Chapter 3.docx

6 Pages
Unlock Document

University of Guelph
Human Resources and Organizational Behaviour
HROB 3010
Rhonda Gordon

Chapter 3: Defining Internal Alignment Compensation Strategy: Internal Alignment Internal alignment (internal equity)- the pay relationships between the jobs/skills/competencies within a single organization Pay structure- the array of pay rates for different work or skills within a single organization; the number of levels, differentials in pay between the levels, and the criteria used to determine these differences create the structure -relationships among different jobs inside an organization form a job structure that should: 1. Supports Organization Strategy -organization’s strategy indicates how it plans to achieve its purpose -internal job structures that are aligned help to achieve it 2. Supports Workflow Workflow- process by which goods and services are delivered to the customer -structure should support the efficient flow of that work and the design of the organization 3 Motivates Behavior -internal pay structure influence employees behavior by providing pay increases for promotions, more challenging work, and greater responsibility as employees move up in the structure Line-of-sight-link between an individual employee’s work and the achievement of organizational objectives -employees should be able to ‘see’ or understand the links between their work, the work of others, and the organization’s objective -internal alignment helps create that line-of-sight Structures Vary Between Organizations -managers may vary to design a structure that supports workflow and directs employee behaviors toward objectives -internal pay structure is defined by: 1. Levels of work -pay structures usually reflect flow of work in the organization, some more hierarchal with multiple levels, others compressed with few levels 2. Pay Differentials Between Levels Differentials-pay difference between job levels -if organization has compensation budget of set amount to distribute among its employees, there are a number of ways to do so: -divide the budget by the number of employees, giving everyone the same amount -pay different employees different amounts based on work that requires more human capital (knowledge, skills, abilities, work performed under less than desirable work conditions, and/or whose results are more valued) 3. Criteria (Content and Value) used to determine those levels and differentials -work content and work value are most common bases for determining internal structures -content refers to the work performed in a job and how it gets done (tasks, behaviors, knowledge required, and so on) -value refers to the worth of the work; its relative contribution to the organization objectives -structure based on content typically ranks jobs based on skills required, complexity of tasks, and/or responsibility -structure based on value of work focuses on relative contribution of the skills, tasks, and responsibilities of a job to the organizations goals Use value –reflects value of goods of services an employee (labour) produces in a job Exchange value- is whatever wage the employer and employee agree on for a job -new technologies associated with Industrial Revolution increased use value of labour without corresponding increase in exchange value Job- and Person-Based Structures -job-based structure looks at work content (tasks, behaviors, responsibilities) -person-based structure shifts the focus to the employee: the skills, knowledge or competencies the employee possesses, whether or not they are used on the particular job the employee is doing -in real world it is hard to describe a job without reference to the job holders knowledge and skills -hard to define person’s job-related knowledge or competencies without referring to work content What Factors Shape Internal Structures? -external factors: economic pressures, government policies/laws/regulations, stakeholders cultures and customs -organization factors: strategy, technology, human capital, HR policy, employee acceptance, cost implications -internal structure: levels, differentials, criteria Economic Pressures Marginal productivity theory- unless an employee can produce something of value from his/her job equal to the value received in wages, it will not be worthwhile for an employer to hire that employee -employers pay use value -pay differences among job levels reflect differences in relative productivity of the job and/or differences in how much a consumer values the output -differences in productivity provide a rationale for the internal pay structure -supply and demand for labour/products/services affects internal pay structure Government Policies, Laws and Regulations -in Canada, human rights legislation forbids pay systems that discriminate o basis of race, religion, sexual orientation, national origin, etc. -pay equity acts require ‘equal pay for equal value’ based on skill, effort, responsibility, and working conditions -internal pay structure may have any number of levels, differentials of any size, as long as the criteria for setting them doesn’t infringe on any rights -a lot of pay-related legislation attempts to regulate economic forces to achieve social welfare objectives (maximums and minimum pay) External Stakeholders -unions, stockholders, and even political groups have a stake in establishing internal pay structures -most unions seek smaller pay differences among jobs as well as seniority-based promotions in order to promote solidarity among members Cultures and Customs -culture is the mental programming for processing information that people share in common -shared mindsets in society may for judgment about what size of pay differential is fair Organization Strategy -different business strategies may require different pay structures to support them -pay structures that aren’t aligned with organization strategy may become obstacles to organizations success Organization’s Human Capital Human capital- the education, experience, knowledge, abilities and skills that people possess -stronger the link between skills and experience and an organizations objective, the more pay these will command Technology and Work Design -technology used in producing goods/services influences organizational design, the work to be performed and the skill/knowledge required to perform the work and therefore technology is another factor influencing design of pay structure Overall HR Policies -organizations other HR policies also influence pay structure -most organizations tie pay to promotions to influence employees to apply higher-level positions -if organization has more levels it can offer more promotions, but there may be smaller pay differential between levels Internal Labour Markets: Combining External and Organizational Factors Internal labour markets- rules and procedures that determine the pay for different jobs within a single organization and that allocate employees to those different jobs -combine external and organizational factors -because employer competes in external market for people to fill entry level jobs, their pay is linked to external market -must be high enough to attract qualified pool of applicants -non-entry level jobs is buffered from external forces and more heavily influenced by internal factors (technology, human capital required, organizations strategy) -external factors are dominant influences on pay for entry jobs but the differences for non-entry jobs tend to reflect organizations internal factors Employee Acceptance: A Key Factor -employees judge fairness of their pay compared to others for related work (to jobs in same internal job structure and in external market at competing employers) -important factor influencing internal pay structure is acceptability to the employees involved Distributive justice- fairness of a decision outcome (results of procedures, pay structure itself -addresses whether the actual pay differences among employees are accepta
More Less

Related notes for HROB 3010

Log In


Don't have an account?

Join OneClass

Access over 10 million pages of study
documents for 1.3 million courses.

Sign up

Join to view


By registering, I agree to the Terms and Privacy Policies
Already have an account?
Just a few more details

So we can recommend you notes for your school.

Reset Password

Please enter below the email address you registered with and we will send you a link to reset your password.

Add your courses

Get notes from the top students in your class.