Dr. Jia - MGT 354 - Exam 2 (Ch. 6, 7, & 8)

Internal Consistency

Compares the value of each job within the same company against the rest of the jobs found within that company.

* Represents job structure or hierarchy

* Based upon job descriptions

* Recognizes differences in job characteristics

FUNDAMENTAL PRINCIPLE:

In an internally consistent compensation structure, if responsibility increased, then ___________.

Salary would increase

Job analysis

- A descriptive procedure

- Identifies and defines job content

- "The process of coming up with the job description"

Job evaluation

- "Valuing the jobs" = Assigning values to jobs

- Compensation systems set pay levels

- Establish pay differentials

- Creates a monetary value for the different levels of an organization

Job analysis components

- Job content (TDRs)

- Worker requirements

- Working conditions

Job content

The actual activities (TDRs)

- Greeting clients

~ Saying Hello

~ Asking the client's name

~ Offering a beverage...etc.

Worker requirements

Minimum qualifications and KSAs

- education

- experience

- licenses

- permits

- special abilities

Working conditions

The social context or physical environment where work will be performed.

Job Analysis Process

1. Determine job analysis program

2. Select and train analysts

3. Direct job analyst orientation [Ultimate goal]

4. Conduct the study

5. Summarize results: write job descriptions

Job Analysis Data Gathering Methods

* Questionnaires

* Interviews

* Observation

* Participation

- Looking for a valid, accurate assessment of the job.

Job Analysis Units

- Element: The smallest step

- Task: One or more elements

- Position: A collection of tasks

- Job: A group of positions with similar tasks

- Job family: A group of two or more jobs with similar characteristics

- Occupation: A group of jobs

Do job analysis units move horizontally or vertically?

Vertically

Standard Occupational Classification System abbreviated...

S.O.C.

Who publishes the S.O.C.?

The Office of Management and Budget

How many major occupational groups are listed on the S.O.C.?

23 major occupational groups

Why is the S.O.C. useful?

- It is relevant for making compensation decisions.

- Lists out most commonly seen compensations.

Sources of Data

job incumbents, supervisors, job analysts

Job incumbents:

Most accurate source of time spent on various tasks

- "What is done."

Supervisors:

What they THINK is done.

Job analysts:

What SHOULD BE done.

Reliable Job Analysis Method

- Yields consistent results under similar conditions.

- "Good"; CONSISTENT OVER TIME

Valid Job Analysis Method

- Accurately assesses each job's duties or content.

- "Best"; MORE ACCURATE

- "What we want"

Job Descriptions

Summarize a job's purpose and list its tasks, duties, and responsibilities, as well as the skills, knowledge, and abilities necessary to perform the job at a minimum level.

Writing Job Descriptions should include:

Job title, job summary, job duties, worker specifications

The _________ makes distinguishments among the terms knowledge, skill, and ability.

Equal Employment Opportunity Commission (EEOC)

Knowledge

Refers to a body of information applied directly to the performance of a function.

Ex. Compensation professionals should know FLSA's overtime provisions.

Skills

Refers to an observable competence to perform a learned psychomotor act.

- These are ACQUIRED.

Ex. Typing 50 words per minute.

Ability

Refers to a present competence to perform an observable behavior or a behavior that results in an observable product.

- These are INNATE.

Ex. To mediate a dispute between labor and management successfully.

What legal considerations are made when determining compensation and benefits?

- Equal Pay Act

- Fair Labor Standards Act (FLSA)

- Americans with Disabilities Act (ADA)

What legal considerations must be made regarding the Equal Pay Act?

Must justify pay differences between men and women performing equal work.

What legal considerations must be made regarding the Fair Labor Standards Act?

Determine exemption status of 'EE.

What legal considerations must be made regarding the Americans with Disabilities Act?

Determine essential job functions for 'EEs.

O*NET Content that is Worker-Oriented

- Worker Characteristics

- Worker Requirements

- Experience Requirements

Worker Characteristics

- Abilities

- Occupational Interests

- Work Values

- Work Styles

Worker Requirements

- Skills

- Knowledge

- Education

Experience Requirements

- Experience and Training

- Skills

- Entry Requirements

- Licensing

O*NET Content that is Occupation Specific

- Experience Requirements

- Occupation-Specific Information

O*NET Content that is Job-Oriented

- Occupation-Specific Information

- Workforce Characteristics

- Occupational Requirements

Occupation-Specific Information

- Tasks

- Tools and Technology

Workforce Characteristics

- Labor Market Information

- Occupational Outlook

Occupational Requirements

- Generalized Work Activities

- Detailed Work Activities

- Organizational Context

- Work Context

O*NET Content that is Cross Occupation

- Worker Characteristics

- Occupational Requirements

Job Evaluation

- Systematically recognizes differences in the relative worth among a set of jobs.

