Module 4 Flashcards
An internally consistent pay structure is one that:
> supports the organization’s internal pay structure and is perceived as equitable when pay rates for different jobs are compared
> Also called internal equity.
Internal equity functions to:
1). Support Organization Strategy: Internal job structures need to be aligned in order to accomplish the goals and objectives set out in the Strategy;
2) Support Workflow: An appropriate number of levels and pay differentials for different work or skills create a pay structure that supports an efficient work flow
3) Motivate Behaviour: through additional pay for promotions, increased responsibility and more challenging work. Each job should make clear the relationship between the work and the organization’s objectives.
What does the line of sight enable someone to do?
> Line of Sight enables employees to see their work in relation to others, offering greater transparency.
An Internal Pay Structure contains:
1) The number of levels of work
2) The pay differentials between the levels
3) The criteria used to determine the levels and differentials
What do levels reflect in an internal pay structure?
> Levels reflect the overall hierarchy of the flow of work in the organization.
Including levels, what is another component to note?
> It is important to note both the number of levels and the reporting relationships.
What are differentials?
> Pay differences between the levels are called differentials.
> Differentials should be based on some measure of the differences in the value of the work to the organization.
What is the criteria for pay structures?
> Content and Value.
> Work content and value generally form the basis for determining internal structure.
What is work content?
> Content refers to the work performed in a job and how it gets done (tasks, behaviour, knowledge).
What is work value?
> Value refers to the worth of the work; its relative merit based on the skills required, complexity of tasks and/or responsibility.
A job based structure looks at:
> looks at work content; tasks, behaviour and responsibility
a person based structure puts the emphasis on:
> the employee and looks at skills, knowledge or competencies the employee possesses
(MAJOR COST IMPLICATIONS).
What are external factors that shape internal inequality?
> Economic pressures (supply of labour and MPL);
> government policies, laws, regulations (OHRC, Ontario Pay Equity legislation);
> stakeholders (unions);
> cultures and customs (mental programming that form a judgement of what is fair).
What are organizational factors that shape internal inequity?
> Strategy (the belief that if the pay structure is not aligned with strategy then it is an obstacle to success);
> Technology (influences the organization design and skill and knowledge to do the work);
> Human Capital (such as education, experience, knowledge, skills and abilities);
> HR Policy (the amount of pay allocated for promotions and the nature of promotions; lateral, development and greater responsibilities; policies and procedures for internal hiring and promotions);
> Employee Acceptance (distributive and procedural justice)
Distributive Justice: the fairness of decision outcomes. For example: whether the financial resources were divided fairly
Procedural Fairness: how decisions about compensation are made;
> Cost Implications (the number of levels and the differentials in the structure impact cost)
What is a tailored internal structure?
> A Tailored Structure is a pay structure that is well defined with relatively small differences in pay
What is a loosely coupled structure?
> A Loosely Coupled Structure occurs when the pay structure for jobs is flexible, adaptable and changing.
What is a hierarchical pay structure?
> A Hierarchical pay structure has large differentials between levels that are linked with the organizational chart.
What is an egalitarian pay structure?
> An Egalitarian structure operates on the belief that all employees should be treated equally in terms of pay so fewer levels, less hierarchy and small pay differentials.
Job Analysis is key to:
> is key to developing job descriptions and job evaluations.
The benefit of traditional job analysis is :
> that it provides the basis for defendable job-related decisions, and establishes a foundation for career paths. However, the process and results are sometimes considered rigid by today’s more flexible organizations with fluid work assignments.
Job Analysis has two critical uses:
1) It establishes similarities and differences in the content of jobs.
2) It helps establish an internally fair and aligned job structure.
Major Decisions in Job Analysis ask the following questions:
1) Why perform job analysis?
2) What information is needed?
3) How do you collect the information?
4) Who should be involved?
5) How useful are the results?
What do job-based structures look at and what do competency-based structures look at?
