CH-10-11 Developing Employees and Their Careers – Human Resource Management: Linking Strategy to Practice : Chapter Notes

This Document Contains Chapters 10 to 11 Chapter 10 Developing Employees and Their Careers Chapter 10 Learning Objectives 1. Explain why employee development practices are useful for organizations. 2. Describe how employee development practices can strategically align with overall HR strategy. 3. Explain the typical career pattern in organizations today as well as the various perspectives on career success. 4. Describe several commonly used development methods. 5. Identify critical career management challenges facing organizations and describe how organizations can meet these challenges. Chapter 10 Outline 10.1 How is Employment Development Strategic? • Development practices are strategic when they help the organization maintain a continual supply of talented and committed employees.  Research suggests that most organizations use certain basic development programs.  Organizations that do not use them are at a disadvantage in recruiting and retaining employees.  Specific development practices used by organizations differ depending on HR strategy. • External versus Internal Labor Orientation  Free Agent and Bargain Laborer HR strategies rely on external labor market for talent  Bargain Laborer strategy unlikely to invest in employees’ long-term development.  Free Agent strategy invests more in development to ensure development efforts look attractive to employees willing to make job transitions.  Loyal Soldier and Committed Expert HR strategies rely on internal supplies of labor.  Such companies must have more extensive development programs.  Typically offer support for formal education and additional programs including assessment and feedback, developmental relationships, and job experiences. • Differentiation versus Cost Strategy  Employee development is important for firms with differentiation and cost strategies.  Cost strategy needs to focus on keeping development costs low.  Many development efforts are not expensive and come from the work itself.  Useful for Loyal Soldier and Bargain Laborer HR strategies.  Differentiation strategy use development to foster high-quality service and innovation. Include opportunities for learning from work, formal education, feedback from bosses and colleagues, and developmental relationships (e.g., mentors). 10.2 What are Careers Like Today? • Career – changes in pattern of work experiences people have over lifetimes. • Historically  Typical career involved going to school and joining and staying with company until retirement.  Particularly in large companies, workforce needs were predictable.  Employees could be relatively certain that, given adequate performance, they could stay with company for long time.  Progression from position to position through promotions that involved more pay and responsibility (commonly referred to as career ladder). • Today’s careers  Do not typically progress in a hierarchical, step-by-step process.  Typical pattern of work experiences includes  Lateral movement within a company,  Hierarchical movement within a company,  Movement from company to company,  Work experiences spent as a contract employee or small business owner.  Protean career  Protean generally means varied and versatile.  Characteristics of new career include:  Shift in emphasis toward psychological success.  Emphasis on development that is continuous, self-directed, relational, and found in work challenges.  Employees increasingly responsible for selecting and pursuing development.  Organizations primarily responsible for development opportunities.  Shift in the emphasis to different types of success.  Emphasis has shifted from objective perspective to subject.  Employees increasingly concerned with psychological success, such as quality of day-to-day work and home life.  Career path  Organizations communicate expectations about how employees will progress from job to job.  Some companies identify a series of work experiences that are likely to prepare the employee for high-level jobs (e.g., general manager, vice-president, CEO).  Internal Career Paths  Organizations identify internal career paths, communicate information to employees and make opportunities clear to help employees achieve career goals.  Employees likely to reciprocate with greater commitment and job performance. • • 10.3 How Can Organizations Help Employees Develop? • Formal Education  Courses  May be organized around helping the employee gain certificate or license.  Some companies provide simple and broad-based tuition assistance programs.  Certification and Licensing.  Earn by demonstrating competence in a particular area of professional practice.  Licenses  Regulated by state governments.  In many fields, individual must obtain license in order to conduct business.  Certification  No legal requirement for people to obtain certification.  Person who holds a certificate has demonstrated a general knowledge of, and competence to do work in, the area being certified.  Providing support to gain and maintain such certification is one way in which organizations can be attractive to current and prospective employees. • Assessments and Feedback  Using assessments and feedback for development involves collecting information and providing feedback to employees about interests, personality, behaviors, skills, etc.  Feedback  Helps employees understand what type of work they should choose so they experience a good fit among interests, skills, and work demands.  Helps employees better understand strengths and weaknesses, plan developmental activities, and manage careers.  Career Assessment  The Holland typology identifies six different personality types that correspond with six different job environments.  The World of Work Map simplifies Holland typology into preferring working with data or ideas or prefer working with people or things.  Encouraging employees to take assessments, and helping interpret results, can be useful for providing guidance concerning what careers and jobs they are likely to enjoy.  Multisource Assessments.  Typical process involves employee’s managers, peers, subordinates, and customers answering questions about employee.  ManagerView360 is an instrument that measures 20 managerial competencies clustered into four major areas task/leadership, interpersonal, communication, and problem solving.  