Unharmonious voice from compensation management • First: coming from employees Why do I get less salaries than my colleague? Why do we get the different salaries? Why do we get the different benefits? Why do we get the different treatment? The above questions would be result in employee’s unsatisfaction, decrease their working enthusiasm, reduce job satisfaction.
Unharmonious voice from compensation management • Second: Coming from shareholder They feel confused: How much do they pay? And the staff will feel satisfied? Finally, they found no matter how much they pay, it seems the employee never become satisfied, why? Then the boss let HR department solve those problems occur in the company.
Unharmonious voice from compansation management • The third voice: coming from HR department As for the HR department, the problem is how to satisfy both boss and the staff. How much right of making decision do we have? How to design compensation system? How to improve employee’s satisfaction? state to boss or employee, explain to both sides. Finally what they got is complaining of both sides.
The reasons for dilemma of compensation management The view point of company: The compensation system never has the unified model, because the compensation system is different when the company stays in different period, different environment, different strategy.
The reasons for dilemma of compensation management • The view point of employee： The employee will keep high concerns of their pay. Because pay is direct related to their life quality. Meanwhile there is no absolute fairness standard of compensation, so the employee won’t feel satisfied for ever.
Dilemma? • How to solve those problems? • Can we look for the absolute fairness way to conduct the compensation management? why?
Basic Factors in Determining Pay Rates Employee Compensation Components Direct financial payments Indirect financial payments
Corporate Policies, Competitive Strategy,and Compensation Aligned Reward Strategy The employer’s basic task: To create a bundle of rewards—a total reward package—that specifically elicits the employee behaviors that the firm needs to support and achieve its competitive strategy. The HR or compensation manager along with top management creates pay policies that are consistent with the firm’s strategic aims.
Equity and Its Impact on Pay Rates Forms of Compensation Equity External equity Internal equity Individualequity Proceduralequity
Addressing Equity Issues Area wage and salary surveys Job analysis and job evaluation Methods to Address Equity Issues Performance appraisal and incentive pay Communications, grievance mechanisms, and employees’ participation
Establishing Pay Rates 1 2 3 4 5 Steps in Establishing Pay Rates Conduct a salary survey of what other employers are paying for comparable jobs (to help ensure external equity). Determine the worth of each job in your organization through job evaluation (to ensure internal equity). Group similar jobs into pay grades. Price each pay grade by using wave curves. Fine-tune pay rates.
Step1: The Salary Survey Uses for Salary Surveys To market-price wages for jobs To make decisions about benefits To price benchmark jobs
Sources for Salary Surveys Sources of Wage and Salary Information Self-Conducted Surveys Consulting Firms Professional Associations Government Agencies The Internet
Step 2: Job Evaluation Identifying Compensable Factors Effort Responsibility Skills Working conditions
The Job Evaluation Process 1 2 3 4 Preparing for the Job Evaluation Identifying the need for the job evaluation Getting the cooperation of employees Choosing an evaluation committee Performing the actual evaluation
How to Evaluate Jobs Methods for Evaluating Jobs Job classification Point method Ranking Factor comparison
Job Evaluation Methods: Ranking Ranking each job relative to all other jobs, usually based on some overall factor. Steps in job ranking: Obtain job information. Select and group jobs. Select compensable factors. Rank jobs. Combine ratings.
Job Evaluation Methods: Job Classification Raters categorize jobs into groups or classes of jobs that are of roughly the same value for pay purposes. Classes contain similar jobs. Administrative assistants Grades are jobs similar in difficulty but otherwise different. Mechanics, welders, electricians, and machinists Jobs are classed by the amount or level of compensable factors they contain.
Step 3: Grouping Jobs Point Method Grouping Similar Jobs into Pay Grades Ranking Method Classification Methods
Step 4: Price Each Pay Grade The Wage Curve Shows the pay rates paid for jobs in each pay grade, relative to the points or rankings assigned to each job or grade by the job evaluation. Shows the relationships between the value of the job as determined by one of the job evaluation methods and the current average pay rates for your grades.
HR in Practice: Developing a Workable Pay Plan Simplified Approach: Conduct a wage survey Conduct a job evaluation Conduct once-a-year job appraisals Compile the compensation budget for upcoming year
Pricing Managerial and Professional Jobs Compensating Executives and Managers Base pay Short-term incentives Long-term incentives Executive benefits/perks
Pricing Managerial and Professional Jobs What Determines Executive Pay? CEO pay is set by the board of directors taking into account factors such as the business strategy, corporate trends, and where they want to be in the short and long term. CEOs can have considerable influence over the boards that determine their pay. Firms pay CEOs based on the complexity of the jobs they fill. Shareholder activism and government oversight have tightened the restrictions on what companies pay top executives. Boards are reducing the relative importance of base salary while boosting the emphasis on performance-based pay.
