1 The OPay OModel 1
Why OShould OWe OCare Oabout OCompensation? 2
What OIs OCompensation? 2
Society 2
Stockholders 4
Managers 4
Employees 5
Global OViews 5
Forms Oof OPay 5
Cash OCompensation: OBase OPay 6
Cash OCompensation: OMerit OIncreases Oand OCost-of-Living OAdjustments 6
Cash OCompensation: OIncentives 6
Long-Term O Incentives 7
Benefits: OInsurance Oand OPensions 7
Benefits: OWork/Life OPrograms 7
Benefits: OAllowances 7
Total OEarnings OOpportunities: OPresent OValue Oof Oa OStream Oof OEarnings 8
Relational OReturns Ofrom OWork 8
The OOrganization Oas Oa ONetwork Oof OReturns 8
A OPay OModel 8
Strategic OCompensation OObjectives 8
Four OPolicy OChoices 10
Pay OTechniques 14
Book OPlan 14
Conclusion 14
Chapter O Summary 15
Key OTerms 15
Review OQuestions 15
Experiential OExercises 15
Case: OThe ORole Oof OLabour OCosts 16
2 Strategy: OThe OTotality Oof ODecisions 18
Similarities Oand ODifferences Oin OStrategies 19
Different OStrategies Owithin Othe OSame OIndustry 20
Different OStrategies Owithin Othe OSame OCompany 20
Strategic OChoices 20
Support OBusiness OStrategy 21
Support O HR O Strategy 22
The OPay OModel OGuides OStrategic OPay ODecisions 23
Stated Oversus OUnstated OStrategies 24
Developing Oa OTotal OCompensation OStrategy: OFour OSteps 24
Step OOne: OAssess OTotal OCompensation OImplications 24
Step OTwo: OMap Oa OTotal OCompensation OStrategy 27
Steps OThree Oand OFour: OImplement OStrategy Oand OReassess Othe OFit 27
Source Oof OCompetitive OAdvantage: OThree OTests 28
Align 28
Differentiate 28
Add OValue 28
, ―Best OFit‖ Oversus O―Best OPractices‖ 28
Guidance Ofrom Othe OEvidence 29
Virtuous Oand OVicious OCircles 29
Conclusion 30
Chapter O Summary 30
Key OTerms 30
Review OQuestions 30
Experiential OExercises 31
Case: ODifficult Oto OCopy? 31
PART OI
Internal OAlignment: ODetermining Othe OStructure 33
3 Defining O Internal O Alignment 35
Jobs Oand OCompensation 36
Compensation OStrategy: OInternal OAlignment 36
Supports OOrganization O Strategy 36
Supports O Workflow 36
Motivates OBehaviour 37
Structures OVary Obetween OOrganizations 38
Number Oof OLevels 38
Differentials 38
Criteria: O Content O and O Value 38
What OFactors OShape OInternal OStructures? 40
Economic O Pressures 40
Government OPolicies, OLaws, Oand ORegulations 41
Stakeholders 41
Cultures Oand OCustoms 41
Strategy 41
Technology 42
Human O Capital 42
HR OPolicy 42
Employee OAcceptance 43
Cost OImplications 44
Strategic OChoices Oin ODesigning OInternal OStructures 44
Tailored Oversus OLoosely OCoupled 44
Hierarchical Oversus OEgalitarian Oand OLayered Oversus ODelayered OStructures 44
Guidance OFrom Othe OEvidence 45
Equity OTheory: OFairness 45
Tournament OTheory: OMotivation Oand OPerformance 46
Institutional OTheory: OCopy OOthers 46
(More) OGuidance O from Othe OEvidence 47
Consequences Oof OStructures 47
Efficiency 48
Fairness 48
Compliance 48
Conclusion 48
Chapter O Summary 48
, Key OTerms 49
Review OQuestions 49
Experiential OExercises 49
Case: OThe OOrchestra 49
4 Job OAnalysis 51
