Learning Objectives * Goin an awareness of themutifaceted nature af compensation + Understand the diferent types of equity an tei resultant ffcts on employee beavis + Explain the nature of salary compression and the challenges presents to employers = Develop an aware of the advantages and disadvantages of pay for performancel incentive pay ard the conditions under ttich it ight be most ‘Describe the legal issues that influence componsation * Appreciate the challenges inhere setting executive compensation lo ‘Stralegic Compensation at Jamba Juice in 1990, San Francisco-based Jamba Ace Ns espanded 9300 sto nao leading rear of Sutera jaces and beat soups and i hate wth company fa as ine 1,000 forte deeoeent ellos anpansiton log hes abo provi "482 Part? Implementation of Statogie Human Resource Management| mpensaon—a hey strategic area for organizaions—impars an employers bi ito atract applicant retain employees, and enre pial evel of perfor mance foam employees in meeting the organiations sraegic objecines \Compenstion falta key economic isue: Compensation programs continue to asumme an increasingly lige shire of an onanzation’soperaing expenses. This partly ee in serie tres, which are highly laborintensiv.&eriea blanc fing act ast occur to ensure that compensation ara, mae, and eins employ fess at the same time, compensation shoul allow the engaiaon to mintineoxt Stroctre that enables ic compete cece and licen ia ts markets Reading 1 Rey Trends of the Total ewan Sem in the 2 Canin” examines the ean of rgaicational reward stems rebut the changing needs of organizations and employees. ‘An organization's compensation astm asualy consis of dee separate compo rent as istated in Exit 1.1, The rst nd largest components dhe ase compen- Stony stem, The seca isthe incenie stem, where employees ree dial compensation based cn indidal, divsonal, and/or arganization wide per formance, Thid tthe indieet compensation system, where exployees are provided exon 77 7 poomaensation System | wweray || tcamioPay || tegatyeied || Optinal | LF | onus | |esseaseany || emsidtineot + Stock options insurance || Heath insrance swore sheen meee were | rembusenet | | + Dipnden ere J Finblework steele | (cloning, | fevcne, camped work | woke) poChapter 11 Compensation ih certain enefis, some uf which are leglyrequised and other ate prosided at the ‘scretion ofthe employer This chapter lass onthe sates and poy fe soc ted with compensation, sapped to presenting details concerning many ofthe con ponents of iect competion Equity tn dsigeing the onal om with dhe perce eyo fires othe se for npn. Al employees shuld {ea ha they are being compenssted ly relative ty tet coworkers and wo india sh hell empl tninter organ. The egy theory of motion ols {tat workers aes thirpercched inputs her wok and he otenes to thane her a depicted in Est 1.2 ‘Wher ind pec that they are Being ted initably relate eee ees they wally Uy To etabish equity by inresing ther oucomes or decreasing {hei inputs. Increasing outcomes nightie asking for addtional compensation or plein rom the onan nae ter cs, the alight ne heey {jay the thet. Decent igh ve no mks had, ing ener reals, coming in at, ling cathy, or eng. a2 vation sytem, a ongizaton needs to be concerned 3 [gguiystncony Ouomes/ Rewards Oucomes/ Rewards of ihe Inputs/Coneibutons Inputs Contribtions a hes “The india senses insu when percssng ha ratios reno equal, ‘The design of sn equitable compensation sem mt incorporate dhe Epes of ‘ui: imeral,exernal, and indiidual. These perceptions of equiy diet mpc, motivation, commitment, and performance on ehe job, ae lhutated i Es 11.3. Te isimportanc to semember thi emploneeasesstents of euity a, in fut pereeptons. “They may be base, in par, on incomplete r inaccurate information. Few employees really know the extent of ther coworker puts unless they are together tga the work Perceptions of Famers 483454 Part 2 Implementation of Statopic Human Resource Management (One eical policy decision empleyers must make ithe exten 10 which compens- sion lel il he made public or kept private. Public employers uly have no choice in this mater, as relevant sate hie may requ fall discasure and repoing of and public acceso sch information. However, pal held an pil sade nga Zations have the option of dieing the compensation of india and/or the com emation ranges asucited wih specie postions. Even a tit information & not {sale cinployrs frequently hive policies that forbid employee from dang thee “ompensat on to oer: Reading 11.2 “Exposing Pay Secrecy,” explores the reasons oe ‘ch poles as well the aebantges and dadvantages of sch apace. “Te efile of many compenstion programs can abo eke it iil for cm poyes uo ubtan accurate formation on clmorker compensate. Noneteles, thew perepbons impact maa, cemmmitment and performance amd. mist be eflectvely Fanaged.Aknagh compensation soe the nly workeated autzame employees rece, itisoten die assy which employees concn that theyre Beng ret appropriate) The etre can prenide a wealth of information to emploeesabout comparable l- sry dna Arecen Ggle search eroed up sere than 2800 his for he search sry Cuomparson” sites. The mat pope of these sites, ww salary-com, averages move than 2t mon bts snually and hss 1.7 allo different stars mth The Wal Sie Joon ven fers its omni, woearcerrea.com,* Moc of the salary infomation fi hy enplnees may a nacre, dated, oben samp tha ae vee the india ermplager’ a. Epler, weve, ad henson By ing Communicate compensation poly with employees. Although 6D pereent of woskers in fone recent vey fepone Ua et py compares unfavorably to pay levels elévhete, ‘nly #8 pevcent ofthat se group reported that thee empoyer do a yood jb of ex ising how pay is determine." ence, with the abundance of sary information a Tite tem ployee is more important thas ever that employers develop an equitable ‘compensation stem and explain i 1 employees. Internal Equity Invemal equity insoles the perceived fires of pay diferent among diferent obs isin av organiaion- Employes should fel that the pay difeentals between jobs Se tr. ye the eonesponding dileences in job respi In tempting 0 tah internal equity, employers can evlste jobs by using four techniques: job rank Ing, jb lication pont stems, and factor comparison, Job earking isa seatey simple, nonquasiave means of determining equity in compensation in salle, es cups organizations. Senior management makes jd sents which jos ace met challenging and ensures tha the more challenging nbn receive higher compensation This method, which is someubat random aad ton {Siete more concerned with the erica ponion of ots rather dan wth the deren amount of compensation, Hecase Re radon, job ranking is used infe- ‘quent ad us ony in sal iaforal onganizaions. ob ctsiiation sss group ols renin similar elo abiiy, ting and poms into prdteusined grades or cases and. competes each jb within a {pode sim rly. This method were scene than job ranking bu it has been ex Soe for fact ley Oreanaons rst fore eat nto a speci etegoy Sind subject is iwobed in ching jols, given the nonquaniate nar of the procest™ omeses, job chasiaton asters are easy to undereand and exphin and ibe widely adnintstced in large oguniatios. The Federal gorernment, for example fran cloborate sje of 19 jo cases, cach of which 3 dstinuhed by 10 Teel of jn dey or challenge: his pacts the corpensaon of more than 8 milion Federal ployes Exibie 14 prover a spl of Several of dhese jb rade, Poin gatems ivave making a quanicee asvessment of job content and ave more cient tha jo anking orclasifeston, Poi stems are east understand and ex pin sudan dificult deagn-are cas" implement ome they are ape om The organization fist creates a ft of compensle fctors—things that the coguizaon i iling to pay ie employes fr, such as educsin, experience, specificChapter 11 Compensation 485, Grade Description and Representative Job Titles from the Classification System used by the Federal Government Jobs Inde in Gade a Includes howe dans of postin the dies of which are Typ, Mesenger, ‘co perform, under nmediate supenison, wth te or no [acre for the eee of independent judgmere: «The sinpes routine work noe, busines, of acl + Cheney wk of aborts chia hacer Ina profona, scent, or echnical fil os? Includes those dats of postion the duties which a Engnerng aide 10 ptm, ander immediate upersin, wth ied lace othe execs of dependent jdemere, oie workin ofc, busines, offical operations, ‘of comparable subordinate echnical wrk of Bed scope m3 professional, seni, oF teil fel, ‘equine taining oF eperence: or «to pfrm cher work af equal moran, difexy, and responsi, aéaequnng comparable ualiiatons oss locus those clases of posons the duis which are: Chemist, ecountant, Engineer ‘eo pofom, ander gees superisin, dil and (Gil), Sates ete resporable work mot, busines, oral adn ‘aration, or comparable subordinate shia wok inane seri otc Beng + copsidable waning and supeisoyor other + broad working inowladge of pail sbjct mae oF of ofce,laboraton, engineering, Sin, or ‘cer procedure and pace, and 1 the erie of aependene judgment ina Vie fs, + co perm eer work of equal importance, sky, nd esponsibiiy, and requ comparable ‘walfesions. Sawa: Fm The Managemen of Cmpestin by Aly Rh an Sap] Cara yg © TS 5 Wah lls, working condions an responsibiy. Each of these compensable foe is then Assigned a factor scale, which descties progressive levels of mastery or accomplishment fot each tac Pans are angie to ea level each sal, and compensation deter ‘nine by the everall inter of points that corespond to the job A sample point tem i presented in Exhibit 11.5. Note that some compensable factors receive higher Pins than others. For example, vel one i technical sis recess 30 point, level te in working conden eines only points. Employers can determine the relative wont ofeach campensalefstor lyases stay for the organiraton’s sate {Ge objetves The more a compensable fact elates o goals and objets, the higher The ales that should be present nthe Ector sales ‘A spec pe of point ste i often wed for admire and managerial pos tions, Developed by the consoling group Hay Ascites, dhs stem ix Kaw 8 the Hay Pa” and i wed by mont of the Fortine 500 companies swell 2 oer 5,000 organizations in more than 3D countries ‘The Hay Pan ies thre for, called486 Part 2 Implemeottin of Stestgie Human Resour Management int System Lol Facore 1 2 3 4 5 Econ 5 0 a o 7% Eperince » 0 6 wo 100 Teche Sil 2 o 0 126 19 Working Condins 5 0 15 0 2s Responsibility 5 0 7s 100 ns “The compensable fisor “echnical il” igh ave is elves defined as flows Keowee [Tis fcr aeanacs the Tnaedye 0” equvalen wang equed to parr te jb dies, te Dagee ‘Gi ot ending and ng adding and bracing of whole numbers lowing of stuctions: we of ad