Designing pay levels mix and pay structures

BHR 3301, Compensation and Benefits 1

Course Learning Outcomes for Unit IV Upon completion of this unit, students should be able to:

2. Develop a pay survey and pay structure. 2.1 Explain the purpose of a survey. 2.2 Determine the questions that must be asked in a pay survey. 2.3 Identify reasons for adjusting pay structures.

3. Discuss issues involved in determining an organization’s total compensation strategy.

3.1 Explain the key factors that influence external competitiveness. 3.2 Discuss compensation strategy and what shapes external competitiveness.

4. Determine differences in compensation opportunities for employees in different jobs and different

levels in the organization. 4.1 Explain the key difference between pay level and pay mix. 4.2 Discuss the consequences of pay level and pay mix decisions.

Reading Assignment Chapter 7: Defining Competitiveness Chapter 8: Designing Pay Levels, Mix, and Pay Structures

Unit Lesson Competition and competitiveness: how do these two words relate to compensation and benefits? To answer this question, put yourself in the position of a college basketball coach and address it from that point of view: As a basketball coach, part of my responsibility is to be certain I can attract and retain qualified players on my team. It is also my responsibility to be certain that I can find young ladies who fit the team and school’s culture as well as young ladies who are willing to buy into the concept and program that I have developed. I must also find young ladies who are willing to get on the court during every game and compete to the best of their abilities based on the training they have received in practice. Additionally, I must find young ladies who have a competitive spirit and will not give up or give in when competing against a stronger team. The best young ladies for the team will realize the rewards/pay they receive by being a part of the team. In order for me to get the cream of the crop, I must look at my competition and be able to offer the young ladies I recruit a similar or better package than the other colleges. (Note: When utilizing the word pay in this scenario, it does not refer to monetary rewards received by the student; however, it does refer to a full-paid scholarship, which ultimately pays for the students’ education). Now you might ask, how do I accomplish all of this? To begin, I must conduct surveys. I have potential student-athletes complete a questionnaire providing information about them, some of their interests, and other schools they are considering. I review the surveys and put them in order according to various categories listed on the questionnaire. I also research key information (cost of tuition, extra-curricular activities, school safety report, basketball record, positions available on the basketball team, longevity of basketball coach, etc.) about the schools of interest. Based on the findings, I take notes and prepare my presentation to the recruit, displaying the differences in the other schools based on what I can offer. One

UNIT IV STUDY GUIDE

Setting Competitive Wages

BHR 3301, Compensation and Benefits 2

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area I focus on is the quality of education: the graduation rate, and the percent of graduates employed immediately after graduation. The questionnaire is also used to determine if I should actively pursue the student-athlete. If the decision is made to continue to pursue the student-athlete, I then utilize other factors to determine the student-athlete’s value. What do I mean by value? Is the student-athlete worthy of a full scholarship, partial scholarship, or a walk-on opportunity? The student-athlete who receives a full scholarship can be viewed in business terms as the top executive you have been looking for to make a difference in the business operations. She brings the full package and would make an immediate impact. The student-athlete who receives a partial scholarship can be viewed as the employee who has potential but needs a little more training. You are willing to invest some in that employee because you realize she has the tools and willingness to improve. The student-athlete who does not receive a scholarship and is classified as a walk-on can be viewed as the employee who has the desire but does not have the additional skills and, at this time, is not viewed as a good investment. Along with all information obtained, I must make certain I am being fair and in compliance with company policy and NCAA guidelines. Based on this scenario, I hope you will review Chapters 7 and 8 with an open mind and be able to explain the purpose of a survey, discuss compensation strategy and what shapes external competitiveness, and determine differences in compensation opportunities for employees in different jobs and different levels in an organization. Human resource professionals must be able to look at what competitors offer and decide if the company will pay leaders or pay followers. Chapter 7: Defining Competitiveness This chapter will focus primarily on factors and concepts related to external competitiveness. Pay level and pay mix are discussed within this chapter. Key factors of emphasis that influence external competitiveness include the labor market and produce/service markets. When you think about the labor market, you should think in terms of the skills needed to get the job done or the people needed. Product and service markets refer to the monetary/financial situations within the organization. Other factors include the overall operation of the organization—culture, technological factors, or longevity of employees. Decisions regarding pay-levels and pay-mix is discussed within this chapter also. Some things to consider when making pay decisions are fairness, compliance, and efficiency. Chapter 8: Designing Pay Levels, Mix, and Pay Structures This chapter focuses on the major decisions and techniques involved in determining an organization’s external competitiveness policy—establishing pay levels and pay mix forms and designing pay structures. Upon reading this chapter, you should be able to identify the seven major decisions involved in setting external competitive pay and designing the corresponding pay structures (Milkovich, Newman, & Gerhart, 2014). This chapter will also discuss surveys and how many organizations use them to gain factual information on pay practices in other companies within their industry. The information gained is used to help compensation specialists/committees determine if the organization’s wages are in line with their competitors. It can also be used to set pay ranges for those vacant positions within the organization that need to be filled. You will find that some of the data is public information and can be obtained via the Bureau of Labor Statistics (BLS) (Milkovich, et.al., 2014). Chapters 7 and 8 provide insight into a better understanding of organizational competitiveness and into developing pay policy, pay levels, pay mix, and pay structures that are beneficial to the organization. In order for organizations to be successful, consideration must be given to all of these factors. In reading these chapters and looking back at the scenario provided, I hope you now have a better understanding as to how things work in day-to-day business operations. Even in our own personal lives, we sometimes use these techniques/factors to make decisions regarding our purchasing and spending (i.e. which store has the better deal, better quality, better customer service, and availability of merchandise for the allocated amount of money we want to spend). I hope you enjoy exploring these two chapters.

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Reference Milkovich, G. T., Newman, J. M., & Gerhart, B. (2014). Compensation (11th ed.). New York, NY: McGraw-

Hill/Irwin.

Suggested Reading Click here to access the Chapter 7 PowerPoint Presentation. Click here to access a PDF of the presentation. Click here to access the Chapter 8 PowerPoint Presentation Click here to access a PDF of the presentation.

Learning Activities (Non-Graded) Please complete the “Still Your Turn: Word-of-Mouse: Dot-Com Comparisons” Activity on page 292 in your textbook. Non-graded Learning Activities are provided to aid students in their course of study. You do not have to submit them. If you have questions, contact your instructor for further guidance and information.

Key Terms

1. Compliance 2. Efficiency wage theory 3. External competitiveness 4. Job structure 5. Market pay line 6. Pay level 7. Pay mix 8. Pay satisfaction 9. Pay structures

10. Pay-policy line 11. Total compensation

https://online.columbiasouthern.edu/CSU_Content/Courses/Business/BHR/BHR3301/13J/UnitIV_Chapter7Presentation.ppsx
https://online.columbiasouthern.edu/CSU_Content/Courses/Business/BHR/BHR3301/13J/UnitIV_Chapter7Presentation.pdf
https://online.columbiasouthern.edu/CSU_Content/Courses/Business/BHR/BHR3301/13J/UnitIV_Chapter8Presentation.ppsx
https://online.columbiasouthern.edu/CSU_Content/Courses/Business/BHR/BHR3301/13J/UnitIV_C