- Helps to establish pay differentials accordingly.

- Job evaluation party reflects the values and priorities that management places on various positions.

- Considered MORE CONCRETE!

The systematic process by which we evaluate, measure, and assign different values to different positions.

Job Evaluation

True or False: Job analysis is almost purely descriptive

True

Compensable Factors

Salient job characteristics used to establish relative pay rates

Virtually every job contains this type of factors.

Universal Compensable Factors

Universal Compensable Factors

Skill, effort, responsibility, and working conditions

Job Evaluation Process Steps

1. Select technique

2. Choose committee

3. Train members to evaluate

4. Document plan

5. Communicate with employees

6. Set up appeals process (Feedback loop)

Market-based evaluation

Uses market data to determine differences in job worth (a very common approach)

- EXTERNAL

Job-content evaluation

Emphasizes a company's internal value system by establishing a hierarchy of internal job worth.

- INTERNAL

The Point Method

- The most popular job-content evaluation method.

- Uses quantitative methodology; OBJECTIVE.

- Evaluated job by comparing compensable factors.

Point Method Steps

1. Select benchmark jobs

2. Choose compensable factors

3. Define factor degrees

4. Determine weight of factors

5. Determine point value

6. Verify factor degrees and point values

7. Evaluate all jobs

Job Evaluation Qualitative Approaches

- Simple ranking plan

- Paired comparisons

- Alternation ranking

- Classification plans

True or False: Qualitative Approaches to Job Evaluation are harder to legally defend.

True

Simple ranking plans

Order all jobs from lowest to highest according to a single criterion

Paired Comparisons

- Comparing job "x" to job "y"

- Understanding how they are distinct

Alternation Ranking

Extremes of different positions

Classification Plans

Categories based on compensation factors

Ex. Public Sector

Market-competitive pay systems refer to:

- A company's compensation policy

- The imperatives of competitive advantage

- Key role in promoting recruitment and retention of talented employees

- Competitive with outside market

- Imperative to compete with other organizations

* To get the employees you WANT! [Attract the BEST]

Four Activities of Market Competitive Pay Systems

- Strategic analysis

- Compensation surveys

- Integrating job structures with the external market pay rates

- Recommending pay policies

Strategic Analysis

- An examination of a company's external market context and internal factors

- Made up of:

* External Market Context

* Internal Factors

- Has the greatest impact or the company & its progress moving forward

- THIS IS LIKE A SWOT ANALYSIS

Strategic Analysis: External Market Context

Industry profile, information on competition, long-term prospects

Strategic Analysis: Internal Factors

Financial condition and functional capabilities

Market Competitive Pay Systems: Compensation Surveys

Involve the collection and subsequent analysis of a competitors' compensation data.

- Comparing/Contrasting data

- Can be done In-house or through publicly available surveys

Market Competitive Pay Systems: Integrating internal job structure with external market pay rates

Compensation professionals integrate the internal job structure with the external market pay rates identified through compensation surveys.

- Answers: What pay is appropriate?

- Gives a BASIS!

Market Competitive Pay Systems: Recommend pay policies

Compensation professionals recommend pay policies that fit with their companies' standing and competitive strategies.

- Maintain or advance their competitive position.

Before investing time and money into compensation surveys, what are the two preliminary considerations?

1. What companies hope to gain from compensation surveys

* What is your goal?

2. Custom development (of surveys) vs. the use of an existing compensation survey.

* Create: More specific!

* Use existing: Save time/money!

What are the two major focuses of compensation practices?

- Wages!

- Salary practices!

What goes into compensation packages?

- Base pay

- The incentive awards structure

- The mix and level of discretionary benefits

- The promotion of efforts to sustain competitive advantage

Base pay

Basic compensation that an employee receives, usually as a wage or salary

External Survey POSITIVE:

You can see if your practices line up with the competition.

Custom Developed Surveys:

- Can be custom tailored; Ask exactly what you want to know

- Quality can be monitored by the 'ER

Access data's value as you gather it*. You can be more flexible/make changes before a final decision.

- Typically not done in-house; handled by specialists!

- External data not readily accessible.

- Can be EXPENSIVE!

