WEEK 3: INTERNAL ALIGNMENT
OBJECTIVES – WEEK 31. Explain why internal alignment is important, and how to
evaluate it.2. Discuss the three (3) key factors that define internal pay
structures.3. Discuss the pros and cons of egalitarian and hierarchical
structures and how they relate to strategy.4. Discuss the impact of internal pay structures on efficiency,
fairness, and compliance in the pay system.5. Explain the importance of job analysis, its uses, and its
relationship to internal alignment.6. Discuss the key difference(s) between job-based, skill-based
and competency-based pay structures.7. Describe the key criteria to judge job analysis.
WHAT SHAPES INTERNAL STRUCTURES?WHAT SHAPES INTERNAL STRUCTURES?
EXTERNAL FACTORS: Stakeholders
Culture & Customs Economic Pressures Government
ORGANIZATION FACTORS:
Technology
Strategy
Human Capital
H.R. Policy
Employee Acceptance
Cost Implications
INTERNAL STRUCTURE:
Levels
Differentials
Criteria
DEFINITIONInternal alignment, often called internal
equity, refers to the pay relationships among different jobs/skills/competencies within a single organization.
3 componentsLevels – flat or lots of stepsDifferentials – big steps in payCriteria – jobs/skills/competencies – basis for
levels - merit, seniority implications
DIRECT HR PAY STRUCTURE CONSEQUENCES
An internally aligned structure should encourage people to:
Undertake trainingIncrease experienceReduce turnoverFacilitate career progressionFacilitate performanceReduce grievancesReduce stoppages
STRUCTURES VARY AMONG ORGANIZATIONS - 3 FACTORS
An internal pay structure can be defined by Number of levels of workPay differentials between the levelsCriteria or basis used to determine
those levels and differentials
ORGANISATIONAL LEVELS E.G. MINISTRY OF BUSINESS, INNOVATION AND EMPLOYMENT
CEO
DCE DCE DCE
GM
Policy manager
Team leader
Senior advisor
Advisors
Team leader Principle
advisor
Policy manager
GM
Office of CEO
DIFFERENTIALS
The pay differences among levelsPay is determined by:
Knowledge/ skills involvedWorking conditionsValued addition to the company
Few and small differentials (levels) usually means pay compression
CRITERIA: CONTENT AND VALUEContent – the work performed in a job
and how it gets doneStructure ranks jobs on – skills required,
complexity of tasks, problem solving, and/or responsibility
Value – the worth of the work; its relative contribution to the organization objectivesUse value – the value of goods or services an
employee produces in a jobExchange value – whatever wage the
employer and employee agrees on for a job
CRITERIA: JOB- OR PERSON-BASED STRUCTURES
Job-based structures relies on the work content – tasks, behaviors, responsibilities
Person-based structure shifts the focus to the employeeSkills, knowledge, or competencies the employee
possessesWhether or not they are used in the particular job
WHAT SHAPES INTERNAL STRUCTURES? EXTERNAL AND ORGANIZATION FACTORS
Internal labor markets Rules and procedures that
Determine pay for different jobs within a single organization
Allocate employees among those different jobs
Employee acceptance Sources of fairness: Procedural, and distributive justice
Pay structures change ‘Change-and-congeal” process
STRATEGIC CHOICES IN DESIGNINGINTERNAL STRUCTURES
Egalitarian versus hierarchical
Tailored versus loosely coupledTailored
Well designed jobs with detailed steps or tasks
Very small pay differentials among jobsLoosely coupled
Requires constant innovation
GUIDANCE FROM THE EVIDENCE
Many levels Large differentials Person or jobSupports: Close fit Individual performers Performance Opportunity for
promotion
Few levels Small differentials Person or jobSupports: Loose fit Teams Equal treatment Co-operation
Hierarchical Egalitarian
RESEARCH EVIDENCE: TOURNAMENT THEORY Motivation and performance
All players will play better in the first tournament, where the prize differentials are larger
Greater difference between an employee’s salary and the boss’s, harder he/she will work
Several studies have given rise to “winner-takes-all”
Does not directly address turnover
(MORE) GUIDANCE FROM THE EVIDENCE
Impact of internal structures depends on context in which they operate
More hierarchical structures are related to greater performance when the work flow depends on individual contributors
High performers quit less under more hierarchical systems when: Pay is based on performance rather than seniority When people have knowledge of the structure
STOCKTAKE
Internal alignment counts because it affects the incentives and sense of fairness of staff
These in turn affect organisational outcomes – such as strategy, workflow, and staff behaviours
HR behaviours include turnover, willingness to develop, and to take grievances , steal and other acts of organisational deviance
Alignment decisions concern: hierarchy/egalitarian person or job based systems
MANAGING INTERNAL ALIGNMENT: INTRO TO JOB ANALYSISUnderstand the role of job analysis in
remuneration & performance management
Understand methodologies for job analysis and job evaluation
Critique the value of job analysis
DETERMINING THE INTERNAL JOB STRUCTURE
Job Analysis A Prelude to Other HRM Functions
Recruitment &Selection Decisions
Performance Management
Job Evaluation—Wage and Salary
Decisions(Remuneration)
TrainingRequirements
Job Description&
Person Specification
Job Analysis
© Stephen Blumenfeld
WHAT DOES A CI LOOK LIKE?
Example of a critical incident (from www):if a retail assistant comments on the
customer’s appearance and the customer leaves the store angry, the behaviour of the assistant may be judged as ineffective in a fashion company.
A good CI reflects:A behaviourA consequenceA qualitative impact (good or bad)
THE POLITICS & CRITERIA OF JOB ANALYSIS
Is it: Valid - Reliable – do actors and methods
converge? Acceptable - Who does it and how? Top
management and union support is criticalUseful - Does precision create rigidity?
Does it inform HR processes? Does one approach fit all purposes? Why not done more?
SUMMARY & CONCJA identifies the content of jobs that
support other HR functions, including rem and performance management
Several methods exist - usually a mixed approach is more valid
Support and engagement seems as important as methodological precision. Is it a social or mathematical process?