Structures OBased Oon OJobs, OPeople, Oor OBoth 52
Job-Based OApproach: OMost OCommon 53
Why OPerform OJob OAnalysis? 53
Job OAnalysis OProcedures 53
What OInformation OShould OBe OCollected? 55
Job OData: OIdentification 56
Job OData: OContent 56
Employee OData 58
Level Oof OAnalysis 59
How OCan Othe OInformation OBe OCollected? 59
Conventional OMethods 59
Quantitative OMethods 61
Who OCollects Othe OInformation? 61
Who OProvides Othe OInformation? 61
What Oabout ODiscrepancies? 61
Job ODescriptions OSummarize Othe OData 62
Using OGeneric OJob ODescriptions 63
Describing OManagerial/Professional OJobs 64
Verify Othe ODescription 64
Job OAnalysis, OGlobalization Oand OAutomation 65
Job OAnalysis Oand OSusceptibility Oto OOffshoring 65
Job OAnalysis OInformation Oand OComparability Oacross OBorders 66
Judging OJob OAnalysis 66
Reliability 66
Validity 66
Acceptability 66
Currency 66
Usefulness 67
A OJudgment OCall 67
Conclusion 68
Chapter O Summary 68
Key OTerms 69
Review OQuestions 69
Experiential OExercises 69
Case: OThe OCustomer OService OAgent 69
5 Job-Based O Pay O Structures Oand O Job O Evaluation 71
Job-Based OStructures: OJob OEvaluation 72
Defining OJob OEvaluation: OContent, OValue, Oand OExternal OMarket OLinks 73
Job O Content O and O Job O Value 73
Linking OContent Owith Othe OExternal OMarket 73
Other OPerspectives Oon OJob OEvaluation 73
―How OTo‖: OMajor ODecisions 74
, Establish Othe OPurpose 74
Single OVersus OMultiple OPlans 74
Choose OBetween OJob OEvaluation OMethods 75
Job OEvaluation OMethods 76
Ranking 76
Classification 77
Point OMethod 77
Who OShould OBe OInvolved? 84
Evaluating Othe OUsefulness Oof OResults 85
The ODesign OProcess OMatters 85
Appeals/Review OProcedures 85
The OFinal OResult: OJob OStructure 85
Balancing OChaos Oand OControl 85
Conclusion 86
Chapter O Summary 87
Key OTerms 87
Review OQuestions 87
Experiential OExercises 88
Case: OJob OEvaluation Oat OWhole OFoods 88
6 Person-Based O Pay O Structures 93
Person-Based OPay OStructures: OSkill OPlans 94
Types Oof OSkill-Based OPlans 95
Purpose Oof Othe OSkill-Based OStructure 96
―How OTo‖: OSkill OAnalysis 96
What OInformation Oto OCollect? 97
Whom Oto OInvolve? 98
Establish OCertification OMethods 98
Outcomes Oof OSkill-Based OPay OPlans: OGuidance Ofrom OResearch Oand OExperience 98
Person-Based OPay OStructures: OCompetencies 99
Defining OCompetencies 101
Purpose Oof Othe OCompetency-Based OStructure 102
―How OTo‖: OCompetency OAnalysis 102
Objective 102
What OInformation Oto OCollect? 104
Establish OCertification OMethods 104
Whom Oto OInvolve? 104
Resulting OStructure 105
Guidance O(and O Caution) O from O the O Research Oon O Competencies 107
One OMore OTime: OInternal OAlignment OReflected Oin OStructures O(Person-Based Oor OJob-Based) 107
Administering Oand OEvaluating OThe OPlan 107
Reliability Oof OJob OEvaluation OTechniques 108
Validity/Usefulness 108
Acceptability 108
Bias Oin OInternal OPay OStructures 109
The OPerfect OStructure 109
Conclusion 111
Chapter O Summary 111
