Strat Comp Test 1

Front 1

Contrasting Perspectives of Compensation

Back 1

Society – Public Relations, Minimum wage, Direct/Indirect costs.
Employees – Retention, Attraction, Sabotage, Intangible concerns
Managers – Wants to be the voice for their employees.
Stockholders – Don’t want pay rates to negatively affect profit margins.

Front 2

Society

Back 2

Public Relations, Minimum wage, Direct/Indirect costs.

Front 3

Employees

Back 3

Retention, Attraction, Sabotage, Intangible concerns

Front 4

Managers

Back 4

– Wants to be the voice for their employees

Front 5

Stockholders

Back 5

Don’t want pay rates to negatively affect profit margins.

Front 6

Key Labor Force Challenge Issues

Back 6

I-ncreasing immigration
-Jobs Revolution
-Global Competition (Transferable Knowledge/skills
-Social Acceptance of the Illiteracy Consequence.
-U.S. labor force is aging
-The labor force numbers and earning level

Front 7

Jobs Revolution –

Back 7

is outsourcing the problem or even an answer?

Front 8

Global Competition (Transferable Knowledge/skills)

Back 8

U.S. Productivity level is still the highest but requires continuing K/S development.
U.S. Educational Platform (does not receive the same National support as China & India or as stringent as many Western European countries.)

Front 9

Skilled-Worker gap (shortage of K/S workers to fill the jobs)

Back 9

Especially Science and Technology

Front 10

The labor force numbers and earning level

Back 10

China & India 5 to 1 population difference (~3% of U.S. jobs in technical jobs are ~ 25-30% of U.S. pay level.)

Front 11

Basic Questions for Designing a Compensation System

Back 11

What is the basis on which pay differentials will be determined?
Why one job pays (x) and another job pays (y)
How much will and can the organization pay?
Have to determine long-term feasibility
What kinds and levels of benefits will be offered?
What are the criteria for determining pay [adjustments[ increases?
Performance or Across the board?
Benefits are indirect pay that must be allowed for everyone.
How do we communicate the compensation plan?
Open or closed system?

Front 12

What is Compensation?

Back 12

All financial and nonfinancial returns employees receive in exchance for their labor
Direct Pay and Indirect pay

Front 13

Direct Pay

Back 13

Wages, Salaries, incentives, bonuses, commissions related to performing the job

Front 14

Indirect Pay –

Back 14

Benefits ~ health insurance, vancation retirement plans, etc.

Front 15

Fixed or base pay (Direct)

Back 15

Job or Individual focus

Front 16

Variable Pay (Direct)

Back 16

Incentives, bonuses, merit pay

Front 17

Benefits (Indirect)

Back 17

Health insurance, vacation, pension, etc.

Front 18

Non-monetary and psychological rewards (Indirect)

Back 18

Office location, job security, job design, recognition. Novel reward behaviors (recognizing employees outside of organizations, must be sincere and meaningful)

Front 19

Compensation Goals

HRM programs and policies are implemented to

Back 19

Attract
Select
Retain (Most difficult)
Develop
Motivate (to obtain organizational goals)

Front 20

Compensation Objectives:

Back 20

Efficiency, Fairness, Compliance

Front 21

Three types of Equity

Back 21

External Equity –
Internal Equity
Employee Equity –

Front 22

External Equity

Back 22

Compensation relationships in comparison to competitors

Would evaluate with pay surveys

Front 23

Internal Equity

Back 23

Comparisons among jobs or skill levels within a single organization

Would evaluate with a Job Analysis or Job evaluation

Front 24

Employee Equity

Back 24

Relation emphasis placed on employee performance

Would evaluate with Performance assessment/Evaluation appraisal

Front 25

Goals of an Equitable Pay Plan

Back 25

-Support Organization’s strategic goals
-Achieve employee acceptance
-Develop Employee acceptance (not satisfaction)
-Fair and Equitable Administration.

