CLASS#1 RewardsandMotivation
TypesofRewards
25/02/200912:57:00
1.IntrinsicRewardsFactorsrelatedtogrowthneeds. Ex.Jobchallenge,interestingwork,opportunityforadvancement. Canbegiventoselfwithoutcontrolofmanager.
2.ExtrinsicRewardsfactorsrelatedtohumanexistenceandrelatednessto
others. Controlledbymanagersorpeers. BOTHTYPESAREIMPORTANT Themixofrewardscommunicatewhatmattersintheorganization. Differentpeoplearemotivatedbydifferentthings. Sometimesmonetaryrewardscancauseproblemsforcompanies($=respect sothosewhodonotreceive$feeldisrespect.) RewardVariables 1.Timingofrewardscheduleofreward. 2.AnticipationofrewardExplicitorsurprise. 3.Formofrewardcash,stock,benefit,merchandise,etc. 4.Administrationofreward basisofdistributionequalityvs.equity proceduresfordeterminingreward
5.Disclosureofrewardsecretorpublic.
Somerewardscanturnintoentitlementbythewaytheyaregivensometimes causeslackofhardwork,theyknowteyaregettingit,whyworkhard?
Starbucksrewardsbothfullandparttimeequally. WFMworkinteamsrewardsareteambased. OnthefollyofrewardingA,whilehopingforB Example:CEOpayinUSAvs.Internationally(GMvs.Toyota).CEOsover
rewardingusuallywhistleblowersgetfired.Easilytrackedbymediaoroutside corporatewatchdogcompanies. Whenrewardsystemsmisfire 1.Politician:TelltheTruth? 2.MedicalPractice:Healsickpeople 3.Universities:Rewardforgoodresearch.Whataboutteaching? 4.Parents:Rewardstudentsforgoodgrades.Whataboutlearning? 5.TeamSports:Rewardsforindividualperformance.Whataboutteam
performance? 6.Sales:Salesvolume/unitsarerewarded.Whataboutcustomerservice? 7.Restaurants:Serversreceivetipsfromcustomers.Whataboutbusers,
cooks,anddishwashers? CLASS#2 EmployeeMotivation DefinitionofMotivation:Factorswhichenergize,directansustainemployee
behavior. Motivationisgoaldirectedbehavior.
MotivationisNOTthesameasperformance. Performance=MotivationXAbility DimensionsofMotivation o Form(peoplewithoutgoalscannotbemotivated) o Direction o Duration(isitconsistent?) o Intensity LearningCurve:Timevs.Performance Outsidefactors(drinking,sickness,etc.)
TheoriesofMotivation 1.CognitiveTheories:POV=TheEmployee ExpectancyTheory EquityTheory
2.BehaviorTheory:POV=TheManager Reinforcementtheory SocialExchangeTheory:POV=Themanager
ExpectancyTheory(Vroom,1964) PeoplesBehaviorresultsfromconsciouschoicesamongalternatives(based ondifferentlevelsofperformance) ValenceApersonspreferenceamongvariousoutcomesofrewards.Ex.Do Iprefertoachieveahigherperformancegoalormoreleisuretime? InstrumentalityApersonsbeliefthatacertainlevelofperformancewill leadtocertaindesirableconsequences.Ex.Ifstudy2hourseverydayformy financeclass,willIearnanAgrade?
o IfIworkharditwillpayoff. o ExceedExpectationvs.MeetExpectation.SETGOALS ACCORDINGLY. o Choiceofperformancevs.Timeandenergy.(IfIperformwellwillthe rewardfollow?) ExpectancyApersonsbeliefaboutwhetheracertainperformance outcomeispossible.Ex.CanIsell12housesthisyear?Willmyteamachieve excellenceinthecustomersatisfactionsurvey? AssumptionPeopleselecttopursuethelevelofperformancetheybelieve willmaximizetheirutility(happiness). Motivationf(V,I,E)whereV,I,E>0 o Willincreasedeffortleadtohigherperformance? ExpectancyTheoryApplicationsforManagers ManagingValence o Rewardsmustbeattractivetoeachemployee ManagingInstrumentality o Highperformancelevelsmustresultinattractiverewards(doIwantto becomeapartnerintheaccountingfirm?) o Performancelevelsmustbesetatareasonablelevelofdifficulty(ex. Salesincentives) Managingexpextancy o Coachingandfrequentfeedbackincreaseexpectancies. o Trainemployeesforskillgapssoabilitiesaregood. Everyoneisdifferentwhenitcomestorewards,talktothem! Flightriskemployeeoffendedbysmallamountofraise. Temptedtoleave. EquityTheory(Adams,1963)**Fairness
Peopledevelopbeliefsaboutwhatisafairrewardforonesjobcontribution anexchange. Peoplecomparetheirexchangeswiththeiremployertoexchangeswith othersinsidersandoutsiderscalledreferents Ifanemployeebelieveshistreatmentisinequitablecomparedtoothers,heor shewillbemotivatedtodosomethingaboutitthatisseekjustice. o unfairsituationscanleadtoalackofmotivation. o Companieswanttobeasfairaspossibleb/cifnottherewillbea negativeoutcome.
