CHAPTER 7 building Market Competitive Compensation Systems Flashcards
Market-competitive pay systems
represent companies’ compensation policies that fit the imperatives of competitive advantage. Market-competitive pay systems play a significant role in
attracting and retaining the most qualified employees.
Four Activities of Market Competitive
Pay Systems
- Conducting strategic analyses
- Assessing competitors’ pay practices with compensation surveys
- Integrating the internal job structure with external market pay rates
*Determining compensation policies
strategic analysis
entails an examination of a company’s
external market context and internal factors
External market context:
industry profile, information on
competition, long-term prospects
Internal factors
financial condition, functional
capabilities
compensation surveys
involve the collection and subsequent analysis of competitors compensation data
two preliminary consideration before investing time and money into compensation surveys
– What companies hope to gain from compensation
surveys
– Custom development versus use of an existing
compensation survey
2 types of surveys
- custom developed
*published survey sources
what companies hope to gain
competitors pay practices
* base pay
* incentive awards structure
*mix and level of discretionary benefits
*promote efforts to sustain competitive advantage
compensation surveys 2 essential strategic considerations
- defining the relevant labor market
*choosing benchmark jobs
defining the relevant labor market
*Occupational classification (e.g., accountants vs. engineers).
*Geographic scope
*Product or service market competitors
benchmark jobs
Benchmark jobs are used to set pay levels based on typical market rates. These jobs have four characteristics:
*Their content is well-known and stable.
*They are common across various employers.
*They represent a range of jobs within a company.
*They are accepted in the labor market for determining pay.
job leveling
is a process used to compare a company’s internal job positions with external jobs, often found in compensation surveys, in order to make fair and accurate pay decisions. It helps companies align their unique job roles with standard market positions even if there are differences between job titles or responsibilities
summarizing survey data two descriptive properties
- central tendency
*variation
central tendency
*arithmetic mean (mean, average)
*median (midpoint)