gages, ‘Grect reading of istrumene, 2m sir deices whee interpetaton i st eauired and Degree {ie af ain, aubcacor, mlipaon and dion of mambes, uding decimal and fasion simple wie ‘of formulas, chars, cles, daw ns, pecans, schedules, wing diagrams; ue of adjustable messing, insvumerschcong of egos, Bs ecrd, and comparasle data, where inerpetaion is equied Sed Degree ‘iz of mahenatis wth te oe 0 comalatd davings, spe Reais, chars, ables, various yes of prion Ineauring instruments, quale to ane thee yeas appled traders taning na parila’ or speciaed cecopaion sth Degree Tir of adranced des mathemati, coger ith tbe st of complicated Sawngs specications har, Tabi, handbook ormols al varaes of precion meaanng instumen.Equnaler to complete acredced oprenicohip ina recognized trade, caf ccupaio, or equivalent to 2 too yar tcl college evcason, Sth Doge ‘Trot higher mathematics abed de applications oegigarng pines and de pfommance of lated raccal operon, oper witha comprehensive inowlede af he theoes and paces of mechani, eee, emia co tke engeeing Fel, quale to complete ur yeas ofthis allege or wei education San Agel fom Competes 7 MOG ad Joy Newman Cie 7908 Hid nis fat which ae common to all manager and adamtsratye js: knawton, yholierssoteng and secounabiits, Kaowhow perzne tothe tshrical knowledge se [pire edo the job, Problemsoling aseses the amount of independent thinking and Gvsion mang equieed in the job Ancona comaidrs dhe cirect responsi or peuple, rotrets andes Ariel sunray of de Hay Plan is presented in Exhibit 1.6, Tact comparison is sortewbat similar in concept 1 the pot system. However sscad of ase ots indepe wen of cach ther rela w conpensible for, fc tor comparson alas fve sander faces in evaluning all ote: responsibil, ils equa, meal efor. physica efor, and working cond ows fbs are eahuted rei five tn eal our on each of these five dimecrsions to determine sppropriat compen tian. For exomple, an employer would ty to determine whether the job ofa paralegalChapter 11 Compensation 487 exwieit Hay Compensable Factors KrowtHow ‘Rrowhow she som tual oF ee Had ofa, however aequred, necessary for acepable ab performance, “Tis sum otal which comprise he necessary overall nd of knowledge" an employee neds, has hee ier: + Knoedge of practical procedures, specie echniges and learned discilns s+ The ality to iuepate ad harmonize he deri fans ivohed in managerial sustios (operating ‘epporing, and administrate. Ts kaowhow may be eeied cnauatvely as wells exeutinly and inves an ome combination the arse of egann, plang, eecting, controling and eating, seve, patcng ln the are of human rls, Problem Solin ben hin ol a are ing id yh rag cag ang, on aan sings chain Toth et a ig raced by sant coe ype Scere estes, polamaclng dished and engars coped cn nosh Potemkin hase ness te ene nach ekg ale ple Tech pty oe Dg done . ‘ecumaliiy : ‘econ Be oe ew nl cna a i and ae io on ends hs es erie Pesan ath lege of pena or cel convl and pune, + Jia one eke Wendy te oul lr of oak) mo ny oi sy eh (cae Sr Gy ie ay py Ba, required move or les responsi, ski, mental er, phocal effort, oF unusual work ing conditions rele tothe job of an accounting clers wo deter appropriate com Peston for each job Factor comparison ca he diel adinister tn erganizatons ‘ere job content and responses change frequent I has abo een eetczed for isasumpion thatthe fre fctons are univers ound equal nsportant in al jobs. ae tor comparion is best utized tn organizations where Unve& Knited change and jd responses and contet remain somevhat sable The consequences of as a compensation satan Ha emploses perceive 1 ein capitable can he severe. Employers have 3 ehoce of four tems for developing an inter tally equi: competion spins bse on nether they wo comader complete or ‘pec job fcr well at whether they wish compare abso each other oo some las Etc 11.7 wamapr de iw eleiqun ig te elatve wrengths and ‘eakneses of each ecg, Reardlee ofthe method chore, employes must under senda cep te stent o erie opal watitaton, commiunent, a performance "A more recent ste that has aie rate tothe management of iaceroal equity is sary compresion. Silry compression happens ven new hires ear big thse emp rs who hare more experince and/or tee within the organization. ise res of rang sarang sare n feds fr wich demand for employes exceeds supply Salary compreson has become a ena and gartcalaly problematic ie fo faculty in colleges and universes. Slay conpresion ca be exacerbated in organizations which dua vies are suade publ. Kc fad to svee orale prulens diet the sense of inequity fl by Tongieray employees who may hae shows tremens lay w thie employers Ieean488 Part? “mplomentatio of Strategic Human Resouree Management T17 peampgzagi dob, Evaluation Methods Uric of Anlss Whole Selectors Factors of ob mae Comparison Job Ranking Factor Comparisons Jobiejab + Identiyjobe based on“worth"to.—_* Define compensable fcr and evaluate corpinzaton relive to other jobs jobs on these factors live etherjobs A Simple, espe asytoundestand fae of employe compriertion 1 Random sabes, notuetin ge YCombursome and agin consant corpiiation pain universal importance of Factors inal questionable Job Cssicaton Pint Method Joby. Standard» Prparejab grads/clcfcation and» Define compensable facts and vl of sign job appropriate class accomplishment and deine vel fo eachjob A rophytolurge number of varies; Simpl to underscand ant administer, 35y tsi undercard; ole Focemploees tarp thigh els 1 Detailed an tme-consuming ta develop; {Extremely tme consumig to develop, Inckof esti lack fuera appa of compensable factors be ica remedy, a it effects are olen fareraching droughout the organization, ‘Shuply adjng salves ores ary compres can create adonal problem alive to dhe he fr such adjntent as well x the aalablty of resources to support ‘sch aiments. Frequent, dhe only elton forthe emplogees who are on the shore fed of lacy compression i oles tir aganination ant seck employment chewbre fon de open aera the going sary rae. When a onganizaton reales dat com Person ste sues ra sry compression, dere sno simple answer 3 how Drst seme the suaion, but acon is necenary w eeu wp-peonning empapce, Chapter 15 ponies ome reomenvaion 35 wt retin suk iia External Equity Exceeral ecuty involves emplonee perception ofthe mess of ther compensation felave to Giose outside dhe oyanzation. Obiowy, employees would not be thrilled wo sce that those who do sina workin other rgairations recive greater compere ‘ston. Enghners nee he avare of ay srctres of cempestor and understand ‘hat thi cam pct motiation,commisent, and producti ‘Asesng external equi eal staightorsard process, Organieations should fit aller wave and sary information to deternine market wage rates. This informa- tion, whieh canbe elected in-house or Uo sources exceral tthe organization, sully realy au relative tothe isty and geogrsphie aceatheough peoke Sonal asecsatons HR. consul fs, or dzough dhe organiza’ own pany re wench. When making asessmens of exer opis, i import to consider not ‘only sre ak other fms of compensation, auch as bonus and incentive plane and henefis packages. Information periing to these addona forms of compens ion maybe more diicul oo, but se Be fncaxparaed no the aay expe cially for higher level amanagerish and executive prstions that my have asic Potion of te oneal compensation based on incendie py: ‘Aer a iaestiaion of the make has been completed, Ce ogaizain then dete nines its oe pay strategy teane tothe marke. The three srateges am employer eanChapter 11 Compensation hone are ed, ha, oF market poiy. A ea pic ioe paying higher wages than ‘competitors to ensure thatthe organization beroaes the employer of hoe. I eer words thi trae ames that py fe aerial Factor in an applicant's decison in Choosing a emphyer and atten to attact and help ren dhe highestqaliy fmpluers hn sort, the emplayer desires to be te fistehoice employer that the git wants ist selection Tra able talent. However, sy onnizaton that ters higher compensation than is competitors neds o nse th i ha 4 mica of wen het prices. This requis the trian i have operational licens ha competitors lack, higher Emplaye proc than i empeionsand/or x pre or erie Tor mi sets are ling ay & premium pie ‘Wh lay policy. the cngniaton campos emplopees elo the rate of compet tos. An enganation employing thi strat atm compensate employees thenigh Senne other means, seh a apprtunty or uaneement, ancente pans, od cation, fd working condos employment secaiy. The aganization believes hat work re {aed otemes are mulated ne nore peta that employees consider more than ins salary in weighing thei employment options, An organization explo a policy ‘cede sgh te the penal and ial choles of the cnployes it eee to slew ito tar eanpensaton upton fo thee ida ha il all them to aecepa Ise ne ay tha ta eee by the cpt, Wa ark poy, naira yay Bec ep ene ene tors An epg fallin hi sate steps tai pay a «Gat ap fant dechiews,aeuming wea ict compete in the labor sharket in alcg ‘employes by er means sich howe ite nthe dessin of I py Hs fame a no surprise thatthe majority of employers settee salary Teel at very near ‘market lees, Sich strategy ates hat erplayes ae es Hkly eae i tet sae ies wuld remain the same mth 4 new employe vin compte elaine tet race and Individual Equity Inca equity cones emplogee perceptions of pay detent among indus ‘io hold iden obi the se ongaaion, Deterniing idl valay eels tad pay difeentals among emplnces wet jb ea be dae 4 wae of ‘es The mot ise sang po sein Senrnshed ten eerie compen ‘ation according uo the Ing of tie on the jo or Ing of time with the employer Although ths rea a sable al expeionet wenore, i hak no eee relay tw perlornance onthe job. Seni stems are very commen in union stings. They are ako ly te un Evra by the con pe hecase they ate ec fn aus Hwee, they provide ie incentive 1b nove patie, ad ey ence ‘workers who may he medicr or banda perfoners to esi wth dhe gunrtion Merit pay systems compensate ila for their proven pe eal, hey provide an incentive for emplgces ts work Rader a accompli me Mic pay generally permanent acled co an employee's ve pay, However in prac: tice, merit pay can be quite problematic Because merithaed pay stems are anchored ae ongniranon’s performance feck gc they can extent he set tat is inherent inthe feedback stem, If an employee elves thatthe performance feed Tack proces ised or wnt, «cempension yen that i based on thie process ‘farther a the emploge’sperepions of names. Any mics py plan must emare thatthe performace feedback upon which it Bui nero and accepted ty employes An increasing number of organo ate sig incentive pay to compensate th employees Incentive plans low dac empleo eecive a portion of his of her cone ‘enstion i direct relation