ModelofEquityTheory Is/OsvsIr/Or O=outcomes:thetypeandamountofrewardsreceived. I=inputs:employeescontributiontoemployer R=Referent:comparisonperson S=Subject:theemployeewhoisjudgingfairnessoftheexchange.
EquityTheoryExchangeSenarios Case1:Equitypayallocationisperceivedtobefairmotivationis sustained.(unionsORpayhighperformancemoreandlowperformanceless) Case2:Inequityunderpayment. o Employeeismotivatedtoseekjustice.Workmotivationisdisrupted. Case3:Inequityoverpayment. o Couldbeproblem.Inefficient.Inotherculturesemployeesloseface. Socialtension
ConsequencesofInequity Theemployeeismotivatedtohaveanequitableexchangewiththeemployer.
Toreduceinequity,employeemay o Reduceinputs(reduceeffort) o Trytoinfluencemanagertoincreaseoutcomes(complain,file grievance,etc) o Trytoinfluencecoworkersinputs(criticizeothersoutcomesorinputs) o Withdrawemotionallyorphysically(engageinabsenteeism, tardiness,orquit)Lorette
EquityTheoryApplications:ExternalPayorMarketTheory Developtoolstopaypeopleinproportiontotheircontributions. Letemployeesknowwhotheirpayreferentsareinthepaysystem:identify paycompetitorsandinternalpaycomparators. Striveforconsistentpayallocations. Monitorinternalpaystructureandpositioninthelabormarketforconsistency. o Paysurveytocollaboratepaystructure. o InternalEquitystructureofpaywithincompany.(HRdept.) Methodologyjobevaluation
ReinforcementTheory(Skinner,1953)ExperimentalPsychology Behaviorthatisrewardedwillbemorelikelytoberepeatedandstrengthened (Thorndike,1911). Behavior Consequence o Reinforcement/Noreinforcement/Punishment o Norewardtriggeredwithincreasedperformance. Reinforcementadesirableconsequence,i.e.,rewardbehaviorincreases theprobabilityitwilloccurinthefuture. Extinctiontheprocessofunlearningabehaviorandtheconsequencesthat formerlyreinforcedit. o Eventuallyunlearnabehavior o Developbehaviorsveryresistanttoextinction.
SchedulesofReinforcement Outputschedule(numberofunits)
o FixedRatio o VariableRatio Timebasedschedule(daily,weekly,yearly,etc.) o FixedInterval o VariableInterval ContinuousSchedulereinforceeverybehaviororunit o Limitedapplicationinworkenvironment. o Usefulforlearningnewskills o Notpracticalforpaysystem o IntermittentSchedulebehaviorisreinforcedonapartialbases. Behaviorisstrengthenedandtakeslongertobecomeextinct onceitislearned. Moreapplicationinworkenvironment Behaviormustbehappeningrepeatedlyinordertogetreward.
IntermittentReinforcementSchedule FixedInterval:notverymotivational/predictable o Reinforcementreceivedafterthepassageoftime. o Leaseresistanttoextinction.(peopleexpectit) o Ex.Monthlysalary,hourlywage,annualbonus Weakestperformancequality Variableinterval:unpredictable/strongermotivationalqualities o Reinforcementreceivedonavariable(uncertain)schedule. o Rewardislesslikelytobeviewedasentitlement. o Ex.Quarterlyprofitsharing(somequartersoccurwithoutprofits)/spot cashrewardpaidoutafterthefact Differentamountsoftimeelapsebetweenrewards Praiseandrecognitionmustbespontaneousinordertobe affective.
Sinceenteringarecessionprofitsharingwillnotbepayingout.
