ELECTIVES Flashcards
often called internal equity,
refers to the pay relationships among different
jobs/skills/competencies within a single
organization
INTERNAL ALIGNMENT
COMPENSATION STRATEGY
Supports organization strategy
● Supports workflow
○ Workflow refers to the process
by which goods and services
are delivered to the customer
● Motivates behavior
○ Structure must be fair to
employees
refers to the process
by which goods and services
are delivered to the customer
Workflow
An internal pay structure can be defined by:
● The number of levels of work
● The pay differentials between the levels
● The criteria or base used to determine
those levels and differentials
Pay structure is hierarchical in nature, based on:
● Number of levels
● Reporting Relationships
The pay differences among levels are referred to as differentials
DIFFERENTIALS
Pay is determined by:
● Knowledge/ skills involved
● Working conditions
● Valued addition to the company
refers to the work performed in a job
and how it gets done
Content
refers to the worth of the work; its relative
contribution to the organization objectives
Value
Structure ranks jobs on skills required,
complexity of tasks, problem solving,
and/or responsibility
Content
Structure focuses on relative
contribution of skills, tasks, and
responsibilities to the organization’s
goals
Value
reflects the value of goods or
services an employee produces in a job
(refers to the output produced by
employees)
Use value
refers to the wage the
employer and employee agree on for a
job
Exchange value
structures rely on the work content – tasks, behaviors, responsibilities
Job-based structures
structures shift the focus
to the employee
○ Skills, knowledge, or
competencies the employee
possesses
○ Whether or not they are used in
the particular job
Person-based structures
WHAT SHAPES INTERNAL STRUCTURE
EOI
○ Well designed jobs with detailed
steps or tasks
○ Very small pay differentials
among jobs
Tailored
○ Requires constant innovation
○ Pay structures are more loosely
linked to the organization to
provide flexibility
Loosely coupled
structures
send the message that the organization
values the differences in work content,
individual skills, and contributions to the
organization
Hierarchical
structures send
the message that all employees are
valued equally
Egalitarian
Importance of internal alignment:
● Efficiency
○ Pay structures imply future
returns
● Fairness
○ For fair (sizable) differentials
○ Against fair (sizable)
differentials
● Compliance
○ Comply with regulation of the
country