to financial performance ofthe ind, unit, entre flan. laente pas is povided for a yien tine pesed sed not added co the fre salary. Consequently, it mus be resumed ia subsequent time pesods and can Ive a greater motatnal apc ha ser pas nance om the jo 489490 Part 2 Imslemertaton of Strategic Human Resource Management The philosophy behind this compensation stem i reward higher lvl of peso mance by return fan ewes othe employes who hae ben reps frees ing them. Iceni pay programs also allen organizations wo adj ther compenston capense bined on ongavatonalpelormance. These plans ean tke awatey offs, Such a eam ales pln, profiesharing pans aisharng plan (in which est sings ae partly tuted othe reponse forthe) ,and tock ownership dso, oF ‘psn clans Het plas ao fer rm mei pay plans in tac omer are ase on ‘jae, measurable vaca performance; he Tae are based ov sect, generally pontiac! pevformancevesed crea, A welled inceatie pay plan cane the ecg act na applicant decison wo accept o eect job ole when Bae compe ‘ation ise market eeland nndtingualerothat of eerpits” Peslrmancesed pay that rib ed ino a employee's, work ui’ or nai ton’ ress popular wth beth employes and mploees.Performancetned pay—uhich snes unl ecent fered wo sein executives onli nowextended-o many ober employ {avonganiationsreaize how variable compensation programs cana india en hoe hehasir and peronance Appeal ow hits of US companies er sme form oF vriable perfomance py and abun 1D percent fal compersation paid in the Un te States variable” Mee pentane suey foe hat enero provide ‘arable perormance base pay ther top empeycesare fs pescentnoreliely than dese a ou eprint facil performance TG importa onsen i he sit fons sight sary ince campers ions he Tet that incentive compen will owe the ese lary a nia Feceves in exchange for incentives that could siguicandy raise merall compensation. Noa employes, however. will fd sich trade atracuve, a sated below Joe Torre and the New York Yankees In October 2007 the sparing word was stumed when Joo Tore pared mays with the Kon York Yanoes baseba ranchse. Tore had managed te Ynkees for 12 ‘sesons and in each of thooe seasons fa led ihe Yarkoes ° te postseason, Including four World Series cranpionshiss. Hower, the 2007 season ended for the Yenkees with alminaton cig te Hist round ofthe plaof forthe thd con ‘secutive year At the tie, Toe was the higesrpaid anager in bxsebal, having tained $25 lon for the 2007 season Tam owner Gouge Stendrenner, hungry or another Woe Sees champion shi, decided to ofr Tare an incentive compensation package To's base slay for 2008 wout be reduced 10 $5 milion but wih incentives of an aon [$3 maiion posse, nth $1 milion being awarded for ach successive level of Yani postseason success. The incentve-liden shrt-erm conract wih a 39 per cont decreased in base slay caused Tare fo leave the Yankers and sign 2 $13 nile year contact with he Los Angeles Dodgers to woes ate Incnsve pays poplar vith employers in part hecae is send Recast to specie Finacial peormaace oa dso ore entire nga alto paid we Ie pede measurable franca metic ae achirwed, can and sheuld appeal © even the ‘mos fall conserve orgaizsns, The Neb of variable conpenston programs Tins them to be allored o organ nde, dassonal, ea oF Yea performance tome cominationtheteok—depending on the interdependence present in jos as wel ‘Sr ergeieaonal strategy, Peshapstheir greats ae is Ua varie compensation pro Jom! welleommuniated ane plemented, allow emploses fl understand the Snemizaon’s goals oecvs ae wel show hr nda jos nt onsnizational ppstormance. As dicused in Chaper 10, Continental tines uso a perce sed “arable compensation prgiata totam around poe peromance The suk? Continental fron more avards fo cttomer saci than anyother US. aiineand as named one of the “ICO Bea Companies to Work rin Amerie” by Franeforfourconsecte eas” Parfoepertomanee plans have been iene) ae meazs of aging the nerests of ‘exaplvers and owners. One sty compared ayfor performance plans with a fixedChapter 11 Compensation salary compensation program and fund thatthe former resulted in igaificandy higher Preity ad eneral inn performance This is hecawse of the fat that pay for Performance generally ara higherality appa, which basa et elle of tower ing it cont of pork or serie delivery. Nee surprisingly, higher performing “emplayces shaw tanked preference for pyr pestomunce compensation programs ‘net saved compensitit win incentiex However, employers need to monitor ‘ch pram to cise that emplaced not Toc excesively on incentive producing rds ne Beas that sel eal Financial rewards at the expense of other impasse ‘Team-Based Incentive Pay at Children’s Hospital Boston The acccants mceirabe department at Chidken’s Hospital Boston was sufring from tow morte and iecincies aller an unsuccestl change to 3 new bing stom. Wh an average of mate than 100 ds om bling fe payment the oan Zaton was facing eanous cashflow carceme is fseal operations. To alate this, management developed a teambacod incontve plan tha! woul alow epoy- 22810 age he flaonship betwoen quae cash fow and the number of days bil spent unelected ia accounts resivable. Emplyee-centered the progam a- owed tear members 10 sot tives possible goal Ievls—threshol, tage, and ‘opimalwih caresponding rewards of $500, $1,000, and $1,500 forthe atin ‘ment af ach Meetings mere ao wih employees to expln the program and ‘obtain employee input and support Employees suddenly began to fel important, ‘empowered, and energized: Weoty press reports albw employees to satmenier thor progress. Duing the list year the average number of days @ i sper accounts receivable was reduced fom more than 100 dys 10 7, and dig te ‘sscand yar, the average was redvcd oth mc-60s—and the satslacon with te program has reduced emplyee trove i the department” Wile perfomancebused rears can be wemendous motvatrs and allow employees to see stronger canton between the peslorance and organizational perfomance, they are cleatiy no for every onganizatin. Caluralbavies, bot isiutonl and na fal cam act as impeinent to the cea implementation of performance based yp. Japan comgmerte Fajs sa de fine Japanese nganation tn ple nent sic cempetatio pl. Has as + breaeagh and revlonary when Bs indie the progr ied Ue i fapaexe ongacaons wo abandon archaic py sstems based alnst ene ga ene fae of performance based plans Aller gh years lowes, Fj abandoned the progr, calling it “awed” and poor fc set Japan cue tha rapes av reir kay and senior, tn addon, «0 ‘isin a poste singe, empnes ng keep dhe perfomance sundae under {he pla as he a6 pele fr fer of fling stort ad being embarrased, fanvaion vss sill av etployees rested cage. Tearing Gt results might not accompany te change Shite py ystems hve been izes in papain vce yar bcs of| the cae of measirement of my species bocane sills eating tothe organs ston’ sera canbe ren etd Silltned py ils btn the empl’ aopensation on the acpsion and mastery oie ted on the jl, Skil pay Programs ot only ge eimplones incentives eo learn new sil or upgrade exiting ‘nes, but they also prowove Dei for the oxganizaon. They can ea be Hed i einng programs ad the srsege needs fee ongaiztion, Daring the tte Ding proces the organization must determine which kinds of employee kil are nose cncal wo 4 abjectnes and fare siccess Then, the organiation must either tine employee with these sills with the capa olan these sil, Despite thee popularity, ailaed py systems ae nt without probes. Employers should remermber that the sequistion of ails and niproned performance are no difer fenthings. Skil bed py stein ate oft hte oa the ae3uision of lwo sad to whether the explojee has sicily transfered the traning tthe work 491a9 Part 2 Implementation of Statgic Hunan Resource Management etn or achieved any ress from the shillbaed waiing. In a apily changing work Cmironment, skill otolecence may res in pay system that cempensaes employers for presiouly learned ils that Have become oadated and are no longer of vale th employer. Most employees would find i unfair de ongaization to reduce compen tn because no longer ves cern employe sil, parca i the organization hs not provided opportunites for employees wo upgrade ther skill; Employers need to implement sila pay plans very exeilly and with a clear seme of what the faire ight oll for how work performed Tearessed pay plans area Becoming ie prewaenin may ganas. Wit none wink and responsi bring centered anu sellmanaged teas, sich compen ‘stom alas provide incentives wo enperate and be ore Hee in working wih others in aching group and organiatinal objectives Adin teased py sen cca be les time-consuming than adminsucring indvidual reward gsems. However teamed pay plane nay impact group dames and ea avers pact a intensiy ‘onic within unt, particulary earn members fel that cern teammates are not Shing te shave of the work ad Ising up thir responsi uv the een. Sach fiveriders can ao grealy dantage morse ov enti or the pln” Teane hase ay plans presenta hey strategie sae for oxganizations in determining the percentage Fos emplayee compensation thts he Bae on tsar ater haa nial peifornsanes- Goscqucy, eam-ased pay las may rei the orig a en thon of superior, patie in the enay stages i inplementaion “eared pay sptens ned 4 decent deciicm mang pea chat gives the team some autonomy and reponiliyn order to be succes they abo need to he ted wo specie measures of accounabil sy and vel. To the extem that they feser Unheaby competion and confit among differnt teams within an onganiation, they {an line adverse elec on ereral perfrmance. Athougl teambazed pay plans sy make tense given te changing mature of work and the enephass on project teams and ‘groups this penal mp en ba nite and trata elation and pe: formance nce to be aseewed before the plan implemented. Despite the chang ture of job design, technology, and work seins, certain canton’ ay fd that thei cltre does noe suppor the team-based pay concept Tean-based pay plans rms be plemented within dhe contest an organi uae tha values sharing And elaboration, cooperation, and upen communication, ‘Wie many eniploers eae the eal ole that elfecie teams playin the sucess ‘oftheir organo, few have been ale wo implement compeaaton sens Gat ‘courage and reward tear ff. The few hat Fave done sc find hat hee estesia ih fence he success of sch pla, Fs there has wo be ig level communication wit ‘eruponecs regarding the des ofthe pla. Second, empomees sould have oie and provide np nt the design and mplesnenttion ode pan. Thin, team weber hee 9 fet thatthe stem fairand equitable." Team-Based Pay at Phelps Dodge Peenir based Profs Oodge has 2 conpermining opsration that employs more tan 4200 indduale at sir Nodh Arcscan locations. When the employees de- Cited to