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CMS 2 > A2 - Establishing Internal Alighment > Flashcards

A2 - Establishing Internal Alighment Flashcards

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1
Q

type of internal structure that contains a high degree of specified detail in the task to be performed

A

closerly tailored

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2
Q

pay structure that considers skills, knowledge, or competencies an EE possesses

A

person-based structure

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3
Q

criteria that looks at what tasks are done, what behaviors are expected and what respons. are expected

A

job-based structure

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4
Q

pay structure theory that states greater differentials at the top have more positive effect on perf. than those w/ smaller differentials for ppl at all levels in the structure

A

tournament theory

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5
Q

type of pay structure founded on the belief that more equal treatment will improve EE statisfaction, support cooperation and therefore affect workers’ perf.

A

egalitarian

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6
Q

internal structure that requires constant product innovation and short product-to-market cycle times and encourages constant innovation and agility

A

lossely coupled

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7
Q

(3) common bases for today’s pay structure

A
  • the content of the work
  • the skills and knowledge req’d to perform it
  • its relative value for achieving the org’s objs.
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8
Q
  • refers to the pay relationships among different jobs/skills/competencies w/in a single org.
  • relationships inside the org.
  • form a pay struct. that should support the org. strat, support the work flow, and motivate behavior toward org. objs.
A

internal alignment

(also known as internal equity)

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9
Q
  • refers to the array of pay rates for different work or skills w/in a single org.
  • this is created by decisions on how to pay each level
  • # of levels, the differentials in pay b/w the levels, and the criteria used to determine those differences describe the struct.
A

pay structure

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10
Q

a pay struct. that supports work flow

A
  • refers to the process by which goods and services are delivered to the cust.
  • pay struct. should support the efficient flow of that work and the design of the org.
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11
Q

pay struct. that motivates behavior

A
  • must be designed to engage ppl to help achieve org. objs.
    • influence EEs’ behaviors
  • make clear the relationship b/w each job and the org’s objs. (“line-of-sight”)
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12
Q
  • an ee’s ability to see how indiv. perf. affects incentive payout
  • EEs on a straight piecework pay system have a clear picture - their pay is direct function of the # of units they produce
  • EEs cov’d by profit sharing have fuzzier picture - their payouts are a function of many forces, only one of which is indiv. perf.
A

line-of-sight

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13
Q

how struct. vary among orgs

A
  1. # of levels of work
  2. pay differentials b/w levels
  3. criteria or bases used to determine those levels and differentials
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14
Q

how struct. vary among orgs

Number of Levels

A
  • feature of any pay struct - hierarchical nature
    • # of levels and rptg relationships
  • more hierarchical = multiple levels
  • compressed, less hierarchical = few levels
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15
Q

how struct. vary among orgs

Differentials

A
  • pay differences among levels w/in org.
    • could divide out the pay budget equally among all EEs (egalitarian)
    • most pay varies among EEs
  • work that requires more knowledge or skills, is performed under unpleasant working conditions, or adds more value is usually paid more
    • motivate ppl to strive for promo to a higher paying level
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16
Q

how struct. vary among orgs

Criteria: Content and Value

A
  • most common bases for determining internal structures
  • Content = the work perf’d in a job and how it gets done (tasks, behaviors, knowledge req’d…)
  • Value = the worth of the work: its relative contrib. to the org. objs.
  • external mkt value may also be included
    • what are competitors paying?
  • may include rates agreed upon through collective bargaining or legislated rates (min. wage)
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17
Q
  • value of goods or services an EE produces in a job
A

use value

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18
Q
  • whatever wage ER and EE agree on for a job
  • the price of labor (the wage) determined in a competitive mkt
    • labor’s worth (the price) is whatever the buyer and seller agree upon
A

exchange value

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19
Q
  • relies on work content - tasks, behaviors, responsibilites - and what is expected
A

job-based struct.

20
Q
  • shifts the focus to the EE: the skills, knowledge, or competencies the EE possesses, whether or not they are used in the EE’s partic. job
A

person-based struct.

21
Q

major factors that shape internal structs.

A
  • External:
    • econ. pressures
    • gov’t policies, laws, regs
    • stakeholders
    • cultures and customs
  • Org.:
    • strat.
    • tech.
    • human cap
    • HR policy
    • EE acceptance
    • cost implications
22
Q

EXTERNAL Factors in shaping internal structs.

