Learning and adaptability and give employees a

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learning and adaptability and give employees a broader view of how the organization functions. c. Potential disadvantages: - The organization may find it difficult to use all skills effectively (i.e., work design must also change). - Employees may acquire skills quickly and compensation tops out. - Skillbased plans may require a larger bureaucracy (related to skills definition and measurement, training, and certification). - Lastly, there is almost no market information available on how to price skills. Example: Alliant Health Systems, Inc., a hospital and healthcare provider in Louisville, Kentucky, began testing a skillsbased pay (SBP) system in 1993. Today, only the finance department has retained the system. It was decided that SBP was too complex to design and administer to each work group. Source: "Lessons Learned in SkillBased Pay" by J. Morris, HRMagazine, June 1996, pp. 136142. VII. Executive Pay A. Executive pay has been given widespread attention in the press. However, executive pay accounts for a small proportion of the labor costs of an organization, and executives have a disproportionate ability to influence organizational performance. They also help set the culture, so if their pay seems unrelated to organizational performance, employees may not understand why their pay should be at risk depending on the organization's performance.
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B. There is much criticism of executive pay, however, because: 1. Some executives are very highly paid, such as the CEO of Walt Disney over $600 million. However, these figures reflect participation in a stock plan. 2. Executives in the United States are the best paid in the world (see Slide 24 for total remuneration of CEOs in selected countries). 3. Often, the ratio of executive pay to average worker pay is cited as creating a "trust gap" in which workers do not trust executives' intentions and resent their pay. The issue becomes even more salient when companies are engaging in layoffs but are not cutting executive pay.
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