FixedRatio:verylimitedapplicationtoday. o Reinforcementreceivedaccordingtofixedamountofoutput. o Ex.Pieceworkpayworkergets$1forpicking12apples/sales commission6%ofhousesellingprice. Mostlyoffshorework Themoreyoumakethemoreyouarepaid.
VariableRatio o Reinforcementreceivedaccordingtovariable(uncertain)amountof output o Thisscheduleismostresistanttoextinction. o Ex.EntrepreneurshipRewardsOnetakesriskswithonescapitaland isuncertainhowmuchoutputwillleadtoabigreward/Gambling behaviorslotmachines.
ReinforcementTheoryApplications Continuousreinforcementincreasesrateoflearning. Intermittentreinforcementstrengthensbehaviorthatislearned. o Dominantschedule Ratioschedulesproducegreatermotivationthanintervalschedules. Variableschedulesproducestrongermotivationthanfixedschedules. Paymaynotalwaysworkwithratioorvariableschedules,butpraise, recognitionandfeedbackcanbeusedeffectivelywithintermittent reinforcement. o Praiseandrecognitionmustnotbegivenonapredicableschedule.If soitwillnotwork.Needstobevariable!
CLASS#3 GoalSettingTheory(Locke&Latham,1990):BasicPrinciples
1.GoalsTargetandenergizeemployeebehavior. Collectivegoalsallowemployeesonteamsandorganizationstowork collaborativelyratherthanatcrosspurposesforacommonobjective. Therightgoalscanproduceintrinsicmotivation. THEYHAVETOBETHERIGHTGOALS.
2.Clearandspecificgoalshavestrongermotivationalpropertiesthannon
specificordoyourbestgoals. Goalsshouldhavequantifiedandmeasurableproperties. Ex.Increasestorerevenuesby20%thisquartervs.increasestorerevenues. Musthavecleartargets.COMMUNITCATIONISKEY.
3.Difficultgoalsproducemoremotivationthaneasygoals. Stretchgoalshavethestrongestmotivationaleffects.Letusdoourbest. Goalsmustalsobeattainableandrealisticotherwisetheycanfrustrate motivatedbehavior. Whenemployeesbuyintothegoalstheybecomemorecommitted. o Thereisclarityafteradiscussionofgoalstakesplace.
4.Employeesaremorecommittedtogoalswhentheyparticipateinthe
goalsettingprocess. Committedemployeesrequirelesssupervisionandthemotivationis sustainedovergreatertime. Goalparticipationincludes(1)choiceofgoals;and(2)voiceindeveloping goals.
5.Employeeswhoreceivefrequentfeedbackongoalprogresssustain
higherlevelsofmotivationthanthosewhoreceivesporadicornofeedback. Feedbackcanenhancemotivationbecauseitprovidesknowledgeofresults whichcanbeanintrinsicsourceofmotivationiflearningoccurs.
GoalSettingTheory:CriticalThinkingQuestions.
1.Customerserviceagentsatamajorairlinehadtheirperformancejudged
accordingtothenumberofflightbookingstheagentmadefromcustomers. Moreisbetter.NOTNECESSARILY!Thiswasafailurebecauseofover booking/selling.
2.AtIBMinthe1980stheperformanceofcompiuterprogrammerswas
judgedaccordingtothenumberoflinesofcodethatwaswritten. Qualityoverquantity.Lotsofcodedoesnotequalbetterfunctioning.
3.MerrillLynchpaidthefinancialsecuritiesbrokersaccordingtothesales
volumetheyproducedfromsellingstocksandbondsfromnewandexisting customers. SocialExchangeTheory(Blau,1964):EmployerEmployeeRelationships
arebasedonexchangesthatcaninfluenceEmployeeBehavior:Twotypes. 1.EconomicExchangesbasedonwrittenrulesthatspecifythequantityand
quantityofworkthatisexpectedandtheamountofpayadotherrewardsthatare exchanged. Basedoneconomiclogicofquidproquo. Employeeemployerrelationshipisarmslength
Disruptionofexpectedrewardsleadstoimmediatedisruptionofemployee productivity. Employeeproducedoutputsthatareexpected,nomore,noless Relationshipisinstrumentalbasedoneconomicneedsnotahighquality relationship.