Key OTerms 112
Why OShould OWe OCare Oabout OCompensation? 2
What OIs OCompensation? 2
Society 2
Stockholders 4
Managers 4
Employees 5
Global OViews 5
Forms Oof OPay 5
Cash OCompensation: OBase OPay 6
Cash OCompensation: OMerit OIncreases Oand OCost-of-Living OAdjustments 6
Cash OCompensation: OIncentives 6
Long-Term O Incentives 7
Benefits: OInsurance Oand OPensions 7
Benefits: OWork/Life OPrograms 7
Benefits: OAllowances 7
Total OEarnings OOpportunities: OPresent OValue Oof Oa OStream Oof OEarnings 8
Relational OReturns Ofrom OWork 8
The OOrganization Oas Oa ONetwork Oof OReturns 8
A OPay OModel 8
Strategic OCompensation OObjectives 8
Four OPolicy OChoices 10
Pay OTechniques 14
Book OPlan 14
Conclusion 14
Chapter O Summary 15
Key OTerms 15
Review OQuestions 15
Experiential OExercises 15
Case: OThe ORole Oof OLabour OCosts 16
2 Strategy: OThe OTotality Oof ODecisions 18
Similarities Oand ODifferences Oin OStrategies 19
Different OStrategies Owithin Othe OSame OIndustry 20
Different OStrategies Owithin Othe OSame OCompany 20
Strategic OChoices 20
Support OBusiness OStrategy 21
Support O HR O Strategy 22
The OPay OModel OGuides OStrategic OPay ODecisions 23
Stated Oversus OUnstated OStrategies 24
Developing Oa OTotal OCompensation OStrategy: OFour OSteps 24
Step OOne: OAssess OTotal OCompensation OImplications 24
Step OTwo: OMap Oa OTotal OCompensation OStrategy 27
Steps OThree Oand OFour: OImplement OStrategy Oand OReassess Othe OFit 27
Source Oof OCompetitive OAdvantage: OThree OTests 28
Align 28
Differentiate 28
Add OValue 28
, ―Best OFit‖ Oversus O―Best OPractices‖ 28
Guidance Ofrom Othe OEvidence 29
Virtuous Oand OVicious OCircles 29
Conclusion 30
Chapter O Summary 30
Key OTerms 30
Review OQuestions 30
Experiential OExercises 31
Case: ODifficult Oto OCopy? 31
PART OI
Internal OAlignment: ODetermining Othe OStructure 33
3 Defining O Internal O Alignment 35
Jobs Oand OCompensation 36
Compensation OStrategy: OInternal OAlignment 36
Supports OOrganization O Strategy 36
Supports O Workflow 36
Motivates OBehaviour 37
Structures OVary Obetween OOrganizations 38
Number Oof OLevels 38
Differentials 38
Criteria: O Content O and O Value 38
What OFactors OShape OInternal OStructures? 40
Economic O Pressures 40
Government OPolicies, OLaws, Oand ORegulations 41
Stakeholders 41
Cultures Oand OCustoms 41
Strategy 41
Technology 42
Human O Capital 42
HR OPolicy 42
Employee OAcceptance 43
Cost OImplications 44
Strategic OChoices Oin ODesigning OInternal OStructures 44
Tailored Oversus OLoosely OCoupled 44
Hierarchical Oversus OEgalitarian Oand OLayered Oversus ODelayered OStructures 44
Guidance OFrom Othe OEvidence 45
Equity OTheory: OFairness 45
Tournament OTheory: OMotivation Oand OPerformance 46
Institutional OTheory: OCopy OOthers 46
(More) OGuidance O from Othe OEvidence 47
Consequences Oof OStructures 47
Efficiency 48
Fairness 48
Compliance 48
Conclusion 48
Chapter O Summary 48
, Key OTerms 49
Review OQuestions 49
Experiential OExercises 49
Case: OThe OOrchestra 49
4 Job OAnalysis 51