Multisource feedback systems work best when:  Reliable ratings are provided and raters’ confidentiality is maintained.  System is easy to use and behaviors assessed are job-relevant. • Work Experiences  Using work experiences can be very effective and are relatively low cost.  Job enrichment involves adding challenges or new responsibilities to employees’ jobs.  Lateral move is job change that involves a change in duties without an increase in pay, responsibility, or status.  Upward or downward moves.  Not every job experience results in learning and growth.  Adding more work or changing job title does not promote employee development.  Greatest learning occurs when job experiences provide greater authority, require skill at creating change, and require use of persuasion to get things done. • Developmental Relationships  Provide support and encouragement for personal or professional growth.  Coaching  Equips people with tools, knowledge, and opportunities to become more effective.  Coaches can be employees who are responsible for improving another’s performance.  Good coaching process: Contracting & Opening, Practicing & Planning, Evaluating.  Mentoring  One-on-one relationship between less experienced and more experienced person.  Can be formal or informal.  Generally benefits employees in two ways. May provide: • Career benefits by offering challenging work experiences, advice, political protection, and sponsoring the employee in contests for promotions, etc. • Psychological and social benefits.  Successful mentoring  Helpful for mentors and protégés to perceive themselves as similar in some way.  Encourages proximity, providing orientation, offering guidelines, and encouraging protégés to set goals. • 10.4 How do Organizations Integrate Development Efforts? • Effective HR practices use development programs in systematic and strategic fashion. • Competency Model  Allows organization to strategically staff important positions with right characteristics.  Allows firm to develop those characteristics by identifying current employees’ strengths and weaknesses and encouraging development using one or more types of development. • Career Development Process  Forward-looking companies help employees to manage development.  Steps identify and pursue career goals and appropriate developmental goals.  Self-assessment  Employees determine interests, values, personalities, and skills.  Can include exercises that ask employees to consider where they are today and where they want to be in the future.  Reality check  Employees gather information to see if self-assessments are realistic and how assessments fit with job opportunities and current employer’s future labor needs.  Employees can talk withr current supervisors as one way to obtain reality check.  Other sources of information about labor market opportunities include career centers of colleges and universities.  Information interviewing • Contacting current incumbents gives insider view of job or profession. • Meeting someone at work can test assumptions about what work is like.  Goal setting – involves setting milestones or achievements for the future, such as positions, skills, and development efforts to pursue.  Action planning • Technology  Companies with effective HR practices make use of technology to ensure employees have ready access to variety of developmental opportunities.  Technology can be used to integrate various programs so that a common database of competencies and associated learning experiences can be used to make and track development plans. 10.5 What Are Some Important Career-Development Challenges? • Organizations and HR departments face several major challenges in career development.  Challenges represent how firms can help employees learn and grow within organization.  Organizations with programs to address challenges are more attractive to potential hires. • Orienting New Employees  New employees need to be helped through transition from being loosely connected with the organization to being knowledgeable and comfortable in their role within organization.  New employee orientation is process of bringing people into organization and helping them adjust so can perform work effectively.  Also known as onboarding, induction, and socialization.  Often a single event, it is best to think about orientation as ongoing process that helps employees adjust and ensures success.  One way in which organizations help employees succeed in careers.  Typical orientation program might involve lectures and discussions, supplemented with tour of physical space, team-building activities, and opportunities to practice skills critical to success in organization.  To make orientation an ongoing process,  Structure meetings between new employees and managers, as well as other important employees in organization.  New employees can meet again informally to share successes and challenges.  Employees who attend orientation training have significantly higher levels of affective organizational commitment.  An effective orientation program should be guided by five principles:  Present realistic information about company and new employees’ role.  Provide support and reassurance to alleviate anxiety and fear.  Have successful employee demonstrate how employees can use coping skills to succeed at work, allow for discussion, and encourage practice.  Teach self-control of thoughts and feelings to help employees manage negative thoughts and feelings that arise because of challenges in adjusting.  Give the new employees information specific to their new jobs and new bosses. • Reducing Burnout  Burnout is a psychological phenomenon involving emotional exhaustion, cynicism, and a decline in feelings of competence about work.  High levels of burnout are associated with low levels of commitment and high turnover intentions.  Burnout is related to workload, pressure, stress, conflict, and unmet expectations.  Supervisors can play a key role by being clear about expectations, offering support, and providing employees with opportunities to help make decisions about work.  Organizations that do not keep an eye out for symptoms of burnout may waste their investments in employee development. • Helping Employees Balance Work with Personal Lives  The strain of balancing the demands of work and personal life can cause dissatisfaction that leads employees to quit their jobs.  Organizations can do something about it.  