Defining Competitiveness

Slides:



Advertisements
Similar presentations
1.
Advertisements

Labor Market. Demand For a Factor Demand for factors is a derived demand. If the demand for the product rises, the demand for the factors used to produce.
The Pay Model Chapter 1.
Copyright © 2002 by The McGraw-Hill Companies, Inc. All rights reserved. 6-1 CHAPTER 6 Building Blocks of the Flexible-Price Model.
Pay for Performance: The Evidence
Factor Markets and the Distribution of Income
Strategy: The Totality of Decisions
© 2014 by McGraw-Hill Education. This is proprietary material solely for authorized instructor use. Not authorized for sale or distribution in any manner.
MICROECONOMICS: Theory & Applications Chapter 17 Wages, Rent, Interest, and Profit By Edgar K. Browning & Mark A. Zupan John Wiley & Sons, Inc. 9 th Edition,
Chapter Nine The Rise and Fall of Industries. 9 | 2 Copyright © Houghton Mifflin Company. All rights reserved. Markets and Industries Industry – A group.
McGraw-Hill/Irwin Copyright © 2013 by The McGraw-Hill Companies, Inc. All rights reserved. Chapter 11: Managerial Decision in Competitive Markets.
Managerial Decisions in Competitive Markets
Managerial Economics and Organizational Architecture, 5e Managerial Economics and Organizational Architecture, 5e Chapter 14: Attracting and Retaining.
Labor Market Overview (Part 2). The Labor Market Labor markets determine –Terms of employment Earnings versus total compensation Working conditions –Levels.
Chapter 13 Unemployment Copyright © 2008 The McGraw-Hill Companies, Inc. All rights reserved. McGraw-Hill/Irwin Labor Economics, 4 th edition.
© 2014 by McGraw-Hill Education. This is proprietary material solely for authorized instructor use. Not authorized for sale or distribution in any manner.
© 2002 McGraw-Hill Ryerson Ltd.Chapter 7-1 Chapter Seven Wages and Employment in a Single Labour Market Created by: Erica Morrill, M.Ed Fanshawe College.
Chapter 1 Introduction to Labor Economics Copyright © 2008 The McGraw-Hill Companies, Inc. All rights reserved. McGraw-Hill/Irwin Labor Economics, 4 th.
Chapter 30: The Labor Market Copyright © 2013 by The McGraw-Hill Companies, Inc. All rights reserved. McGraw-Hill/Irwin 13e.
Ch 26: Factor Markets With Emphasis on the Labor Market Del Mar College John Daly ©2003 South-Western Publishing, A Division of Thomson Learning.
Supply CHAPTER The Supply Curve 5.2 Shifts of the Supply Curve
Designing Pay Levels, Mix, and Pay Structures
Defining Internal Alignment
Designing Pay Levels, Mix, and Pay Structures
1 Chapter 11 Practice Quiz Tutorial Labor Markets ©2000 South-Western College Publishing.
© 2005 Worth Publishers Slide 12-1 CHAPTER 12 Factor Markets and the Distribution of Income PowerPoint® Slides by Can Erbil and Gustavo Indart © 2005 Worth.
Defining Competitiveness
Chapter 3 Labor Demand McGraw-Hill/Irwin
McGraw-Hill/Irwin © 2005 The McGraw-Hill Companies, Inc., All Rights Reserved. Supply Decisions.
5 Planning For and Recruiting Human Resources What do I Need to Know?
Surveying Market Pay & Compensation Practices
Jayendra Rimal.  This type of compensation policy should be developed to fit in with the competitive advantage of a company.  It has a role in attracting.
Recognizing Employee Contributions with Pay
Perfect Competition *MADE BY RACHEL STAND* :). I. Perfect Competition: A Model A. Basic Definitions 1. Perfect Competition: a model of the market based.
PART FOUR Resource Markets
