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Prentice Hall, Inc. © 2006 6-1 A Human Resource Management Approach STRATEGIC COMPENSATION Prepared by David Oakes Chapter 6 Person-Focused Pay.

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Presentation on theme: "Prentice Hall, Inc. © 2006 6-1 A Human Resource Management Approach STRATEGIC COMPENSATION Prepared by David Oakes Chapter 6 Person-Focused Pay."— Presentation transcript:

1 Prentice Hall, Inc. © 2006 6-1 A Human Resource Management Approach STRATEGIC COMPENSATION Prepared by David Oakes Chapter 6 Person-Focused Pay

2 Prentice Hall, Inc. © 2006 6-2 Person - Focused Plans  Rewards employees for acquiring job - related  Competencies  Knowledge  Skills  2 main types  Pay - for - knowledge  Skill - based pay

3 Prentice Hall, Inc. © 2006 6-3 Competency - Based Pay Programs  Pay - for - knowledge  Skills - based  A combination of both

4 Prentice Hall, Inc. © 2006 6-4 Pay Programs  Rewards employees for improving or acquiring new skills / knowledge  Horizontal  Those at same level of responsibility or difficulty  Vertical  Those at a higher level of responsibility or difficulty  Depth  Level of expertise or specialization

5 Prentice Hall, Inc. © 2006 6-5Competencies  Uniquely combined characteristics of the person that enables employees to fulfill job requirements well  Core competencies are derived from company’s strategic statements

6 Prentice Hall, Inc. © 2006 6-6 Vertical Skills Programs  Works well for work teams  Service industry  Manufacturing industry  Employees  Learn functional skills  Perform managerial tasks

7 Prentice Hall, Inc. © 2006 6-7 Pay - For - Knowledge Plans  Reasons for adoption  Removes entitlement label  Connects pay to job-related abilities  Increases employee autonomy  Technological innovations  Increased global competition

8 Prentice Hall, Inc. © 2006 6-8 Pay-for-Knowledge Models  Stair - step  Skill - block  Job - point accrual  Cross - departmental

9 Prentice Hall, Inc. © 2006 6-9 Stair - Step Model  Jobs from same job family  Jobs differ in complexity  Higher the step, greater the skills  Companies use separate models  Models designed to match jobs

10 Prentice Hall, Inc. © 2006 6-10 Skill – Block Model  Applies to jobs in same job family  Employees expected to progress to increasingly complex jobs  Skills may not build on each other  Emphasizes horizontal & vertical skills

11 Prentice Hall, Inc. © 2006 6-11 Job - Point Accrual Model  Applies to jobs from different job families  Creates organizational flexibility  Points assigned to skills  Higher the number of points, the higher the core compensation level

12 Prentice Hall, Inc. © 2006 6-12 Cross - Departmental Model  Employees develop skills usable in other departments  Helps manage sporadic, short – term staffing shortages  Helps meet seasonal fluctuations

13 Prentice Hall, Inc. © 2006 6-13 Person - Focused Pay  Compensates employees for flexibility  Compensated for potential contributions  Based on skills & knowledge  Used for jobs not easily assessed  For skills and knowledge

14 Prentice Hall, Inc. © 2006 6-14 Job - Based Pay  Compensates employees for current jobs  Pay limits set for each job  Evaluations based on job descriptions & objectives  2 main types  Merit pay  Incentive pay

15 Prentice Hall, Inc. © 2006 6-15 Employee Advantages  Can provide job enrichment  Can provide job security  Can make jobs more intrinsically motivating  Can make jobs more interesting  Increases employees’ flexibility

16 Prentice Hall, Inc. © 2006 6-16 Job Characteristics Theory Employees more motivated to perform jobs that contain  Skill variety  Task identity  Autonomy  Feedback

17 Prentice Hall, Inc. © 2006 6-17 Core Characteristics  Skill variety  Requires using different abilities  Task identity  Enables employees to do entire job  Autonomy  Allows employees to choose  Feedback  Provides clear communications

18 Prentice Hall, Inc. © 2006 6-18 Advantages To Employers  Leads to enhanced job performance  Leads to reduced staffing  Leads to greater flexibility  Improves quality  Increases productivity levels

19 Prentice Hall, Inc. © 2006 6-19Disadvantages  Can increase hourly labor costs  Can increase training costs  Can increase overhead costs  May not mesh well with existing incentive pay systems

20 Prentice Hall, Inc. © 2006 6-20 Lowest - Cost Competitive Strategy  Lowers output costs per employee  Training should improve productivity  Improves product & service quality  Long - term gains should outweigh short - term costs

21 Prentice Hall, Inc. © 2006 6-21 Differentiation Competitive Strategy  Requires employees who are  Creative  Open - minded  Risk - takers  Requires long - term focus  Pay - for - knowledge effective with work teams


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