior
    • motivational intesity, direction and persistence of current EEs
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14
Q

the degree to which pay influences indiv. and aggregate motivation among the EEs we have at any point in time

A

incentive effect

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15
Q
  • the effect that pay can have on the compostiion of the workforce
  • different types of pay strats. may cause different types of ppl to apply to and stay w/ an org.
A

sorting effect

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16
Q

EE belief that returns and/or rewards are due regardless of indiv. or company perf.

A

entitlement

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17
Q

refers to all forms of financial returns and tangible services and benef. EEs receive as part of an employment relationship

A

compensation

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18
Q

global views of “compensation”

A
  • in English - something that counterbalances, offsets, or makes up for something else
  • in China - in the past, treated as a necessity of life or entitlement; now, broader sense of returns (wages, benefs., training opps., etc…) as well as entitlement.
  • in Japan - takes care of EEs’ financial needs
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19
Q

Total Returns

A
  • total comp - pay rec’d directly as cash such as base and merit incr’s, cost of living adjmnts, and indirectly as EE benefits
  • relational returns - learning opps, status, opps to belong and challenging work, are psychological returns ppl believe they receive in the workplace
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20
Q

parts of Cash Compensation

A
  1. base
  2. merit/cost-of-living
  3. short-term incentives
  4. long-term incentives
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21
Q
  • part of Cash Compensation
  • cash comp. that ERs pays for the work perf’d.
  • tends to reflect the value of the work or skills and generally ignores differences attributable to indiv. EEs
A

base wage

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22
Q
  • parts of Cash Compensation
  • periodic adjmnts to base wage based on chgs in what other ERs are doing, chgs in overall labor mkt, or chgs in experience or skill
    • same level for all EEs
  • increments to the base pay in reognition of past work behavior
    • w/ or w/o formal perf. eval system
    • size varies w/ perf.
A

cost-in-living adjmnt/merit pay

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23
Q
  • parts of Cash Compensation
  • tie pay increases directly to perf. - offered as an inducement to encourage good perf.
  • variable pay: does not increase the base wage - must be re-earned each pay period
  • potential size will generally be known beforehand
  • influences future behavior
  • can be tied to perf of indiv., team, total business unit, or some combo of each
A

incentives

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24
Q

long-term incentives

A
  • intended to focus on EE efforts on multiyear results
  • typically in form of stk ownership or options to buy stk at advantageous prices
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25
Q

parts of benefits in total comp.

income protection

A
  • some are legally required in U.S. - SS
    • ERs make up half the contribs. to SS
    • used to compensate EEs who become diabled or unemployed
  • others: med. ins., retirement programs, life ins. savings plans
    • protect EEs from financial risks inherent in daily life
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26
Q

parts of benefits in total comp.

work/life balance

A
  • help EEs better integrate their work and life responsibilities
    • time away from work (vacations, jury duty)
    • access to services to meet specific needs (drug counseling, financial planning, referrals for child/elder care)
    • flexible work arrangements (telecomm., nontrad’l schedules, nonpaid time off)
  • increasingly important today due to changing demographics (2-income families; single-parents)
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27
Q

parts of benefits in total comp.

allowances

A
  • often grow out of whatever is in short supply
    • housing, transportation, food….
    • usually in foreign countries
28
Q

relational returns from work

A
  • nonfinancial returns from work have substantial effect on EEs’ behavior
  • recognition and status, employment security, challenging work, and opps. to learn
  • personal satisfaction from succesfully facing new challenges, teaming w/ great co-workers, receiving new uniforms…
29
Q

Pay Model

A
  • Comp. Objs.
  • policies that form the foundation of the comp. system
  • techniques that make up the comp. system
  • plays a central role in formulating and implementing an org’s pay strat.
30
Q

Compensation Objs.

parts of the Pay Model

A
  • shape the design of the pay system and serve as the standard against which the success of the pay system is eval’d
  • pay systems are designed to achieve specific objs:
    • efficiency
    • fairness
    • ethics
    • compliance w/ laws/regs.
31
Q

Efficiency

Comp. Objs for pay models

A
  • improving perf., increasing quality, delighting custs. and s/h’s
  • controlling labor costs
32
Q

Fairness

Comp. Objs for pay models

A
  • fundamental obj.
  • requires fair treatment for all EEs by recognizing both EE contribs. (higher pay for greater perf., experience, or training) and EE needs (fair wage as well as fair procedures)
  • Procedural Fairness: the process used to make pay decisions - the way that a pay decision is made may be equally as important to EEs as the results of the decision
33
Q

Compliance

Comp. Objs for pay models

A
  • conforming to fed’l and state comp. laws/regs
  • if laws chg, pay systems may need to chg too to ensure continued compliance
  • if global, must comply w/ the laws of all the countries in which they operate
34
Q

