Market Pricing - Conducting A Competitive Analysis (C17/GR17) Flashcards
What is one way market pricing supports an organization’s business strategy?
Provides key competitive information on how the organization’s compensation level compares to the market.
A compensation philosophy includes….
Statement of what the organization believes about how people should be rewarded.
Relevant labor markets is….
Market(s) from which an organization draws and loses its employees.
Lead - Lag
Company’s pay philosophy is to stay ahead of the market the first half of the year, then fall behind the market in the second half of the year.
An organization that is new with few or no formal policies is most likely in what stage?
Start- Up
Start-Up Stage is…
The organization is new with few or no formal policies or procedures. The
organization’s focus is on obtaining capital, marketing products or services, initial sales
growth and cash conservation.
Growth stage is…
In this stage, the organization is highly focused on growing sales, increasing
distribution capability and determining how to efficiently produce products or services
to meet growing demand. Growth typically generates the need to begin standardizing
procedures through policy creation.
Mature stage is…
he mature stage is characterized by a focus on maintaining/increasing market
share, improving productivity and otherwise reducing cost of sales. Improvements to
products are more evolutionary than revolutionary. The organization typically has higher
levels of bureaucracy and greater amounts of cash on hand than at other stages.
Decline stage is…
– At this point, the organization’s revenues are declining. It must decide whether
to reinvest in current products, create new products or maximize profits with current
products as long as possible.
Life cycle of a company - 4 stages
- Start-Up
- Growth
- Mature
- Decline
Pay Range
the range of pay rates, from minimum to maximum, established for a pay grade
Slotting
Act of placing a job into a job worth hierarchy established by a method other than the company’s primary job evaluation method.
Market Rate Composite
Market rate composite results from combining market rates for the
same job from multiple survey sources.
When using market-based job evaluation, what percentage of jobs in the organization should be benchmarked?
At least 50%
Benchmarking
a job that is commonly found in many
organizations and used to make pay comparisons
When building a job worth hierarchy using market date, what is the purpose of using job descriptions?
Identify benchmark jobs and match to survey job description.
What is an advantage of market- based job evaluation and pay structure design?
Simple to administer.
What is an advantage to a published survey?
You may receive a discount if you participate in the survey.
What information should documentation of sources and processes include?
• Specific surveys used and why
• Measures of central tendency used
• Practice of selecting the most appropriate number of surveys to calculate the prevailing
market rate accurately (may vary from job to job, depending on whether averages
are skewed).
• Method of aging the data from multiple surveys to a common point in time
• Method of developing market rate composite for each job
If cost is a factor, what survey should you least likely consider?
Custom third-party survey
How do you measure the market for high-demand jobs?
Focus on individual employees with specific skills
What is a component of data integrity?
The extent to which the survey has been audited.
What data is typically requested by surveys?
Wage rate or salary.
NOT: Employee gender and age
What is usually located in an HRIS?
Information related to individual employees
NOT: information related to groups of employees nor spreadsheet applications useful for gathering and sorting information.
In job matching, what is a “strong” match?
If your job matches 80% or higher
How should you age data over a two year period?
Age one year first, then age the second year on top of that.
Blending
The process of using market rates for two or more jobs to establish a market rate for a single hybrid job.
The process of using market rates for two or more jobs to establish market rate for a single job
What determines if a survey should receive greater weight?
Surveys with higher number of companies and/or incumbents reported.
What should regression analysis be used for?
Estimating the change in market rates for jobs based on scope data
What is the difference between awarded and short- term incentives?
Awarded represents what is actually paid.
Target represents what would be paid if the plan pays out at expected levels.
What is the definition of total cash compensation?
Base pay plus short term variable pay
How is the value of stock typically shown in survey data?
As a monetary figure
What is included in total direct compensation?
Answer: long- term incentives
NOT: direct benefit expenses and event tickets
Who is best suited to communicate compensation information to individual employees?
Managers and supervisors for the person to whom the employee directly responds.
When is it appropriate to practice open communication regarding pay decisions
If the organizational culture supports it
What is a characteristic of a good survey?
Survey sources are identified.
NOT: limited sample size, aggregate data is trimmed
A majority of surveys are reported in what format?
Summary Statistics
How do you measure for high demand jobs?
Hot skills are critical to organizations and, as they are in short supply
As a general rule, salary survey information is expected to reflect the marketplace to within plus or minus of what percent?
10%
How should you age data over two calendar years?
Age one year first, then age the second year.
In market pricing, job rates are set based on what criterion
A company’s best estimate of typical wage rates in the external market
In base pay structure design, what data does the job evaluation step provide?
Data that can be used to create a job worth hierarchy
Pay Competitiveness
Looks internally at external competitiveness, where we want to target pay.
Relevant Labor Markets:
- Where do we get the people we need to recruit?
- How do we maintain he people we recruit
- How do we motivate them
Geographic locations, industry, organization size are all macro concepts that dene our relevant
labor markets.
Internal Equity:
- Each job’s relative value
* Equal pay for jobs of equal worth
External Equity:
Pay levels compared to competitors
Prevailing external rates
Achieving equity
Retention
Pay Grade
a numeric, alphanumeric or other label identifying the different levels within
the pay structure.
Includes: Maximum, Midpoint, and Minimum
Midpoint Differential
the difference between the midpoints of two adjacent grades
Job Documentation
includes written information about job content or the functions of the job
and required knowledge, skills and abilities (KSAs
Job Worth Hierarchy
to group or categorize jobs relative to other jobs (e.g., pay grades, bands)