Competency-Based Pay Competencies Demonstrable characteristics of a person, including knowledge, skills, and behaviors, that enable performance What is Competency-Based Pay? Paying for the employee’s range, depth, and types of skills and knowledge, rather than for the job title he or she holds
What is a competency? • An underlying characteristic of an individual which is causally related to criterion related effective or superior performanceCompetencies can be motives, traits, self-concept, attitudes or values, content knowledge, or cognitive or behavioral skills -any individual characteristic that can be measured reliably and that can be shown to differentiate significantly between superior and average performers
Motive: Underlying need or thought pattern that drives, directs and selects an individuals behavior. Eg need for achievementTrait: A general disposition to behavior responds in a certain way, for instance with self-confidence, self-control, stress resistance Self-concept: What they think they value, what they think they do or interested in doingKnowledge: Content knowledgeCognitive or behavioral skills: Either covert or overt
Competency model building A detailed approach
A Detailed Approach • Info about the company • Decision on the job position(s) • Discussion on the CM application • Basic data collection on the job responsibilities(using customized menu) • Focus group • Review job description • understand performance criteria • Discuss specific behaviours • List top ten competencies
A Detailed Approach • Critical incident technique - interviewing top performers • incidents that lead to effective performance • incidents that lead to in effective performance • Discuss specific behaviours • List behaviours • List competencies
A Detailed Approach • Content Analysis • Group behaviours • Match behaviours to competencies using competency dictionary as a guideline • Evolve new set of competencies if any • Match behaviour indicators identified through CIT to the top 10 competencies identified by the focus group
Using Job Analysis and Behavioural Events Interview for Competency Mapping: • Job Analysis B. Behavioral Event InterviewThis methodology is used to identify competencies in a person. It includes sitting through with the candidate in an interview situation carrying out a behavioral interview followed by recording of responses and identification of behavioral codes.These codes will in turn help us in identifying the competencies in a person and arriving at a form of relative ranking for each competency. know the concept of competency modeling. Can explain the methods of competency modeling
Question: • know the concept of competency modeling. Can explain the methods of competency modeling.
Why Use Competency-Based Pay? Competency-Based Pay Supports StrategicAims High-Performance Work Systems Performance Management
Competency-Based Pay in Practice Main elements of skill/competency/knowledge–based pay programs: A system that defines specific skills A process for tying the person’s pay to his or her skill A training system that lets employees seek and acquire skills A formal competency testing system A work design that lets employees move among jobs to permit work assignment flexibility
Competency-Based Pay: Pros and Cons Pros Higher quality Lower absenteeism Fewer accidents Cons Pay program implementation problems Costs of paying for unused knowledge, skills, and behaviors Complexity of program Uncertainty that the program improves productivity
The Pay Gap Factors Lowering the Earnings of Women: Women’s starting salaries are traditionally lower. Salary increases for women in professional jobs do not reflect their above-average performance. In white-collar jobs, men change jobs more frequently, enabling them to be promoted to higher-level jobs over women with more seniority. In blue-collar jobs, women tend to be placed in departments with lower-paying jobs.
Compensating Professional Employees Employers can use job evaluation for professional jobs. Compensable factors focus on problem solving, creativity, job scope, and technical knowledge and expertise. Firms use the point method and factor comparison methods, although job classification is most popular. Professional jobs are market-priced to establish the values for benchmark jobs.
Case discussion • P454 Salary Inequities at Acme Manufacturing
Function of compensation management • What’s the function of compensation management?
Function of compensation management • The view-points of company： 1.Reduce the turnover rate, especially for turnover of key talent people 2.Attract talents, especially for key talents 3.Reduce internal conflicts, improve employee’s job satisfaction
Function of compensation management • The view-points of employee 1. Short-term motivation: satisfy physiological needs 2. Long-term motivation: satisfy growth needs
Question: • Which problem is the most difficult during managerial process in one company?
The core issue of HRM 1. Human being is the most complex creature in the world. 2. Regarding to the managerial problems occurred in the company, it is the most difficult problem to manage people.
True essence of HRM 1、Employee’s ability 2、Employee’s willingness Do you think which one is more important?
True essence of HRM • In general, the employee won’t do what the unit hope they do. • In general, the employee only finish tasks what the unit will valuate, which will be related with their benefits. • Why? What action should we adopt according to the above viewpoints?
True essence of HRM • Valuation points by MBO, tell your staff what does the unit concern? Concern points are your unit valuation points, through MBO, let every staff know their goal, let them know what you will assess their performance according their goal. So every staff know their goal, then they know what they will finish, what they shouldn’t do.