Assignment 1

Question 1

How does SOCIETY perceive compensation?

Answer 1

As a measure of justice
Women are paid 60-80% of what men are paid. the other side of the debate is that women often gravitate towards lower paying occupations than men.

Question 2

How do STOCKHOLDERS perceive compenation?

Answer 2

They view executive pay as excessive if it is not tied to the performance of the company.
Generally interested in their own earnings ( market value of the stock and/or dividends)

Question 3

How do MANAGERS perceive compensation?

Answer 3

View it as both an expense and an influence on employee work behavior and ultimately the organization’s performance.

Question 4

How do EMPLOYEES perceive compensation?

Answer 4

Return/Reward for their services and others view it as an entitlement.

Question 5

What does Compensation mean in English?

Answer 5

To counterbalance, to offset, to make up for

Question 6

Relational Returns

Answer 6

Learning opportunties, status, opportunities to belong and challenging work - psychological returns people believe they receive from the workplace.

Question 7

Total Compensation

Answer 7

Pay received directly as cash such as base and merit increases, cost of living adjustments, and indirectly as employee benefits such as pensions and health care.

Question 8

Base Wage

Answer 8

The cash compensation that an employer pays for the work performed. It is a component of cash compensation.

Question 9

Merit Pay

Answer 9

Given an an increment to the base pay in recognition of past work behavior.It is a component of cash compensation.

Question 10

Incentives

Answer 10

Inducement to encourage good performance. Received if goals are met, they do not increaes base wage. Essentially they must be re-earned each pay period. The potential size is generally known at the start of the performance period. It is a component of cash compensation.

Question 11

Income Protection Program

Answer 11

Some are legally required, while others are voluntarily provided by employers. Medical Insurance, retirement programs, life insurance and savings plans are common income protection benefits.

Question 12

Work/Life Balance Benefits

Answer 12

Help employees better integrate their work and life responsibilites that include time away from work, acess to services to meet specific needs and flexible work arrangements.

Question 13

Allowances

Answer 13

Such as housing or transportation , often grow out of short supply.

Question 14

Explain Total earnings opportunities in terms of the present value of a stream of earnigns.

Answer 14

Compensation has been treated as something paid or received at a moment in time. But compensation decisions have tempral effect. A present-value perspective shifts the choice from comparing today’s initial offers to a consideration of future bonuses, merit increases and promotions.

Question 15

3 Basic Building Blocks of the Pay Model

Answer 15

1) Compensation Objectives
2) Policies that Form the Foundation of the Compensation System
3) Techniques that comprise the compensation system.

Question 16

Describe the 4 Compensation Objectives that shape the pay system and serve as a standard for evaluating the pay system.

Answer 16

1) Efficiency- defined as improving performance, increasing quality, delighting customers and stockholders and controlling labor costs
2) Fairness- defined as attempting to ensure fair treatment for all employees by recognizing both employee contributions and needs
3) Compliance- defined as conforming to various federal and state compensation laws and regulations
4) Ethics- defined as considerations concerning how results are achieved

Question 17

Internal Alignment

Answer 17

POLICY CHOICE.
Refers to comparisons among job or skill levels inside a single organization. Pay for different jobs in the organization should reflect 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.

Question 18

External Competitiveness

Answer 18

POLICY
Refers to the compensation relationships external to the organization. Comparison with competitors. Pay must be high enough to attract and retain a motivated workforce, but low enough to control labor costs to remain competitive.

Question 19

Employee Contributions

Answer 19

POLICY
Refers to the relative emphasis placed on performance. Differentiate pay in the same job groups or with the same skills based on differences in performance or seniority.

Question 20

Management

Answer 20

POLICY

A policy regarding administration of the pay system.

Question 21

Pay Techniques

Answer 21

The procedures through which policy choices are set in motion. They are the mechanism used to link the policy choices to the overall compensation obejctives.
Job analysis and Job Evaluations are used to est a pay structure to achieve interal consistency in the pay system.
Pay surveys are used to est external competitiveness.
Incentive plans or performance based pay increases are used to distinguish employee contributions.