Front 26

Key Phases of Implementing a Pay Plan Design

Back 26

Job Analysis
Relevant Market Survey: External Analysis
Pay Market Structure: Point Value vs. Market
The Ability to Pay (Financial Fea$ibility)
Fair and Consistent Administrations of the Pay Plan

*Very important to communicate equity to employees

Front 27

Constraints of a Compensation System

Back 27

Ability to Pay: the ability of the product market to determine the maximum compensation that an organization can pay despite use of technology and creativity

Legal Constraints: legislation and administrative law affecting business

Collective Bargaining: management’s legal requirement to bargain over compensation

Internal Labor Market: all the jobs within an organization and the relationship among these jobs

External Labor Market: the need for all employers to bid for labor in the marketplace

Front 28

Responsibility for Managing an Effective Pay Plan

Back 28

The HRM Department
All Managers and Supervisors
Employees
Board of Directors
Stockholders

Front 29

Four Segments

Back 29

Macro (General) environment

Task environment

Perceived Task Environment (PTE):

Front 30

Macro (General) environment

Back 30

economic, social, and demographic sectors that indirectly affect the organization

Front 31

Task environment:

Back 31

those environmental sectors that are either directly affected by or have effect on the organization through their influence on operations and goal attainment

Front 32

Perceived Task Environment (PTE):

Back 32

those environmental elements that the organization believes will influence its goal attainment.

Front 33

Social:

Back 33

Most uncertain segment because it deals with people

Front 34

Economic:

Back 34

Structural economics is permanent and irreversible, all about risk

Front 35

Technological:

Back 35

Pacing technology: state of the art technology
Key technology: old pacing technology, possessed by key competitors
Base technology: when key technology gets replaced it becomes base technology. When base is replaced it becomes obsolete

Front 36

Three Goals of MEA

Back 36

1. Identify and Understand existing and potential changes in the Macroenvironment
2. Integrate relevant environmental information into the organization’s decision-making process (Identified PTE at this point)
3. Stimulate Strategic Thinking (develop, evaluate, and select strategic alternatives ~ a strategic decision)

Front 37

Simple v. Complex Environmental Dimensions

Back 37

1. Homogeneity or heterogeneity of environment sectors that an organization has to manage (reflects relative complexity)
2. The relative changeability {degree of change} or rapidness of change among the environmental sectors (reflects uncertainty or lack of predicatability decision makers face)

Front 38

Strategy:

Back 38

what we want to do

Front 39

Structure

Back 39

plan how, resource allocation point

Front 40

Congruence model:

Back 40

if the first 3 components fit together we should achieve firm performance

Front 41

Environmental Org Link

Back 41

PTE- Strat-Structure- HR performance- Resource Valuation

Front 42

SHRM and International Issues

Back 42

-There is no Global Universal Model of HRM!
-Lack of Global Experience
-Employment Regulation
-Training
-Compensation
-Employee Protection Rights (Termination)

Front 43

What is the Elephant?

Back 43

Global Competition

Front 44

Characteristics of Global Competition

Back 44

-Competitive conditions across country markets are strongly linked.
-Many of the same rivals compete in many of the same country markets
-A True global market exists.
-A firm’s competitive position in one country is affected by its position in other countries
-Competitive advantage is based on a firm’s world-wide operations and overall global standing.

Front 45

Cross Country Differences and Location Appeal

Back 45

Manufacturing costs vary from country to country based on:
-Labor Pooling (skill clustering)
-Wage Rates
-Technological Spillovers
-Worker Productivity
-Natural Resources

-Regulatory (Legal) Environment

-Inflation, Energy costs and Tax Rates

-Quality of the business environment varies from country to country.

