Chapter 5 Building Internally Consistent Compensation Systems

Strategic Compensation: A Human Resource
Management Approach
Tenth Edition
Chapter 5
Building Internally Consistent
Compensation Systems
Slides in this presentation contain

hyperlinks. JAWS users should be
able to get a list of links by using
INSERT+F7
Copyright © 2020, 2017, 2015 Pearson Education, Inc. All Rights Reserved
Learning Objectives
6.1 Explain the concept of internal consistency.
6.2 Summarize the practice of job analysis.
6.3 Describe the practice of job evaluation.
6.4 Summarize various job evaluation techniques.
Learning Objective 6.1
• Explain the concept of internal consistency.
Internal Consistency
• Compares the value of each job within the same company
against the rest of the jobs found within that company. So
this is an internal comparison of jobs. This approach leads
us to develop the job structure or hierarchy based on the
comparison of jobs against each other within the company.
• Represents job structure or hierarchy
• Job descriptions are its cornerstone (keystone, foundation)
are its cornerstone of developing job structures and
recognizes differences in job characteristics
• Recognizes differences in job characteristics
Internally Consistent Compensation
Structure (1 of 3)
Structure (2 of 3)
• Benefits Counselor
– Provides basic counseling services to employees and
assistance to higher-level personnel in more complex
benefits activities. Works under general supervision of
higher-level counselors or other personnel.
– Provides skilled counseling services to employees
concerning specialized benefits programs or complex areas
of other programs. Also completes special projects or
carries out assigned phases of the benefits counseling
service operations. Works under general supervision from
or other personnel.
Structure (3 of 3)
– Coordinates the daily activities of an employee benefits
counseling service and supervises its staff. Works under
direction from higher-level personnel.
• Manager of Benefits
– Responsible for managing the entire benefits function
from evaluating benefits programs to ensuring that
Benefits Counselors are adequately trained. Reports to
the Director of Compensation and Benefits.
Tools for Building Job Structures
• Job analysis
– A descriptive procedure
– Identifies and defines job content
• Job evaluation
– Compensation systems set pay levels
– Establish pay differentials
• Summarize the practice of job analysis.
Job Analysis
Job analyses describe:
• Job content: actual activities
– Greeting clients
▪ Saying “Hello”
▪ Asking the client’s name
▪ Offering beverages, etc.
• Worker requirements: minimum qualifications and KSAs ’
• Working Conditions: social context or physical