Question 22

Concept of Caveat Emptor

Answer 22

1) Is the Research Useful?
2) Does the study separate correlation from causation?
3) Are there alternative explanations?

Question 23

Strategy

Answer 23

Refers to the fundamental directions that an organization chooses. Organizations define strategy through tradeoffs it makes in choosing what (and what not) to do.

Question 24

Questions to ask Regarding Strategic Choice.

Answer 24

1) What business should we be in?
2) How do we gain and sustain competitive advantage in this business?
3) How should total compensation help this business gain and sustain competive advantage?

Question 25

Stated Strategy

Answer 25

Written strategy

Question 26

Unstated Strategy

Answer 26

Emerge from the pay decisions that the organizations have made. Inferred from compensation practices.

Question 27

Business Strategy & Competitive Dynamics

Answer 27

Factor to be considered in assessing total compensation implication.
Organizations need to understand the industry in which they operate and how they plan to compete

Question 28

Culture/Values

Answer 28

Factor to be considered in assessing total compensation implication.
Pay systems should be congruent with the overall organization’s philosophy about the way they do business and the way they treat employees in the organization.

Question 29

Social and Political Context

Answer 29

Factor to be considered in assessing total compensation implication.
Legal and regulatory requirements, cultural differences, changing workforce demographics and expectations take on new meanings when addressed globally.

Question 30

Employee Prefernces

Answer 30

Factor to be considered in assessing total compensation implication.
Employees have different needs and preferences. Pay systems can reflect this by being flexible.

Question 31

Union Preferences

Answer 31

Factor to be considered in assessing total compensation implication.
Major players in Europe. Organization must consider union desires, and it must work to design a pay system that will accomplish its goals and yet consider the union interests that are part of environmental pressures that help shape compensation strategies.

Question 32

Other 3 Steps Involved in Developing a Total Compensaiton Strategy.

Answer 32

Step 2- involves mapping a total compensation strategy.

Step 3 & 4- Implementing the strategy and then reassessing and realigining it to close the loop.

Question 33

3 Tests Used to Determine Whether a Pay Strategy is a Source of Sustained Competitive Advantage

Answer 33

1) Is it Aligned
2) Does it Differentiate
3) Does it Add Value?

Question 34

Test 1- Is it Aligned

Answer 34

Test Used to Determine Whether a Pay Strategy is a Source of Sustained Competitive Advantage.
Align with business strategy. Align externally with the economic and socio-political conditions. Align internally within the overall HR system.
The easiest test to pass.

Question 35

Test 2- Does it Differentiate?

Answer 35

Test Used to Determine Whether a Pay Strategy is a Source of Sustained Competitive Advantage.
How the pay system is managed. Must be difficult to copy in order to sustain competitive advantage.

Question 36

Test 3- Does it Add Value?

Answer 36

Test Used to Determine Whether a Pay Strategy is a Source of Sustained Competitive Advantage.
Organizations continue to look for the return they are receiving from their incentives, benefits and even base pay.
Compensation is often a company’s largest controllable expense.

Question 37

Virtuous Cylce

Answer 37

Describes the environment in which a total compensation package emphasizing performace-based pay works well.
Works best in organizations that are successful and therefore better able to offer incentives that in turn reinforce employees’ high performance

Question 38

Vicious Cycles

Answer 38

Describes the environment in which a total compensation package relying on stronger performance based pay does not work. It fails in organzations that perform poorly and therefore are not able to pay bonuses. Employees performance diminshes and this in turn exacerbates the organization’s performance.

Question 39

Mandatory Benefits

Answer 39

Unemployment, FICA, Worker’s Comp insurance

Question 40

The Pay System Should Result In:

Answer 40

“Right people, right pay, achievement of right objectives, the right way?”