Post on 31-Mar-2015
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A Human Resource A Human Resource Management ApproachManagement Approach
STRATEGIC STRATEGIC COMPENSATIONCOMPENSATION
Prepared by David Oakes
Chapter 6Chapter 6
Person-Focused PayPerson-Focused Pay
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Person - Focused PlansPerson - Focused Plans
Rewards employees for acquiring job - related
Competencies Knowledge Skills
2 main types Pay - for - knowledge Skill - based pay
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Competency - Based Competency - Based Pay ProgramsPay Programs
Pay - for - knowledge
Skills - based
A combination of both
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Pay ProgramsPay Programs
Rewards employees for improving or acquiring new skills / knowledge
Horizontal Those at same level of responsibility or difficulty
Vertical Those at a higher level of responsibility or difficulty
Depth Level of expertise or specialization
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CompetenciesCompetencies
Uniquely combined characteristics of the person that enables employees to fulfill job requirements well
Core competencies are derived from company’s strategic statements
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Vertical Skills ProgramsVertical Skills Programs
Works well for work teams Service industry Manufacturing industry
Employees Learn functional skills Perform managerial tasks
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Pay - For - Knowledge Pay - For - Knowledge Plans Plans
Reasons for adoption Removes entitlement label
Connects pay to job-related abilities
Increases employee autonomy
Technological innovations
Increased global competition
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Pay-for-KnowledgePay-for-KnowledgeModelsModels
Stair - step
Skill - block
Job - point accrual
Cross - departmental
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Stair - Step ModelStair - Step Model
Jobs from same job family
Jobs differ in complexity
Higher the step, greater the skills
Companies use separate models
Models designed to match jobs
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Skill – Block ModelSkill – Block Model
Applies to jobs in same job family
Employees expected to progress to increasingly complex jobs
Skills may not build on each other
Emphasizes horizontal & vertical skills
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Job - PointJob - Point Accrual Model Accrual Model
Applies to jobs from different job families
Creates organizational flexibility
Points assigned to skills
Higher the number of points, the higher the core compensation level
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Cross - Departmental Cross - Departmental ModelModel
Employees develop skills usable in other departments
Helps manage sporadic, short – term
staffing shortages
Helps meet seasonal fluctuations
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Person - Focused PayPerson - Focused Pay
Compensates employees for flexibility
Compensated for potential contributions
Based on skills & knowledge
Used for jobs not easily assessed
For skills and knowledge
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Job - Based PayJob - Based Pay Compensates employees for current jobs
Pay limits set for each job
Evaluations based on job descriptions & objectives
2 main types Merit pay Incentive pay
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Employee AdvantagesEmployee Advantages
Can provide job enrichment
Can provide job security
Can make jobs more intrinsically
motivating
Can make jobs more interesting
Increases employees’ flexibility
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Job Characteristics TheoryJob Characteristics Theory
Employees more motivated to perform jobs that contain
Skill variety
Task identity
Autonomy
Feedback
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Core Characteristics Core Characteristics
Skill variety
Requires using different abilities
Task identity Enables employees to do entire job
Autonomy Allows employees to choose
Feedback Provides clear communications
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Advantages To EmployersAdvantages To Employers
Leads to enhanced job performance
Leads to reduced staffing
Leads to greater flexibility
Improves quality Increases productivity levels
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DisadvantagesDisadvantages
Can increase hourly labor costs
Can increase training costs
Can increase overhead costs
May not mesh well with existing incentive pay systems
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Lowest - Cost Competitive StrategyLowest - Cost Competitive Strategy
Lowers output costs per employee
Training should improve productivity
Improves product & service quality
Long - term gains should outweigh short - term costs
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Differentiation Competitive Differentiation Competitive StrategyStrategy
Requires employees who are Creative Open - minded Risk - takers
Requires long - term focus
Pay - for - knowledge effective with work teams