Internal Alignment Ch.3 Flashcards
What are the decisions needed for an organization’s compensation strategy?
5 decisions outlined in the pay model
What is internal alignments/equity
- addresses relationships among different jobs in a single organization
- relative value in terms of job content (DutiesTasksResponsibilities) and qualifications of job holders (KnowledgeSkillsAbilityOther)
What is job structure?
- The relationships among different jobs inside an organization
- an ordering of jobs based on their relative value
What is a pay structure?
- Decisions on what to pay each job w/in the job structure at the different levels
- array of pay rates for different work or skills w/in a single org
Relationships form a job structure that:
1) Support org’l strategy
2) Supports the workflow
3) Motivates behaviour
3 things used in a pay structure:
1) Number of levels (in jobs/work - org’l hierarchy)
2) Differentials in pay (btwn the levels - differences in pay)
3) Criteria used to determine those differences
What criteria is used to determine the differences between the differentials in pay (pay structure)?
1) Work Content/incumbent qualifications: work performed in a job, how it’s done and what’s required to complete it (determined through job analysis)
2) Work value: worth of the work: focuses on relative contribution of the skills, tasks, and responsibilities of a job to org goals (determined through job evaluation)
- -together they create job based & person based structures
What is a work flow
Process by which G/S are created and delivered to customers
What is a job based structure?
And where are they generally used?
- looks at work content (tasks, behaviours, responsibilities
- used in orgs that have variety of jobs that differ in DTRs (e.g., engineering)
What is a person based structure?
And where are they found?
- focus on employee
- skills, knowledge, competencies
- found in orgs where jobs aren’t that different in content but differ in KSAOs of employees (e.g., healthcare)
What shapes internal structures?
1) External factors
2) Organizational factors
which country has the largest pay differential between CEO and average worker?
- US (354)
- Switzerland, Germany, Spain
What are the external factors that shape internal structures?
GEEC
- economic pressure: supply/demand for labour & G/S
- governmental policies, laws and regulations: discrimination, pay equity, minimum wage
- external stakeholders: unions & stockholders (unions advocate for pay differences based on seniority)
- cultures and customs: shared mindsets w/in a society (different norms regarding size of pay differentials)
What are the organizational factors that shape internal structures?
HOOOE
- organizational strategy: align pay structures with business strategy
- human capital: pay differences reflect differences in KSAOs
- Organization & work design: differences in use of technology, outsourcing, delayering affect pay structure
- Overall HR policies: (particularly promotions)
- Employee Acceptance: fairness of pay judged through procedural and distributive justice
What is procedural justice?
fairness of procedures for determining a pay structure
What is distributive justice?
fairness of the pay structure itself
What are internal labour markets?
- rules & procedures that determine the pay for different jobs w/in one organization and that allocate employees to those different jobs
- entry level jobs = shaped by external factors
- non-entry level jobs = shaped by organizational factors
What are the 2 strategic choices to tailor internal structures to align with the organization’s objectives/strategy?
1) How tailored to organization design and workflow to make the structure:
- tailored (well-defined jobs with detailed tasks)
- loosely coupled (flexible, adaptable, changing jobs)
2) How to distribute pay:
- egalitarian (few levels, small differentials)
- hierarchical (many levels, large differentials)
What is the equity theory?
Individuals form a ratio of inputs to their outputs in a given situation and then compare the value of that ratio with the value of the input/output ratio for other individuals
-Supports either egalitarian or hierarchical structures based on accuracy of comparisons
What is tournament theory?
Motivation and Performance
- motivated to perform better where prize differentials are sizeable
- the bigger the prize for getting to the next level, the greater the motivational impact
- supports large pay differentials; hierarchical model
What is the institutional model?
- copy best practices of others
Which structure has greater performance when the workflow depends more on individual contributions?
Hierarchical
-high performers quit less when pay is based on performance rather than seniority
Which structure has greater performance when close collaboration and sharing of knowledge is required?
Egalitarian