Economic Pressures

A
  • concentrated on the supply of labor to explain pay structures - most famous one is marginal productivity theory
    • unless an EE can produce a value = to the value rec’d in wages, it will not be worthwhile for the ER to hire that EE
  • let economic mkt forces influence pay structs (Adam Smith)
  • ERs unfairly pocketed the surplus value created by the difference b/w use and exchg. value (Karl Marx)
    • urged workers to overthrow capitalistic systems to become owners themselves and reap the full use value of their labor
  • marginal productivity theory - ERs do in fact pay use value; one job is paid more or less than another b/c of differences in relative productivity of the job and/or differences in how much a consumer values the output
23
Q
  • difference b/w labor’s use and exchg. values
  • Marx - under capitalism, wages are based on labor’s exchg. value - which is lower than its use vlaue - thus provided only a subsistence wage
A

surplus value

24
Q

EXTERNAL Factors in shaping internal structs.

Gov’t policies, laws, and regs.

A
  • U.S - equal employment legislation forbids pay systems that discrim. on basis of gender, race, religion, or nat’l origin
    • EPA and CRA require “equal pay for equal work”
  • legislation attempts to reg. economic forces to achieve social welfare objs.
    • min. wage
    • max (special rptg requirementsfor exec. pay)
25
Q

EXTERNAL Factors in shaping internal structs.

External Stakeholders

A
  • Unions:
    • most obvious
    • seek smaller pay differences among jobs and seniority-based promos as a way to promote solidarity among members
  • Stockholders and Unions:
    • differences b/w what execs. make compared to others w/in the org.
  • political group
26
Q

EXTERNAL Factors in shaping internal structs.

Cultures and Customs

A
  • Culture - “mental programming for processing info that ppl. share in common”
    • shared mind-sets may judge what size pay differential is fair
    • ‘just wage’ doctrine:
      • endorsed during 14th in Europe by christian church
      • effort to end the economic an social chaos resulting from the death of 1/3 of the pop. from plague causing major shortage of workers giving ordinary ppl power to demand higher wages
    • living wage - advocates of this are trying to chg societal judgments about what wage is just
    • plays role in shaping pay structs.
  • both incorporate views from various disciplines, including sociology and philosophy, and ideas of fair wages have varied widely among cultures and overtime
27
Q

Organizational Factors in shaping internal structs.

Org. Strat.

A
  • aligned, but need to be adaptable to change
  • if not aligned w/ the org’s strat., may bbecome obstacles to the org’s success
28
Q

Organizational Factors in shaping internal structs.

Org. Human Cap

A
  • major influence
  • educ., experience, knowledge, abilities, and skills that ppl possess req’d to perform the work
  • greater the value added by the skills/experience = more pay those skills will command
29
Q

Organizational Factors in shaping internal structs.

Org. Work Design

A
  • tech used in producing goods and services influences the org. design, the work to be performed, and the skills/knowledge required to perform the work
  • multiple structs. often exist w/in same org.
  • designs of orgs is changing
    • workers may not be actual EEs of org
    • temp. contracts
    • outsourcing
    • delayering
30
Q
  • this chg in work design eliminates some layers or job levels in the pay struct.
  • can cut unnecessary, noncontrib’g work
  • add work to other jobs, enlarging them
  • self-mng’d teams in prod. work, entire levels of supervisory jobs are removed, and the responsibility for more decisions is delegated to the teams
  • chgs a job’s value and job struct.
A

delayering

31
Q

Organizational Factors in shaping internal structs.

Overall HR Policies

A
  • amt of pay to tie to a promo, the nature of promos, and pay differences must be consistent w/ what the org. is trying to accomplish
  • most orgs. tie money to promos to induce EEs to apply for higher-level positions
    • more levels = more promos
    • may cause smaller pay differences b/w levels
  • more frequent promos (even w/o big pay increases) offer a sense of “career progress” to EEs
32
Q

Internal Labor Mkts: Combining External and Org. Factors

A
  • refers to the rules and procedures that:
    • determine the pay for the different jobs w/in a single org
    • allocate EEs among those different jobs
  • some argue that this isn’t useful anymore
    • _today’s ext. mkt also dominates pay decisions of non-entry-level jobs for many orgs. _
33
Q

Organizational Factors in shaping internal structs.

EE Acceptance

A
  • EEs judge fairness of their pay w/ comparison to others that are in similar jobs
    • both internal jobs and external jobs
  • (2) sources of fairness
    • procedural justice: procedures for determining the pay struct. and the results of those procedures
    • distributive justice: the pay struct. itself
  • many EEs and mgrs are more influenced on the process and if the process for setting pay is fair, then even if the pay is lower, they will be o.k. with it
    • consistently applied to all EEs
    • if EEs participated in the process
    • if appeals procedures are available
    • if data used is accurate
34
Q

Procedural Justice in internal pay structs.