-Regions tend to be similar

Front 46

Global Pay Issues (Getting the “Blinders” off)
• Base Salary vs. Perks

Back 46

o Issue of Taxation
o Currency Fluctuations
o Labor Regulations
o (STAR) Cultural Influences (Pay distribution)

Front 47

• Home Balance Sheet Approach

Back 47

o Foreign Service Premiums (Beyond Base)
 Hardship allowances (Hazard Pay)
o Quality of Life (family) This should not change
o Purchasing Power
o Mobility Premiums

Front 48

• Global Employee Status Classifica

Back 48

o Expatriate (PCN)
o Local (Host) Country Nations (LCN)
o Third Country National (TCN)

Front 49

• Companies Like

Back 49

CONTROL

Front 50

• Three Perspectives of Global Decision-making

Back 50

o ► Ethnocentric (Exporter) HOME
o ► Polycentric (Localizer)
o ► Geocentric (Globalizer) GLOBAL

Front 51

Ethnocentric

Back 51

(Exporter) HOME

Front 52

Polycentric

Back 52

(Localizer)

Front 53

Geocentric

Back 53

Globalizer) GLOBAL

Front 54

• Localizer ~

Back 54

Think Global, Act Locally.

Front 55

• Exporter ~

Back 55

One Size Fits All (export HR systems globally), rarely successful

Front 56

• Globalizer ~

Back 56

~ Think and Act Globally and Locally

Front 57

Parent country

Back 57

is the country in which the company's corporate headquarters is located ~ Expatriate (≈ PCNs – Parent Country National) citizen of the parent country.

Front 58

• A Host country is

Back 58

is the country in which the parent country organization seeks to locate (or has already located) a facility ~ Host (Local) Country National - citizen of the host country.

Front 59

• A Third country

Back 59

is a country other than the host country or parent country ~ Host Third Country National - citizen of a host country placed in another country that is not the partent country.

Front 60

• Headquarters-Based Pay Method

Back 60

the pay levels and rates are established by Corporate and are the same for all locations, domestic and global. Simplest to administer but has potential of equity issues. (LOCALIZER)

Front 61

• Host country-Based Method ~

Back 61

pay level and rates for expatriates are based on the host country pay rates, most appropriate for long-term global assignments. (GLOBALIZER)

Front 62

• Home country-Based Method ~

Back 62

compensates expatriates as they would be in their home country, most appropriate for short-term global assignments. (EXPORTER)

Front 63

• Components of Total Pay Packages (Key is keeping and employee Whole):

Back 63

1. Base Salary - annual salary, unadjusted.
2. Short & Long-term Incentives
3. Tax Equalization Allowances - payments for higher tax rates of other countries.
4. Benefits - continuation of, or substitute for,
home benefits.
5. Allowances & FSPs (Foreign Service Premiums) - cost-of-living, housing, education, medical, security, and relocation payments.

Front 64

• Reentry transition may result in culture shock

Back 64

 60 to 70 % of expatriates do not know what their position will be upon their return.
25% leave the company within one year upon returning. (because company doesn’t plan for return)

Front 65

 Short-term incentives are usually annually based-

Back 65

- 401K

Front 66

 Long-term incentives

Back 66

are usually in the form of stock options or stock purchases based on performance standards

Front 67

Balanced Scorecard Approach

Back 67

• Uses a Constellation (multiple) of measures
o Pinpoints areas of success
o Indicates areas to improve
• Categories of measures
o Financial results
o Process improvements
o Customer service
o Innovation
• Forces discussions about priorities among different measures
• Outcome – Objectives with different weights in terms of importance.

Front 68

Four Key Steps in Formulating a Compensation Strategy

Back 68

1. Assess Total Compensation Implications
2. Fit Policy Decisions to Strategy
3. Implement Strategy
4. Reassess the Fit

Front 69

1. Assess Total Compensation Implications

Back 69

• Competitive Dynamics
• Core Culture / Values
• Social and Political Context
• Employee / Union Needs
• Other HR Systems

Front 70

2. Fit Policy Decisions to Strategy

Back 70

• Objectives • Contributions
• Alignment • Administration
• Competitiveness

Front 71

3. Implement Strategy

Back 71

• Design System to Translate Strategy
into Action
• Choose Techniques to Fit Strategy

Front 72

4. Reassess the Fit

Back 72

• Realign as Conditions Change
• Realign as Strategy Changes

Front 73

What is a Strategic Compensation Perspective?

Back 73

The strategic perspective involves thinking about how pay can assist in achieving organization success, while not being fixated on pay techniques

Front 74

Corp Level

Managers

Back 74

Corporate Strat.

