ILRHR4631 Week 4 Lecture - Managing Compensation Spring...

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Managing Compensation Spring 2009 ILRHR 4631 Week 4 Lecture February 9, 2009 Charles G. Tharp
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World@Work
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STRATEGIC POLICIES TECHNIQUES STRATEGIC OBJECTIVES EFFICIENCY      Performance Quality Customers Stockholders Costs FAIRNESS COMPLIANCE ALIGNMENT ALIGNMENT COMPETITIVENESS COMPETITIVENESS CONTRIBUTORS CONTRIBUTORS Finance/Law Finance/Law Work Descriptions Evaluation/ INTERNAL Analysis Certification STRUCTURE Market Surveys Policy PAY Definitions Lines STRUCTURE Seniority Performance Merit INCENTIVE Based Based Guidelines PROGRAMS Planning Budgeting Communication & Change EVALUATION THE PAY MODEL THE PAY MODEL External relationships Theories of motivation Accounting, Finance and Law Internal relationships
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External competitiveness External competitiveness refers to the pay relationships among organizations the organization’s pay relative to its competitors
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Compensation Strategy: External Competitiveness External competitiveness is expressed in practice by: Setting a pay level that is above , below , or equal to that of competitors Determining mix of pay forms relative to those of competitors Pay level and pay mix decisions focus on: Controlling costs Attracting and retaining employees
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External competitiveness is expressed in practice by: 1. Market Position: setting a pay level that is above , below , or equal to competitors, and 2. Mix of Pay: by considering the mix of pay relative to those of competitors
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A company’s targeted market pay level and mix of pay are influenced by: Business strategy Especially cost structure and the percent of costs represented by labor Workforce strategy The number and type of employees needed to achieve the business strategy. HR strategy What role does pay play in the employment “value proposition” offered by the company? Compensation strategy What is the mix of pay that supports the HR strategy?
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Company's Market Position May Differ Depending on Whether Comparing Base Pay or Total Compensation What would you suspect are the jobs most critical to achieving the business strategy? Why might these differ so much?
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Two Companies: Same Total Compensation, Different Mixes How would you describe the compensation strategy of Company A? Company B? Which company has the riskier pay mix? Why would an employee opt for a riskier pay mix? Other things being equal, which company would you want to work for? Why?
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How Labor Markets Work Theories of labor markets begin with four assumptions Employers always seek to maximize profits People are homogeneous and therefore interchangeable Pay rates reflect all costs associated with employment Markets faced by employers are competitive
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Labor Demand Theories and Implications Labor demand theories suggest that employers compete for workers through: Compensating differentials Efficiency wages Signaling How might these theories impact the level of pay offered and the corresponding impact on the demand for labor?
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ILRHR4631 Week 4 Lecture - Managing Compensation Spring...

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