de-cely tha exe labor union, management saw agen oppatuniy to oeate 2 more inconive-based compansatn sytem she nw plan WvOwes & ‘se eal, with bonuses avarded or necting terraced gols st fora specie Ikeanon or mine, Goals are set by team menbers, ard the compensation constantly being evaluated through tho ‘eoabcck provides ay enployees™ Legal Issues in Compensation _ “Those designing compensition sens must ao bear in ind eat compensation ia condivon ol employnent covered der Tie VIE of the Gil igs Act of 1964, The ‘lesgn of any compensation system tht intentionally or unintentionally dscriminatesChapter 11 Compensation agaist any protected cls cn ube the organization to es acon. The Equa ay ‘Aco 1958 sk arly eles compensation and must be eonsered when desig ingand acminsterng compensation programs. These fs were de in Chap 7. ceo the yay ft we ted hat has Deen Hie ae Beas and women ae olen temple nthe name jobs ad heaton res equal pay for cal work "To combat ths Hoan the concep of cmpuabe moth has etn advanced” Compare worth ares tht the sta of ea pay Yor eal srerk sho be replated with the dtr xl oy fr eee cae a cupatins hgh Pecoming more gendered, ae i some gee sepa, won and men gery dot the se aa te sue ok in ou econ, so the Ea Pay Act dace sing eee he he ees tha tronen rece rive en Rc exunp, n amichse, en Wight be working, tm the loading dock and worn might he ering the ike Men inary e fast more bt the Equal Py Act cant aes hs bevae the joe xing perormed By men and women ate not the same Comparable worth would argue ht he work e- ing done nthe eice ooking, clr sod tear as meh vale tnd i inpotnt wo the onion a that being done onthe lading dock and thou be compensated sin. Comparable of to ret oy, wees ress ey id pte He cane the bck fete, wre at hat wend sap a8 exe ob tale. Gender seretping feral jo eee inal th ga Fer exgmple the maori of schol parr element sco), se turns, an fight senda ae Tema. AN he cours have be Sp {hei to arguments for comparable worth shy have ren exremey reactant ae Seton becae the dotine falls tide essing fedrae n aion, the vale of arturo) ver dict obey determine al prone eal ena Co Parable worth may be our says best hope for anon the ged up ge ‘hich women content have en nde cara 73 cents on he lao wh snen carn” Thin pray tegen hl the a! ay Act dn Ine exons that allow gene hand pay diferent to ext. Comparable wrth, heer, Bley senaia an unenforceable ea wl la ave posed tat pia addr i Eun pay for ep work all the stand the ons have cfd wo manufactre sndands and plc thi ave note kee (ne anal a hat inp conpetsibn he Fi Lat Suda Ac of 1888 (F131) ester ns genre ole and he se fd labor. exempi rm minima wage and verte rein retain op oem ployee (manage, asta, side lxpeple at oleionab) wh eee Tdepent gen carping ut di te Hwee there ha een gi Can comtoery concerning wets cera ys fale pan mgr cpl ces and independent contacs are Kgl considered employes and/or covered tide the FLSA. As wonton cope slang contin t evel, thie ctl equi the court to ree sry of te keg sat of ch nota Employes he imrin, canpanin that cphy tha wre il hae to exec {ion when desing campeon progr wetnire at he a "The FUSA hr toed stem pre for cert een ee Ren sex wien and pa! ng before ou econ cane tac ees ed $n sformatio technology, Cong wx uw stipe many of the changes tit ould ee pice relate othe nate of jn wrk a oareatonal ie Prolene ve aren becuse of he agua regarding piv coed der he ac as erefoe eg foronerine pln espns, hee hae ben 4 "umber of highrise that ve een jr pats ye Pier tn 200, RaoStack ete cas acon ist fo $80 lt tha wa led by manager who chimed that they were clad yxopery der thet a a tempt to sid paying them overtime Ser semen were ose the sane Year by Starck $16 mln), ie Aid (52 wi) al aie Det (ew separate {es sett for $85 millon and §27 milion Whe the US. Deparment of Cabo 493494 Part 2 Implementation af Strategie Human Resour Management les emphayess comprehensive FLSA compliance asitance progam, much confusion sillexsts nd voit continue w beled in 2006, Congress amended the FLSA to provide some addin claiation a 1 hich employee ae exempt fom it provisions. Under the reied FLSA standards, fn employe i exempt from FLSA coverage i he or she i aid 2 minimum salary of ‘165 per neck, has pracy dies that involve “management,” astomariy overses a Tene tw employes nl har the authority wo hive and fe or prvi recommendations for hing un fring This standard of hiring/firing decision-making or patipation has ‘yee esa in determining FLSA exempt sats Executive Compensation ‘One imporantand controversial area of compensation concern hey rected by execu tives. Thee eno real erage oan fo execute compensation largely because of i ferences betcen indies aswel a ste ongaiations widhina given industry. The demand or olemed CEOsand other chief fiero can generate els for shareholders ‘fen resis insure compensation packages. Typically, a seior execute rece ‘rmore thas 20 percent of anal compensation in he Fro, with he remainder ‘rly side twee annul (0 percent) and longer (percent incentives aeeutne compensation has been eitczed fo is excesvenens well 3 forthe fet that i olen melted 1 aha performance. In IBD, the average CEO nade {2 tines the acrage hourly worker's py. by the yea 200, average CEO pay ad roma {to 581 times the average hourly worker's pay Recent corporate acounting sca in Imhich exceuines reaped milions of dallas in compensation whie dei erganiztins tre yoing bankrupt has dra even moe attention io execute empensaion. The ls fon learned from the Enron scandal that heasy reliance on stack options a pi of {cect compensation can create a culture obsessed with improving tock performance tthe expense of al other concerns Nonetheless, sock gptions “eman a Key compo nent of exceuie compensation packages. ‘Sock options provide employees with the opportuni to purchase shares at some fa sue dae, at a pice thats determined a the time the options ae awarded, They are designed to foes employee atention on erating shareholder va, and in doing s, employes are abo able to eeapthe benefits of the organization's Enancal performance Tevet. sock opins can prompt excetines o engage in crea accounting practices in which reenuts and prota are aetiidaly inated, ding up the value ofthe Sock andthe options. ln addon, stock option are deductible an corporate income taxes depice the fact ha they do not hae to be reported as expenses dhe organi t's anal pores ‘Several ange ganizations inching Cea ola and Bank One Corp however, have shanti decided in expense sock options offered to employees. Designed o xs com enn in the estes communi i Hight oF dhe ecent accouing sandals, this move ‘nil mae caning appeat ver. Melly, this may ede the wea Stock options, partic tly among rankand ile employers, a tock opdons and cash il cost dhe onganiza tion an idenial amount. With tock options requsig moe tine and recontheeping fo the organization and oversight by employees, both employers and employees might find spe equnalent ish compenextion more efit that suck opons. Regardless “te decons tha iil onguzations wake regarding the ure of stock options, those rganzations dat continue t offer stock opons to execuis a5 wells othe em ployee il non ind ther compensation practices more cael serusnized by tho fous the organization, ‘A number of employers have been moving aay rom stock optons and nsica com pensting employes, purteuarly executives, with sock grants Siok gras require thatthe omunzaon meet spec Financial you, such asa gives ctu on capital oF fenum o set as condition of thei Sswance”A dhe sie tie that organizations five been moving away foun sock options, dese fas been a masked trend in privatelyChapter 11 Compensation held organizations olering eqiy stakes 2 part of execute compensation packages Designed largely to allow these privately eld onguniztions wo cemmpte ith publicly lik engin fr execute talent, sich plana ae now fered y 48 percet of pe ‘ate empyers A vce ty Irom PricewaterseCoopers fe thatthe ype es Pension package for execuives at the fskestrowing privately held snaniations enerally const of 4 pete hase sary, 16 percent anil perforrnce incentives fn 5 percent rach of longer cash and equity sed incenties The suney further Fan eel oar preyed erp aig ineeasing perenne exec tue compensation om performance av hingersern messes They tr peste real among exces a sme 6 wey 9 the rari, In 2, Cac Cala snnenicel raaly new pas for det compen ‘ion. Type dear compensitio cles cn l/r sic ops by Cake’s ca, ‘hs amounted to $5000 had $75,000 apis aaa. However the ne plan, al director competion was to be perlormanctaeed, Directors wold wecete onal SIZHO00 option packages only the engniaton pated anal compound froth carinys per aare of & percent Cokes tha neces step it Fh of the fice thatthe ganization had bee sagging Finacial for ber of yeas, 8 sas ofits flapped sipped an sexsi ho noncanne dinhs p duced mised rela” secu cunpension decisions are stung ee of tess imptan ole dec sone mad wy ers the dea race, lee execs ly cee the supply of suc ae winery ac yer CEO prtons, ngiations eed neatly strategize cr excentive cman packages Reading 113 "Navee ing Sharer Influence: Gampemation Pats andthe Shareholder Approval Broes examines how management atlemps to work in undem wih shart of pally held organizations o develop competi and eecious compensation pla. Conclusion Organizations face a mumber of key strategic ise in eting tei compensation poicies and programs. These ince capernaton eave to the market, the lnc betwee Fixed al varsble compensation slain onde wes team-enel py, the ap propriate mix of fine and sonfianeil corapenstion and developing ore ‘oteffectie program tht rel in high perfomance I addon to thee tate bes the ft pace of change in our sacity ad the comespunding ace for omgaations to resp in er torent compe create ‘halls forall HR pregrans Ft parity for competion. Pratl re te than at anytime ia the pas, organizations need w eat Ui eases po grams within the context oftheir corporate stategy al specie HR strategy to ene {hat they are consent wih the necessary performance memes required by the ong hiraion, very rig compensation sere iii the Aesiy nese by ra em \enporary ongaizaten's compete strategies, 0 no supe to ces Heit bring incomorated into compensation stems "AC these tine, organizatons wishing to be more inoraine may ned walter thei “compensation sem to promote more intapreneril Belaor that ecrages en Ployces to acta riktakng eneprencurs. Sina, snuller entrepreneurial organi Tons wil usualy ced diferent compensation sens dn thet Inger caumerpute ‘Oxjasizaions aking a atratgie appre camnpenstn ree the ned fr creat to meet strategic objectives. Also within « given onganzaton, ilferent compensation programs may be needed for dierent divisions, departments, ue grape of employees {Compensation stems must grow and evoke in te sane manera the gunn to site chat what is acl being rewarded i consstent wi the oegarzation’s suatgic objectives. This ink between srstegy and compen een fr ensring opt pevfonnance 495,496 Part? Implesentaton of Strategie Haman Resnoroe Management 1. Does mney matte employees? Why or why not? 2. Why shoud compenon stems be equ? How can an organizaten deagn at equible compensation ‘ston? 3 Compare and conta he fab raat methods. Gran exe fan organzaton in whch ocho the fou mathads might role sh opt tte 4. Oscues the pros and cons of emplyee pay being fed veous vale ar dependant on prtrmance How mght sich dec os pact recruting, mative ‘on ad tenon? 