Develop programs that allow flexible work hours, provide assistance with child care, and offer time off to deal with family illnesses  Employees perceive such programs show organization cares about employees.  Employees are more committed to organizations that have family-friendly policies. • Developing a Diverse Workforce  Increased workforce diversity requires different development needs of employees.  Give employees access to developmental programs.  Organize one or more affinity groups.  Additional challenges for older workers (e.g., encourage to update skills, provide challenging assignments, reward learning, and encourage information sharing). • Managing International Assignments  Employee who goes to another country for a time to work is called an expatriate.  Turnover of expatriates can be very high and costly.  Organizations can help employees prepare and make it likely not to leave early.  Pre-departure Resources • Pre-departure resources include a variety of activities that vary from self-directed research to field trips to the host country. • Training programs involve lectures and activities to prepare employees and reduce culture shock.  On-Site Resources • Opportunity to have conversations with people who understand culture and the work the expatriate is doing. • Access to a local mentor. • Organization-sponsored coach or more experienced expatriate.  After-Return Resources (Repatriation)  After living in a new culture, people often have difficulty readjusting.  Following an international assignment, employees have valuable knowledge and skills that the organization does not want to lose.  Other Issues  Family members should be invited to participate in each phase.  Offering assistance to family members increases likelihood they will adjust to new culture, reducing chances that family dissatisfaction will become a factor.  Failure of family to adjust is common reason for terminating assignments early.  Organizations should offer the same support to employees from other countries who come to U.S. as they give to U.S.-based employees working abroad. Chapter 10 Teaching Notes The following presents suggestions designed to help you utilize the special features and cases found in Human Resource Management: Linking Strategy to Practice. Concept Checks Answers to each of the four sets of Concept Checks are presented at the appropriate points in the chapter outline. The pre- and post-quiz questions also address the Concept Checks. Tables and Figures The table and figures presented in the chapter help illustrate the concepts of the chapter. They should be brought to the attention of the students and, perhaps, included in the exams. A Manager’s Perspective, What do you think?, And A Manager’s Perspective Revisited The chapter starts with a short scenario where Juan is thinking about why three employees have left the organization in the last three months. Five true/false questions related to this scenario and the chapter topics are noted on page 365 and answered on page 390. Discussion of the chapter could start by posing these questions and asking for the class to vote on which questions are true through a show of hands, thumbs-up/thumbs-down, clickers, or paper copies of the questions. To keep student interest, the methods for identifying true answers should be varied. The activity could be repeated near the end of the chapter discussion. At that time, students could be asked if they agree with the answers. The students also could be asked to identify what additional questions Juan should ask. During the discussion of the chapter material, you could refer to the questions noting that a certain section or discussion point addresses one or more of the questions. You may wish to address the questions at the end of discussing the chapter. If so, you may want to bring the students’ attention to these questions informing them that they will be asked to answer the questions near the end of the chapter discussion. At that time, students (individually or in groups) could be asked to explain why the answers are true or false. Students also could add questions to the list and briefly explain why they think a new question should be asked. This could be done as a class or in smaller groups. If done in smaller groups, each group could be asked to briefly report on an aspect of their discussion. Of course, one or more of the questions or more detailed versions of the questions could be included in an exam. If included in an exam, students should be warned that these questions might be part of the exam. Building Strength through HR: Aflac This special feature (page 367) highlights several issues noted in a brief introduction to Aflac’s career development program noted above this inset box. This case illustrates how career development can help build and maintain an organization’s competitive strength. If internet access is available in the classroom, you could access Aflac’s career development webpage http://www.aflac.com/us/en/careers/careerdevelopment.aspx during class to further illustrate their HR practices. The webpage provides a brief overview of various career development programs including technical training, job specific training, industry education, and personal growth related development opportunities. You could ask the students (1) why does this strategic employee development appears to be so successful? (2) Why might this program help Aflac recruit employees? How does it encourage current employees to stay and be productive? (3) Should organizations be involved teaching life skills (such as how to buy a home and be a great grandparent)? Another approach could be to compare Aflac’s career development webpage and offerings to those of Nokia. Nokia’s success in utilizing career development after a merger is briefly discussed in the paragraph above the introduction to Aflac. Nokia’s webpage provides multiple links to their career development opportunities. You are able to access lists of courses they offer in various areas. The “e-learning” link accessed through the “training” link found at the left of the page provides a listing of the various courses available. The “developer training” link gives you access to brochures, training schedules, Nokia Training Centers, and course roadmaps that clearly present the typical sequence of courses. You could ask the students if Aflac might benefit from a more detailed website versus inferring that people need to phone for more information on career development opportunities and which would