> Job-based structures, which are most common, look at the tasks and accountabilities of the job while skill;
> and competency-based structures look at the person.
Five Process Steps to build job or person-based structures:
1) Collect and summarize information that identifies similarities and differences,
2) Determine what is to be valued about the job,
3) Quantify the relative value,
4) Translate relative value into an internal structure, and
5) Translate relative value of jobs in an internal structure.
What are the six steps in the job analysis process?
1) Develop preliminary job information.
2) Conduct an initial tour of the work site.
3) Conduct interviews. Information collected include job identification data, job content data, information on qualifications to do the job. Job content is the HEART of job analysis and includes the tasks involved, their purpose, reporting relationships, working conditions, and other specific job information. Conventional methods of collecting job analysis data such as questionnaires and interviews are often replaced by online questionnaires because the latter are more objective and less time consuming.
4) Conduct a second tour of the work site.
5) Consolidate the job information. Job descriptions provide a written summary of a job, including responsibilities, qualifications, and relationships. Job specifications are the qualifications required to be hired for a job, and may be included in the job description.
6) Verify the job description. Job analysis can be judged based on reliability (consistency) of the information obtained, validity (accuracy) of the information obtained, acceptability of the data and the process by employees and managers and practicality (usefulness) of the information.
What is job structure?
> refers to the relationships among different jobs/skills/competencies
within a single organization → job structure
Job structure needs to:
> Supports organization strategy
Supports work flow
- Work flow is the process by which good and services are delivered
to the customer.
> Motivates behavior
- “line-of-sight” – relationship between each job and the
organization’s objectives.
What is an internal pay structure?
> Refers to the array of pay rates for different work or skills within a
single organization.
An internal pay structure can be defined by:
the number of levels,
the pay differentials between the levels, and
the criteria or bases used to determine those levels and differentials.
Higher pay is usually due to work:
> requiring more skill/knowledge,
performed in unpleasant work conditions, or
work that adds more value to the company.
Do pay differentials motivate employees?
> To motivate people to strive for promotion to higher-paying levels
A structure based on content
ranks jobs based on what?
ranks based on: skills
required, complexity of tasks,
problem solving, and/or
responsibility.
A structure based on value is focused on what?
> focused on the relative
contribution of the skills, tasks,
and responsibilities of a job to the
organization’s goals.
Internal labour markets refer to the rules and procedures that:
> determine the pay for the different
jobs within a single organization,
and
> allocate employees among those
different jobs.
Breakdown the tailored structure further:
Adapted by organizations with a
low-cost, customer-focused
strategy.
Has well-defined jobs with
detailed steps or tasks.
Has well-defined pay structure
Examples: McDonald’s, Walmart
Breakdown the loosely coupled structure further:
Adapted by organizations that
require constant innovation.
Jobs are flexible, adaptable and
changing
Pay structures are more loosely
linked to the organization to provide
flexibility.
Example: 3M
Breakdown egalitarian structures further:
Fewer levels and smaller differentials.
Equal treatment can mean
knowledgeable employees feel
underpaid, who may quit or change
their behaviours.
Results in higher performance when
collaboration is required
Breakdown hierarchical structures further.
Have multiple levels
Have detailed job description
Results in higher performance
when work flow depends on
individual effort.
Employees judge fairness by
comparing:
to jobs similar to their own,
their job to others at
the same employer, or
their pay against external pay
levels.
What is tournament theory?
Relationship between motivation and performance.
Example: players perform better where prize differentials are sizeable.
Works best in situations where individual performance matters most
What is institutional theory>
Copy others and conform
Organizations use “best practices”, and are simply copied
What aligns with the strategy of one organization may not align with that
of another.
It may not be possible to have “competitive advantage” by simply
imitating practices
Potential Outcomes of an Internally-
Aligned Pay Structure
- Undertake training
- Increase experience
- Reduce turnover
- Facilitate career progression
- Facilitate performance
- Reduce pay-related grievances
- Reduce pay-related work
stoppages
Consequences of an Internally-Aligned
Pay Structure
Efficiency
- Aligned structures lead to better performance.
