Compensation Class 13 10 1 Sang Hoon Han PhD Candidate CPA Department of Management and Human Resources Fisher College of Business The Ohio State University Compensation Overview Compensation o Compensation includes all forms of financial returns and tangible services and benefits employees receive as part of an employment relationship Multiple dimensions e g pay level pay structure individual pay decision etc o Compensation systems should be Strategic Motivating Attractive Equitable Understandable 3 Why Compensation Matters Why Compensation Matters HR Management Practices Human Social Capital Available Employee Behavior Attitudes HR Practices HR Planning Recruitment Selection Socialization Job Design Compensation Training Development Performance Management What Employees Have Knowledge Skills Abilities Others What Employees Feel Motivation What Employees Do Feel 5 Internal and External Labor Market Internal Labor Market Until 1980s limited mobility Osterman 1984 Enter bottom Internal promotion Long commitment Doeringer Piore 1971 Pay the position Each position o Not person Not individual skills etc Pay decision process o Job evaluation o The job position s relative value within the total value of all the jobs in the organization o The relative contribution each job should make to the organization s overall performance aka job structure o Decision for each job position s pay Internal Labor Market Employees and employers focus on internal equity o Within an organization employees compare their job position s output input ratio with other job position s output input ratio o Internal in equity may affect job dis satisfaction and thus turnover intentions Same job function at different organizations can be paid differently Gerhart Rynes 2003 External Labor Market Global labor market Union decrease Downsizing short term temporary workers High mobility across organizations Capelli 1999 Pay the person s individual ability Not job Dulebohn 2002 o Labor market demands and supply for the skillsets is the key factor of pay decision Heneman LeBlanc 2002 External Labor Market Employees and employers focus on external equity skills by paying comparable pays o Employers should attract and retain workers with certain o Employees can move to other organizations if their current employers pay is not satisfactory ILM vs ELM Comparison Pay determinant Pay decision process Which equity to focus on ILM Position ELM Person o How much contribution is made by the position o Skillsets of the person Job evaluation of the position Demands and supply for the skillsets in the external labor market Internal equity o Comparison between positions within the organization Low mobility across organizations o Less focus on external equity Same job function at different organizations can be paid differently External equity o Employers should attract and retain workers from external labor market with certain skills by paying comparable pays Employees can move to other organizations if their current employers pay is not satisfactory Test your knowledge True or False Company A relies on the internal labor market in its workforce planning A Pay is mainly decided based on the job evaluation of each job position O B Pay is mainly decided based on the person s skills and abilities X C Employees working for job positions with higher contributions to the organizational performance are paid higher than employees working for job positions with lower contributions O D Pay levels differ significantly between employees with better skillsets and worse skillsets X E The employer focuses on external equity X Test your knowledge True of False Company X relies on the external labor market in its workforce planning A Employees are paid by the level of contributions that their positions make to the organizational performance X B Company X is concerned about the pay level for the corresponding function at the competing companies O C Labor market demands and supply for the skillsets that an individual employee possesses are the key factors of pay decisions O D Employees are not likely to move to other organizations even if their current employers pay is not satisfactory X E Employers attract workers with certain skills from the external labor market by paying competitive pay O Pay for Performance aka Incentive Pay PFP aka Incentive Pay Incentive Pay Forms of pay linked to an employee s performance as an individual group member or organization member o Influential because the amount paid is linked to certain predefined behaviors or outcomes o Motivating employees with incentives o Pay for Individual performance Group Performance Organizational Performance 15 Competing Arguments about PFP Positive view PFP is helpful for individual and or organizational performance Goal setting theory Locke et al 1981 Expectancy theory Vroom 1964 Tournament theory Lazear 1998 PFP promotes competition which motivates employees performance Upper echelons theory Hambrick et al 1984 o Top management team members characteristics value and experience heavily affect the organization s decisions and performance o Knowing this immense influence of TMT employees are motivated to be promoted to TMT PFP stimulates the competition 16 Competing Arguments about PFP Negative view PFP is not helpful for individual and or organizational performance Cognitive evaluation theory Deci Ryan 1985 PFP decreases intrinsic motivation creativity and prosocial behaviors 17 Competing Arguments about PFP It depends view Self determination theory Ryan Deci 2000 o The same scholars later adjusted their argument PFP can be positive if well designed o Perceiving autonomy competence and relatedness enhances intrinsic motivation o Therefore designing PFP in a way that enhances autonomy competence and relatedness may enhance intrinsic motivation creativity and innovation 18 Test You knowledge True or False A Goal setting theory Locke et al 1981 suggests generally positive performance effects of PFP O B Expectancy theory Vroom 1964 may suggest positive performance effects of PFP for employees O C Overall tournament theory Lazear 1998 suggests positive performance effects of PFP O D Cognitive evaluation theory Deci Ryan 1985 supports positive view on PFP X E Self determination theory Ryan Deci 2000 suggests that PFP can be positive if it is designed in a way that enhances autonomy competence and relatedness O 19 Competing Arguments about PFP Recent view Performance Function of intrinsic AND
View Full Document
Unlocking...