be a better recruiting tool. (Please keep in mind that Aflac may have more information available on an internal webpage that only Aflac employees can access.) Nevertheless, Nokia illustrates how much career development information can be provided in a clear manner and is easily accessible. The following webpages are noted above: http://www.aflac.com/us/en/careers/careerdevelopment.aspx http://www.forum.nokia.com/main/technical_services/training/index.html How Do We Know? Can a feedback program really improve performance? This inset box (on page 377) is briefly mentioned on the page before the box. Alan Walker and James Smither tracked the performance of 252 bank managers who received upward feedback. They found that managers who were initially rated poor or moderate showed significant improvement in upward feedback ratings over a five year period. They also found that managers who met with their subordinates to discuss feedback improved more than other managers. The class could be encouraged to read the details in the inset box. During the lecture or class discussion of the chapter, the study, conclusions, and recommendations could be summarized. This could be accomplished through your lecture (asking for student input) or by assigning the box to an individual student. You or the student could lead a brief class discussion after presenting the facts. Regardless of who presents the information, the students could be asked the following questions: (1) What might be bank manager-related job skills and behaviors on which subordinates could provide helpful feedback? (2) Why might the meetings with subordinates to discuss their feedback be so instrumental in future improvement relative to that feedback? (3) Why might it be important that people publicly commit on what and how they plan to improve their performance? What affect will their failure to improve have on the subordinates (in addition to lower feedback ratings)? (4) On what job behaviors and skills might students provide upward feedback to their current college professors/instructors? (5) Would it be beneficial to both parties for them to meet to discuss the feedback before grades are determined (e.g., midterm evaluations)? (6) What are the possible pitfalls that could occur from such discussions in an educational or organizational setting? How is this type of discussion typically handled in Survey Feedback as part of an organization development intervention? (7) Would you (as a student or employee) feel comfortable discussing the group’s feedback with the professor or supervisor? Why or why not? How Do We Know? How do we maximize the return on mentoring? This study on head coaches is briefly mentioned just above the inset box found on page 380. Three researchers investigated the effects three types of mentoring had on the future performance of the assistant coaches after they themselves became head coaches. The researchers found that those mentored by successful head coaches had the best records. Thus, they concluded that successful mentors will be most beneficial for their mentees’ success. You could ask the following questions of the students: (1) Why might successful mentors have more success in helping their mentees be successful? (2) Is it possible that some assistant coaches learned what not to do from their less successful coaches and just need time to translate that learning to their own success? (3) Are the conclusions of this study relevant to business and other non-sports-related organizations? (4) Do any of the students have experience with mentoring either at work or school or through another organization? If so, did they see the same outcome that mentees benefited more from successful mentors? Why or why not? (5) Would peer (i.e., students mentoring students) or instructor mentoring of students re: college expectations and appropriate behaviors help? Would you benefit more from a student who has been successful in college than one who has not? Why? Building Strength Through HR: Johnson & Johnson Background information regarding one of Johnson & Johnson’s employee development programs is presented in the full paragraph above the inset box (refer to page 382). The inset box builds on that full paragraph and provides an overview of a two-year Information Management Leadership Development Program (IMLDP). You could briefly mention the information found in the inset box and the paragraph at the top of this page (page 382) as a lead in to several questions: (1) What kind of formal education might be appropriate for a leadership development program? Why? (2) What types of work experiences might be helpful for a leadership development program? (3) What development topics might be more appropriate for online training? What might be more appropriate for eight weeks of intensive classroom training? Why? (4) J&J emphasizes their credo values (i.e., responsibility, integrity, and ethical value) in their career development program. How might they develop these? Can development opportunities instill these credo values in someone who might be weak in them when hired, or are the development opportunities meant to reinforce values that are already present to some extent? (5) What other HR practices might be necessary or helpful to support or reinforce the employee development opportunities? A related web-based activity is described at the end of this chapter in the Instructor’s Manual. Technology in HR: National Aeronautical and Space Association (NASA) This inset box (refer to page 384) briefly addresses NASA’s career development program. Additional information introducing the SATERN system is discussed below the box. Both sets of information are necessary to understand the system. Either you or the students could provide more information about the system by accessing the Frequently Asked Questions (FAQ) linked to https://saterninfo.nasa.gov/faq.html. The questions on the FAQ website include: What is eTraining? What is SATERN? What are the objectives of the SATERN Project? Who benefits from SATERN? Why are we implementing SATERN? Then the potential effectiveness of the system could be discussed. KEY TERMS action planning affinity group burnout career career development career development process career ladder career path certification coaching culture shock downward move employee development expatriate goal setting Holland typology job enrichment job rotation job transfer license mentoring multisource assessments and feedback new employee orientation Protean career reality check repatriation self-assessment upward move Chapter 11 Motivating Employees through Compensation Chapter 11 Learning Objectives 1. Describe how employee compensation practices strategically align with overall HR strategy. 