Part. Chapter 3 Defining Internal Alignment Chapter 4 Job Analysis Chapter 5 Evaluating Work: Job Evaluation Chapter 6 Person-Based Structures

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Part

I

Chapter 3 Defining Internal Alignment

Chapter 4 Job Analysis

Chapter 5 Evaluating Work: Job Evaluation

Chapter 6 Person

-

Based Structures

Internal Alignment: Determining the

Structure

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EFFICIENCY • Performance • Quality • Customers • Stockholders • Costs FAIRNESS COMPLIANCE COMPETITIVENESS COMPETITIVENESS CONTRIBUTORS CONTRIBUTORS ADMINISTRATION ADMINISTRATION

Analysis Certification STRUCTURE

Market Surveys Policy PAY

Definitions Lines STRUCTURE

Seniority Performance Merit INCENTIVE Based Based Guidelines PROGRAMS

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Chapter

3

Defining Internal Alignment

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1. Explain why internal alignment is an important pay

policy issue and how to evaluate internal alignment.

2. Discuss the dimensions that comprise a pay structure

and factors that influence it.

3. Discuss the pros and cons of egalitarian and

hierarchical structures and how they relate to strategy.

4. Discuss the impact of internal pay structures on

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Compensation Strategy:

Internal Consistency

Supports Work Flow

Supports Fairness

Directs Behavior Toward

Organization Objectives

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Internal alignment,

Internal alignment, often called internal equity, refers to the pay relationships

between the jobs / skills / competencies within a single organization. The

relationships form a pay structure that can

support the workflow

support the workflow,, is fair tofair to employees

employees,, and directs their behaviordirects their behavior

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Internal Consistency:

Engineering

Job Structure

at Lockheed

Entry Level Entry Level Recognized Recognized Authority Authority Engineer:

Engineer: Limited use of basic principles. Close supervision.Limited use of basic principles. Close supervision.

Senior Engineer:

Senior Engineer: Full use of standard principles and concepts. Under Full use of standard principles and concepts. Under general supervision.

general supervision.

Systems Engineer:

Systems Engineer: Wide applications of principles and concepts, plus Wide applications of principles and concepts, plus working knowledge of other related disciplines. Under very gener

working knowledge of other related disciplines. Under very general al direction.

direction.

Lead Engineer:

Lead Engineer: Applies extensive knowledge as a generalist or specialist. Applies extensive knowledge as a generalist or specialist. Exercises wide latitude.

Exercises wide latitude.

Advisor Engineer:

Advisor Engineer: Applies advanced principles, theories, and concepts. Applies advanced principles, theories, and concepts. Assignments often self

Assignments often self--initiated.initiated.

Consultant Engineer:

Consultant Engineer: Exhibits an exceptional degree of ingenuity, Exhibits an exceptional degree of ingenuity, creativity, and resourcefulness. Acts independently to uncover a

creativity, and resourcefulness. Acts independently to uncover and resolve nd resolve operational problems.

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Pay structure,

Pay structure, refers to the array of pay rates for different work or skills within a

single organization. The number of levels, number of levels, differentials

differentials in pay between the levels, and the criteriacriteria used to determine those

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Internal Consistency:

Engineering

Pay Structure

at Lockheed

Entry Level Entry Level Recognized Recognized Authority Authority Engineer:

Engineer: ($40,000)($40,000)Limited use of basic principles. Close supervision.Limited use of basic principles. Close supervision.

Senior Engineer:

Senior Engineer: ($58,500)($58,500)Full use of standard principles and concepts. Full use of standard principles and concepts. Under general supervision.

Under general supervision.

Systems Engineer:

Systems Engineer: ($73,000)($73,000)Wide applications of principles and concepts, Wide applications of principles and concepts, plus working knowledge of other related disciplines. Under very

plus working knowledge of other related disciplines. Under very general general direction.

direction.

Lead Engineer:

Lead Engineer: ($93,000)($93,000)Applies extensive knowledge as a generalist or Applies extensive knowledge as a generalist or specialist. Exercises wide latitude.

specialist. Exercises wide latitude.

Advisor Engineer:

Advisor Engineer: ($120,000)($120,000) Applies advanced principles, theories, and Applies advanced principles, theories, and concepts. Assignments often self

concepts. Assignments often self--initiated.initiated.

