HRM Final Flashcards
Total Compensation (Financial Returns)
- Direct: cash (e.g., base salary, merit pay, incentives, stock options)
- Indirect: Benefits and Services (e.g., insurance, retirement, paid time off)
Non-financial returns from work
- Flexible work arrangements
- Great co-workers / bosses
- Great location
- Learning opportunities – careers
- Challenging & Meaningful Work
pay fairness
- Based on different forms of pay—total rewards
- Both internal and external comparisons used
- Compare ratios of outcomes / inputs
- Negative consequences of perceived inequity
External Competitiveness Strategy
Firms make strategic decisions about whether to lead, lag, or meet the market rate for different jobs
In general, what are some potential advantages for leading the market?
- More applicants [select better quality employees]
- Improve motivation (increase effort / productivity)
- Less turnover
- Decrease monitoring and supervision
Costco vs Walmart example
- Lower turnover: 17%(Costco) vs. 44%(Sam’s)
- Higher productivity: Operating profit per employee $21,805 (Costco) vs $11,615 (Sam’s)
- Less “shrinkage” (combination of employee theft, shoplifting, vendor fraud, administrative error). Costco’s inventory shrinkage is lowest in industry (less than .20 percent of sales).
- Higher sales per square foot: $886 (Costco) vs $525 (Sam’s)
- Lower Selling, general, and admin expenses [SGA] 9.73% at Costco among lowest in industry
Internal Equity- Job Evaluation
- Measures relative internal worth of organization’s jobs
- Committee identifies each job’s compensable factors
- Characteristics organization values and is willing to pay for
Jobs rated for each factor
Internal Equity- Compensable Factors
Experience
Education
Complexity
Working conditions
Responsibility
compensable factors
- Position does not entail overseeing the work of other employees or facilitation/leading any team discussions
- Position requires leading team meetings or facilitating team discussions. Also may involve supervising the work of other employees when necessary
- Position requires overseeing and directing the work of at least 1 employee. Train and mentor employees when necessary
- Position is responsible for leading, directing and/or supervising employees within one team or department. Expected to train, mentor and ensure accountability of all members of the team
- Position is responsible for leading, directing and/or supervising employees across several departments. Looked upon to provide guidance to departments and senior management on complex issues
Pay Ranges
- Set of possible pay rates defined by a minimum, maximum, and midpoint of pay for employees holding a particular job or a job within a particular pay grade
- Flexibility helps organization balance conflicting information from job evaluations and market surveys
- Usually pay ranges overlap somewhat
equity theory
People compare inputs and outcomes for themselves and others—performance is important “input”
Expectancy theory
- Behavior a function of Expectancy X Instrumentality X Valance
- Expectancy: employees’ assessment of their ability to perform required job tasks. [If I try hard, can I perform job well?]
- Instrumentality: employees’ beliefs that the requisite job performance will be rewarded by the organization [If I perform well, will I be rewarded?]
- Valence: value employees attach to the organizational rewards [Is the reward worth it?]
Common problems with Incentive pay plans
-Not enough motivation: Not enough reward or reward not valued, Process / outcome seen as unfair, Employees can’t influence outcomes
- Motivate the wrong behaviors, Goal displacement, Measurement issues
Piecework
Wage based on amount (e.g.,number of units) employee produces
Individual bonuses
- Not rolled into base pay
- Employee must re-earn bonus during each period
- May be based on objective outcomes (e.g., meeting sales target)