A
  • addresses how design and admin. decisions are made and whether procedures are applied in a consistent manner
35
Q

Distributive Justice in internal pay structs.

A
  • addresses whether the actual pay differences among EEs are acceptable
36
Q

(2) strategic choices to fit/tailor the pay struct. to be internally aligned

A
  1. how specifically tailored to the org’s design and work flow to make the struct.
  2. how to distribute pay throughout the levels in the struct.
37
Q

fitting the org’s design and work flow to make the pay struct.

Tailored vs. Loosely Coupled

A
  • low-cost, cust-focused bus. strat may be supported by a _closely tailored struct. _ (McDs/Walmart)
    • _high degree of specified detail in the tasks to be performed _
    • locations are all similar in style and pay no matter where you are
    • differences in pay among jobs are very small
  • pay structs. are loosely linked to the org. in order to provide flexibility - loosely coupled (3M)
    • no specific steps
    • adaptable to chg
    • for bus. strats. that require constant product innovation and short product design to mkt cycle times
38
Q

how to distrib. pay throughout the levels in the pay struct.

Hierarchical vs. Egalitarian

A
  • Egal: have *fewer levels and smaller differences* *b/w adjacent levels and b/w the highest- and lowest-pd workers*
    • all EEs are valued the same
    • more equal treatment results in improved EE satisfaction, support cooperation, and therefore affect workers’ perf.
    • levels of responsibility and supervision are removed so that all EEs at all levels become responsible for a broader range of tasks but also have greater freedom to determine how best to accomplish what is expected of them
  • Hierarchies: org. values the differences in work content, indiv. skills, and contribs. to the org.
    • mulitple levels of hierarchical structures typically include detailed descripts of work done at that level and delineate who is respnosible for what
39
Q

theories and models developed from research for pay structs.

A
  • Equity Theory: Fairness
  • Tournament Theory: Motivation and Perf.
  • Institutional Model: Copy Others
  • Other Guidance from Research
40
Q

research on pay structures

Equity Theory: Fairness

A
  • suggests that EEs judge the fairness of their org’s internal pay struct. by making multiple comparisons:
    • comparing to jobs similar to their own (internal alignment)
    • comparing their jobs to others at the same ER (internal alignment)
    • comparing their jobs’ pay against external pay levels (external competitiveness)
  • results from this depends on the EE knowledge of other EEs’ jobs, internal structs., and external pay levels.
  • could support either egal. or hierarchical structs.
    • depends on the comparisons and the accuracy of the info. about them
41
Q

research on pay structures

Tournament Theory: Motivation and Perf.

A
  • focused more directly on motivational factors than on ppl’s perceptions of the structs.
  • notion that larger differences in pay are more motivating than smaller differences
  • pay increases should get successively greater as one moves up the job hierarchy
  • differences b/w the top job and the second-highest job s/b largest
  • Report results:
    • 1 says that giving bigger raises increases effort and reduces absenteeism
    • another says that perf. improves w/ greater differentials at the top levels of the struct.
  • usually only supported at orgs where indiv. (rather than team) work matters most; or at least small group work.
42
Q

research on pay structures

Institutional Model: Copy Others

A
  • predicts that very few firms are “first movers”
    • instead, they copy innovative practices after innovators have learned how to make the practices work
43
Q

guidance from research regarding managing internal pay structures

A
  • more hierarchical structures are related to greater perf. when the workflow depends more on indiv. contributors
  • high performers quit less under hierarchical systems when pay is based on perf. rather than seniority and when ppl have knowledge of the structure
  • more egal. structures are related to greater perf. when close collaboration and sharing of knowledge is req’d
  • impact of any internal structure on org. perf. is affected by the other dimensions of the pay model: pay levels (competitivenenss), EE perf. (contribs), and EE knowledge of the pay structure (mgmt)
44
Q

(3) consequences of alignment

A
  1. efficiency or competitive adv:
    • pay differentials - able to create and sustain a competitive adv. b/c they will lead to better org. perf.
    • provide incentives to EEs to remain w/ the org. and to incr. their expereince and training in order to advance to higher paying positions in the org.
    • should induce cooperation w/ co-workers and a desire for greater responsiblity
  2. fairness:
    • EE attitude about fairness of the pay structure influences their work behaviors
  3. compiance:
    • _must comply w/ laws and regs that pply to the org. _
45
Q

consequences of a poorly aligned pay structure

A
  • if it doesn’t motivate EEs to help achieve the org’s objs., then it is a candidate for redesign

CMS 2 (13 decks)

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