2.SocialExchangesbasedonlogicofnormofreciprocity,i.e.,ifsomeone
showscaringandsupporttous,weareobligatedtoreciprocatetothatindividual. Socialexchangesgiverisetotrustbetweentheparties,therelationshipis similartohowyoutreatafriend. Theresourcesthatareexchangesarenotmadeexplicit(thereisnocontract) tothereceivingpartyintheexchange. Thepurposeoftheexchangeofresourcesistoimprovethequalityofthe relationshipbetweentheparties. Forexample,agiftmaybegivenasaresourcesuchasmentoringand employeessohe/shecanadvanceinthecareer. Employeesrespondtobesupported,caredforandtreatedwithkindnessby anemployerinasocialexchangerelationshipbeofferinginnovations, workingovertimetocompleteaproject,volunteertoserveacommittee, speakinghighlyaboutthecompanytocustomers,etc.goingbeyondwhatis expectedandbeingagoodcitizen. Howevertheemployermustsettheprecedent.
PayStrategies
CLASS#4 CompensationGoalsandStrategy A.BasicGoalsofaCompensationsystem: AttractEmployees RetainEmployees
25/02/200912:57:00
o Somecompaniespaylessthantheircompetitors.Thehigherpaying employercanbemoreselectivewhenhiringandgenerallyhavelower turnover(Walmartvs.Costco) o Toretainemployees,employersmustbeproactiveonwhatiscommon rewardorpayinthatfield. MotivateEmployees CompliancewithPayLaws AdministrativeSimplicity o QuotaBased o Howtovalueastockoption?Howshouldanemployeebehavewith suchoptions. o Everyonemustunderstandtherewards CostEffective o Notjustlowpay. B.Compensation:StrategicChoices Uniquetothearchitectureofeachorganization Jobbasedvs.IndividualPay o Canpayforthejoborcanpayfortheperson(baseball,paypositionor payplayer)
o IndividualNotaboutthejobitisabouttheskill.(JRIdesignerspaidby skill) Fixedvs.VariablePay
o Controllingcosts.Fixedismorepredictable,Variablearenot. o Fixed=salaryandbenefits o Variable=Bonuses,profitsharing,commissions. Internalvs.ExternalEquity o ExternalMarketdynamics,howpeoplearepaidoutside. o Internalhowpeoplearepaidwithinthecorporation. Performancevs.Membership o Performancepaycreatesacertainculture,highperformersrule (GeneralElectric). o Membershiphasitprivileges,eachmembergetstheysame privileges.Createssocialharmony,lesscompetition(Unions). EgalitarianvsElitistSystem o Egalitarian:nospecialprivilegesforpeoplehigherinthehierarchy (SunMicrosystems:everyonewithaprofessionaljobgetsstock options.Everyonegetsthesametreatment o Elitist:onlytopperformersgetprivileges.Higherpaidorhigher performingemployeesgetbettertreatment. AtMarketvs.AboveofBelowMarket o Market:paidfullvalueoftheirjobworthaccordingtotheirjobworth. (7080%ofcompaniesusethisstrategy) o AboveMarket:somecompaniespay2030%moretogetthecreamof thecrop.Wallstreetbankspaythetopdollar.NYlawfirmspaytop dollar.Worktogetthemosttalentedandlockthemin. o BelowMarket:dontdotheresearchtofigureoutfairpayforthe market.Thereforehaveahighturnoverrate. Monetaryvs.NonMonetaryRewards o NYisaverymonetaryculture.Thinkingofpaymostofthetime. o Heavyemphasisofmonetarycanleadtogreed.Greedteaches employeestobeunethical.Moneybecomesthemetricforeverything andpeoplewilldoanythingtogetit. OpenPayvs.SecretPay o Open:letseveryoneknowwhateveryoneisearning.Fairwayofpay.
o Secret:thereisalotofmismanagementinpayandkeepingit disclosedkeepunfairpaysecret. Centralizedvs.DecentralizedPay o Centralized:donethroughathecompanythroughthehierarchy. o Decentralized:donethroughanoutsidecompanyorbranchoffices.
C.ImpactofStrategicPayChoicesontheOrganization StrategicChoicescanStrengthenorDiluteOrganizationCulture o Ex.WhatchoiceswouldsupportaCultureofHighEmployee InvolvementandEmpowerment? o Ex.WhatchoiceswouldsupportacultureofSecurityandemployee Loyalty StrategicChoicesshouldSupportHumanResourceandBusiness Strategies. o Ex.WhatchoiceswouldsupportandHRstrategyofPromotefrom within? o Ex.WhatchoiceswouldsupportaBusinessstrategyofInnovationand Growth?