2. Use concepts of reinforcement theory, goal setting theory, equity theory, expectancy theory, and agency theory to explain how people react to compensation practices. 3. Describe how pay surveys are conducted and used to create compensation level strategies. 4. Explain job-based pay and skill-based pay approaches to compensation structure. 5. Describe major protections provided by Fair Labor Standards Act, as well as state and local regulations. Chapter 11 Outline 11.1 How Is Employee Compensation Strategic? • Compensation practices are strategic when they encourage employees to put forth best effort and perform to help company produce particular goods and services. • External versus Internal Labor  Organizations with external labor orientation frequently hire new employees.  Employees not expected to form long-term attachment to organization.  External equity concerns fairness of what company pays compared with what the employee could earn elsewhere.  Firms with internal labor orientation seek to retain employees for long periods of time.  Encourage employees to stay by providing security and good working conditions, which are emphasized more than money.  Internal equity involves beliefs concerning fairness of what organization pays compared with what it pays other employees. • Differentiation versus Cost Strategy  Differentiators seek high-performing employees who create superior goods and services.  Cost leaders adopt compensation practices that reduce labor expenses. • Aligning Compensation with HR Strategy  Variable rewards associated with differentiation HR strategy.  Uniform rewards associated with cost reduction strategy.  Relational commitment based primarily on social ties rather than monetary incentives.  Transactional commitment based primarily on financial incentives.  Uniform Transactional Compensation associated with Bargain Laborer HR strategy.  There is little difference in pay to high and low performing employees.  Must develop fair and uniform practices that increase perceptions of fairness.  Uniform Relational Compensation associated with Loyal Soldier HR strategy.  Provides similar rewards to all employees while building sense of commitment.  Pay increases usually linked to time with organization.  Long-term forms of compensation other than salary are helpful.  Variable Transactional Compensation associated with a Free Agent HR strategy.  Compensation is primary source of motivation for employees.  Salary compression occurs when new employees are paid much more than employees who have been working at organization for years in similar position.  Variable Relational Compensation associated with Committed Expert HR strategy.  Uses compensation to reward high performers.  Strives to build long-term commitment. 11.2 How Does Compensation Motivate People? • Assumption of all compensation strategies is that pay can be used to motivate employees. • Motivation is a force that causes people to engage in one behavior rather than others.  More specifically, motivation is represented by three elements.  Behavioral choice involves deciding whether to perform particular action.  Intensity concerns deciding how much effort to put into behavior.  Persistence involves deciding how long to keep working at behavior. • Theories of Motivation  Reinforcement Theory  Behavior is caused by chains of antecedents and consequents.  Antecedent causes people to think about consequents.  People engage in behaviors for which they are rewarded.  Contingency o Consequent motivates behavior only when it is contingent (i.e., it depends on occurrence of behavior). o Reward should be given if, and only if, desired behavior occurs. o Key principle from reinforcement theory is compensation should be based on performance so better performers receive higher pay.  Known as pay-for-performance.  Linking pay to performance can be beneficial when part of overall program of performance assessment, goal setting, and feedback.  Goal-Setting Theory o Goal-setting theory is grounded in cognitive psychology and holds that behavior is motivated by conscious choices. o Goals improve performance through four specific motivational processes:  Goals focus attention away from other activities toward desired behavior.  Goals get people excited about accomplishing something worthwhile.  People work on tasks longer when they have specific goals.  Goals encourage the discovery and use of knowledge. o Goal setting can be combined with compensation in a number of ways.  Justice Theory o Motivation depends on beliefs about fairness. o Early form of justice theory was equity theory.  People compare inputs and outcomes to inputs and outcomes of others.  If they perceive inequity, might try number of things to make pay seem fairer. o Distributive justice: fairness of outcomes. o Procedural justice: fairness of procedures to allocate outcomes. o Employees who see organization as more fair tend to have higher levels of satisfaction and commitment and higher individual performance.  Expectancy theory o Motivation based on beliefs about valence, instrumentality, and expectancy. o Valence: belief that certain reward is valuable.  Instrumentality: belief that desirable reward will be given if appropriate behavior or outcome is produced.  Expectancy: belief that can achieve desired level of performance. o All three desirable beliefs must be present for motivation to occur. o People are motivated when believe receive reward for higher performance.  Agency Theory o Agents are employees are agents of owners of company. Agents act on behalf of principals(s) who are owners and/or shareholders. o Wage rates higher when employees take risk. o Pay for performance effective when can earn more than with fixed wages. o Compensation practices must be structured so employees are rewarded when they do things that would be most desirable from owners’ perspective. o Pay should be structured so managers and employees receive higher rewards when they do things that increase value for owners and shareholders. • Linking Motivation with Strategy  Basic principles based on motivational theories.  Guide for best ways to motivate employees through compensation practices.  