Building and Managing Human Resources
This week our seminar covers topics from chapters 1 and 2 in the text.
McGraw-Hill/Irwin © 2005 The McGraw-Hill Companies, Inc. All rights reserved. 7-1 Defining Competitiveness Chapter 7.
Economics 2010 Lecture 12 Perfect Competition. Competition  Perfect Competition  Firms Choices in Perfect Competition  The Firm’s Short-Run Decision.
Defining Competitiveness
McGraw-Hill/Irwin © 2006 The McGraw-Hill Companies, Inc., All Rights Reserved. The Competitive Firm Chapter 7.
© 2010 McGraw Hill Ryerson 7-1 COMPENSATION Third Canadian Edition Milkovich, Newman, Cole.
Chapter 11: Managerial Decisions in Competitive Markets
McGraw-Hill/Irwin Copyright © 2008 by The McGraw-Hill Companies, Inc. All rights reserved. Milkovich/Newman: Compensation, Ninth Edition Chapter 12 The.
Production and Cost Analysis II 13 Production and Cost Analysis II Economic efficiency consists of making things that are worth more than they cost. —
Human Resource Staffing and Performance Management Introduction
1 Chapter 11 Practice Quiz Labor Markets Marginal revenue product measures the increase in a. output resulting from one more unit of labor. b. TR.
McGraw-Hill/Irwin © 2004 The McGraw-Hill Companies, Inc., All Rights Reserved. Attracting and retaining qualified employees Personnel economics.
Chapter 7: Pure Competition. McGraw-Hill/Irwin Copyright  2007 by The McGraw-Hill Companies, Inc. All rights reserved. What is a Pure Competition? Pure.
Chapter 9 Perfect Competition McGraw-Hill/IrwinCopyright © 2009 by The McGraw-Hill Companies, Inc. All Rights Reserved.
Production and Cost Analysis II 13 Production and Cost Analysis II Economic efficiency consists of making things that are worth more than they cost. —
Chapter 9 Pay-for-Performance: The Evidence
Human Resource Staffing and Performance Management Introduction
Pay for Performance: The Evidence FastCat Phase III
Chapter 1 Introduction to Labor Economics Copyright © 2010 by The McGraw-Hill Companies, Inc. All rights reserved. McGraw-Hill/Irwin.
McGraw-Hill/Irwin Copyright © 2013 by The McGraw-Hill Companies, Inc. All rights reserved. CHAPTER 1 “Observations always involve theory.” -Edwin Hubble.
© 2014 by McGraw-Hill Education. This is proprietary material solely for authorized instructor use. Not authorized for sale or distribution in any manner.
Ch. 8: COMPENSATING WAGE DIFFERENTIALS AND LABOR MARKETS A compensating wage differential –an increment in wages required to attract workers into.
Defining Internal Alignment
McGraw-Hill/Irwin © 2005 The McGraw-Hill Companies, Inc. All rights reserved. 7-1 Defining Competitiveness Chapter 7.
Introduction: Thinking Like an Economist 1 CHAPTER 2 Production and Cost Analysis II Economic efficiency consists of making things that are worth more.
1-1 Human Resource Management Gaining a Competitive Advantage Chapter 2 Strategic Human Resource Management McGraw-Hill/Irwin Copyright © 2008 by The McGraw-Hill.
Pay for Performance: The Evidence
PART FOUR Compensation Chapters Chapter 11 Pay and Incentive Systems McGraw-Hill/Irwin © 2006 The McGraw-Hill Companies, Inc. All rights reserved.
Unit 5 Seminar Topics Compensation Strategy: External Competitiveness
Chapter 18 Consumer Behavior and Pricing Strategy
Copyright © 2003 by The McGraw-Hill Companies, Inc. All rights reserved.
Defining Competitiveness
Defining Competitiveness
CHAPTER Perfect Competition 8.
Presentation transcript:

Defining Competitiveness Begins material for Exam II and FastCat Phase II Chapter 7

What Is External Competitiveness? External competitiveness refers to pay relationships among organizations - an organization’s pay relative to its competitors.

Compensation Strategy: External Competitiveness External competitiveness is expressed in practice by: Setting a pay level that is above, below, or equal to that of competitors Determining mix of pay forms relative to those of competitors Pay level and pay mix decisions focus on: Controlling costs Attracting and retaining employees There is no single ‘going rate’ (see Machine Tool Operators example)

See also Evansville OES data

What is Pay Level? Pay level refers to the average of the array of rates paid by an employer.

What are Pay Forms? Pay forms are the various types of payments, or pay mix, that make up total compensation.

Exhibit 7.1: Single Company's Market Position May Differ Depending on Whether Comparing Base Pay or Total Compensation

Exhibit 7.2: Two Companies: Same Total Compensation, Different Mixes

Exhibit 7.3: What Shapes External Competitiveness? LABOR MARKET FACTORS Nature of Demand Nature of Supply PRODUCT MARKET FACTORS Degree of Competition Level of Product Demand ORGANIZATION FACTORS Industry, Strategy, Size Individual Manager

How Labor Markets Work Theories of labor markets begin with four assumptions Employers always seek to maximize profits People are homogeneous and therefore interchangeable Pay rates reflect all costs associated with employment Markets faced by employers are competitive

Labor Demand Analysis of labor demand indicates how many employees will be hired by an employer In the short run, an employer cannot change any factor of production except human resources An employer’s level of production can change only if it changes the level of human resources An employer’s demand for labor coincides with the marginal product of labor

Labor Demand (cont.) Marginal product of labor Additional output associated with employment of one additional human resources unit, with other production factors held constant Marginal revenue of labor Additional revenue generated when firm employs one additional unit of human resources, with other production factors held constant

Exhibit 7.4: Supply and Demand for Business School Graduates in the Short Run

Exhibit 7.5: Supply and Demand at the Market and Individual Employer Level

Labor Supply Assumptions about behavior of potential employees Many people are seeking jobs Possess accurate information about all job openings No barriers exist to mobility among jobs Upward sloping supply curve: More people willing to take a job as pay increases If unemployment rates are low, offers of higher pay may not increase supply

Exhibit 7.6: Labor Demand Theories and Implications

Efficiency Wage Research evidence states: Higher wages do attract more qualified applicants Also attract more unqualified applicants Above-market wage allows organizations to operate with fewer supervisors

Exhibit 7.7: Supply Side Theories and Implications

Product Market Factors and Ability to Pay Two key product market factors affect ability of a firm to change price of its products or services Product Demand – Puts a lid on maximum pay level an employer can set Degree of competition – In highly competitive markets, employers are less able to raise prices without loss of revenues

Relevant Markets Three factors determine relevant labor markets Occupation Geography Competitors Employers choose their relevant markets based on Competitors – Products, location, and size Jobs – Skills and knowledge required and their importance to organizational success

Exhibit 7.8: Probable Relationships Between External Pay Policies and Objectives

Pay with Competition (Match) Attempts to ensure an organization’s Wage costs are approximately equal to those of its product competitors Ability to attract potential employees will be approximately equal to its labor market competitors Avoids placing an employer at a disadvantage in pricing products or in maintaining a qualified work force

Lead Policy Maximizes the ability to attract and retain quality employees and minimizes employee dissatisfaction with pay May also offset less attractive features of work If used only to hire new employees, may lead to dissatisfaction of current employees

Lag Policy May hinder a firm’s ability to attract potential employees If pay level is lagged in return for promise of higher future returns May increase employee commitment Foster teamwork May possibly increase productivity

Flexible Policies Employers have more than one pay policy Policy may vary for different occupational families Above market for critical skill groups Below or at market for others Policy may vary for different pay elements Above market in total compensation Below market in base pay Above market in incentives and rewards At or above market in benefits

Exhibit 7.9: Pay-Mix Policy Alternatives

Employer of Choice/ Shared Choice Companies compete based on their overall reputation as a place to work Approach corresponds to brand or image Co projects as Er Shared choice begins with traditional options of lead, meet, or lag Adds a second part – offers employees choices (within limits) in the pay mix Similar to employer of choice in recognizing importance of both pay level and mix Employees have more say in forms of pay received

Exhibit 7.10: Volatility of Stock Value Changes Total Pay Mix

Exhibit 7.11: Dashboard: Total Pay Mix Breakdown vs. Competitors’

Exhibit 7.12: Pay Mix Varies Within the Structure

Exhibit 7.13: Some Consequences of Pay Levels

Which Pay Policy Achieves Competitive Advantage? Involves assessing consequences of different pay policy options Evidence: Pay level affects costs Effects on productivity unclear Effects on ability to attract and retain employees unclear Possibility of achieving competitive advantage Message that pay level and mix signal to people