Ethics

Comp. Objs for pay models

A
  • the org. cares about how its results are achieved
  • put org’s ethics stmts into daily practice
  • managing pay sometimes creates ethical dilemmas
35
Q

Policy Choices (4)

Parts of Pay Models

A
  1. internal alignment
  2. external competitiveness
  3. EE contribs.
  4. mgmt of the pay system
36
Q
  • the pay relationships among jobs or skill levels inside a single org.
  • jobs and ppl’s skills are compared in terms of their relative contribs. to org’s bus. objs.
  • focuses attention on EE and mgmt acceptance of those relationships.
  • involves establishing equal pay for jobs of equal worth and acceptable pay differentials for jobs of unequal worth
A

internal alignment

37
Q
  • the pay relationships among orgs
  • focuses attn. on the competitive positions reflected in these relationships
  • “how much do you want to pay in comparison to what other ERs pay?”
A

external competitiveness

38
Q

external competitiveness decisions

A
  1. to ensure that the pay is sufficient to attract and retain EEs
  2. to control labor costs so that the org’s prices of products or serv. can remain competitive in a global econ.
39
Q
  • comparison among indivs. doing the same job for the same org.
  • directly affects EEs’ attitudes and work behaviors
  • what mix of types of pay systems should ERs use?
    • perf.-based
    • flat rate
    • team incentives
A

EE Contribs.

40
Q
  • last building block in our model - policy regarding admin. of the pay system
  • ensuring that the right ppl get the right pay for achieving the right objs. in the right way
A

management

41
Q

Pay Techniques

Part of Pay Models

A
  • the procedures through which policy choices are set in motion
    • link the four basic policies to the pay objs.
  • there are variations
    • job analysis and job evals. are techniques used to estab. a pay structure to achieve internal consistency in the pay system
    • pay surveys are used to estab. ext. competitiveness
    • incentive plans or perf.-based pay incr’s are used to distinguish EE contribs.
42
Q

(3) questions that the concept of caveat emptor raises as it applies to comp. mgmt studies and research

A
  • is the research useful?
  • does the study separate correlation from causation?
  • are there alt. explanations?
43
Q

a common measure of association that indicates how changes in one variable are related to changes in another

A

correlation coefficient

44
Q

making chgs in the way work is designed to include external cust. focus

A

reengineering

45
Q
  • the fundamental direction of the org.
  • it guides the deployment of all resources, including comp.
  • defined through the tradeoffs it makes in choosing what (and what not) to do
A

strategy

46
Q

Q’s a mgr asks regarding strat. choice

A
  • what bus. should we be in?
  • how do we gain/sustain competitive adv. in this bus.?
  • how should total comp help this bus. gain and sustain competitive adv.?
47
Q

Stated vs Unstated Strat

A
  • written or stated strats
  • unstated comp - emerge from the pays decisions that the orgs. have made
    • inferred from comp. practices
48
Q

focuses on those comp. choices that help the org. gain and sustain competitive adv.

A

strat. perspective

49
Q

Business Strat

A
  • tailor their pay systems to align w/ the org’s bus. strat.
  • greater alignment = the more effective the org.
50
Q

(3) general business strats

A
  • innovator
  • cost cutter
  • customer focused
51
Q
  • general business strats
  • stress new products and short response time to mkt trends
  • supporting comp. approach = places less emphasis on evaluating skills and jobs and more emphasis on incentives designed to encourage innovations
A

innovator

52
Q
  • general business strats
  • stresses doing more w/ less by minimizing costs, encouraging productivity increases, and specifying in greater detail exactly how jobs s/b performed.
A

cost-cutter

53
Q
  • general business strats
  • stresses delighting cust. and bases EE pay on how well they achieve this
A

customer-focused

54
Q

other business strats

A
  • cost leadership strat.: firms that cust costs
  • differentiation strat.: those that seek to provide a unique and/or innovative prod. or service at a premium price
  • defenders: those that operate in stable mkts and compete on cost
  • prospectors: more focused on innovation, new mkts, etc…
55
Q

“AMO theory”

Supporting HR Strategy

A

P = f (A,M,O)

P = performance

f = function of: A(ability), M(motivation), and O(opp.)

  • HR systems will be more effective when:
    • roles are designed to allow EEs to be involved in decisions and have an opp. to make an impact
    • when EE ability is developed through selective hiring and T/D
    • when the comp. system motivates EEs to act on their abilities and take adv. of the opp. to make a difference
56
Q

Comp and Supporting HR Strat.