Can be linked to compensation strategies discussed earlier in chapter. o Differentiators tend to use variable compensation. o Cost leaders tend to use uniform compensation. o Variable compensation systems have greater need for high motivation than uniform compensation practices. o Uniform compensation practices can make use of key motivational principles.  Variable Compensation and Motivation  Can reduce joy of performing naturally interesting tasks.  Performance increases when high performers are paid more than low performers.  Organizations using variable compensation benefit from making rewards contingent on achieving goals. o As part of a Free Agent HR strategy, organization can encourage exceptionally high performance by rewarding only individuals who reach highest level of goal achievement. o Organizations with variable relational compensation pursue a Committed Expert HR strategy and benefit from providing rewards to everyone who attains at least some level of goal achievement. o Because employees working under variable compensation tend to assume greater risk, overall level of compensation should be higher for Free Agent and Committed Expert HR strategies.  Must understand what reference group employees use in assessing fairness of pay. o Primary reference group for Committed Expert HR strategy is people working in same organization. o Primary reference group With a Free Agent HR strategy is people working in similar jobs at other companies.  Organizations with Committed Expert HR strategy o Procedural fairness is particularly important for organizations. o Employees need to develop trust and feel that organization supports them.  Problems o Fail to motivate because reward is not large enough to influence behavior. o Amount of difference between a raise for high and low performers too small.  Uniform Compensation and Motivation  Not as effective as variable compensation for encouraging high motivation.  Organizations with Loyal Soldier HR strategy: o Employees tend to compare themselves with employees in same organization. o Usually seek competitive advantage through cost reduction. o Develop skills that have little value to other organizations, which decreases likelihood that other organizations willing to offer employees higher salaries.  Organizations with a Bargain Laborer HR strategy: o Seek to pay lowest possible wages. o Employees in organizations are likely to move from organization to organization depending on which organization is willing to pay most. o Low skill level of employees suggests wage rate will be near minimum wage. 11.3 How Is Compensation Level Determined? • Pay level – amount of overall pay that employees earn in that organization relative to what employees earn in other organizations.  Pay-level strategy organization chooses depends largely on its competitive strategy.  First step in process of determining pay level is to gain information to understand compensation packages being provided by other organizations. • Pay Surveys  To determine appropriate pay level, organization must identify a comparison group.  Obtain data about compensation in organizations that make up comparison group. • Pay-Level Strategies  Next step is to develop pay strategy that determines how high pay should be.  Meet-the-market strategy establishes pay in middle of pay range for selected group of organizations.  Lag-the-market strategy establishes pay level lower than average in comparison group.  Lead-the-market strategy establishes pay level higher than average in comparison group. • Linking Compensation Level and Strategy  Differences in pay level can be linked to strategic decisions.  Bargain Laborer HR strategies tend to use uniform transactional compensation, which focuses on reducing labor costs.  Free Agent HR strategies use variable transactional compensation to attract top performers.  Internal labor strategies emphasize development of long-term relationships rather than focusing on money.  Committed Expert HR strategy has more of lead-the-market orientation than those pursuing a Bargain Laborer HR strategy. 11.4 How Is Compensation Structure Determined? • Pay structure focuses on how compensation differs for people working in an organization. • Job-Based Pay  Focuses on evaluating differences in tasks and duties associated with various positions.  People who have more difficult jobs will be paid more.  Approach typically uses point system that assigns numerical value to each job.  Hay System evaluates jobs in terms of four characteristics: know-how, problem solving, accountability, and working conditions.  Points assigned on each dimension are added together to create numerical score that represents value of job.  Jobs arranged along continuum from positions assigned low to high point values.  Jobs with similar point values grouped together into categories (pay grades).  Range created around each midpoint so pay for everyone performing jobs worth certain number of points falls within range.  Individual’s level of compensation within range is determined by things such as experience and performance level.  Some organizations adopt narrow categories so each pay grade includes a few jobs.  Broadbanding has fewer categories; each category includes broader range of jobs.  Job-based pay systems advantages:  Use of point system provides clear method for controlling and administering pay.  Centralized HR personnel conduct surveys and establish guidelines for determining how much to pay each employee.  Pay practices that are job-based appear to be very objective.  Job-based pay systems disadvantages:  Centralized control.  Employees at top of a pay range can only receive higher compensation if they are promoted into a position worth more points.  Individuals try to get current positions re-evaluated and valued with higher points, so will receive higher pay, even though tasks performing have not changed.  Inflexibility and resistance to change.  Difficult to hire new employees who require wage that is above established range.  Little incentive for employees to learn new skills not part of formal job duties. • Skill-Based Pay  Focuses on directly evaluating differences in skills and abilities of employees.  Employee might be paid for having certain set of skills, even if tasks that employee normally performs do not require those skills.  System shifts emphasis away from jobs and focuses on skills that workers possess.  