Ch 4_Strategic and Tactical Compensation Issues

8/3/2019 Ch 4_Strategic and Tactical Compensation Issues

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Organizational Structure

Strategic and TacticalCompensation Issues

Chapter 4


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Compensation strategies

To develop and operate a compensationsystem that promotes fair treatment, anorganization should consider compensation

strategies such as:

1. Relating job worth to difference in jobrequirements

2. Recognizing the worth and value ofemployee knowledge and skills

3. Rewarding employee contribution and theresult achieved

4. Promoting employee continued acquisition

and upgrading of knowledge and skills


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5. Supporting team and work unit

cooperative efforts6. Designing compensation plans that

successfully compete within establishedlabor markets

7. Aligning compensation of all employeeswith objectives and goals of theorganization

8. Providing a compensation package thatenhances current life style and provideslong-term protection for employees andtheir dependents.


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Employees-A criticalresource

Pay satisfaction

Job satisfaction

Organizational satisfaction

Satisfaction: an employmentperspective


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Division of labor

The basis of the employer employeeexchange process is the Division of labor

The performance of specialized activities And the provision of rewards to those who

make contributions

The quality and quantity of rewardsnormally vary according to the worth ofemployee contributions as measured bythe employer and the value of thosecontributions as perceived by employees


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Creating an organizationalhierarchy

One basic approach to distributingrewards focuses on the level of the job inthe organizational structure. The higher

the level the job is, the greater theresponsibility of the incumbent. The structure consist of

A board of directors Senior managers Operating managers Professionals and administrators and Operative employees.


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Major groups in theorganization structure

Exemption status exempt (excused) from the overtimerequirements (it depends on

responsibilities and duties and

salary) Exempt group

Nonexempt group

Unionization

Nonunion group Union group

Increased responsibilities require broader and more complex

knowledge and skills. The more diverse the knowledge and higher

the level of the skill requirements, the greater the compensation.


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Board of directors

It consist of a Chairman and Inside members and

Outside members

The compensation package consist of Regular meeting fees

Annual retainer

A set of other fees

Acquisition of stock

Long term incentive programs Nonqualified stock option plans

Restricted stock plans


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Board of directors

Following corporate performancemeasures are being used to

determine incentive awards1. Earning per share

2. Net profits after taxes

3. Return on equity4. Return on assets and

5. Annual sales or revenue


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Outside Board of directors

Some organizations now providetheir outside directors with-

1. Group travel insurance2. Group life insurance

3. Accidental death and

dismemberment insurance


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Senior management

Consist of executives and seniormanagers such as-

CEOCOO

Vice President etc.

Their compensation relates to the size

of the organization


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For organizations in different industries, the

determinant or size indicator varies.

Industries

Manufacturing,construction andretail trade

Utilities

Banks

Insurance companies

Indicator

Total sales volume

Operating revenue

Total deposit Total premium

income


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Operating managers

Mid-Level Department head

Branch head

First-Level Supervisors

Entry level professionals

Administrators

Compensation package Less than senior managers

Pay for performance opportunity

Pay varies by size of unit managed


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Sales personnel

Five basic methods are used forpaying sales personnel-

Salary Sales commission

Combination of salary and commission

Salary and bonus Combine bonus payments with a salary

and commission.


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Professionals

Some specialist in the area of Science Engineering

Accounting Finance or Law

Compensation package

Compensation and noncompensation rewardsreceived by peers Play the role of operating managers and

rewarded accordingly.


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Operative employers

Paraprofessionals

Technicians

Administrative support

Skilled craft workers

Semiskilled workers

Unskilled workers


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White collar- included professionals,administrator

Blue collar - skilled and semiskilledworker

Pink collar nurses, teachers,retailers etc.


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Regular and temporaryemployees

Regular employees

Temporary employees

Full-time employees

Part-time employees

Temporary employment agencies


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THANK YOU ALL

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Ch 4_Strategic and Tactical Compensation Issues