lesson 5 Flashcards
1.1 Explain the potential impact of the compensation system on employers
The compensation system it chooses can help retain and attract employees.
It can also have moral and philosophical implications.
1.1 Explain the potential impact of the compensation system on employees
influences standard of living.
1.1 Explain the potential impact of the compensation system on shareholders
Shareholders place importance on the bottom line.
1.1 Explain the potential impact of the compensation system on wider society
compensation id often viewed from an equity perspective in wider society, focusing on questions of justice.
1.2 Identify potential problems an organization can face if it fails to choose and appropriate compensation system (7)
- promote underproductive or counterproductive behavior
- low EE motivation
- poor performance
- high turnover
- creates organizational rigidity, inability to adapt to change
- poor customer service
- conflict between organizational units
1.3 What are extrinsic rewards
Satisfy basic needs for survival and security, social needs and needs for recognition.
- financial returns
- general working conditions
- surpervisor.co-worker regard
1.3 What are intrinsic rewards
Satisfy a higher level of needs such as:
- self development
- growth
- achievement
- self-esteem
1.4 Differentiate between rewards and incentives
Reward - positive consequences of performing behaviors an organization desires - used to get EEs to perform at a higher level
Incentive - specific reward provided if a specific behavior is done - used to get EEs to do something that they normally wouldn’t rather than preforming at a higher level
1.5 Define rewards system
Mix of intrinsic and extrinsic rewards an organization provides to employees and includes components like career advancement opportunities, work/life balance, an employee recognition program, a positive workplace culture and compensation
1.5 Define compensation system (give 3 components)
Subset of the rewards system
1) Base pay
2) Performance pay
3) indirect pay (health, retirement)
2.1 Identify the main goals of optimal reward and compensation systems (8)
1) Promoting achievement of organizational goals
2) For the system to fit within the strategy for achieving its goals and supporting its structure
3) Attracting and retaining qualified individuals who can perform the required task behaviors
4) Promoting desired employee behaviour
5) Being seen as equitable by all EEs
6) Complying with all relevant laws within the jurisdiction of operation
7) Achieving organizational goals at a cost that is within financial means
8) Achieving organizational goals in the most cost effective manner possible
2.2 What are the 5 steps of developing an effective compensation system
1) Understanding the organization and the context in which it operates
2) Formulating the compensation strategy
3) Determining compensation values
4) Designing performance pay and indirect pay plans
5) Implementing, managing, evaluating and adapting the compensation system - includes communicating
2.3 Explain the importance of ongoing evaluation and adaptation of a compensation system
Determines whether or not the system is accomplishing its objectives and if it is cost effective.
The evaluation can provide feedback on the nature of issues and inform the nature of changes needed.
3.1 Explain the concepts of vertical and horizontal fit and their significance in rewards and compensation
Fit refers to the alignment of strategies at various levels in an organization.
Horizontal is alignment between strategies at the same level (HR strategies such as performance management and compensation are aligned with or support each other.
Vertical fit refers to alignment between an organization’s mission, vision and values with various supportive strategies
3.2 Describe the dynamics that underpin a contingency approach to organizational design
The business strategy and organizational structure must fit with the environment the organization operates, the technology used, the size of the business and the characteristics of the people employed.
The success of a compensation system depends upon the fit.
Rewards and compensation sit inside of a larger set of structural variables which are interrelated and must fit with each other.
3.3 Identify structural variables in an organization that interface with and impact reward and compensation systems (5)
1) Job design
2) Coordination and departmentation - methods to coordinate the work of EEs
3) Decision making and leadership - Mechanisms through with decisions are made and managerial role
4) Communication and information
5) Control structure - methods to control EE behaviour and to ensure they are doing what they are supposed to
3.4 Explain the role of managerial strategy in a strategic compensation framework (3 patterns & comments)
Three main patterns of structural variable have emerged:
- Classical
- Human relations
- high involvement
Each of there represents a particular combination of structural variables that has proven successful in the right circumstances.
The managerial strategy used strongly impacts the success of the compensation system
3.5 Explain the factors that influence determination of the most appropriate managerial strategy for that organization (3)
1) interaction between goals and the general environment in which the organization operates determines the organizations domain
The domain defines the products or services that the organization will offer and the task environment.
2) The task environment is a specific slice of the general environment that is of particular relevance to the organization
3) Organizational goals “drive” the determination of other contextual variables (business strategy, technology, organization size and the nature of the workforce)
3.5 List key elements of the task environment (3)
1) Customers or clients
2) competitors
3) Suppliers and regulatory agencies
3.6 Explain how contextual variables affect reward and compensation decisions
The key point is that a change in any of these may trigger a need for a change in the rewards and compensation system.
An organization looking to change its managerial strategy usually needs to change its compensation system.
The systems are interconnected
3.6 List contextual variables that affect rewards and compensation (4)
1) business strategy
2) new technology
3) Size of the organization
4) characteristics of the workforce
4.1 In the context of managerial strategies define: Classical strategy
Assumes most employees inherently dislike work but can be induced to work in order to satisfy their economic needs,
This approach assumes that the only way to get employees to work is to create circumstances where satisfaction of their economic needs becomes threatened if they don’t behave like the organization wants