Pay People Right Zingheim & Shuster Chapter 5 Rewarding Individual Ongoing Value

Paying for needed skills and competencies Paying for consistent performance over time Paying for value relative to the labor market

Base Pay Fundamentals Manager Accountability External Market Emphasis on Ongoing Value Only One Part Ongoing Value for Both Job-Based and Person-Based Pay

Emphasizing Integration of All Elements of Total Pay Integrating Total Pay Total Pay Chart, page 100 Examples –Pharma Company –IBM –AlliedSignal –E-Pay

Emphasizing Skills and Competencies Relationship of Skills and Competencies to Pay Both Competencies and Results Monsanto Example – Competencies PacificCorp – Competency Blocks Skill Pay

Emphasizing Consistent Performance Over Time Assessing a Sustained Track Record Variable Pay for Current Year’s Performance Communicating the Message of Change Lump Sum Payments

Emphasizing Value Relative to the Labor Market The Labor Market and Market Rates When to Use Market Rates –Meaningful variable pay –Well-defined jobs –Large Labor Costs –Pay near Minimum Wage Skill Maintenance

Base Pay Increases for Current Performance – Potential Issues Limited or “myopic” view Overpayment for past performance Overvaluing the external market Discourage growth in skill and/or competency Create a vulnerable workforce in challenging times People highly-comped relative to ongoing value

Process for Base Pay Management Company determines dimension(s) to emphasize in base pay Determines base pay budget Managers use budget to allocate base or lump sum payments according to the dimension(s) established Managers communicate those allocations to the individual

Detailed Guidelines v. Manager Flesibility Consistency –Within group or within company Ratings and Scoring Dollars or percentages Budget