5. Anayae your curant pb responsbiites, Determine water fe metiod 3p which you are congensited & appropae, 6. & performance based ray effec? Why or wy nat? Hew can geromanc based pay syste be betlor designed fo ensue cptma esis? Reading 11.4 How have reward systems ewhed in organizations role to the six tends presented in the reading? 1 these tends make sense for organaatons puss ing every nd of satogy? Reading 11.2 \Weat are the advantagas and ésadantages of agar zonal pokes thal mandate gay secrecy? Consder ths queston fromthe persecive of manages loys and ous spay Socecy 2 good practon? Reading 11.3 What saleges can executives use to infenco own sez on compensation polises and practices? What finds of faraton should shireholers see when onedering 4 groposed compensation package fr rceutves? 1. Beefy inten an evga nhs 2 hee 205, 20s, 40s, 60s, £06, and 705. Dtornine what motvates workers fom dferert generat and design con ‘enaation plane foreach geerton that woul est i high petormance 2. i salary compression an teue at your colege or ui verily? Wy wate ds flocs end how sit being ane trwow adr sktrs dina facuy to gan a sence ofthe exe of he problan how se- fue itis percaved 35 being, and how is being rranagod. Veithe Web ste tp/worasanzcom Ck ons tay tends" and then prepare a al repr on the lt te developments in compansaton practice tthe same Web ta, cick on aay wizard” Selecta [pb calegry an thn determin the megan compen Saton figures for ths pasion n agit cilerent eet fons win he Unted States. Shoud an oganzston that operates io teas terntiocabons py torent Sales foie wot? ls ea of eng a suit filaration for an erpayee wto senses megquiy?READ Key Trends of Chapter 11 Compensation NG he Total Reward System in the 21st Century Hai-Ming Chen and Yi-Hua Hsieh Tda/s organizations operate in anintensay compote lind scape. Duzeg the past 20 yeas, enomous charges hve Cased many compares fo thnk about bel wa of dang busines Theze carges elie nereasng Gaba, thong costs, bearung mare conpetine,meniang the ‘eatity of careny movements, aust the duson of inlormatonandnawtchrelogins anda widespread erghass ‘on quality npronemnt nd aentvenes oad aie Theat factors have combined Io ines campeon and increase the pressing loa maj Wanslomaton organ tne and mage Thi erie descbes he tanson 9 the global envenment and human resource management looks atthe rational eward systems ol the pst and evan ines the recent innovations 9 rewang employees arising ‘rom the changing neds af organizations a compete en vironment hen descbes the basc tends ad evo of the modem sisters from the diensions of bass, method, function frequen, cbt and design. Viewpoint of Strategie HR Management Conpettioygotalaston ad continuous changesin mails ‘2 tctnolgy a he pial easons or he ransom teonof human resource management Basadon econo of compete goal mares, the new Sealege aes for ba ran rezurce management have been defined Ina mae. fae tal echarecozed by the ‘war orale companies fry indusy ave fag 4 fat bv nara and = tang peopl! Tone th canara envtenment the notin of stg haan eure managament has emerged Satege human resource management fcuees on te veal deecion of te xgaiation in pusut aft statad gpals and cijpcves Ierasing the core competecis of the fer, in particular Ruan resources is one ofthe boy ‘omnis the success ofthe fim. The Hea that people Imanagemet canbe a ey soues of sustained compete advantage el or be nlogratin of human esaurce i geen ad busines ti Skatege human resource management encompasses ecions and actors cancaring the raagemant of er loys atl ves the business that are deed tose human esouces management iccludesdamatcaly die tnt views about the naire of rvards, Viewing emloyees 8 perfomance drivers meane inking efferent about ‘shal woul ake to atact keep and engage tering ing discretionary effort onthe Asbusines stale nd peas undego a generatonl Shit ouard syst and he picsopty of pay management rust charge To stact new alent and eta tp pares reward system must aval engloyees fo pom io ways ‘hat corirbuto oa company’s srs esc of is at 2 nation ust dso beeen atrscing tlt fo the comganyandrelaning employes who can eet ie thei fan fo lar resus A raver stem Bat oxy Sieg" the lganziton, oat or prop designed asa number of regetveorganatonalffecs Understanding ‘he rnds in ota evar systems an iglenenting them prop ry iscuc to atacng and kespng letad emplyoes 2rd ‘aces exeouig fganaton sale Gee Exe 1). Factors Influencing the Total Reward System498 Part 2 Key Trends in Total Reward Systems Today organizations se facing changes generated by i ceased competion merges and acquis, sing mar els and changhg eneloyee demagrapics a reen years, because ofthese changes and shi n rgerizationa a gy and the phsophy of human resource management, hundreds of ogamiatons~tian manulacuing concerns and senaes lo govern agences-have develop and ‘opted ne, ralradtonal evar systems. We eatgorze Tevard systems tends in sc dimorsins: bas, a, function, frequeney, objet and design ‘Trend 1: Seniority-Contribution ‘Tha tradtonal ead sles many base on seri or lent of senios Jobs have bn defed i ems of aks. Tats employers haveto perform nara dafned turctons. ‘They need neon defn ls Ths kr of ward systor ar come fo be vewod as an entament and ths isnot ce: fable of rly mabating or rong employee bohanor? To compete in today’s matepiace rong cumbers of corporations are seeking new stalages 2 improve en pee penance sd devogmant The Yew end r= ‘war systems Is Ease on employees’ conioutons, which Inchdes compeency ad ptfamance A conpeteny is & fet of arbutes including sels, kronledge, abies ard be favors. Compelances are those sbules embedded in ‘employees that consti the polental ol ceatng value. propery mata. thy may be transformed into hh pe fomance? Rewarding fer competences means that pay strongi influences ty the congeterces required 10 both preform a rola and nun a curpny.Paioeranco is produ {ity and eccomplhment. Rewarding fo pestmance alps tn ald workers accurate fr spect cojcties and pro ‘ies an incentive for exceeding the abject Today, atone human eserce management es pasze the total eatin othe fe Ioan, enter Prise infomation technology lator have ed to ungraded hits requced in bs tougheat orgarzatons. Because these advantages come Hom buns cx, Uy cannot be related by other organizations. As a rule 2 com pans human or nfelecia capil is indead ts oni tt eure of sustinabl competveadvatage Technotug al fianci taleg ranstcturg and dstrbton capsiies canal be copied, but hus capital caret in egunaatane whore spond Hesblty and product sr important, ward spstems shout nt De sey based 1 tasks but alo geared tava rewarding 2 velopment ofan enpyen’ hls and kaaslodge. An empnyee who becomes more shied becomes move fla. Ar i the fenpoyee becomes more kroiedcoatl, ters isa beter Udestanding of is or hr oe contin fo tre orn ton. Repay changing buses enero mandate thal employees conus upgrade thes st b3se By exp Ting pay to grout Sas and rade, opaiatons fa to madera ther hur assets much 35 toy pga thar physica asset Inplementaton of Strategic Human Resource Management ost exgariaetons vow crpatociscapabiis, sls corsage assets as a source of astanate compotive advantage fr the fem. For exgariaton thal experience ‘apd ecnolagcl change ccmpotert employees wil adapt to these changes, Therefore enpiyes must contra lear new sil, tnowledge, methois and techniques t keep ip he changng enirment Skibaced pay isthe roar Keep employes larry, Sa-baved pay 1e- ‘sds enphyes far keepng pace vi the changing en Fonmenn which he compare operating ‘rgpazaons that us apayrfr competency setup tp cain halt helps them focus tlt on We cee as ass stale. also helps tb recogni te nk betwoon ‘hey hs stotgy and he top prlnnance of ernpiy tex Theor, one of to kay ands ofthe tll reward ‘ptm inthe 21 century tal te basis of the reward sslem has gradual shied from employes seni to utr ‘Trend 2: Simplex-Multiplex ‘he tana! reward meted just 208 money. Homer, peep on or re than uray A pay rae done does fot hav sufcent power fo ralvatewith bm. The adorn ‘evard sje embraces eventing that waked by en- ‘loys in fo employment reins. ‘Succes companies use «pata approach to rewaré ar do etry on just ane cr two mated. Each mothos has adc purpose ad structure to encourage a set of acto or fitides Thee f 0 sgl metod that works in thelong un Success companies fave achaved an algn- trent betwsen what the company reeds to alan wih ts Step and what it neds to renfore ints core values. Revaids are eventing erpojees pacoie to be of vale reutng Fam the emp aymen! estonstip. They pe ‘may ecb cash compensation, bnehs. and ote na ash fos and th work experience Stalag reward pons (obeyed cash langue tain ad edveaonal appt fies, tedesigy, Hele work schedules, stock optons fl ecogiion avards such as eerchandce and tava aneaah rewards suchas ors dey cv, ress cones yrdeenng sizes and automatic teler machines, add ‘oanerce to employes! Sly Hes and engender higher loyal. otcal tame ad obshary aangerants erable nptyoes to elle bares ork ard fai vesporses ft ad emplyers he esas Heil lo Yes00nd to tusese noes, The tll evard stm is defined hereto inde be salar arable pay, dec compensation, xq Sle beets perfomance managenen tiring cree d= ‘elt coaching and abe enplree eta ples Conbrationso variable ray, cognition and celebrtion nd bens are estat a proving atl reward pace fa The evar ol our 1 be ly effec foratact ing and etaning eea-akll empoynes ince tating ‘Seldeselepment opportuni flexbleSchadulas and ec fgnion vals that send a moe caring massage to amples (soe Eat 2,Components of Total Reward System exnieit The concep ofthe conlomporry reward syst 6 cm posed of four components tal ay, atacve variate pay ents and ecognton and ceebrabon. | lndidal grow: prong th ting fr workers to {0 and bam ding thr hoe cane. 2 Postve workglce: brandieg you agaiatin 50 poeple sexed about coming lo wor, 3. Competing Fut: making your company nue lac: Ine fo he people you need