Front 75

Business Level

Managers

Back 75

Business Strategies

Front 76

Functional
Managers

Back 76

Functional Strategies (HR)

Synergy

Resource Development

Competitive Advantage

Front 77

Sub-Functional Managers

Back 77

Sub functional strategies (compensation)

Front 78

Strategic Relationships

Back 78

Socital
Corporate
Business
Functional

Front 79

Sociatal

Back 79

Government Decisions

Front 80

Corporate

Business

Back 80

Organizational Management Decisions

Front 81

Functional

Back 81

Function Level Decisions

Front 82

Hofer & Schendel’s Business Strategy Classifications (as the relate to pay systems)

Back 82

• Only evaluates business level strategies, excludes a corporate effect

Front 83

Hofer & Schendel’s

Back 83

Share Increasing

Growth

Profit ~

Turnaround

Divestiture/Liquidation (Exit Strategies)

Front 84

Share Increasing ~

Back 84

Absolute growth in market share (PLC – Intro, growth) actively and aggressively trying to increase market share *** Most similar to Miles and Snow’s prospector strategy

Front 85

Growth ~

Back 85

~ Relative growth in Market share (PLC – Growth, Shakeout) Increasing market share to a certain goal

Front 86

Profit ~

Back 86

Sustaining satisfied Market share (PLC – Mature)

Front 87

Turnaround ~

Back 87

Attempt to regain declining Market share, very risk oriented strategy (PLC – Decline)

Front 88

Divestiture/Liquidation (Exit Strategies) ~

Back 88

~ Losing Market share and are planning on exiting the market (PLC – Decline, Termination) Two critical things to examine: philosophy and resources

Front 89

Miles and Snow’s Strategic Typology

Back 89

• One major research error- combined corporate and business units. First major study to try to understand business strategy

Front 90

Miles and Snow’

Back 90

• Prospectors
• Analyzers ~
• Defenders ~
• Reactors ~

Front 91

• Prospectors

Back 91

Market leaders, characterized by market/product development (R&D), aggressive and risk oriented.

Front 92

• Analyzers

Back 92

are more stable (cautious) in market growth and/or expansion. They will pursue growth and new developments once they have proven successful – moderate risk through extensive planning. Adept at managing change and larger organizations use incentives to be aggressive toward risk. Analyzers should use a mixed pay plan using a fixed rate. *** Most similar to the growth/mature phase of Hofer and Schendel

Front 93

• Defenders

Back 93

attempt to maintain secure markets that experience minimal and slow change. They are characterized as followers. Doesn’t really occur today.

Front 94

• Reactors ~

Back 94

~ They do not pursue new markets and exhibit minimal planning. Response to market change is reactionary and often has negative results for the organization. Greatest threat to become structurally obsolete.

Front 95

• Corporations can have segments that are

Back 95

• Corporations can have segments that are

Front 96

Strategy –

Back 96

A fundamental pattern of present and past deployments and environmental interactions that indicates how an organization will achieve its objectives.

Front 97

HR Strategy –

Back 97

Acquiring the Quantity and Quality of human resources the possess
the necessary knowledge, skills and abilities within relevant time constraints, to achieve
organization goals

Front 98

Compensation Strategy –

Back 98

Decisions to Environmental Threats and Opportunities and linked or at least support the overall direction of the organization

Front 99

Compensation Goals

Back 99

Attract, Retain, Motivate and Develop the Human Resources necessary to accomplish the Organization's goals

Front 100

PAY PLAN DESIGN

Back 100

• Pay Mix Level: How do you pay compared to the market?
• Pay Mix Components: Fixed pay, incentive pay, or mixed?
• Pay Adjustment Policies: Pay according to performance
• Pay Communication: Open or closed system
• Pay Evaluation Criteria: Evaluating effectiveness of pay system

Front 101

FIRM PERFORMANCE: only looking at gains

Back 101

• ROI
• EPS
 Represented by an annual average as either a gain or deficit

Front 102

Low environmental Uncertainity

Back 102

Better Fixed play Plan

Front 103

High economic uncertainity

Back 103

better Variable Pay plan

Front 104

The Fair Labor Standards Act – The Major Provisions

Back 104

• Minimum wage
• Hours of work
– Overtime pay
– Employee status
• Exempt (E, A, P)
• Nonexempt
• Commission Sales
• Child labor
• Equal Pay Provision
• Record Keeping Provision