Consultant Engineer:

Consultant Engineer: ($162,000)($162,000) Exhibits an exceptional degree of ingenuity, Exhibits an exceptional degree of ingenuity, creativity, and resourcefulness. Acts independently to uncover a

creativity, and resourcefulness. Acts independently to uncover and resolve nd resolve operational problems.

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Government Policies, Laws, Regulations Stakeholders

Cultures and Customs

Government Policies, Laws, Regulations Government Policies, Laws, Regulations

Stakeholders Stakeholders Cultures and Customs Cultures and Customs

ORGANIZATION FACTORS:

Strategy

Strategy HR PolicyHR Policy Technology

Technology Employee AcceptanceEmployee Acceptance Human Capital

Human Capital Cost ImplicationsCost Implications

INTERNAL STRUCTURE: INTERNAL STRUCTURE: Levels Levels Differentials Differentials Criteria Criteria

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Illustration of an Internal Labor Market

Consultant Engineer Consultant Consultant Engineer Engineer Advisor Engineer Advisor Advisor Engineer Engineer Lead Engineer Lead Lead Engineer Engineer Systems Engineer Systems Systems Engineer Engineer Senior Engineer Senior Senior Engineer Engineer Engineer Engineer Engineer Hire Hire Hire Hire Hire Hire

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!

An internal pay structure is defined by:

!

the number of

levels

of work

!

the pay

differentials

between the levels

!

the

criteria

used to determine those levels

and differentials

!

These are the factors that a manager may

vary to design a structure that supports the

work flow, is fair, and directs employee

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Strategic Choices Among

Structure Options

Tailored versus Loosely Coupled

Egalitarian versus Hierarchical

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Layered

Chief Engineer

Engineering Manager Consulting Engineer Senior Lead Engineer Lead Engineer Senior Engineer Engineer Engineer Trainee De De--layeredlayered Chief Engineer Consulting Engineer Associate Engineer

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Strategic Choice:

Hierarchical vs Egalitarian

Hierarchical

Hierarchical EgalitarianEgalitarian Levels Levels Differentials Differentials Criteria Criteria Supports: Supports: Many Fewer Large

Large SmallSmall

Person or Job

Person or Job Person or JobPerson or Job Close Fit

Close Fit Loose FitLoose Fit

Individual Performers

Individual Performers TeamsTeams Performance

Performance Equal TreatmentEqual Treatment Opportunities for Promotion

Opportunities for Promotion CooperationCooperation Work Organization Work Organization Fairness Fairness Behaviors Behaviors

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Pay structurePay structurePay structure Undertake training Undertake training Increase experience Increase experience Reduce turnover Reduce turnover

Facilitate career progression

Facilitate performance

Reduce pay

Reduce pay--related related grievances

grievances

Reduce pay

Reduce pay--related work related work stoppages

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What The Research Tells Us

!

_{Equity Theory}

!

Tournament Theory

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MY PAY My qualifications My work performed My product value MY PAY MY PAY My qualifications My qualifications My work performed My work performed My product value My product value OTHERS’ PAY Their qualifications Their work performed

Their product value OTHERS’ PAY

OTHERS’ PAY

Their qualifications

Their work performed

Their product value

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Which Structure Fits Best?

!

How the work is organized

!

Fair to employees

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!

!Internal alignment_{Internal alignment} refers to the pay relationships among jobs / skill / competencies within a single organization.

!The potential consequences of internal pay structures are

vital to organizations and individuals.

!

!Pay structures_{Pay structures} – the array of pay rates for different jobs within an organization – are shaped by societal,

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Summary

(continued)(continued)

!Employees judge a structure to be equitable by

comparing each job’s pay with the qualifications required, the work performed, and the value of that work.

!Acceptance by employees of the pay differentials among

jobs is a key test of an equitable pay structure.

!There is widespread experience and increasing research

to support the belief that differences in internal pay

structures, particularly employee career paths, influence people’s attitudes and work behaviors and therefore the success of organizations.

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strategic perspective of compensation?

2. Discuss the factors that influence internal pay

structures. Based upon your own experience, which ones do you think are most important? Why?

3. Look into any organization you are familiar with.

Describe the flow of work. How is the job structure aligned with the organization’s business, the work flow, and the organization objectives? How do you believe it influences employee behaviors?

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Review Questions

(continued)(continued)

4. What is the just wage_{just wage} doctrine? Can you think of any

present-day applications?

5. Under what organization designs are more egalitarian

versus more hierarchical structures likely to be effective?