1. Compensation

2. Employee’s Perspective
What compensation do you seek?
Direct
Money
Indirect
Benefits

3. Employer’s Perspective
What do you compensate?
Individual Characteristics:
Ability
Training
Education
Job:
Responsibility
Critical function
Job content

4. Employer’s Perspective
What factors influence your compensation policy?
Supply and demand skills
Unions
Ability to pay
Cost of living increases
Government (FLSA, min. wage)
Strategy

5. Influence of Equity
External
Market wages
Internal
Perceived equity

6. Develop a Job Hierarchy
A. Job Evaluation
1. Preliminary planning
2. Select a plan
3. Develop the plan
4. Evaluate jobs, NOT PEOPLE

7. Pricing Jobs "The acceptability of job evaluation
hinges in large part on whether the
results are consistent with the ranking
of the same jobs in the external labor
market."

8. Pricing Jobs A. Use key or benchmark jobs
Jobs that are relatively stable in content and found in many organizations
Compare your internal analysis to external wages
B. Conduct wage survey to examine external wages

9. Pricing Jobs C. Use points from job evaluation as a predictor
Use predictor to determine wages for non-key positions
Non-key positions: jobs that have no similar “comparison job” outside of the organization

10. Develop a Pay Structure
A. Pay on the basis of individual jobs or grades?
B. Utilize single rates or a rate change?

11. Inequities
Comparable worth
Salary compression

12. Pricing Managerial and Professional Jobs
Not easy because there are fewer quantifiable factors
Managers are often compensated for long term performance
Are executives overpaid?

13. Financial Incentives "The basic aim of an incentive should be
to encourage good performance by
linking performance and rewards, and
this in turn requires valid, accurate
performance appraisals.”

14. Incentives for Production Employees
Piecework
Group incentive plans
Attendance
Annual bonus

15. Incentives for Mangers and Executives
Stock options
Long-term incentives

16. Organization Incentive Plans
Profit sharing plans
ESOP – Employee Stock Options Plan
Cost savings plan
SCANLON and Gainsharing

17. Potential Incentive Plan Problems
Worker doesn’t believe that plan will lead to rewards.
Unfair standards – too high or unattainable
Changing standards – obtain top management commitment to maintain standards

18. Recommendations
1. Ensure that efforts and rewards are directly related.
2. Incentive rewards are understandable and calculable.
3. Use accurate and effective standards.
4. Guarantee those standards.

19. Performance Evaluation

20. Performance Measurement Purposes
A. Administrative decisions
Promotion
Training
Compensation
Transfer, demotion, and separation

21. Performance Measurement Purposes
B. Employee feedback and development
Roles
Strengthens E  P and P  O relationships
Allows behavior change

22. Performance Measurement Purposes
C. Evaluations of policies and programs
Selection and promotion decisions
Aiding in validation of selection tools
Helping to determine if programs are effective
(e.g. training)
D. Defense of policies
Use to show job relatedness (performance)

23. Performance Measurement Issues
A. Identifying performance dimensions
Most jobs are multi-dimensional
Use job analysis to assess performance
Errors similar to job analysis
B. Establish performance standards
Determine legitimate standards
Don’t set standards too high or low

24. Performance Measures A. Comparative methods 1. Ranking
2. Forced distribution
3. Problems with comparative evaluations:
No indication of potential performance
Little specific feedback
No feedback about where to improve

25. Performance Measures B. Absolute methods 1. Trait rating scale
Central tendency problems
Doesn’t capture specific behaviors
2. BARS (Behaviorally Anchored Rating Scales)
Complex and costly
Not applicable to a broad group of jobs
Avoids contamination and deficiency errors
3. MBO – set for individuals, not jobs

26. Measures of Physical Output

27. Administrative Challenges
A. Components that influence the performance appraisal process
1. Appraiser (rater)
2. Appraisee (ratee)
3. Method
4. Purpose of evaluation
5. Motivation to appraise

28. Administrative Challenges
B. Rater errors
1. Unreliability
2. Leniency
3. Severity
4. Central tendency
5. Recency
6. Halo

29. Administrative Challenges
C. EEO
Not only for your selection
Show that method isn’t discriminating
Validate performance appraisal procedures

30. Trends in PA Research
1. Focused on the accuracy of appraisal and improving method.
2. Focused on rater errors and reduction of errors.
3. Current focus: cognitive processes and interpretation and evaluation of performance.