Published Survey Sources

- Professional associations

Ex. SHRM, The gov't (O*NET)

- Industry Associations

- Consulting Firms

Ex. Aon, Frederic W. Cook & Company, Korn Kerry-Hay Group, Peal Meyer & Partners, Willis Towers Watson, and William M. Mercer

- Federal Government

What are two PROBLEMATIC published survey sources?

- LinkedIn

- Glassdoor

The U.S. Bureau of Labor Statistics Surveys

- Publishes information on the wages, earnings, and benefits of workers.

What specific information about the wages, earnings, and benefits of workers does the BLS publish?

- Employment cost trends (over time)

- National compensation data

Ex. IRS data

- Wages by area and occupation

- Earning by demographics

Ex. Race, gender

- Earnings by industry

- County wages

- Employee benefits

True or False: The U.S. Bureau of Labor Statistics Surveys are NOT publically available.

False

Compensation Cost Trends (Bureau of Labor Statistics)

This program publishes quarterly statistics that measure the following:

- Changes in labor costs over time.

Employment Cost Index*

Ex. The push for a higher minimum wage

- Levels of costs per hours

* Employer Costs for 'EE Compensation

Additional Compensation Cost Trends (Bureau of Labor Statistics)

- Costs per head-count

- Monthly Reports

* That adjust for COLA

The National Compensation Survey measures:

- Wages by area and occupation

- Earnings by demographics

- Earnings by industry

- County wages

* Quarterly census of employment and wages

- Employee benefits

Compensation Surveys: Two essential strategic considerations are...

1. Defining the relevant labor market

2. Choosing benchmark jobs

* Pick @ different levels

Ex. Entry, middle, upper.

- Entry = The easiest

Compensation Surveys: Where to start?

1. Understand and articulate the relevant labor market.

Ex. Urban, sub-urban; educated, uneducated

DEMOGRAPHICS*

2. Identify benchmark jobs ~ reference points

- Compare a company's jobs to survey data.

* Find a proxy/benchmark job that is fairly common

- Helps set pay levels - a "base line"; LOTS OF INDUSTRY OVERLAP

Relevant Labor Market: Qualified candidates are based on:

- Occupational classification

- Geography [Typically]

- Market competitors

* [Sometimes based on how geographically close they are]

- Product or service

Benchmark Jobs are used for:

- Job evaluations

- Compensation surveys

Four characteristics of benchmark jobs:

1. Contents are established, well-known, stable

2. Common across employers

3. Entire range of jobs

4. Accepted for setting pay rates

What do we need to do if there are differences between jobs in different relevant labor markets?

Job Leveling

Job Leveling Features

- Typically, there are differences between a company's jobs and benchmark jobs

- Corrections for these differences are based on subjective judgment

- The process for making these corrections is referred to as job leveling

- Point level factor refers to one job leveling process

What causes points to up in a point-level system?

Higher compensation!

- Often not a set pattern between amounts

Compensable Factor and Point-Level: Nonstrenuous

Primarily sedentary with some walking, standing, and carrying of light objects

Compensable Factor and Point-Level: Moderately strenuous

Often lists 30 to 50 lbs, walks over uneven surfaces, and/or stands for long periods.

Compensable Factor and Point-Level: Strenuous

Often lifts more than 50 lbs, climbs high, runs, or defends against physical attack.

Compensable Factor and Point-Level: Low risk

Adequately lighted, ventilated, and heated area where normal precautions must be observed.

Compensable Factor and Point-Level: Moderate Risk

Requires special mitigating precautions and/or protective gear or clothing due to potential risk from such sources as moving machinery, chemicals, animals, or diseases.

Compensable Factor and Point-Level: High risk

Extreme temperatures, likelihood of physical attack, or potential exposure to smoke and fire.

Where did the compensable factor and point-level definitions come from?

The U.S. Bureau of Labor Statistics

Point-Leveling Instructions:

- After recording the level for each factor for a job, determine points associated with that level.

- Then... sum the points to determine the overall work level.

How do points work?

- POINTS are associated with each factor.

- POINTS range by work level

* Pay is adjusted according to how many points an 'EE has

Survey Data Characteristics

- They contain a lot of data

- Outdated data due to lag time (Use CPI to adjust)

* $40,000 in the 1940s does NOT equal $40,000 today

- Statistical analysis is needed to integrate internal job structures with the external market!

Summarizing Survey Data: Two descriptive properties...

1. Central tendency: Represents the fact that a set of data centers around a central point or average.

2. Variation: Represents the amount of spread or dispersion in a data set

* Avoid skewing data