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MGMT of Human Resources

MGMT of Human Resources - Chapter 11 9 questions Equity...

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Chapter 11 – 9 questions Equity theory You and coworkers have equal pay** PAY RELATIVE TO THAT OF THEIR ANOTHER EMPLOYEE EMPLOYEES Op/Ip >,<, or = Oo / Io p= a person (you) o=other (another employee) O=Perceived outcome – pay, benefits, working cond (what you get) I= inputs (time,$, energy) If P’s ratio is smaller than the comparison other’s ratio, underreward inequity results If P’s is larger, overreward inequity results, although evidence suggests that this type of inequity is less likely to occur and less likely to be sustained because P may rationalize the situation by reevaluating their outcomes less favorably or inputs (self-worth) more favorably --- think more of what you are Work attitudes and behaviors are influenced by comparing what they get paid to that of their coworker The fact that management believes its employees are paid well compared with those of other companies does not necessarily translate into employees’ beliefs 2 types of employee social comparisons of pay are especially relevant in making pay level and job structure decisions 1. external equity- pay comparisons focus on what employees in other organizations are paid for doing the same general job (comes into play to influence you to take a job, or leave your current place of employment or stay) – market pay survey is primary tool used in choosing a pay level 2. internal equity- pay comparisons focus on what employees within the same organization Developing pay levels – big section (key idea of chapter) Two important competitive market challenges: 1. product market competition –p. 489 a. must compete effectively in the product market- able to sell their goods and services at a quantity and price that will bring a sufficient return on their investment b. higher labor cost than competitors = higher average prices for products of similar quality (may result in a loss of business) c. upper bound on labor costs and compensation d. when t heir are productive differences over time in your business you need to watch the costs of the business e. major component in labor costs = average cost per employee (direct and indirect, i.e. pay and a dental plan) also staffing level (# of employees) often one of the first things done 2. labor market competition a. the amount an organization must pay to compete against other companies that hire similar employees b. not only companies that have similar products, but have similar types of employees c. if an organization is not competitive in the labor market, it will fail to attract and retain employees of sufficient numbers and quality d. places a lower bound on pay levels 3. Employees as a resource 237
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a. having higher labor costs than your competitors is not necessarily bad if you also have the best and most effective workforce, one that produces more products of better quality b. Pay policies and programs must not only be evaluated in terms of costs but also returns they generate (how they attract, retain, and motivate a high-quality workforce) 4. Deciding what to pay a.
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