Front 105

Minimum Wage (Federal and State of Florida) Hours of Work

Back 105

• Legislation is intended to provide an income floor for workers in society’s least productive jobs
– Federal minimum wage is $7.25 (as of July 24, 2009).
• Almost all states have their own minimum wage to cover jobs omitted from federal legislation
• If state and federal legislation cover the same
job, the higher rate prevails
– State of Florida’s minimum wage is adjusted on January 1 of each year.
-Tipped Employee’s direct hourly rate = $4.23 [minimum wage – 2003 tip credit ($3.02)]

Front 106

Overtime Provisions (OT Pay Determination)

Back 106

• Non-exempt workers must be paid 1.5 times their regular rate of pay for hours worked in excess of 40 in any workweek
• Regular rate of pay includes base pay plus
• Non-discretionary bonuses
• Shift premiums
• Production bonuses
• Commissions
• Overtime is paid on time worked, not time compensated
• A workweek is any fixed, recurring period of 168 consecutive hours

Front 107

✔Exempt & Nonexempt Status (FLSA Classification Guidelines, Re: Handout)

Back 107

• Non-exempt employees are included in FLSA regulations and have full protection of law
• Exempt employees are excluded from FLSA minimum wage and overtime provisions
• Primary Classifications of Exempt employees
(Reference US DoL, FLSA’s Fact Sheet #17A)
– Executives
– Professionals (Computer Employee Exemption)
– Administrative employees
– Highly Compensated Employees (Salary > $100,000)
– Outside Sales

Front 108

Child Labor Law provisions

Back 108

• The FLSA regulates child labor by:
• (a) setting minimum ages for jobs that have been determined to be particularly hazardous,
• (b) setting minimum ages for all other jobs (that is, jobs that are not considered particularly hazardous), and
• (c) limiting the hours that children are permitted to work.
• There are exceptions to some of these requirements, especially in the agricultural industry and parental employment of their children.
• Persons under 18 cannot work in hazardous jobs
– Age 16-17 can work in most non-hazardous occupations
– Age 14-15 can work in most non-hazardous occupations (except mining and manufacturing)

Front 109

Employee v. Contractor Status under FLSA

Back 109

• When classified as an employee, an organization must
– Withhold federal/state/local income taxes
– Match Social Security/Medicare withholding
– Include person in company benefit programs
– Pay for unemployment insurance and workers’ compensation
– Allow up to 12 weeks of unpaid leave for family emergencies
– Provide any other state or federally mandated benefits
• To be classified as a contractor, a person must
– Have ability to set own hours and determine sequence of work
– Work off-site
– Work by the project rather than have a continuous relationship with the employer
– Be paid by the job
– Have an opportunity for profit and loss
– Furnish own tools and training
– Be self-employed or work with a leasing company

Front 110

FLSA: Record Keeping

Back 110

• Personal information
• Hour & day work week begins
• Total hours worked per work day & per work week
• Regular hourly pay rate for any week involving overtime
• Total overtime pay for work week
• Deductions from or addition to wages
• Total wages paid each pay period
• Date of payment and pay period covered

Front 111

Compensatory time under FLSA

Back 111

• Compensatory time off may sometimes be offered instead of cash overtime
• Rate is the same as for cash
• Public employees can accumulate compensatory time
• In private sector, practice of allowing compensatory time must be part of an established plan

Front 112

Lilly Ledbetter Fair Pay Restoration Act (2009)

Back 112

• Amended Title VII, CRA of 1964 and the Age Discrimination in Employment Act of 1967, to clarify that a discriminatory compensation decision occurs each time compensation is paid pursuant to the discriminatory compensation.
• A victim (employee) of pay-based discrimination now has the right to file an EEOC complaint within 180 days of their most recent paycheck, as opposed to within 180 days of their first unfair paycheck, as stated in the original Acts.