D.FairLaborStandardsAct MinimumWageProvision o $5.85/hr.($6.55asof7/24/08;and$7.25asof7/24/09) o Advantageswagefloor,min.standardofliving Disadvantageslimitsopportunityforunskilled,andtheyouth;may o encouragesubstitutesforlabor. o Tippedemployees$2.13/hr. OvertimeProvision o 1.5XBasedWageRatefor>40Hours/week o Onlynonexemptemployees(hourly)covered.
o EmployerRequiredtofilenonexemptemployeesrecordsofwork hourswithDepartmentofLabor. EnforcementofFLSA o Audits o Investigation o Remediesincludebackwages,attorneyfeesandcourtorderstostop violatingFLSA o Finesandimprisonmentforwillfulviolators. ExemptionsEarnasalarynotlessthan$455/weekplusbeinoneofthe followingjobclassificationsaccordingtoatestofjobduties. o Executives/Managers o AdministrativeEmployees o Professionals o ComputerEmployee o OutsideSalesForce Challenge:CorrectClassificationsofJobs
ProblemsManagingUndertheFLSA Correctclassificationofexemptionjobs o Ex.Teamleader?Telemarketers? Bonuscalculationsnondiscretionarybonusispartofovertimepay calculation. o Ex.Shiftpremiums,Xmasbonus,specialdutypay. Independentcontractororemployee? o Setownhours,owntools,ownofficeandworksite o Checkoutindependentcontractoringooglesearch o Contractorshavetherighttocontroltheirownwork,usuallyhavetheir ownoffice.
o Employees:alloftheprocessesarecontrolledbytheemployer. TrackinghoursofnonexemptsTimeClocks? Inflexibleworkhoursbiasto40hr.workweek. o 50/30schedule10hrsOT CompTimetimeoffinsteadofpayforOT?
ManagingFLSAintheworkplace:CriticalThinkingQuestions
OvertimeProvision 1.Howdoyoumanagetheovertimeofpeoplewhotelecommunicatefroma homeoffice? 2.Thereisanegativeincentivetoprovidevariablepayfornonexempt employeesbecausethebonuscalculationbecomesverycomplicatedforovertime.Is thereawaytoavoidthisproblem? EqualPayAct(1963,JFKwaspres.):equalpayforjobsofsubstantially
similarwork. Federallawtoensurethatwomenarepaidequaltomeniftheyaredoing similarwork. Factorsthatdefineequalwork: o Skill o Effortcanbementalorphysical o Responsibility o WorkingConditionschallengeofworkinginstressfulorphysical conditions 4LegalexceptionstotheEPA:MenandWomenspayonasimilarjobcan bedifferentduetodifferencesin o Seniority:legaldefenseofpaydisparity.Equalforbothmenand women.
o PerformanceorMerit(avalidSupervisorbasedevaluationof performance)Payislinkedtojobperformance.Meritissymbolicfor judgmentbasedperformanceinmeritpay.Mostcommonsystemin theunitedstates.Theburdenofproofisontheemployertoprovethat thereistruemerit,notfavoritism. o QuantityorQualityofOutput(suchaspieceworkorsales commissionplan)Malesproducingmoreoutputthanwomen. o FactorotherthanGendersuchasNightshiftdifferentialorhazardous dutydifferential COminimumwage:$6.85 $7.02statecontrolstheminimumwage. HighestisWashington$8.07 LowestisGeorgia$5.85
Federal$5.85
JobEvaluation
JobAnalysisandJobbasedPay
25/02/200912:57:00
JobAnalysis:Asystematicprocedureusedtocollectjobinformationthatis
usedinvarioushumanresourceapplicationsincludingpay,staffing,legaldefenseof HRdecisions,training,andperformanceevaluation. Jobbasedpaywagesandsalariesarebasedondeterminingtheworthofa
job,wherethejobitselfisthesourceofvalue.Jobanalysisisabasisofjobbasedpay. Personbasedpaywagesandsalariesarebasedontheworthoftheskillsor
competenciesofanindividualperson. Talents,whatapersonbringstotheworkplace JobEvaluationOverview JobAnalysisandJobbasedPay Jobbasedpay Jobanalysis>Job>JobPayPay DescriptionEvaluationStructureSurvey Personbasedpay SkillsandCompetenciesPayStructurePaySurvey
Background ThereisaNeedforaSystematicApproachtodevelopcompanypay structures. BasedonJobAnalysis Internallyfindingthevalueofonescontributionandassigningitanumberor rankingcomparingtothemarketandthenassigningitamarketvalue.