Primary objective is tying pay increases to development of skills useful to organization.  Skill-based pay disadvantages:  Payroll costs tend to be higher.  When employees master highest skill set they have no room for advancement.  Skill-based pay benefits:  Increased emphasis on skill development provides better-trained workforce.  Greater flexibility in production processes.  Helps to build culture that supports participation and employee self-management.  Skill-based pay linked to higher organizational productivity. • Linking Compensation Structure to Strategy  Free Agent HR strategies use variable transactional compensation.  Loyal Soldier HR strategy uses uniform relational compensation.  Committed Expert HR strategy uses variable relational compensation.  Bargain Laborer HR strategies uses job-based pay. 11.5 How do Government Regulations Influence Compensation? • Fair Labor Standards Act (FLSA)  Law establishes national minimum wage, regulates overtime, requires equal pay for men and women, and establishes guidelines for employing children.  Exempt employees not covered by FLSA regulations.  Paid a salary and not required to keep track of actual hours they work.  Executive exemption (primary duties are managing business and supervising).  Administrative exemption (perform office or work directly related to management).  Professional exemption (perform tasks that require special skills and advanced knowledge learned through specialized study).  Outside sales exemption (salespeople who work away from place of business).  In any of these cases, employees must spend at least 80 percent of workday doing work activities that qualify them for exemption.  Nonexempt employees are covered by FLSA regulations (paid hourly wage).  Minimum Wage  Overtime (defined as number of hours over 40 during a one-week period)  Child Labor (protects those under age of 18 from unsafe and excessive work)  Equal Pay  Requires organizations to pay equal wages for equal work.  Male and female employees can be paid at unequal rate if basis for difference is seniority or performance. • State and Local Regulations  Rgulations cannot contradict federal rules  Large number of state and local regulations can make it difficult for organizations to keep track of all applicable compensation guidelines Chapter 11 Teaching Notes The following presents suggestions designed to help you utilize the special features and cases found in Human Resource Management: Linking Strategy to Practice. Concept Checks Answers to each of the four sets of Concept Checks are presented at the appropriate points in the chapter outline. The pre- and post-quiz questions also address the Concept Checks. Tables and Figures The table and figures presented in the chapter help illustrate the concepts of the chapter. They should be brought to the attention of the students and, perhaps, included in the exams. A Manager’s Perspective, What do you think?, And A Manager’s Perspective Revisited The chapter starts with a short scenario where Katie is thinking about the new changes in pay decisions. Five true/false questions related to this scenario and the chapter topics are noted on page 401 and answered on page 433. Discussion of the chapter could start by posing these questions and asking for the class to vote on which questions are true through a show of hands, thumbs-up/thumbs-down, clickers, or paper copies of the questions. To keep student interest, the methods for identifying true answers should be varied. The activity could be repeated near the end of the chapter discussion. At that time, students could be asked if they agree with the answers. The students also could be asked to identify what additional questions Katie should ask. During the discussion of the chapter material, you could refer to the questions noting that a certain section or discussion point addresses one or more of the questions. You may wish to address the questions at the end of discussing the chapter. You may want to bring the students’ attention to these questions, informing the students that they will be asked to answer the questions near the end of the chapter discussion. At that time, students (individually or in groups) could be asked to explain why the answers are true or false. Students also could add questions to the list and briefly explain why they think a new question should be asked. This could be done as a class or in smaller groups. If done in smaller groups, each group could be asked to briefly report on an aspect of their discussion. Of course, one or more of the questions or more detailed versions of the questions could be included in an exam. If included in an exam, students should be warned that these questions might be part of the exam. Building Strength through HR: Marriott International, Inc. This special feature (page 404) highlights several issues noted in this opening case regarding Marriott (refer to pages 402-4). This case illustrates the benefits of effective compensation. The inset box (refer to page 404) presents some of the compensation practices mentioned in the case but not all. Therefore, you could ask the students what other HR practices appear to contribute to Marriott’s success (e.g., earlier eligibility for benefits, market-based pay for specific geographic areas). The discussion should address what they did and why specific compensation techniques appear to be working. The students also should be encouraged to discuss the effectiveness of obtaining and analyzing a great deal of data to determine why employees leave. Much of the changes in compensation has been based on these and similar analyses. The discussion could be supplemented by students familiar with the Marriott. Supplemental information also could be provided by a student responsible for updating the case and finding relevant information from the organization’s website or other sources. You should inform the students of any school policies that address contacting organizations. A discussion of the case could be accomplished through guided class or group discussion or briefly mentioned in a mini-lecture to show relevance to the chapter topics. Additional ways to address the opening case could include individual students or teams of students presenting the main points and how the case answers the opening question of that section. This opening case also could be used as a topic for a more comprehensive assignment due later in the term. How Do We Know? Do contingent rewards really