environment
Worker Requirements
• Minimum Knowledge, Skills, and Abilities (KSAs) ’
– Education
– Experience
– Licenses
– Permits
– Special abilities
– Ex: HR managers must have knowledge of recruitment,
selection, training, compensation and benefits, labor
relations and negotiations, human resource information
systems, oral/written comprehension, active listening,
critical thinking.
Working Conditions
• Social context – where looking at interpersonal relationships,
interdependence we’re considering, so we might call those horizontal
type of aspects and then vertical aspects would be things such as
supervisory responsibility that creates that social context for working
condition.
• Physical environment
– Vary along dimensions
– Based on level of noise and possible exposure to
hazardous factors. Example: people who are climbing a cell towers
to repair them. Or people working with heavy equipment in a
manufacturing facility or somebody who is working with chemicals in the
chemical processing plant, these are where we can find important
elements of the physical environment that we need to take account of for
describing work
Job Analysis Process
• Determine job analysis program
• Select and train analysts
• Direct job analyst orientation
• Conduct the study
• Summarize results: write job descriptions
Job Analysis Data Gathering Methods
• Questionnaires
• Interviews
• Observation
• Participation
Job Analysis Units (1 of 2)
• Element: the smallest step
– Ex: Connecting a flash drive into a USB port.
• Task: one or more elements
– Ex: Keyboarding text into memo format.
• Position: a collection of tasks
– Ex: Clerk typist.
Job Analysis Units (2 of 2)
• Job: a group of positions with similar tasks
– Bob, John, and Jason are clerk typists
• Job family: a group of two or more jobs with similar
characteristics
– Clerical job family: file clerk, clerk typist, administrative
clerk
• Occupation: a group of jobs
– Office support occupation
Standard Occupational Classification
System (SOC)
• SO C
– Published by the Office of Management and Budget
– Lists 23 major occupational groups
– Relevant for making compensation decisions
Sources of Data
• Job incumbents
• Supervisors
• Job analysts
– Note: A review of O* Net, which falls within the scope
of job analysis, follows as an appendix.
Reliable and Valid Job Analysis
Methods
• Reliable Job Analysis Method: Yields consistent results
under similar conditions.
– For example, two independent analysts reach similar
conclusions about the duties that constitutes a job
• Valid Job Analysis Method: Accurately assesses each
job’s duties or content
Writing Job Descriptions
• Summarize a job’s purpose and tasks, duties, and
responsibilities
• Should include:
– Job title
– Job summary
– Job duties
– Worker specifications
Worker Specifications
• Education
• Skills
• Abilities
• Knowledge
• Other qualifications to perform job
Equal Employment Opportunity
Commission (EEOC) (1 of 2)
• Distinguishes among the terms knowledge, skill, and
ability
• Skill refers to an observable competence to perform a
learned psychomotor act
– Ex: Typing 50 words per minute. Typing requires
knowledge of the keyboard layout and manual
dexterity.
• Knowledge refers to a body of information applied directly
to the performance of a function
– Ex: Compensation professionals should know FLSA’s
overtime provisions. (Fair labour standard Act)
Equal Employment Opportunity
Commission (EEOC) (2 of 2)
• Ability refers to a present competence to perform an
observable behavior or a behavior that results in an
observable product
– Ex: To mediate a dispute between labor and
management successfully.
( You must be a leader/ bargaining skills, interpersonal
skills ) all these abilities
Legal Considerations for Job
Analysis
• Equal Pay Act
– Must justify pay differences between men and women
performing equal work
• F L SA
– Determine exemption status
• AD A
– Determine essential job functions
• Describe the practice of job evaluation.
Job Evaluation
• Systematically recognizes differences in the relative worth
among a set of jobs
• Helps to establish pay differentials accordingly
• Job evaluation partly reflects the values and priorities that
management places on various positions
• Job analysis, in contrast, is almost purely descriptive
Compensable Factors
• Salient job characteristics used to establish relative pay
rates
Universal Compensable Factors
• Skill
• Effort
• Responsibility
• Working conditions
Job Evaluation Process Steps
• Select technique
• Choose committee
• Train members to evaluate
• Document plan
• Communicate with employees
• Set up appeals process
• Summarize various job evaluation techniques.
Two Examples of Job Evaluation
Techniques
• Market-based evaluation: uses market data to determine
differences in job worth. So that means going out and
conducting alary surveys and using that as a basis to
determine differences in the relative worth of jobs in the
metric of dollars.
• Job-content evaluation: emphasizes company’s internal
value system by establishing a hierarchy of internal job
worth; the point method is a job-content evaluation
system
The Point Method
• Most popular job-content method
• Uses quantitative methodology
• Evaluates jobs by comparing compensable factors
The point method system is the most detailed approach for

evaluating jobs based on that job content message.
Point Method Steps
• Select benchmark jobs
• Choose compensable factors
• Define factor degrees
• Determine weight of factors
• Determine point value
• Verify factor degrees and point values
• Evaluate all jobs
Job Evaluation Qualitative Approaches
• Simple ranking plans
• Paired comparisons
• Alternation ranking
• Classification plans
• Explain how internally consistent compensation systems
and competitive strategy relate to each other.
Systems and Competitive Strategy
• Internally consistent pay systems may reduce a company’s
flexibility to respond to changes in competitors’ pay
practices
• Narrowly defined jobs
– Resultant bureaucracy
Copyright
This work is protected by United States copyright laws and is

provided solely for the use of instructors in teaching their
courses and assessing student learning. Dissemination or sale of
any part of this work (including on the World Wide Web) will
destroy the integrity of the work and is not permitted. The work
and materials from it should never be made available to students
except by instructors using the accompanying text in their
classes. All recipients of this work are expected to abide by these
restrictions and to honor the intended pedagogical purposes and
the needs of other instructors who rely on these materials.

Chapter 5 Building Internally Consistent Compensation Systems

Uploaded by

Document Information

Copyright

Available Formats

Share this document

Share or Embed Document

Sharing Options

Did you find this document useful?

Is this content inappropriate?

Copyright:

Available Formats

Chapter 5 Building Internally Consistent Compensation Systems

Uploaded by

Copyright:

Available Formats

Strategic Compensation: A Human Resource

Slides in this presentation contain

• Working Conditions: social context or physical

The point method system is the most detailed approach for

This work is protected by United States copyright laws and is

You might also like