PurposeofJE Providesinternalconsistencyinthepaysystem,e.g.,internalpayequity o AsystemthatisFAIR Rationalsystemcanbeexplainedtoemployees. o Everyoneisspeakingthesamelanguage,everyoneunderstands. PaydecisionscanbedefendedfromDOLauditsundertheEqualPayActor Title7andEEO.
JobEvaluationMethods WholeJobApproach:(1)Ranking;(2)Classificationbasedonthewhole job. o Rankingmostbasic;usedforsmallfirms Compareeachjobtoeachotherandthenrankthemfromtopto bottom. o ClassificationmainlyusedforGovernmentjobs. QuantitativeJobApproach:PointFactor o PointFactormorecomplexusespointsassignedtocompensable factors,andsubfactors. o Basedonthelogicofcompensablefactors(factorsthatproducevalue onajob.
CompensableFactors UsedwithPointFactorJEplans Aregenericfactorscommontomostjobs.
Consideredcompensablefactors.Ex.Skill,Effort,Responsibility,Working Condition o Manyhightechjobsdonotconsiderworkingconditions,everyoneis workinginthesame(cubical)conditions. Representuniquedimensionsofjobnooverlap Companymustbewillingtopayforthefactor. Factorshaveweightsthattranslateintodifferentamountsofworthpoints. Factorsmaybedividedintosmallersubfactors Ex.HaymethodofJobEvaluation o EngineeringJob=1000worthpoints KnowHow=650 Problemsolving=175 Accountability=175
o ManagementJob=1000worthpoints ThePracticeofJobEvaluation JobEvaluationCommittees AdvantagesofJECommittees o Broaderjobknowledgefromdifferentperspectives o Increasedparticipationleadstoincreasedunderstandingand commitmenttotheJobEvaluations. Manytimes,jobsarebrokenintofamilies. SelectingmemberstobeontheJEcommittee o Jobincumbents,managers,HRexpert,unionreps Accountability=600 KnowHow=200 ProblemSolving=200
o Employeeswhohaveknowledgeofjobs ThePracticeofJobEvaluation(Contd) GuidelinesforJobEvaluationCommittee o Eachcommitteememberevaluateseachjobindependentlybefore meetingwithgroup o Eachmemberreportshisorherevaluationingroupwithdifferences noted. o Groupdiscussesdifferencesandworkstowardconsensusmembers explaintheirrationaleforchoices o Allmembersshouldparticipate
QualityChecksonJobEvaluations JobComparisons15percentrule CorrelationAnalysiscomparethecommitteeevaluationstobenchmarkjob evaluationsprovidedbyconsultantorhistoricaldata.
HayMethodofJobEvaluation:PointFactorMethod ThreeCompensableFactors KnowHow:thesumtotalofeverykindofskill,requiredforacceptablejob performance o KnowHowsubfactors: Specializedandtechnical Managerialbringthingstogether Humanrelationsinternalcustomerservices. ProblemSolving:theamountoforiginalthinkingrequiredtoanalyze, evaluate,create,reason,arriveatandmakeconclusions.Theenvironment youfindyourselfinyourjobtosolveproblems. o ProblemSolvingsubfactors: Thinkingenvironment
Thinkingchallenge Accountability:theanswerabilityforanactionandfortheconsequencesof theactionthemeasuredeffectofthejobonendresults o Accountabilitysubfactors: FreedomtoAct ImpactonEndResults Magnitude
PayDiscrimination
PayDiscrimination TheMale/FemalePayGap 1950s1970s:59% 2004:77%
25/02/200912:57:00
PossibleExplanationsforthePayGap
1.TheCrowdingHypothesis:Occupationswithfewornobarrierstoentry becomecrowded,therebydepressingwagelevels.Somesectorsdominatedbywomen orimmigrantsdisplaythephenomenon. 2.InstitutionalBarriers:(a)accessdiscrimination:EEOCwaspassedtominimize this(b)Glassceilings:problemswithwomenmovingupheexecutivepositions(still issueswiththis) 3.WorkFamilyConflicts:(a)Inflexibleworkschedules;(b)unfriendlyfamily employmentpractices 4.JobStereotyping WalMartCase Paydiscriminationagainstwomen o Possiblethatthepaywasbasedonbetterstoreperformance. o Womenholdthemajorityofcashierjobsandarepaidlessthanmen. o MenRegionalVPsarepaidmuchhighersalariesthanwomen.more qualifiedforthanmen. o Womenreceivelesspromotionsforjobstheyare Notfightingforemployees o Example:againstunionizingemployees
