ch 4_strategic and tactical compensation issues
TRANSCRIPT
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Organizational Structure
Strategic and TacticalCompensation Issues
Chapter 4
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Compensation strategies
To develop and operate a compensationsystem that promotes fair treatment, anorganization should consider compensation
strategies such as:
1. Relating job worth to difference in jobrequirements
2. Recognizing the worth and value ofemployee knowledge and skills
3. Rewarding employee contribution and theresult achieved
4. Promoting employee continued acquisition
and upgrading of knowledge and skills
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5. Supporting team and work unit
cooperative efforts6. Designing compensation plans that
successfully compete within establishedlabor markets
7. Aligning compensation of all employeeswith objectives and goals of theorganization
8. Providing a compensation package thatenhances current life style and provideslong-term protection for employees andtheir dependents.
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Employees-A criticalresource
Pay satisfaction
Job satisfaction
Organizational satisfaction
Satisfaction: an employmentperspective
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Division of labor
The basis of the employer employeeexchange process is the Division of labor
The performance of specialized activities And the provision of rewards to those who
make contributions
The quality and quantity of rewardsnormally vary according to the worth ofemployee contributions as measured bythe employer and the value of thosecontributions as perceived by employees
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Creating an organizationalhierarchy
One basic approach to distributingrewards focuses on the level of the job inthe organizational structure. The higher
the level the job is, the greater theresponsibility of the incumbent. The structure consist of
A board of directors Senior managers Operating managers Professionals and administrators and Operative employees.
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Major groups in theorganization structure
Exemption status exempt (excused) from the overtimerequirements (it depends on
responsibilities and duties and
salary) Exempt group
Nonexempt group
Unionization
Nonunion group Union group
Increased responsibilities require broader and more complex
knowledge and skills. The more diverse the knowledge and higher
the level of the skill requirements, the greater the compensation.
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Board of directors
It consist of a Chairman and Inside members and
Outside members
The compensation package consist of Regular meeting fees
Annual retainer
A set of other fees
Acquisition of stock
Long term incentive programs Nonqualified stock option plans
Restricted stock plans
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Board of directors
Following corporate performancemeasures are being used to
determine incentive awards1. Earning per share
2. Net profits after taxes
3. Return on equity4. Return on assets and
5. Annual sales or revenue
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Outside Board of directors
Some organizations now providetheir outside directors with-
1. Group travel insurance2. Group life insurance
3. Accidental death and
dismemberment insurance
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Senior management
Consist of executives and seniormanagers such as-
CEOCOO
Vice President etc.
Their compensation relates to the size
of the organization
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For organizations in different industries, the
determinant or size indicator varies.
Industries
Manufacturing,construction andretail trade
Utilities
Banks
Insurance companies
Indicator
Total sales volume
Operating revenue
Total deposit Total premium
income
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Operating managers
Mid-Level Department head
Branch head
First-Level Supervisors
Entry level professionals
Administrators
Compensation package Less than senior managers
Pay for performance opportunity
Pay varies by size of unit managed
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Sales personnel
Five basic methods are used forpaying sales personnel-
Salary Sales commission
Combination of salary and commission
Salary and bonus Combine bonus payments with a salary
and commission.
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Professionals
Some specialist in the area of Science Engineering
Accounting Finance or Law
Compensation package
Compensation and noncompensation rewardsreceived by peers Play the role of operating managers and
rewarded accordingly.
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Operative employers
Paraprofessionals
Technicians
Administrative support
Skilled craft workers
Semiskilled workers
Unskilled workers
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White collar- included professionals,administrator
Blue collar - skilled and semiskilledworker
Pink collar nurses, teachers,retailers etc.
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Regular and temporaryemployees
Regular employees
Temporary employees
Full-time employees
Part-time employees
Temporary employment agencies
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