improve performance? This inset box (on page 410) is briefly mentioned in the chapter. Suzanne Peterson and Fred Luthans investigated whether compensation can be used as a tool to increase the performance of fast-food workers. Some of the fast-food restaurant managers were trained to use contingent rewards for employees. The researchers found that the restaurants that used contingent rewards had faster drive-through times and higher profits. The class could be encouraged to read the details in the inset box. During the lecture or class discussion of the chapter, the study, conclusions, and recommendations could be summarized. This could be accomplished through your lecture (asking for student input) or by assigning the box to an individual student. You or the student could lead a brief class discussion after presenting the facts. Regardless of who presents the information, the students could be asked who has experience with fast food restaurants or similar type work and asked if they agree that contingent rewards would be more motivational than rewarding all employees the same merit pay. They also could discuss why the contingent rewards improved performance of the employees and why the positive effects of contingent rewards appeared to have a long term positive effect on performance. The students also could be asked what other rewards might appeal to people in fast food restaurants or similar types of work who are performing at high levels (e.g., flextime, time off work, discount coupons, employee of the month). Other ways to address this information could be through a short written assignment or a more in-depth research paper on the topic. How Do We Know? Do beliefs about the fairness of pay influence performance? This inset box (found on page 414) is referenced on the page after the box. Robert Bretz and Steven Thomas investigated whether high salaries improve performance. They compared the performance of professional baseball players before and after salary arbitration. They concluded that players performed better during the year before they were eligible for arbitration. Their findings supported the principles of expectancy and justice (equity) theories. The information reported in the inset box could be part of a lecture or class discussion. You could ask the following questions of the students: (1) Why might performance of some baseball players be higher prior to their arbitration? (2) Are the conclusions of this study relevant to business and other non-sports-related organizations? (3) Regardless of the students’ answers to the earlier questions, explain the higher performance prior to arbitration and levels of performance after (un)successful arbitration using Expectancy and Equity Theories. (4) How might the results of players’ arbitration affect the performance of the other players? (5) In regard to college students, do we see similar high performance levels in class and on assignments prior to performance evaluations and subsequent higher or lower performance dependent upon the grade on assignments? Why or why not? (6) Explain the study results and/or students’ motivational responses to rewards (anticipated and actual) using another motivational theory noted in the chapter. Technology in HR: Be careful when obtaining information This inset box (refer to page 420) is briefly referenced on the next page of the chapters. This box summarizes advantages and disadvantages of the availability of salary information on the Internet. These are discussed from the standpoint of managers and employees. Organizations are advised to communicate the sources of their salary data and explain why free Internet data may provide an inaccurate picture of compensation. The brief information presented in this box could be referred to during a lecture. Students could be asked to outline a written communication to employees that addresses the above-noted advice to employers. This could be done in in-class groups or as an individual out-of-class assignment. The students could compare their written communications to those of others on the basis of topics covered, introduction to the sensitive topic, tone of communications, conclusions, etc. They also could be asked to suggest how best to deliver this written communication to the employees (e.g., e-mail, newsletter, paper memo, blog). A web-based activity is described at the end of this chapter in the Instructor’s Manual. Building Strength Through HR: The Container Store As noted on the next page of this chapter, this inset box (refer to page 423) illustrates how The Container Store utilizes above-average pay rates and payroll technology to encourage high levels of performance and lower turnover. You could briefly mention this inset as an example in your mini-lecture or ask the students to briefly describe the main points presented in the box. You could ask the students if any of them are employed by The Container Store and, if so, they could discuss their experiences with the compensation system. Then you could ask the students to discuss the following questions: (1) Is The Container Store a cost leader or differentiator? (2) Is external or internal equity (or a mix) a more important consideration when designing the pay rates? Would the answer to this depend upon the level and type of job? (3) How does The Container Store keep its prices competitive when they pay 50-100 percent above the average wage and have generous benefits? (4) What other HR practices might be necessary for the compensation and access to payroll technology to be effective? KEY TERMS agency theory broadbanding contingency distributive justice employee compensation equity theory exempt employees expectancy expectancy theory external equity Fair Labor Standards Act (FLSA) goal-setting theory internal equity instrumentality job-based pay justice theory lag-the-market strategy lead-the-market strategy market-based pay meet-the-market strategy minimum wage motivation nonexempt employees overtime pay-for-performance pay level pay survey point system procedural justice reinforcement theory relational commitment salary compression skill-based pay transactional commitment uniform rewards uniform relational compensation uniform transactional compensation valence variable relational compensation variable rewards variable transactional compensation Instructor Manual for Human Resource Management: Linking Strategy to Practice Greg L. Stewart, Kenneth G. Brown 9780471717515