8/16/2021 1 Unit 2 Defining Internal Alignment INSTRUCTOR ASSOCIATE PROF DR PHAM THI BICH NGOC NATIONAL ECONOMICS UNIVERSITY Outline Jobs and Compensation Compensation Strategy Internal Alignment Pay[.]
8/16/2021 Unit 2: Defining Internal Alignment INSTRUCTOR: ASSOCIATE PROF DR PHAM THI BICH NGOC NATIONAL ECONOMICS UNIVERSITY Outline Jobs and Compensation Compensation Strategy: Internal Alignment Pay structure What Shapes Internal Structures? Strategic Choices in Designing Internal Structures Consequences of Structures Job analysis Job evaluation 8/16/2021 Jobs and Compensation Pay varies significantly according to the job employee’s pay (and by implication, their pay growth over time) depends on both the nature of the job and the job level Internal Alignment Internal alignment, often called internal equity, refers to the pay relationships among different jobs/skills/competencies within a single organization The relationships form a pay structure that should support the organization strategy, support the workflow, and motivate behavior toward organization objectives 8/16/2021 Pay structure Pay structure refers to the array of pay rates for different work or skills within a single organization An internal pay structure can be defined by (1) the number of levels of work, (2) the pay differentials between the levels, and (3) the criteria or bases used to determine those levels and differentials STRUCTURES VARY AMONG ORGANIZATIONS Work content and its value are the 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, etc.) A structure based on content typically ranks jobs on skills required, complexity of tasks, problem solving, and/or responsibility A structure based on the value of the work focuses on the relative contribution of these skills, tasks, and responsibilities to the organization’s goals Value refers to the worth of the work: its relative contribution to the organization objectives 8/16/2021 Criteria: Content and Value STRUCTURE BASED ON CONTENT A structure based on content typically ranks jobs on skills required, complexity of tasks, problem solving, and/or responsibility STRUCTURE BASED ON VALUE In contrast, a structure based on the value of the work focuses on the relative contribution of these skills, tasks, and responsibilities to the organization’s goals Pay Structure at Lockheed Martin, under Two Alternative Pay Level Policies 8/16/2021 Use Value and Exchange Value Use value reflects the value of goods or services an employee produces in a job Exchange value is whatever wage the employer and employee agree on for a job Same work content across all locations→ same use value but may be different exchange value Job- and Person-Based Structures A job-based structure relies on the work content—tasks, behaviors, responsibilities A person-based structure shifts the focus to the employee: the skills, knowledge, or competencies the employee possesses, whether or not they are used in the employee’s particular job 10 8/16/2021 WHAT SHAPES INTERNAL STRUCTURES? 11 STRATEGIC CHOICES IN DESIGNING INTERNAL STRUCTURES Two strategic choices are involved: ◦ (1) how specifically tailored to the organization’s design and workflow to make the structure and ◦ (2) how to distribute pay throughout the levels in the structure 12 8/16/2021 Tailored versus Loosely Coupled Mc Donald, Walmart: closely tailored structure (Jobs are well defined with detailed tasks or steps to follow; Differences in pay among jobs are very small) 3M: innovative company culture, employee work in teams, pay structures are more loosely linked to the organization in order to provide flexibility 13 Hierarchical versus Egalitarian 14 8/16/2021 Guidance from the evidence when choosing pay structure Equity theory: Fairness ◦ employees judge the fairness of their organization’s internal pay structure by making multiple comparisons: ◦ Comparing to jobs similar to their own (internal equity), ◦ Comparing their job to others at the same employer (internal