Fairness
- Fair differentials motivate.
- Small differentials facilitate cooperation and commitment.
Compliance
Comply with regulations of the country
The underlying purpose remains the same for both (job-based and skill and competency based structures)
Collect and summarize work content information that identifies
similarities and differences.
Determine what to value.
Assess the relative value.
Translate the relative value into an internal structure
What is job analysis?
> the systematic process of collecting information about the nature of jobs.
What does job analysis involve?
Involves the identification and description of what is happening on the job
required tasks, duties and responsibilities
required knowledge and skills
working conditions
Why Perform Job Analysis?
Job analysis potentially aids every HR function.
An internal structure based on job-related information provides a work-
related rationale for pay differences.
In compensation, job analysis has two critical uses:
it establishes similarities and differences in the work contents of the jobs,
and
it helps establish an internally fair and aligned job structure.
Information To Be Collected > Related to the job:
Job Identification – includes job titles, departments, and the number of
people who hold the job
Job content – elemental tasks or units of work, with emphasis on the
purpose of each task
Information To Be Collected > Related to the incumbent:
Employee characteristics
Internal relationships
External relationships
Methods for Collecting Information:
Interviews
Focus Groups
Questionnaires
Observation
Journals and Diaries
Who Collects job data?
Human resource generalists and
supervisors.
Someone thoroughly familiar
with the organization and its job.
Who provides job data?
Jobholders and supervisors.
Subordinates and employees in
other jobs that interface with the
job under study.
Number of incumbents from
which to collect data varies with
the stability of the job and ease of
collecting the information.
Disagreements can:
> clarify expectations, learn a better way to do a job, and document how
the job is performed
Support of what stakeholders are relevant to job analysis?
> Support of top management, and union officials, is critical.
Outcomes of Job Analysis - job descriptions:
A written record of the tasks, duties, and responsibilities that make up a
job.
Identifies and describes the job title, job summary, relationships to other
jobs.
Outcomes of Job Analysis - job specifications:
> Specifies the knowledge, skills, and abilities necessary to perform the job.
More on Job Descriptions - what you should do and what is important for managerial descriptions:
Use generic job descriptions to avoid starting from scratch or to cross-
check externally.
Descriptions of managerial/professional jobs are often more detailed –
the job, its scope and accountability.
It is very important to verify the description with jobholders and
supervisors to make sure it is accurate and complete, note needed
clarifications.
The real issue should be: How much detail is needed to make these pay
decisions?
> enough to set pay levels, encourage continuous learning, increase
the experience / skill of the work force, and minimize the risk of pay-
related grievances.
What determines pay and pay differences
Work-related information is needed to determine pay
differences in work determine pay differences.
Job Analysis: Bedrock or Bureaucracy? Why are employers reducing jobs?
Employers are reducing jobs, cross-training employees so they can do a
wider variety of tasks in order to increase productivity and reduce cost
Traditional job analysis makes distinctions among levels of jobs and
increases rigidity.
Generic job descriptions can increase flexibility
What is offshoring?
> Refers to the movement of jobs to locations beyond a country’s
borders
What are notable about jobs at risk of offshoring?
> Hourly compensation and productivity differ across countries.
Availability of qualified workers and proximity to customers are
considerations.
Both low-skill jobs and white-collar jobs are at risk for offshoring.
Managerial jobs and positions where local knowledge is essential are
not as susceptible.
Judging Job Analysis - what are the components that we use to judge?
Reliability: A measure of the consistency of results among various
analysts/methods/ sources of data, or over time.
Validity: Examines the convergence of results among sources of data and
methods.
Acceptability: Data and process must be acceptable to job holders and
managers.
Currency: The job information must be current.
Usefulness: Refers to the practicality of the information collected, e.g.
Can it be used for multiple purposes?
