Assignment 2 Flashcards
1) Understand the considerations in establishing a pay structure's internal alignment. 2) Delineate the factors, both external and internal, that affect internal pay structures. 3) Discuss various strategic choices in designing internal pay structures 4) Summarize the evidence from research studies concerning the effectiveness and motivational impacts of various pay structures 5) Describe the consequences that accompany strategic choices concerning pay approaches
Internal Pay Structure
Made up of the relationships among different jobs inside the organization. Should support the organization strategy, support the workflow and motivate behavior toward organization objectives.
Interal Alignment
Often called Internal Equity. Refers to the pay relationships among different jobs/skills/competencies within a single organization
Pay Structure
The array of pay rates for different work or skills within a single organization
3 Things that Create the Pay Structure
1) Number of Levels
2) Differentials in Pay Between Levels
3) The Criteria used to determine those differences
Internally Aligned Pay Structures:
1) Support Organization Strategy
2) Supports Workflow- the process by which goods and services are created and delivered to the customers
3) Motivates Behavior- design the structures so they direct people’s efforts toward organization objectives ( employees who see or understand a link b/t their work and the organization’s objectives are more lilely to work toward those objectives)
Content
Refers to the work performed in a job and how it gets done ( tasks, behaviors, knowledge required)
Value
Worth of the work
Use Value
Reflects the value of goods or services an employee produces in a job
Exchange Value
Whatever wage the employer and employee agree on for a job
Job Based Structure
Looks at what tasks are done, what behaviors are expected and what responsibilites are expected.
Person Based Structure
Shift the focus on the skills, knowledge or competencies the employee possesses, whether or not they are used on the particular job the employee is doing.
Organization Strategy
Structures that are not aligned with the organization strategy may become obstacles to the organization’s success
Organization Human Capital
A major influence on internal structure is human capital. I.e. Education, experience, knowledge, abilities, and skills that people possess. The stronger the skills the more pay they will command
Organizing Work Design
Technology is another crucial organization factor influencing the design of pay structures
Overal HR Policies
Amount of pay to tie to a promotion, the nature of promotions and pay differnces must be consistent with what the organization is trying to accomplish
Internal Labor Market
Refers to the rules and procedures that determine the pay for different jobs within a single organization, and allocate employees among those different jobs
Closely Tailored
contains a high degree of specified detail in the tasks performed ( McFry Maker)
Loosely Coupled
Require constant product innovation and short product-to market cycle times and that encourage innovation and agility.
Pay Structures should
1.support the way the work gets done
2.fit the organization’s business and
3 be fair to employees
Egalitarian Structures
Have fewer levels and smaller differentials between adjacent levels and between the highest and lowest paid workers.
Hierarchial Pay Structures
Typically include detailed descriptions of work done at that level and delineate who is responsible for what.
Consisten with a belief in the motivational effects of frequent promotions
Value the differnces in work content, individual employee skills, responsibilites and contributions to the organization
Equity Theory
employees judge equity on the basis of comparisons between the work requirements and pay for their own jobs with the work requirements and pay for other jobs in the organization
Tournament Theory
Structures with greater differentials at the top have a more positive effect on performance than those with smaller differentials for people at all levels
The pay offered for a higher posistion motivates those at lower levels in the organization to come to work and do their best in order to stay in contention for promotion
the greater the prize to get to the next level the higher the movtivation
Works best when individual performance matters most and where
Institutional Model
Copying Others- practices of other firms influence an organization’s pay structure decisions, and this extends itself to internal pay structures that may be adopted