Structures OBased Oon OJobs, OPeople, Oor OBoth 52
Job-Based OApproach: OMost OCommon 53
Why OPerform OJob OAnalysis? 53
Job OAnalysis OProcedures 53
What OInformation OShould OBe OCollected? 55
Job OData: OIdentification 56
Job OData: OContent 56
Employee OData 58
Level Oof OAnalysis 59
How OCan Othe OInformation OBe OCollected? 59
Conventional OMethods 59
Quantitative OMethods 61
Who OCollects Othe OInformation? 61
Who OProvides Othe OInformation? 61
What Oabout ODiscrepancies? 61
Job ODescriptions OSummarize Othe OData 62
Using OGeneric OJob ODescriptions 63
Describing OManagerial/Professional OJobs 64
Verify Othe ODescription 64
Job OAnalysis, OGlobalization Oand OAutomation 65
Job OAnalysis Oand OSusceptibility Oto OOffshoring 65
Job OAnalysis OInformation Oand OComparability Oacross OBorders 66
Judging OJob OAnalysis 66
Reliability 66
Validity 66
Acceptability 66
Currency 66
Usefulness 67
A OJudgment OCall 67
Conclusion 68
Chapter O Summary 68
Key OTerms 69
Review OQuestions 69
Experiential OExercises 69
Case: OThe OCustomer OService OAgent 69
5 Job-Based O Pay O Structures Oand O Job O Evaluation 71
Job-Based OStructures: OJob OEvaluation 72
Defining OJob OEvaluation: OContent, OValue, Oand OExternal OMarket OLinks 73
Job O Content O and O Job O Value 73
Linking OContent Owith Othe OExternal OMarket 73
Other OPerspectives Oon OJob OEvaluation 73
―How OTo‖: OMajor ODecisions 74
, Establish Othe OPurpose 74
Single OVersus OMultiple OPlans 74
Choose OBetween OJob OEvaluation OMethods 75
Job OEvaluation OMethods 76
Ranking 76
Classification 77
Point OMethod 77
Who OShould OBe OInvolved? 84
Evaluating Othe OUsefulness Oof OResults 85
The ODesign OProcess OMatters 85
Appeals/Review OProcedures 85
The OFinal OResult: OJob OStructure 85
Balancing OChaos Oand OControl 85
Conclusion 86
Chapter O Summary 87
Key OTerms 87
Review OQuestions 87
Experiential OExercises 88
Case: OJob OEvaluation Oat OWhole OFoods 88
6 Person-Based O Pay O Structures 93
Person-Based OPay OStructures: OSkill OPlans 94
Types Oof OSkill-Based OPlans 95
Purpose Oof Othe OSkill-Based OStructure 96
―How OTo‖: OSkill OAnalysis 96
What OInformation Oto OCollect? 97
Whom Oto OInvolve? 98
Establish OCertification OMethods 98
Outcomes Oof OSkill-Based OPay OPlans: OGuidance Ofrom OResearch Oand OExperience 98
Person-Based OPay OStructures: OCompetencies 99
Defining OCompetencies 101
Purpose Oof Othe OCompetency-Based OStructure 102
―How OTo‖: OCompetency OAnalysis 102
Objective 102
What OInformation Oto OCollect? 104
Establish OCertification OMethods 104
Whom Oto OInvolve? 104
Resulting OStructure 105
Guidance O(and O Caution) O from O the O Research Oon O Competencies 107
One OMore OTime: OInternal OAlignment OReflected Oin OStructures O(Person-Based Oor OJob-Based) 107
Administering Oand OEvaluating OThe OPlan 107
Reliability Oof OJob OEvaluation OTechniques 108
Validity/Usefulness 108
Acceptability 108
Bias Oin OInternal OPay OStructures 109
The OPerfect OStructure 109
Conclusion 111
Chapter O Summary 111
Key OTerms 112