A
  • key to attracting, retaining, and motivating EEs w/ the abilities necessary to execute the bus. strat and handle greater decision-making responsibilities
  • key to motivating them to fully utilize those abilities
  • higher pay levels and pay for perf. are often part of HPWS
  • central to successful bus. strat.
  • ultimately seek to decrease costs or increase revenues relative to competitors
  • key stakeholders (EEs, s/h’s, custs.) must be happy w/ their “deal” w/ the company
57
Q

(5) strategic compensation choices (Pay Model)

A
  1. Objectives: How should comp. support the bus. strat. and be adaptive to the cultural and regulatory pressures in a global environ.?
  2. Internal Alignment: How differenetly should the different types and levels of skills and work be paid w/in the org?
  3. External Competitiveness: How should total comp. be positioned against competitors?
  4. EE Contribs: Should pay increases be based on indiv. and/or team perf, on experience and/or continuous learning, on improved skills, on changes in cost of living, on personal needs, and/or on each bus. unit’s perf.?
  5. Mgmt: How open and transparent should the pay decisions be to all EEs? Who s/b involved w/ designing and managing the system?
58
Q

Developing a Total Comp. Strat: (4) Steps

A
  1. Assess Total Comp. Implications
  2. Map a Total Comp. Strat.
  3. Implement Strat.
  4. Reassess
59
Q

Developing a Total Comp. Strategy

Step 1: Assess Total Comp. Implications

(5) Factors that s/b considered during this assessment process

A
  • Bus. Strat and Competitive Dynamics - Understand the Business
    • understand of the specific industry in which the org. ops., and how the org. plans to compete in the industry
    • aligning different comp. stats. w/ different bus. strats
  • HR Strat - pay as a supporting player or catalyst for chg?
    • comp. is embedded in the total HR approach no matter the HR strat.
  • Culture/Values
    • pay system should reflect the values that guide an ER’s behavior and underlie its treatment of EEs
    • mirrors the ER’s image and reputation
  • Social and Political Context
    • legal requirements, cultural differences, chg’g workforce demographics, expectations
    • mgrs of comp. may try to shape the sociopolitical environ. as well as be shaped by it
  • EE Preferences
    • how to better satisfy indiv. needs/preferences in this chg’g environ.
  • Union Needs
    • preferences for different forms of pay and their concern w/ job security affect pay strat.
  • Other HR Systems
    • choice is good? Yes/No/Maybe?
    • all of the above
60
Q

Developing a Total Comp. Strategy

Step 2: Map a Total Comp. Strat.

A
  • a strat. map offers a picture of a company’s comp. strat.
  • clarify the message that the company is trying to deliver w/ its comp. system
  • provide visual reference
  • useful in analyzing a comp. strat. that can be more clearly understood by EEs and mgrs.
61
Q

Developing a Total Comp. Strategy

Step 3: Implement

A
  • through the design and exec. of the comp. system
  • translates strat. into practice - and into ppl’s bank accts
62
Q

Developing a Total Comp. Strategy

Step 4: Reassess and Realign

A
  • closes the loop
  • recognizes that the comp. strat. must chg to fit chg’g conditions
  • period reassessment is needed to learn, adapt, and improve
  • results from using pay system need to be assessed against the objs. that you are trying to achieve
63
Q

(3) tests to determine whether a pay strat. is a source of competitive adv.

A
  1. Is it aligned? (easiest of the tests)
    • align w/ bus. strat
    • align externally w/ the economic and sociopolitical conditions
    • align internally w/in the overall HR system
  2. Does it differentiate?
    • not just copying the single approach
    • implies that it is the way programs fit together and fit the overall org. that is hard to copy
  3. Does it add value? (most difficult)
    • costs are easy to measure
    • hard to measure value created as a result of those costs.
  • possible to align and differentiate and still fail to add value
64
Q

Best Practices vs. Best Fit

A
  1. Best ‘Fit’: presumes that one size doesn’t fit all
    • strat. perspective - if mgrs align pay decision w/ the org’s strat. and values, are responsive to EEs and union relations, and are globally competitive, then the org. is more likely to achieve competitive adv.
    • design the “fit” w/ the environ., bus. strat, and pay plan
  2. Best ‘Practice’: assumes that there exists a universal best way
    • set of best pay-practices exists - comp. practices that allow ERs to gain preferential access to superior HR talent and competencies which in turn influence the strats. the org. adopts
    • practices are applied universally across situations
    • results in better perf. w/ almost any bus. strat.
    • gives access to superior EEs
65
Q

Virtuous Circle Model

A
  • describes the environ. in which a total comp pkg emphasizing perf-based pay works well
  • works in orgs that are successful and therefore are better able to offer incentives that in turn reinforce EEs’ high perf.
  • higher perf. in turn influences improved org. perf.
66
Q

Vicious Circle Model

A
  • environ. in which a total comp pkg relying on stronger perf-based pay doesn’t work
  • it fails in orgs. that are performing poorly and therefore are not able to pay bonuses and their stk options are declining
  • EEs’ perf. diminishes and this in turn exacerbates the orgs’ perf.
  • experts do not know what comp strat can be used to shift an org. caught here into a virtuous circle

CMS 2 (13 decks)

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