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Total Strategic Compensation. Human Resource Management. Intrinsic rewards Satisfaction with the job and work Challenge Skill variety Task significance Responsibility Pride in work. Extrinsic rewards Financial Nonfinancial Positive relationships Pleasant working conditions - PowerPoint PPT Presentation

Text of Total Strategic Compensation

  • Total Strategic CompensationHuman Resource Management

  • What is Total Strategic Compensation?Intrinsic rewardsSatisfaction with the job and workChallengeSkill varietyTask significanceResponsibilityPride in workExtrinsic rewardsFinancialNonfinancialPositive relationshipsPleasant working conditionsActivities provided by the companyTeamsSocial eventsCamaraderie

  • What is Total Strategic Compensation?Direct compensationAll monetary compensationBase salaryIncentives, bonusesIndirect compensationBenefitsProtection programsPay for time not workedEmployee services and perquisitesRecognition programsService awardsOthers

  • Total Compensation Program ObjectivesMotivate employeesAttract them to the organizationRetain competent and better performersEncourage low performers to leaveMotivate other key behaviors that support organizational goals

  • Which Key Behaviors?Individual performanceGroup/team performanceOrganizational performanceCreativityDependabilityProblem solvingFlexibilityEntrepreneurismConformityCooperationSalesSupervisionManagementPerformance of undesirable workOthers

  • Total Compensation Program ObjectivesSupport the organizationAttaining strategic goalsSupporting cultural changeManaging highly flexible environmentsSupporting new management strategiesMeeting organizational needs as well as those of the individual business unit

  • Total Compensation Program ObjectivesAdministratively soundFlexibility in rewarding diverse job and work typesEasily communicated to a variety of employeesComplies with legislation and regulationsAdaptable when components change, such as benefits

  • Total Compensation Program ObjectivesCost effectivenessTrend to lower fixed costs of compensationTie increases in compensation to achievement of organizational goalsTie increases to profitabilityMaximize tax savingsMany benefit expenditures are tax-deductibleSection 125 and 401(k) plans allow tax savings for the employee

  • Pay: Direct CompensationBase compensationTraditional salary gradesBroadbandingAll-salaried workforceHierarchical versus egalitarianNontraditional pay plansIndividual incentives/bonusesGroup/team incentives/bonusesOrganization-wide incentives/bonusesPay at riskSkill-based payOwnership plans (ESOPs)Competency-based pay

  • Base Compensation ComponentsExternal competitivenessMarket analysisInternal equityJob evaluationIndividual equityWell-designed incentive or merit programsAdministrative policies and procedures

  • External CompetitivenessEstablishes the value of the job on the marketMust understand the jobAccurate job analysisJob descriptionMust define the relevant labor marketWho is the competition for incumbents for this job?Salary data are gathered accordingly

  • Internal EquityEstablished through job evaluationMeasures the relative value of the job to the organization, based on its valuesMeasures the worth of the job, not the incumbentNecessary when market data are not available for all jobsCommunicates managements intention to be fair

  • Job EvaluationMany different typesSlottingPoint-factor job evaluationCurrently there is a trend toward less emphasis on point-factor job evaluationIncreased emphasis on competitivenessNew management strategies de-emphasize status and hierarchy

  • Point Factor Job EvaluationCompensable factors are identifiedBy top managementBased on strategy, goals, mission and climate of the organizationOlder systems used 8 to 10; now more often 4 to 6Factors are weighted based on their relative valueA measuring device using these factors is created Jobs are analyzed and compared to this yardstickThorough quality control is doneEnd product is an array of jobs, from the most to least important in value

  • Individual EquityAm I being rewarded fairly forThe amount of job-related education I haveThe number of years of job-related experience I haveMy level of performance relative to othersHow hard I workThe value of what I believe my services to the organization to beOther issues that may be relevant

  • Individual EquityEstablished throughFair and accurate performance appraisal systems that link performance to payWell-designed incentive systems that link accomplishment of goals and performance to bonuses, stock options, profit sharing, etc.Critical for motivationTo remain with the organizationTo perform at high capacity

  • Administrative PoliciesEnsure that compensation pays people for what we want them to doAllocate resources fairly and consistentlyConsist ofSalary policy stating the total compensation policySalary structurePolicies about how pay is changed

  • Salary StructuresConsiderExternal value (market analysis results)Internal value (job evaluation results)Establishes grades and ranges that jobs are placed inRepresent the organizations policies of the value of jobs

  • Types of Pay IncreasesCost of living allowances (COLAs)Promotional increasesPay increases within the range:Merit payPay for performanceStep payPay for seniority

  • Traditional Merit Pay ProgramRewards employees for performanceProvides the mechanism to increase base salaryUsually combines performance level and position within the grade to determine the salary increaseCan be quite effective if designed and implemented properlyVery difficult to implement properlyOften the problem is measuring performance

  • New Ways to Pay PeopleBroadbandingSkill- or knowledge-based payCompetency-based payBonuses and other incentivesIndividualGroup or teamEntire organization

  • BroadbandingCollapses many grades into fewer broad bandsUseful when there are few management levelsUseful for dual-career tracksMore flexibility in paying individuals within bandsMore flexibility in matching individuals to market ratesCan be combined with a traditional system

  • Skill or Knowledge -Based PayUsually about ten skill or knowledge unitsEncourages diversification, reduces specializationFlexibility to change product or service emphasisIncreased work force stability, greater job securityMore satisfying jobs, fewer absences, reduced labor costs (?)More costly in compensation and training; can lead to above-market pay

  • Competency-Based PayCompetencies: The set of key skills, abilities, knowledge or personal characteristics that the organization requires for it to accomplish its strategic goals. All individuals within the organization, to at least some extent, will be successful only to the degree that they have adequate levels of these competencies Competency performance data are used for development, pay, promotions and training decisions

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