PayDiscriminationandComparableWorth
RelevantLaws:(a)EPA;(b)Title7CRA,disparatetreatment(applies);
disparateimpact(rarelyused) Disparatetreatment: TitleVIIprohibitsemployersfromtreatingapplicantsor employeesdifferentlybecauseoftheirmembershipinaprotectedclass Disparateimpact:Evenwhereanemployerisnotmotivatedby discriminatoryintent,TitleVIIprohibitsantheemployerfromusingafacially neutralemploymentpracticethathasanunjustifiedadverseimpacton membersofaprotectedclass. KeyCourtCases 1.Lemonsvs.CityandCountyofDenver(1980) involvedcollegeeducatedDenvernursesworkingforpubichospitals. Publicpayisopenandfoundouttraditionalmailjobs(treetrimmerorsign painter)werepaidmorethanthenurseseventhoughthesewerebluecollar jobs. 95%womeninnursingfield. Nursingwasundermarketed,marketdatawastaintedaccordingtohistorical data. 2.Gunthervs.CityofWashington(1981) 3.AFSCMEvs.StateofWasthington(1985) 4.Ledbettervs.GoodYearTireandRubberCo(2007) GoodYearonlywomaninworkunit,foundoutmenwhohadlessseniority thenherwerebeingpaidmore.Shealsofoundoutshewasthelowestpain workerinthemanufacturingfacility. Tooktheclaimtocourt,foundoutshefiledtoolate(over180days)therefore therewasnovenueforher. 180dayruleisvalidforallpaydiscriminationcasesnow. ComparableWorthLaws:anapproachtoseekremediescomparabletopay
discriminationact. Statelawsinfewstates(WA,MN,MI)coverspublicemployees. CanadaProvinciallawsforCWprivateemployees.
ProvisionsofComparableWorthLaw 1.OneJEplanusedforALLjobs.SameJEfactorsappliedtoeachjob. Exception:Unioncontract 2.Eachjobclassifiedbygenderrepresentation.
a.Maledominatedjobs:Males>70% b.Femaledominatedjobs:Females>60% 3.Matchfemale&malejobsaccordingtoJEpoints. 4.Wherepaygaps,femalesraisedtomalepaylevel. 5.Equalizepayscalesover35yearperiod. 6.About1%paybudgetusedtoreduceinequities.
PaySurvey
PaySurveyPracticesPartI PurposeofPaySurvey
25/02/200912:57:00
o Pricekeyorbenchmarkjobsinthemarket o Examinebothbasesalaryandbenefits SelectAppropriateMarkettoSurvey o LocalMarketmin.wage,nonexemptjobs o RegionalMarketprofessional,middlemgmt.Jobs o National/InternationalMarketexecutive,scarceprofessionaljobs Basisforselectingmarketsandpaycomparators o Whoarecompetitorsforemployees? o Whichfirmshireourexitingemployees? o Whoareourcompetitorsintheproductmarkets? TypesofPaySurveys o PrivateSurveyprovidedbyconsultingfirmortradeassociation mostexpensive,buthasmostusefulinformation o GovernmentSurveyBureauofLaborStatistics(BLS)lowcost, butdesignedmainlyforeconomicstudiesandresearch o SelfdesignedSurveycompanydoesaninhousesurvey:Caution: thecourtsmayviewthisapproachasaformofpricefixingwith possiblefinesandpenalties. PaySurveyPracticesPartII MeasuringPayData o Distributions: NormalBellshapedcurverarelyappropriate NonNormalpaydataisunevenlydistributed;moretypicalof paydatacollectedfromsurveys
o MeasuresofCentralTendencyusedtoreportPay Medianthemiddlevalueofanorderedsequenceofdata Meansumofdatadividedbynumberofobservations Unweightedeachcompanyisanobservation Weightedeachemployeeisanobservation
o MeasuresofVariationusedtoReportPay RangeofPayData Minumum,Maximum,Midpoint Quartertile1st,2nd(abovemidpoint);3rd,4th(below)
StandardDeviationdistanceofdatafrommeaninanormal distribution. o TypicalMarketpositions Leadthemarket LagtheMarket MatchtheMarket
GomezMejia&Balkin,1992 o RecommendedPaySurveyPractices Relevance MatchonJobDescriptions(notTitles): actuallyneedtoreadthejobdescriptionandmatchitup withyourbenchmarkjob. ConsistentUseofSameStatisticalMeasures: CangetintroublewithDept.ofLaborifyoudontdothis, duetofairnessbetweengenders.Mustbeconsistent.
