Midterm Flashcards
classical managerial strategy
an approach management that assumes most employees inherently dislike work but can be induced to work in order to satisfy their economic needs
compensation strategy
the plan for the mix and total amount of base pay, performance pay, and indirect pay to be paid to various categories of employees
competency-based pay
pay that is based on the characteristics, rather than the performance, of individual employees; usually applied to managerial or professional employees
contingent workers
workers not employed on a permanent full time basis
defender corporate strategy
focusing on dominating a narrow product or service market segment
employee stock bonus plan
a plan through which employees receive shares in their employer firm at no cost to the employee
employee stock plan
any type of plan through which employees acquire shares in the firm that employs them
employment standards legislation
legislation that sets minimum standards for pay and other conditions of employment
high involvement managerial strategy
an approach to management that assumes that work can be intrinsically motivating if the organization is structured properly
human relations managerial strategy
an approach to management that assumes most employees inherently dislike work but can be induced to work in order to satisfy their social needs
human rights legislation
legislation that prohibits discrimination in hiring or employment on the basis of race, ethnic origin, religion, gender, marital status, or age
indirect pay
non cash items or services that satisfy a variety of specific employee needs, sometimes knows as “employee benefits”
labour market constraints
constraints on compensation strategy flowing from the relative levels of demand and supply for particular occupational groups
membership behavior
occurs when employees decide to join and remain with a firm
merit raise
an increase to an employees base pay in recognition of good job performance
organizational citizenship beahavior
occurs when employees voluntarily undertake special behaviors beneficial to the organization
organizational commitment
the strength of the individuals attachment to his or her organiztion
organizational identification
a sense of shared goals and belongingness, and the desire to remain a member of the organization
pay-for-knowledge system
establishing base pay according to the total value of the skills and competencies an employee has acquired
piece rates
a pay system under which individuals receive a specified sum of money for each unit of output they produce or process
product/service market constraints
constraints on compensation strategy caused by the nature of the product or service market in which the firm operates
prospector corporate strategy
focuses on identifying and exploiting new opportunities quickly
reward
anything provided by the job or the organization that satisfies an employee need
reward strategy
the plan for the mix of rewards to be provided to members, along with the means through which they will be provided
reward system
the mix of intrinsic and extrinsic rewards that an organization provides to its members
sales commission
pay that is geared to the dollar volume of sales or transactions conducted
skill block
the basic component of a skill based pay system, containing a bundle of skills or knowledge necessary to carry out a specific production or service delivery task
skill certification
the testing process that determines whether an individual has masted a given skill block and should be granted the pay raise associated with that skill block
total rewards
a compensation philosophy that considers the entire spectrum of rewards that an organization may offer to employees
work motivation
the attitude one holds toward good job performance
describe the key purpose of a compensation system
is to help create a willingness among qualified persons to join the organization and to perform the tasks the organization needs.
explain why an effective compensation system is so important to most organizations
a compensation system is one of the most powerful tools available to an employer for shaping employee behavior and influencing company performance
distinguish between extrinsic and intrinsic rewards
extrinsic rewards satisfy basic human needs like survival and security whereas intrinsic rewards satisfy higher-order human needs like self-esteem and achievement.
distinguish between a reward system and a compensation system
a rewards system is the mix of intrinsic and extrinsic rewards given to its employees and the compensation system is the monetary part of the rewards system
describe the key aspects of a compensation strategy
one aspect is the mix across the 3 compensation components (base pay, performance pay, and indirect pay), and whether and how this mix will vary for different employee groups. The other is the total amount of compensation to be provided to individuals and groups. “How should compensation be paid?” and “how much compensation should be paid?”
explain why a compensation system must be viewed in the context of the total reward system, and the broader environment of the organiation
The reward system has intrinsic and extrinsic rewards, and the compensation is only the monetary part so it has to be viewed and weighed with the other rewards being given and this will be based on the environment and jobs of the organization
identify and explain the key criteria for evaluating the success of a compensation system
- a reward system must help the organization achieve its goals
- it must fit with the organizations strategy for achieving its goals and support its structure for implementing that strategy
- it must attract and retain individuals who possess the attributes necessary to perform the required task behaviors
- it should promote the entire spectrum of desired task behavior for every organization member.
- it should be seen as equitable by all organization members.
- it must comply with all relevant laws within the jurisdictions in which the firm Operates
- it must achieve all this at a cost that is within the financial means of the organization
- it should achieve these objectives in the most cost effective manner possible
Describe the steps along the road to effective compensation and explain how this book will facilitate that journey
- understand your organization and your people - understand the organizational context in within which it will operate
- formulate your reward and compensation strategy - to determine the mix of compensation components to include in your system and the total level of compensation to provide, relative to other employers.
- determine your compensation values
- design your performance pay and indirect pay plans
- implement, manage, evaluate, and adapt the compensation system
understand the concept of “fit” and explain why a compensation system that is a success in one firm can be a failure in another
“Fit” refers to the alignment of strategies at various levels in an organization. A compensation that is a success in one firm may not be in another because they have different business strategies that don’t work with the compensation system of the other firm.
explain how the strategic framework for compensation can be used as a tool for designing effective reward and compensation systems
this framework describes three managerial strategies (classical, human relations, and high-involement) that an organization can adopt and shows how each relates to an organizations structure and its best-fit reward system. The framework then identifies the determinate of managerial strategy, since these will ultimately determine the most appropriate reward strategy and compensation system
describe the main elements in the strategic compensation framework, and explain how they relate to one another
Contextual variables: was environment ->business strategy, organization size, technology, workforce
MANAGERIAL STRATEGY
Structural Variables: job design, decision making and leadership, control system, reward system, communication and information, coordination and departmentation.
describe the three main managerial strategies that organizations can adopt, and explain their implications for the most effective compensation systems
classical managerial system -
base pay
base pay is the portion of an individuals compensation that is based on time worked, not on output produced or results achieved.
advantages of base pay
- flexible
- allows employer to recognize and encourage important job behaviors that dont directly produce output, such as skill development
- can signal the relative importance of jobs within the organization
- creates a commitmment
- can support a particular managerial strategy
- simplicity
disadvantages of base pay
- represents more of a fixed employer commitment than performance pay
- does not directly motivate task behavior
- does not directly contribute to citizenship behavior
- not self correcting
applicability of base bay
good for job which the output is:
- easy to measure
- easy to price in terms of its value to the employer
- easy to attribute to individual employees
- controllable by the individual employee
- relatively stable
define performance pay
any type of financial reward provided only when certain specified performance results occur
advantages of performance pay
- signal key employee behaviors and motivate employees to achieve them
- they can reduce the need for other types of mechanisms for controlling employee behavior
- can raise employee interest in performance and provide employees with information about their current performance levels
- can support specific managerial strategies
- make pay more variable and thus can help link compensation levels to the firms ability to pay.