Dilerent remard methads a thay to have iternt ‘iets on ocgancatonal outcomes. spt appropriate retro wi enable employes to ever atracte and rele van ewards at a sstanate cost ad help ensure tht en slojos perce fey are rein sapepriate value from the company m exchange fr ther cantons fos suc cass. A mote malig fenadng method another Wend ‘Trend 3: Extrinsie-Intrinsie nthe mi-1950s tho total rovard syst was a encept on the far hoon, bu now fms the bai ofthe company risson forthe ist century Nowadays te urton of he toa-evars system has bah exes andinkns value be cause of he vanous rewaed methods. A vadional wards sjslam mest likey apes fnancal payment ard empha Stas th exinscfuncban Hower, he new ond af the tol rewad system has grata ted To an ininse {ocus on incentive and mob. Reward pracieas play imgotant role mcivating crcioyas o prt. Most rasaachars ago tha reward aces logcal sare a5 tats in shang the behav employees and moivaing tham to parr at higher leek ana the use of pope rewards can culate Chapter 1 Compensation 499) improved fer pestomance atte organizations ive? Fr Ihave, ering on fakes pce through etal pos the and negate reinforcement. he rigt behavior coud be encouraged trough the use of rewards and prise’ An effective rewards system haps guide and spre the work force and prove a specie mohating deco I can ako ay 2 mor olen strulatig fue performance. ‘Organs sod managers consstenby acknowledge ‘rewards and recognition 35 an important element in moat ing adil employees haps to matvato employees 1 ‘chow the is and goals and wetorce the ky oes and Uohavors bat are needed fr a accessfl xganiaton AN integrated reward syst resus the atractn ad reton- ton of cal alent increases eganatens commitment, encourages employees lo increase capable end mot ‘ates behave the higyprtrmence ‘An elective reward systom ston a reward but also ‘acenive and mation, Tercera, wo can conc that the end the olal-ewatd ston in nce, hs reachod beyond extinscto ining factor. ‘Trend 4: Periodic-Instantaneous Most of te rational ard tes place atthe end ofthe year or twee a year However, these day, rewards occu ‘stantnaousybacause of the canénueusy changing en tenment and vans reward meio ‘A reward sstom can bea porertl mtvationa tot or employees but ony #118 anplenened corecty and i a temo fashion A reward system is most ffectne when en yess can sea how they contBute fo botionine ests {ed how th contro wil be recognaed and renardod ‘meray. oo delored rend inses most of ts power. Instat ofthe tadanal rem being fed amour each anh er yar, @groving proportion shoud become fomtingant on partrmance, The total-enard system that alles Frequent appoites for awards, such 35 week, Imonthy or quae, ceats fregentcppotunis Iota ‘ith employees abou thai petomance and cela tat ‘esis Employees can see more mmedatay how thai e fers uence resis. I actualy doers stong vale to erpoyess tough saverl rear’ tool mstantngousy “Today's business enounen’ demands reward state ges that point out emgloyee vas and contrbuton atthe fight moment, For hunan resource management pct tener, ere, Demos essen oaok at he ova business needs and o dantly Yow oftan the renard can sist in guiing and changing ergloye behaviors tra wil lead to long tom perormanoe bay case, periods rea ing is vot able fo satly bath enployoos and employers! eds. Rewards fered nstanlaeausy can bring the max mum ecu and unton er egaszatons ‘Trend 5: Unitary-Differential Traditonal reward systems have only one kind of progam that sapped o all employees athe ganization fh aber words, the practce objet ofthe reward system unan500 Part? However, in today compete envroament, mary eran atone se begnning to aFFropatey vow employee e- wards as an imgrtent vest ther than one of thoi largest expenses Organics cary understand tha hey rust otek evar and rela dilernt hinds of employes. They vst aso balance the ned fer diferent tent with thor company'sneed to emsin corpetiveres. Thal & r= ‘wad ystems ust moet the needs of he xganzaton and the neode of he employee, Therelore the race abject shouldbe diferent for tflorent rd to's Every raton & igo, and ne approach to reward: ing and mating emplayeos does nt Hi all ganzabos. Ineatan sans, alerts wl grove fo be ina cor ary’ eat interest, and in cher scenarios thay cul be @ oor choice. Als, esch employs has different characters tec needs and aities fat can best be mot wth dernt types of rewards Ii important to ty to custoie the ‘pons 1 suit he personaly and nlerests of each per foar to make he revde mote meanagla Organzatons should ge employees sevra! options fa: which choose to-enure the reward vaio The erento i sponse for groweg eer 00 senableegporusty and alt tol necessary for enpioy es to pafor wal Superior companies use a varaly of {eenques to meets empojees ard achive ther gan zatonal goals. n beet, is essai hat renad systems {ake inf aco othe enployes goals an metratons. The pracso abt ofthe maden read stem is deren: ti meaning tat organzaenal revard ans Wl way de erdng on {pes of pions and indica empyees Spoil charac The wile reward stam ako gies empl he exit to cat lforent combina ore wade fo meet dial emplyee now ‘Trend 6: Independent-Coordinate Inthe past reward stars he a stong tke wih org rizatonal gal and conor Inthe easing capetine frakelpce, damatcaly dierent vaws have covloped shout the nature of human resource marageret. The ew ton that pase management canbe a key source of sus+ toned compative advantage cals for he tegaton of hu tran rasuorae naraganenl ad busnas satay, Meare, tolalenard seme are na lenge indopndeat in designing and impkmentg the broader tratey. On the cont ey trust bo cordhatod with he ogpnaatnnal mein an ‘es, and compete anospbare. Revising oil fewad prozans and assessing the efec: theness of he aheward aalagy aed stuctre m mack tse neds etic The tot-everd satay hou a Sure tal he rend arena matches the sage needs Of the business and tat tha mecha of eft oust Sucre reinflore the desire crpxe cure ard manage ant abl. This begins with a aticuaton af he companys ‘res an sites stategjos. Tha tll rewar satay mus be clear about where, when ant how the Inks bewees ‘snes gol rd cowards saul and shoul not be ae Implementation of Strategic Human Resour Management Its important for any manager who reieing the or garizatn'scurentrevardspstem fist to conser the kay ‘results and behaviors thatthe organaiton needs fo be suc= essul A trough rethinking and restructuring of renard land recognition paces thal ate aloe wih new og ‘ate goals and cute wil ge crmpaias the focueed ‘energy they rood to suoned in alrite One c- ‘al element designing and mplemaning ung vers system is to cao oor o The uses stitogy, ta le and eat of the xgaizaton The elfectreness of eating an algnent between these organizational systons has boon clear exalted in he practitoner and acs eric Hort. 2 typical way to approach sage human sesouce managements o deine ia rg he concept of bust ress stegy and oman resource anagerant. Thre ‘rust bea ek beacon a fen’ statgy and he woe of human ezowoes People managem can bea key source of sustaned conpeliveadvaniage, and ft reward 95° tems ate one eical part of the hun resource manage ‘ment Therelore oganzatana nods and satis should te ude in desiging and tphmentig te coward 5 tem. Sategiay nkng ar coordndzg te ve, ssn, and goal of he organization wile managing reward system ‘estefan conlempay creanstioes. Significance of the Strategic Total-Reward System Recent devetopments have made it mare important han ‘re for companies to make sua thay have a sratogi ho {ste andintgrated approach to cambensabon. To compete ina tough arena, organiza now more than eve need tha support ofan ile, lec 2nd motivated werk force. The organization's primary abet in using Saag teanids is wore efecreress snd nat smal to sop people fom leaving tut lo have thom bocomo engaged frombers of a produce and enegied werforce Rapid change creates the enance for some na die tions, Some compares wl ake asntage of tis oppor tony, and come wil miss the choice and faoze whore they ave or even taka some backward step. But its 3 change for toward dsigar: to hire. A wed-designed trad system must motte, direct and educate. rust Keep people focus on cunt abjctves while preparing ‘hm fr future challenges Most of alt must ffecvely an the intrest of key stakehaer groups: custorars, ‘owners and employes. When the stem is well dosgned ndiplemented, treats excelent ptcames foal sake holders. Human tesnrca manage’ need 12 erae hat ‘het rovard sytem designed to suport the wear of key busiass sucess fats, bal the sstom delves ‘Sharetoler value and tat they dar erased valu to empnjees. Inthe 2st centr echlogca pola regulatory de nageapic and economic forces ulaste i the past al Cone to e#6R pressures on onanuains to change fonese thet sivval and euccesk. iting and sustaining successful change requ consieable thought ard action on lated sippoive srs and aystems. Organizations fd ther eibeystims inching cites! huraresosrce Iaragorentstens have lo become icseasingly sale {9 fo sowed n an enerment thal i in const ha. hat furcboal ard uni sates must be lgned with eral im sategy to enhance erganzatona eleceness ‘Sategc reward stems~an neal acpect of man Source managenent-at tal ensuing desed employen esiaors and etnanced em pstomanes NMarketng i the art and scarce of iking the product producers of sence powders wih exsing and potential fustomess Trough posing, markers rete an nage fora parila tand or poate oduct and that mage Is designed fo resonate wth the predetermined target marke. The concept of tll ear i about he positoring an or ‘ganization asses for employe atacton relenton ad Iovaon, As marketers of@ companys olalvenard sat fy, Pemaresouce piclessonds are atemgtg o create fn rage ove hat lta and engage ensieg and potential engoyers Trasional reward ystems ae ath of he past Toa renard sysioms i todays word must be aust 0 tat they se dosey algned wih ar organeaor's changing strategies and dsigtad to renaré exemply petlrmence Understanding te ends explaned here wt hep managers to design aid inglerent arena -ystem stag tha wll satsly employees ranger an sharers an sengh enonpatrs ue Conclusion ary compares raze hat the best people withthe most import sis wor or ave than pap. Te est pele otk for conpanies sh a cmpaing flue t fly, paz the chance fo grow andi place at flrs a pos le work experince and ital pay cdg base pay be fits incentves zd recognition To creale an flaca ‘evar stem, compares need fo understand where thar ‘ear dolare ate beng alocatd The conpacis thst 60 the best obo inking rewards o buses resus and er oye perarmance to atacand ean the best workers nile the ones best postanad fr fue sucess, This ace views the alan syste fom ex deve lon: basis meth fein pnt, eit an desi och denon has tas ends and tants because of the repay changing eneonment, Exit 3 summarzes the condison of hs area Accoring to Mls an6 Son, ogenatons dlr fom ‘one sate bythe buses ates hey parun, Organea fons raj be prospctors or deena depandng on thi Chapter 11 Compensation 501 Koy Trends of the Total Reward [shceemattatas Cor From ve Conran Muller “Seoniy Simple Gane Pedic Method Freeney Object Design nstananeous Unitary Dire Independent — Coordinate the twaness stale, xganzaton suc and reward system must gn wth oe ano Organizations a boing ‘oes te atere mor than he composi tem ofthe al they tetiove Ham py an evar dolar The best ox eves ate anes opp the pacts of bhers Rather, ‘hay are boing a prattens al becomanes nd deer ing how atecive cr wafacbe those pracices woud be. For har sesoce managers devlpng and execuinga prac a ill-eward stom bat ads ale fo the business isa trea ne Save Cont nl eis i. 58 (5), Nv-De 2008, ea tg poms oe ws B20] What tt anda ot Ky ad ‘Srperon Canpratn an Sot gener, 70) eo 2.1193) Steg en espn rt at ‘ting oth no Consens ad Boa Banagenan Taps ‘Kia TS (008 Plomarc app aces ide Homan Sp Mapa 26, 227 45 9.57 J 2001 Lewtags enon evs de pro ‘ins Hse Easy GL SEIS 5 Mon Sala, A, Toa 5, Whe, CS. (2008, ‘eens a ranean parce Ja ae Und [Shes A congtton Componatin ns Grete ene. 3 6 Cacops (1900 Using tant end and cog ‘Spartan Deratment na 20481 322-3. za A 2ON0, Cag on eo ego ago masse evan creo sta Engen Bote Mongar 1710 38-0, es Saw CC. (188) Dagny sage haran Ieaboe sites Opaneaor Dp 12, 98-2.502 Pare 2 Implementation of Swatesie Human Resoure Management READING Exposing Pay Secrecy Adrienne Colella, Ramona L. Paetzold, Asghar ‘Zardkoohi and Michael J. Wesson ee EON AEE 2 PSE ETE Pay ocr it cute issue a mary oration at ‘4 contoveial one nour soe: However, tha Fas boon Tiesto resco ti top We pa oats this void by exposing the compieiy of py secrecy ax 2 co ‘uct Wht ar fs cots and Bnei? What ators aflcr tha Ink between py Searcy and he ea which tis ‘itor Bono? Th ale eves he complet fo recy and wre hope, gets ioas for mc ew seach jn tho bead manapemert fel, Pay secrecy in gains fs 4 tents sue a has been fora lng tie. Take, for arama the flowing remoran that ware exchanged October of 1918: POLICY MEMORANDUM (October 14, 1919) Forbidding Discussion among Employees of Salary Received It has been the poly of tho erganizain to base sala on the valve of sevices rendered, We have, hevole, a org estate rule tha the sa fy question a conidial mate botween the or ‘anczaton andthe nda Its abviousy important tat amployoes ve up 10 this ue inorder fo avord mvidous comparison and Gssatsacton Recently several cases have come 1 the notice of management where employees have discussed the sal questan among thems This memorandum shoud sere a8 2 warning that anyone who beats his rte inthe ature lb > Stanly discharged. POLICY MEMORANDUM (October 15, 1919) Concerning the Forbidding of Discussion among Employees We emphatcaly resent both to pot and working of your pley memorandum of October 14. We re ent bang f8 wha! we msy and what thscuss, ad we protostagaine® the spit oF pty regulation which has made possible the sending fut of such an edict (Robert Bancioy, cited in ‘Steels, 1975: 102-109) ‘The autors of the second menocandue than walked acund the ofice wih sgn slang thai salis hangng Irom tie recs, or hr eagneaten oe up spy so cacy pale. [bs ancodote dserbes the marageralicapit toned 93) at a magazine whore hunorst Kabert Bercy vee 1919. Af Fo iy i iscomorkers {wy manne in in to wie ie discontent with the iraguare’s pay saatcy ples, one phage diferent tom tow you or wewauld have chosen ta epand pay sory ise temans a sores contentious Ese organs odo. For example Many Crag, an asitant cook fran Ohio using home, was fred i 1387 alor dscussng he pay with her eonodkers.Athough the sag home had tld her never fo discus pay sc as Ic avad “hard foeings” ‘among employees, she vad he manda aftr ting oer nares’ complains of being shvtchanged on cv tine or not rceiing a pomized rae, A federal appa ‘out affred the National Labor Raion Boar’ (NLRB) {etrmiaton tt he nsiog hare td to tae with boc wages (MLR x Man Stat Trace Coit, 2000), Inhitor tots us that there must be datemens owing from pay secrecy. Whats the big deal sbout Row pay struts #8 are not supposed Krom about i? Wy ‘Sov egenizaon tating ue 96 thugh we cannot handle Fnowledge of abs pay? What four pay reflects egal crninaton? And we cannot deerme what py lees ‘ee pss wouldnt pay serey actualy demptvate us 59 {hat ow perrmance lee wold Be expectod to drop? iach the ned empirical research Ras shown ta p27 acer leads to employee destlacon and low motraton (Go, Brough 1982; Furl &. Jenn, 972) Inthe seany Ccompansaon leratureaessing Fay seen, resets figue, 1 gpneral al pay sacocy ba for organiatens ‘dso demonstatng lowered matiaton (Bartol & Marin 1989; Laver, 190Gb, 1967; Lowenthal Korum & Fr 1890 Mikoich& Andarsoy, 1972) Ths, he sat of en peal krouldge conte to suggest thst pay cenisregateor bah ads and xaos Fata dence o he agate ces of py secrecy nce being viewed 353 way fxorganatons ade py dscmnaion {ac England recent posse elton poiting eng ee who sic ay dsamaon feuded py ‘oman ton he peor (GBC News, 2008) 5: Gesing 3 growing awareness hal ay ery mayb csly {psacely by coreting Scminsin pacs= ower cert albes ard paces suggest tha tere may benef aspects pay sce Fisk saves ailing how peop Tet about pay secrecy indicate thal the majorly of US. wakes ar toro (Heron ‘Sin, 203 Wah 2000 Fatemore, an organs "somo sone Fra py sete) Employer suneys {Gatin Gomer tj, 1085 Fmetcom Sane, 2001 and ‘neat tao, Papp, 2001 ah, 200 eae al came lamas sec proaetin many ana, esto potent git (eg, Fedcsabrg ls sd ir, 97: NURS va Terace Cate, 2000 Tse dene sees to suggest Mat nual enplyes snd many rsa nd gy sere sci a deat “hous tesco esearch of to 1960s ned 1070s (eg, Fuel & Jelena 1978 Lr, 19858 1967 Inkoneh & Anderson 1972) seems oa us wih on view of py sesc- tal poses csts to mart Becausa, among oer hing indica enoyees sho, ‘want thers har ton no tly mestton tat we we anu of sce Ben fo deter wheter Here try als be berets lo organzabrs. No egaatoral Solr hve inesigated how nil demande ad gzatna paces can conte to beat cho ith ths dated aeadene knowledge. ints tie we dois te aparenty onan po sons abot py sere) and ge at ee a Spe ser to te ueson ol what pay sea bene tr etme! fonds ond ermnsaona tos, we feat ate fies of pay secey depend en aval of {oct thatendordsrtmes robe or of bono Cr plyesandomplyes andor tes ost Troupe forse of cr eeassen, ws earns agian Based on Iarageer econ pychotgy, and cl pape thes oka he lof poy sce inoue ad sg gest avs fuer hd Os trata ga o eapen the dsasson of gay secey in xgenabns shat ret pte warm ho me ca be errs We Rt eno {elnino py sco. What Is Pay Secrecy? [Ahough Bore is no one destin of pay scent can ‘imply be sewed a a Yeshition ofthe mount of nlm ‘an employees ae proved about what otters are pid. a practice, however, pay sacecy can became quite cones. Fs ther isthe Save of arab of ntamaton An ex yer may keep pay nloraton secret by never pring fo its pubicaton x release. Second, the employer may rastict the type of pay infomation wade aval, For Chapter 11 Campensation 503 angle may coos to poe cet sgpegt ior alan shut py, suchas py veges nd’ aoe poy ‘meen but fal ge preoke wdiatove! infomation {bout employes Thich employe may rene! he a tern whepy oration desea Ft examp, {he employer ay ncorage sora roms agaist S05" '9 py even pay rman occlu sa file ths cae he employe may acy Beaton 1 impose heavy sanctions against emplyes who disclose oy engage decrsore ao "he tad! vee for Sexson ofpy-the cone pensation Hetie-entes sora densons of pay Payee poy sete, the basso pay, nd te frm of pareve Gert & Res 2005) Although py e165 can Tange ass bese varus dmesons etal ous tas boon pyle, bw erage py acs bs erat & Rye, 2003) Because we arsed ‘anc he dszsson about ay screy as a gone con- $Muc ad tense we ab da wa! ousares {mcr haan resource (HR fous bat intra 1 te fr 2 ch ade arc, fos on aye Scns al aa he completes of ompenston 57 tems hr other words, hen we speak of py sry, re tang stout th lak of eration tat emptor have about ie lve of aber employes pay me eganatn ‘ihaugh mach por esearch a careainted ay Se acy as akerroting we aie at tis best undoes alg caninus Ts for vs par sey anced {srepesering fe aunt of ration bul pay ate {Wempoyoos Baro (1082) ws the Wal nt at 5 4 contnuum wen he lees to aarges of how steer txts have vying es of pay See wh the mast seat anchor bang resend by ogantons 2 chro taraon rowel oenpoees be tan ther oon py a slay eres. Thee oro ast oper scores aan woe omston souk “pes poy ls and erases fern eae a ahi oat exposes. We base of vow on Barus. 285to ve ase Dal ary cosa net y= Cray become moe exene spy Bocas mere et rahe aime Wrought el oganaaons we raking god lath eos to pov equal anpersaten {os at congersaton aczrty fees an a's Contato foe orinaton, haere Pa s detained tens aqui 9 ute in Be oye fe boo, we recog Hal erpljed! ews on wher thy rcee pay at sf may deve om ose of he gabon Thus. ow datsson of py sce wi re Hey 0 be perceptions tetas ne rn of ples Why Is Pay Secrecy Interesting? Based on eae discussion we fad pay secrecy intersting cause bust fas the patrtal apoyo mary poo fle scioss pos oganizatcns, and indusies (Babin & GomeeMsja, 1985 Heron Sure, 2001). Sace pay s2cry rfacts 2 ck of iomaton, ono way of504 Pact? concephialaing psy secrecy i in tems of pay uncetay Humane ae general motte to recae nosy othe Alec hat 286 rm (Li & var den Bos, 200) an, thos canbe expected to engage na arty of behas 35 @ rmeersofebmiaing redueng. ot aerwise coreg wih pay ‘cesta par, et of cage bases forms: tin processing ae known fo ret when odgmerts ust be made under unceily (Kahne & Tork, 1973) Ths, the poste breath of appcabn of pay sae lcs i riedatelyrezascentversasues aboutteeseio which US employees ae making les han cial descions about jobs and carer choces and what the impact mat be on Dmerican sey hough the ave to sucha questions beyond he sop ef his ari re vette scons ftton enkaners cur ntretin nrg about pay crc). Adon, part of tho fazcnatng character of thes topic stem fom the fat thal sata new canoe bu ae, fone of continuing debe without my insights oer the years For exargla, pay socecy was 2 major dficly rund the te ofthe pssage of the Nationa Labor Ree fons Act (NLRAY, 1935), because twas determines to in {are wih the atlemps of ampbyoos fo wnonze. Bacause ‘sfomation about pay 5 so eta! t employee behevrs ‘and deckon mang, the NLPA conc uss to make enforced pay secrecy ileal ode to promote rasmalerpoyo2 {nfomation about thie eb ceeumstnoos and workplace farness Bieman & Gay, 2004; Gey & Bierran, 2008) Given tis itera background we would hve expcied te things Feat sheer lgaliy shu hee dete er= Bioyers om usng pay secrecy ove th paid sce the fil enforcemert of the NEPA. Quite Io the contrary, tray employers ingly anocuee ard promt her pay sacecy poles For example, & suney of US. engloyers found tot 36 percent of respondent ae ths panes prohibited dcussan of pay (Hmextcom Suvey, oO), Secon he cankovesa!atre of his top: should have promote esersve esearch in his testo bul a0 aogial newark of understaag abou be costs end Donets of pay screcy fr ined ganizations, and cerensocty. No such compressive couse of shud exis Pay secrecy deo seems toretectcrent oi or ural ‘als that ae eressod o facfated troughs practon (One hey value © that of privacy. Today, pracy concerns are reanakering, as evdonced by weave nen legloton fof new awareness of let lag. uch asthe Fara ‘Ebucatoal Rights and Prvacy Act FERPA, 1974, and he Heals Insurance Portabty and Accountabily Act MAA], 1996) aswel a8 pubic outrage shut echelogaly poss be bohavors,suehasidenty fl Pe sc. promotes the ron that our an pay shou te kat rattan, not the employer shot have the igh to detemine whet" ‘discoae our pay and to who. Thus, ool and personal Salence appears abe grounded. he general reugence Of pracy cancers that ce pat of u"evoing work. ‘One fa but nt lass enporanaspact of pay secrecy that rndar it norestiog to ss the fact tht might wel Implementation of Strategic Human Resource Management be acutally bound crstrctnvesigatons of eoectist and indidalst soieies (Tae, 1989) have indicated that Wester cues and economies reflect autonomous indidualete goals aad values, whereas Easlem cures land economies tend (o fell colts. grourtased (goals and vals. Ths, pay secrecy nay ot be as exit ‘ersal an cue man Eastem cutie Thar, the tendency ‘wou be award vales that fave the calecve (Tans, 1989, 1994) Morea members of he collective typical sxe ot tly recogniaed a5 “thers compet dst fom the seh caving the ory nati of ‘thers pay" and "eernt ters fr comparison nba deine In ation te caloc- thst’ sense ol ttn the group oaranizaton might be pected to accompany lack of concer what poop other {han ones ate making nthe worgace. Te nterdper- dence tha accompanies calectvir futher sgest tha 3 ‘ew of what good fr ne of us is gied fr allo us" wuld ‘lk ond fo donate and render gay sece0y les contro ‘sal(Mariu 8 Kayan, 1991) Fra inddalsn cole ‘testes typical do not want a sar out Kom he group or Compote wens the grup: pay secrecy would slow bis to outa Ths, pay Serecy may alvays be postive inn Easements ir coast, lv Wester cultures, nduuals engage selfconatnal that tends otto ncide goneal “theo Self emancements (leat outside of cso patos hd fend: Moshex, ror, & Bencerina 2003). This each n= vidual th workplace & seen as fal alorerous and @ ‘comptes for resources. Idependesce nstesd of inede- pendence is assocated wih ndduaiste sities pling {hat each peron's wee depends on his 01 he own eF fons and rovards, Pay secrecy reflects values emanating from ths fp of cut, and is bth supported and po Inotd by nore capitate scitios hat poate nl Conpetueness (Mix & Kiama, 1994) I may only be twthin Westar cure that pay serecy can produce the Cte that re associ wth What Are the Costs and Benefits of Pay Secrecy? Before turing tothe focus af ou atle—hat he costs and ents of pay sacrecy depend ona vary of previous Uscusedfactore-t ls essental fst ay out he casts tnd bona themsehes In this secion we fest eve the roan! cat of pay 80/60) before turing to adscusson fine benelis Perhaps suring, some aspects of py Sacer can tum ut to be bah cots and bens 36 We (a show. Fur, factors ade an evn great lave of Conlon i be adieaed in the ne sactn ofthe pape. Fer ow, wo ty to alcidate fhe major costs and bene as son by rseuchers ard practioner costs There are at ast thee mar costs to pay seer, acon ing to esearch scalars (whe contre fo change he use th pay secre by argeiabons). Fes, employe judgmentstou fseness and ther perceptions of rust may be sac ce, Secand engloyee perfomance rotation can be ex peced to decrease Tha fom an ecanonicsperspecbe, the labor matt maybe less effcent becawse enplyees vil nt ave to te highest valued use. Ts weld mean that organsatene are nt oblanng the best employees for the jobs Why sd tom whee, would these costs ou? Pray secrecy about lack of fomation, hus producing uncerany fr erpoyees and an armel infomation staus between emplyoes andthe organzaton Baad on fis ac of infrmatn, enplyees may nr that gay out ‘ames and pocedutes for detratons are una, een when the organization mating 3 good tah afer to prove ep tab compensation sed on nd contibtns (Recs ‘ta his was an andoring assumptin we rae eit) ‘One teas the might acer fe because the uncer of not krowng where eeloyees stand with respect 10 ‘ers andthe eset lo which ther conten ae val ‘ay ead to general anol ahout workplace woth, Acard ng lo recent workin the oganatnal sce erate ot Uncertainty management eo Lin & van den 85,200), lnceased urcetaniy enhances the degree fo which eople ‘are atout arness because apparent faress sor way of ‘oping with the anioly goerate by woe When the ‘enrenment uncertain, people are abet gain some de (gee of pretty of thor futur treatment by king at aw Tay hey ecely have baen er now are bie Weta \inen eated fay, people can devlop stand reduce ther fears of bing expted in the future. When tealed iy, hover, hey may lke @ defense stance in an ‘tempt to aod expotaton Thus, eters paribus ergloy- 25 who ae faces wth pay secrecy shou be mare co ‘emed abou wheter fe pay fa than employees who ‘arin pasion where pay information is op. AS sul, they may 2e more wgiant about he exten o whch py and ‘3) dermnaton processes arf, and ths bacomes 2 as whan farms judgments are negative ‘Unfortunately, unde high Sees af pay sere ud ‘ment can be expected lobo negative fer l tee genera ‘ypas of forness pdgments: lomatonal,pocedal and erate (Bee & Moog, 1985; Clgat Conlon Wesson, Porter, & Ng, 2001; Leven, 1976; Thou! & Wakes, 1875). Obwousy, gdgnents about iformstoral feness cin be expected t be nogalve because afomaton is be fy willl: udgaver aes ca be exgoted to be nagatve because, for example the ack of inlrmaton rests engloyoe voce, pemts trees of tas, and suggests thal deceon mang abut pay may be done witout sual nlomaton. These defi vl tha aon tequrements lr piocedia justice tobe pried (Cesena tal, 1980; Thbaut & Wate, 1978) Distibute fares judgments can be expectd to bo nogatve for tvo rigor rasons Fst acca estates bout what safret others (Domtsie, 1989) are boing Chapter 11 Compensation 505 the absence of nid pay infomaton, managers overes: timated the slaes of other maagers at ther own and lower lvls and undoestirated he salaries of managers at higher ocganasbral ere (ether wos, they tended to compress the pay range) The fact ha hose al lower tevels ofthe onganzaton were peroeied as having highor pay than was actualy the case wuld lead to judgments of ‘elrbutie unfameze, because they would arguably be Imakng lesser conrbutons to Be organiation than was Connencurate wth ther perce py Scand fara hori thoy Lind 2001) states that poopie are ely tobase Speci anes agents on fs {ener impression of eranzaorl anes nthe absence {oF oer information Tus, mth absence of itomatin about pay, dstibane faimessemcering pay level can te known and judgments about be erred based on iments about oer asc ofanes. procedural ard informational famess judgments ae negate, 25 nated ‘hove then dtibuve formes omens shoud be nega Ive a wel (on den Bom Lid Yermunt & Wike, 1957) The retance on eter frnes ucts generaly may be ‘awed a ai fo use oe aality heise n prospect theory (Kanneman & Tver, 1973) In the absence of spectic pay miomaton, enploees would be expected to rely on recent or vd infomation Pat was realy eral Ale or accessible ia memoy, Ths iferraton ight wel be oer judgents abut lames Fegscing aspects of he ‘oxganiaten-itat i, ren lames dgments beyond those ‘egardeg pay could become ean! ude pay seen. Related to unlainess judges estiog tom pay ‘rags he nation af dts in te organzaton We folow Mayer, Davis and Schooan’s defniton of tus as “the valingness of 8 party tobe unable >the actos of a tier party based on he expataon that he oer wil pe foxm 8 parila acion portato the uso, respecte ofthe ail 9 anor oF conte that her party (1995 ‘71, Pay secrecy shoud goerly be expected to lowes ‘employees’ organzatonal fst Research on xganatoral twst al poats to he inporianc of managorsopermess wth bo themselves and eters (Bue, 1991) see ths thar suggests thal managemant has Boh inleghy ad benevolence. Sich openness hasbeen shows tobe apr rary ae of ut (aye al, 195: Misa, 198) “Two other key factors skongy suggest that organiza tional st ahoud be lected by py aerecy and sons ing judgments of etamess Fish mada aon to yaung, ‘altace miionares ding the tecelogy boom of the 1900s, esvonomical execuive ay level and coperate scandals have hghighied the we dscropany pay ‘amencan socely, fending lo entace geceptns tht py nay be unl Pay sacray i ths emironment enhances ews of this unlarness and eapton suggesting ha (gazatone cannot be rusted. Sard, pay sectecy gals that he organization des ot bu is arpoyees. Pay soreny shod ls rede work otra, Bo cause a pay-pertormance hnkage undoes mary theots506 Part2 of motion, ane can aque thal pay secrecy wl duce Imtwtion by teakng that inage. The only study we ae ‘ware of hat examines Bis comecton was conducted by Ful and Jenns (1978 who foun that maning rom pay secrecy n pa openness reste nnceased pefoance ‘on the pict of her sangle of salespeople, suggesting that moan was hampered by pay secrecy. Tas resi ap peared to stom tom an equy then explanation since managers acting under pay secrcy compressed the mana ‘eal py Scale inthe estates, as mend ear the Ink between gay ard performance wes weakened, and ‘here was less moan to perm. ‘Other theors of work metro ao depend on ring pay to prfomance;wihaut percepts af this ink, ergy tees lack an essen deer of mataton Fa example exp ancy tears (lao, Pitch & igen 1060, Vee 1954) ‘ange hat te nian to pero 3 ect function the ‘subjective probabiy hat engagrg 0 a cet ese of pedo ‘mance wi actin gen cufconos a, instumertait). eal ‘eons suggest hat pfamaree goals erloys fcr riled odie mothaton Locke & Lath, 1990), and gol cermmiront i partly dlorniod by tie vaknce of out umes assailed wth aching 2 goal (Kin. Wesson, Hallenbeck, & ge, 1900) Thar, empleo ko the rate woth of thr auames, hey maybe les Wey to be oarimtted lo god tal assue the achiaerent of the desedoutoomes They may ake pocr estinates of thei “ijeciv pobaites othe vance of tor utcamas. Pay sotrecy can also have an sorant and deetrcus