Front 113

Social Security (Overview and Issues)

Back 113

• Basic floor of continuing income
• Pay-as-you-go system
• Taxes employee AND employer equally through Federal Insurance Contribution Act (FICA
• With retirement eligibility comes eligibility for Medicare

Front 114

• Basic floor of continuing income

Back 114

– ill and disabled workers
– dependents of disabled workers
– retired workers
– survivors of workers

Front 115

• Taxes employee AND employer equally through Federal Insurance Contribution Act (FICA) [Social

Back 115

[Social Security (FICA) - 6.2%, Medicare - 1.45%]

Front 116

• With retirement eligibility comes eligibility for Medicare

Back 116

– Part A ~ Hospital coverage
– Part B ~ Medical insurance component

Front 117

Worker’s Compensation Laws:

Back 117

state law intended to continue the flow of income, for a specified period, for workers whose injuries are job-related.

Front 118

Recognize:

Back 118

safety violations
+ high rate of injuries & illnesses
high experience ratings

Front 119

Workers Compensation

Back 119

higher workers’ compensation premium payments

The biggest problem is FRAUD

Front 120

Common Characteristics

Back 120

Income loss from total disability (weekly cash payments)
Income loss from permanent partial disability (lump sum payments)
Medical expense payments (unlimited coverage)
Rehabilitation expense payments (to return to labor force)
Income loss from death (burial allowance survivor benefits)

Front 121

Additional Features

Back 121

All job-related injuries and illnesses are covered
Coverage is provided regardless of whose negligence caused the injury or illness
Payments are usually made through insurance financed by employer-paid premiums
Co-insurance: with this, the beneficiary of the coverage absorbs part of the loss that is covered

Front 122

• Unemployment Insurance (UI)

Back 122

Benefits financed by federal and state taxes levied on employers under Federal Unemployment Tax Act (FUTA) (Florida’s UI tax ranges from %.4% - .1% base on Employment Experience Rating EER) Based on 13-26 weeks usually.

Front 123

• Unemployment Compensation provides income to a subset of workers who are temporarily unemployed and searching for any suitable employment that is:

Back 123

• in the worker’s customary occupation,
• located at a reasonable distance from the worker’s residence, and
• free from risk to health and safety

Front 124

Unemployment Insurance
• Denial of Benefits

Back 124

o Voluntarily quit without a good cause
o Discharged for misconduct (that is, just cause)
o Discharged for fraud
o Failed to seek or accept suitable employment
o Received certain other unemployment benefits
o Unemployment was caused by labor disputes resulting in work stoppages

Front 125

Employee Retirement Income Security Act, 1973 (ERISA)

Back 125

• ERISA
• Eligibility: Employees at least 21 years old Employers may require 6 months of service as a precondition for participation
• Vesting: Length of time (generally 5 years) employee must work for employer before entitled to employer payments to plan
• Pension Benefit Guaranty Corporation (PBGC)

Front 126

What is Job Analysis?

Back 126

JA is a systematic process of collecting descriptive information of the tasks (activities), duties, responsibilities (TDRs) and results required in a job and the knowledge, skills & abilities (KSAs) an individual must possess to perform the job successfully.

Front 127

What is Job Analysis?

Back 127

• Develop an internal structure to provide a work related rationale for pay differences
• Uses of job analysis in compensation
• Establishes similarities and differences
in work content and demands of the jobs in an organization
• Used to establish an internally
fair and aligned job structure

Front 128

Job Requirements (TDRs and demands

Back 128

job specifications

Front 129

Employee Specifications (KSAs and interests

Back 129

based on inference

Front 130

• Task – distinctive activities

Back 130

leading to a specified end results of a specific job (answering the telephone, transferring calls, writing and distributing message)

Front 131

• Demands – environmental conditions

Back 131

which tasks or duties must be performed.
• Job – group of positions identical as to their major TDRs

Front 132

• Position –

Back 132

collection of TDRs that comprise a single employee’s work assignment

Front 133

• Knowledge

Back 133

body of information required to perform the job