KeepPayDataCurrent: Atleastonanannualbasisonsalaryjobs,collectsurvey data.Sametimeoftheyeareveryyear. MonitorEffectivenessUsingHRBenchmaryks: Benchmarksaremarkerstellingyouthatyouhaveapay problemwhenthishappened.Showsthatpayis inequitable:filinggrievances,employeeturnoverexiting revues,strike,picketing,legalcases.
SalaryStructures/PayGrade
SalaryStructuresandPayGradeDimensions PayGradeWidth o Distancefrommin.tomax.ofrange o Typicalrangesare3040percent o MidpointtoMidpointDifference
25/02/200912:57:00
Representspaydifferentialfromonepaygradetothenextone inasequence MustbeMeaningfulinamount Rangesfrom8percent(nonexempts)to 12percent(managementandexempts)
PayGradeDimensions PayGradeOverlap o SalariesthatareCommontoadjacentPayGrades. o Overlapgivesmanagersflexibilitytomoveemployeestohighergrades whenpromotedwithoutanoverlygenerouspayraise. o Toomuchoverlapleadstopayinequity,toolittleoverlapcauses barrierstopromotionandinefficiencies CompaRatio o TheAverageofallactualsalariesinapaygradedividedbythe midpointoftherange o CompaRatiosletCompensationManagersviewthedistributionof salariesandidentifygradesthatareoutofcontroltoomanyabove,or toomanybelowthedesiredpaypolicypositioninthemarketindicates aproblem. o CR>1.10isquitehigh o CR<.90isquitelow o CR=1.00istheideal RedCirclePayRates
o PayRateabovethemaximumforspecialsituationssuchas outstandingemployeethatrequiresexecutiveapproval SalaryStructures PurposeandGoals o establishseriesofgradestoclassifyjobsaccordingtosimilarworth basedonjobevaluationpoints o payforjobsaccordingtoprevailingpaylevelsandpreferredposition (lead,lag,match)inthemarket o establishpayrangesforeachjobwithaminimum,maximum,and midpointtotherange. o Usecontrolpoints(maximumandmidpoint)tocontrolpayrollexpenses o adjustrangestochangesinmarketonperiodicbasis MidpointofRangeControlpointthattiesthepayrangetothemarket. Beingpaidatthemidpointoftherangemeanstobepaidatthecompetitive pointinthemarketaccordingtothefirmspaypolicy.Oneisexpectedtobe fullycompetentinjobtobepaidatthemidpoint. o expectedtohavemasteredallkillsandcompetenciesofthatjob. o Entrylevelsalesrepwouldbepaidbelowthemidpoint.Howfar?Not thelowestpoint,butfairlylow. MaximumofRangeControlpointthatcapsthesalaryatthispoint.Only exceptionalcasesmayreceivemorepaythanthemax.Normalwaytoearn moreiswithapromotion. MinimumLowestpointonthepayrange.Givesmanagersflexibilitytohire newemployeeswhoneedtrainingandexperiencetogaincompetenceinthe job.Paidbelowmarketpositionuntilcompetencyiscertifiedthrough performancereviews. EXAM Chapter1generalunderstanding/powerpoints Chapter2dontread
Chapter17Thelegalenvironment,readforspecifics Knowthecaseswewentoverinclass Powerpointslidesaremoreuptodateonminimumwagethanthetext.Study inmoredetail Chapter4dontread/Jobanalysis Chapter5Jobevaluation:veryspecific.KnowthebasicsaboutHay.Readthe chapterforgeneralunderstanding. Chapter7Readforreview.Paydiscriminationandworth/courtcasestoreview classnotes.14pages Chapter8:212228/Salarysurveys>salary.com/differentwaysofsurveying whenisitgoodorwhenisituseful.Dontreadpages228249thatisonSalary Structures. Definitionsofmeanmedianmode Format:3questions,shortessay.MultiplepartsofeachquestionApartandB part.Aisshortessayapageorless.Choseonly2towriteon. 1.RewardsandMotivation thetheoriesanddifferentrewards paystrategies
2.Thelegalenvironment minimumwage,livingwage,overtimeprovision,equalpayact,job evaluation,paydiscrimination. Criticalthinking.
3.SalarySurveys
Differenttypesofsurveys,whycertainonesaregoodandwhyothers arebad.
SalaryStructuresnotonexam.