equity), and ◦ Comparing their jobs’ pay against external pay levels (external equity) Tournament Theory: Motivation and Performance ◦ The greater the differential between employee salary and boss’s salary, the harder employee will work ◦ larger raises with a promotion increases effort and reduces absenteeism ◦ performance improves with larger differentials at the top levels of the structure ◦ teams with small differences in player salaries did better than those with large differentials 15 Consequences of an Internally Aligned Structure 16 8/16/2021 Consequences of an Internally Aligned Structure More hierarchical structures are related to greater performance when the workflow depends on individual contributors High performers quit less under more hierarchical systems when pay is based on performance rather than seniority and when people have knowledge of the structure More egalitarian structures are related to greater performance when close collaboration and sharing of knowledge are required The impact of any internal structure on organization performance is affected by the other dimensions of the pay model; pay levels (competitiveness), employee performance (contributions), and employee knowledge of the pay structure 17 CONSEQUENCES OF STRUCTURES Efficiency: ◦ aligned structure can lead to better organization performance ◦ Internal pay structures imply future returns The size of the differentials between the entry level in the structure and the highest level can encourage employees to remain with the organization, increase their experience and training, cooperate with co-workers, and seek greater responsibility Fairness Compliance 18 8/16/2021 Internal consistency Developed using two processes Job analysis ◦ Mostly a descriptive procedure ◦ Identifies job content Job evaluation ◦ Is used to establish pay differentials among employees within a company 19 10 Báo cáo giải pháp công tác quản lý Mầm non tài liệu mầm non mẫu giáo Kỹ sống cho trẻ mầm non sáng kiến kinh nghiệm thư viện kiến thức tổng hợp mầm non mẫu giáo để chăm sóc ni dạy ngày tốt Báo cáo giải pháp công tác quản lý Mầm non tài liệu mầm non mẫu giáo Kỹ sống cho trẻ mầm non sáng kiến kinh nghiệm thư viện kiến thức tổng hợp mầm non mẫu giáo để chăm sóc ni dạy ngày tốt Báo cáo giải pháp công tác quản lý Mầm non tài liệu mầm non mẫu giáo Kỹ sống cho trẻ mầm non sáng kiến kinh nghiệm thư viện kiến thức tổng hợp mầm non mẫu giáo để chăm sóc ni dạy ngày tốt Báo cáo giải pháp cơng tác quản lý Mầm non tài liệu mầm non mẫu giáo Kỹ sống cho trẻ mầm non sáng kiến kinh nghiệm thư viện kiến thức tổng hợp mầm non mẫu giáo để chăm sóc ni dạy ngày tốt Báo cáo giải pháp công tác quản lý Mầm non tài liệu mầm non mẫu giáo Kỹ sống cho trẻ mầm non sáng kiến kinh nghiệm thư viện kiến thức tổng hợp mầm non mẫu giáo để chăm sóc ni dạy ngày tốt Báo cáo giải pháp công tác quản lý Mầm non tài liệu mầm non mẫu giáo Kỹ sống cho trẻ mầm non sáng kiến kinh nghiệm thư viện kiến thức tổng hợp mầm non mẫu giáo để chăm sóc ni dạy ngày tốt Báo cáo giải pháp công tác quản lý Mầm non tài liệu mầm non mẫu giáo Kỹ sống cho trẻ mầm non sáng kiến kinh nghiệm thư viện kiến thức tổng hợp mầm non mẫu giáo để chăm sóc ni dạy ngày tốt Báo cáo giải pháp công tác quản lý Mầm non tài liệu mầm non mẫu giáo Kỹ sống cho trẻ mầm non sáng kiến kinh nghiệm thư viện kiến thức tổng hợp mầm non mẫu giáo để chăm sóc ni dạy ngày tốt ... may be different exchange value Job- and Person-Based Structures A job-based structure relies on the work content—tasks, behaviors, responsibilities A person-based structure shifts the focus to... not they are used in the employee’s particular job 10 8/16 /20 21 WHAT SHAPES INTERNAL STRUCTURES? 11 STRATEGIC CHOICES IN DESIGNING INTERNAL STRUCTURES Two strategic choices are involved: ◦ (1)... organization’s design and workflow to make the structure and ◦ (2) how to distribute pay throughout the levels in the structure 12 8/16 /20 21 Tailored versus Loosely Coupled Mc Donald, Walmart: closely