Chapter 11 - Pay and incentive systems. The learning objectives for this chapter include: Explain how the responsibilities of HR managers are affected in unionized operations, explain guidelines helpful when hospitality operations are downsized, identify planning and implementation alternatives for outsourcing,. | Chapter 11 Pay and Incentive Systems Challenges of the “Trust Gap” How do perceptions of unfairness develop? What are some of the predictable consequences of the “trust gap”? What are some strategies for reducing the “trust gap”? Three Major Changes in Pay Philosophy Willingness to reduce the size of a workforce and to restrict pay Less concern with pay position relative to competitors, and more concern with what the company can afford Implementation of programs to encourage and reward performance – thereby making pay more variable Three Forms of Equity Internal Equity External Equity Individual Equity Internal Equity In terms of the relative worth of individual jobs to an organization, are pay rates fair? Determined through the process of job evaluation – that is, assigning a value (., points) to each job, and developing a rank order of jobs based on their relative worth to the firm External Equity Wages are determined based on market value (“going rates”) Determined through pay . | Chapter 11 Pay and Incentive Systems Challenges of the “Trust Gap” How do perceptions of unfairness develop? What are some of the predictable consequences of the “trust gap”? What are some strategies for reducing the “trust gap”? Three Major Changes in Pay Philosophy Willingness to reduce the size of a workforce and to restrict pay Less concern with pay position relative to competitors, and more concern with what the company can afford Implementation of programs to encourage and reward performance – thereby making pay more variable Three Forms of Equity Internal Equity External Equity Individual Equity Internal Equity In terms of the relative worth of individual jobs to an organization, are pay rates fair? Determined through the process of job evaluation – that is, assigning a value (., points) to each job, and developing a rank order of jobs based on their relative worth to the firm External Equity Wages are determined based on market value (“going rates”) Determined through pay surveys of similar jobs in local, regional, national, or international labor markets The median rate of pay for a given job in a relevant labor market is considered to be the “going rate” Individual Equity Is each individual’s pay “fair” relative to that of other individuals doing the same or similar jobs? Individuals who perceive that they are in an inequitable situation will seek to reduce that inequity by: Mentally distorting their inputs or outcomes Directly altering their inputs or outcomes Leaving the organization Strategic Compensation Compensation is a pivotal control and incentive mechanism that can be used to achieve business objectives Compensation plans need to be tied to an organization’s strategic mission, and take their direction from that mission, ., innovation, cost leadership Integrate pay considerations into planning and control Overall organizational performance is the ultimate criterion of the success of strategic pay decisions and operational compensation .
