1. Extending the System Chapter 14 Compensation of Special Groups
Chapter 15 Union Role in Wage and Salary Administration
Chapter 16 International Pay Systems

2. STRATEGIC ISSUES TECHNIQUES STRATEGIC OBJECTIVES
Work Descriptions Evaluation INTERNAL analysis certification STRUCTURE
CONSISTENCY
EFFICIENCY Performance Quality Customer Cost
EQUITY
COMPLIANCE
Market Surveys Policy PAY definitions lines STRUCTURE
COMPETITIVENESS
Seniority Performance Merit INCENTIVE based based guidelines PROGRAMS
CONTRIBUTORS
ADMINISTRATION
Planning Budgeting Communication EVALUATION

3. Compensation of Special Groups
Chapter 14
Compensation of
Special Groups

4. Who Are Special Groups? Supervisors Corporate Directors
Chief Executive Officers
Professional Employees
Sales Force
The Contingent Work Force

5. Supervisor Pay
The major challenge in compensating supervisors centers on equity.
Some incentive must be provided to entice nonexempt employees to accept the challenges of being a supervisor.
One approach is to key base salaries of supervisors to some amount exceeding the highest paid person in the unit.
The differential varies any where from 10% to 35%.

6. Supervisor Pay (continued)
Another approach is to pay supervisors for scheduled overtime.
Develop special supervisory incentive and bonus plans:
annual bonus
spot award
lump sum
individual incentive

7. Key Activities of Corporate Directors (1 of 2)
Establish policy for key internal and external operations that permits effective use of organizational resources while complying with social and legal mandates.
Ensuring that senior management is properly structured and staffed.

8. Key Activities of Directors (2 of 2)
Identifying the mission of the organization and the preferred strategic and tactical practices to accomplish the mission.
Reviewing senior management actions to ensure that actions are congruent with established policies and plans and that these managers are making best use of available resources and achieving desired results.

9. Conflicts Faced By Corporate Directors
Help set strategic plans that affect profits.
Face the possibility that disgruntled stockholders may sue over corporate strategies that are unprofitable or unpopular.
Watson-Wyatt reports that 98% of the companies they survey compensate outside members, while 5% compensate inside directors. The larger the firm, the greater the likelihood of compensating outside directors. The reverse is true for inside directors.
Compensation has not always kept up with this increased responsibility that directors face.
There is a growing concern that board members are paid too much to perform rubber stamp duties, but too little to assume today’s risks, responsibilities, and pressures.

10. Major Benefits Offered to Directors
Retirement programs
Matching director’s gift to college or university
Deferral of cash compensation until retirement
Grants to charity
Medical insurance
Payment of spouses travel expenses
Death benefits
The trend in director’s compensation is toward increased variable compensation. About 51% of large firms provide directors with some form of stock compensation.
The compensation goal is to make sure the directors make decisions that are in the best interests of the stockholders.
This is also true of executives. An obvious way of achieving this is to make sure the directors are also stockholders.
A major change in the compensation programs of outside members of the BOD began to appear in the mid 1990s with the elimination of pension plans for outside directors. A major reason for the elimination of pensions was that lucrative retirement plans encourage outside directors to stay too long and cause them to lose their independence. Some companies are planning on giving their outside board members annual stock grants that they would be required to hold until their retirement from the board.

11. Conflicts Faced By Top Management
Stockholders want healthy returns on investment.
Government wants compliance with laws.
Must decide between strategies that maximize short-term gains versus directions that focus on the long run.

12. Components of an Executive Compensation Package
Base salary
Short-term incentives or bonuses
Long-term incentives and capital appreciation plans
Executive benefits
Executive perquisites

13. Examples of Long-Term Incentives for Executives
Incentive stock options
Non-qualified stock options
Phantom stock plans
Stock appreciation rights
Restricted stock plans
Performance share / unit plans

14. Conflicts Faced By Professional Employees
May be torn between the goals, objectives, and ethical standards of their profession and the demands of an employer concerned more with the profit motive.

15. Pay Components for Professional Employees
Dual career ladders
Knowledge-based bonuses
Advanced and continuing education
Professional licenses and certification
Bonuses
Royalty compensation
Intellectual property rights

16. Conflicts Faced By Sales Staff
Often go for extended periods in the field with little supervision.
Challenge is to stay motivated and continue making sales calls despite little supervision.

17. Key Factors in Designing a Sales Compensation Plan
The nature of the people who enter the sales profession
Organizational strategy
Competitor practices
Product sold

18. Alternative Sales Pay Plans
Guaranteed base salary
Guaranteed base salary + commission
Guaranteed base salary + bonus
Guaranteed base salary + commission + bonus
Commission only

19. Sales Force Incentive Performance Measures
Revenue
Customized non-sales objectives
Profit margin
New accounts
Units sold
Product mix
Company / unit performance
Expense control
Team performance
Customer satisfaction
Market share

20. Key Steps in Designing a Sales Compensation Plan
Establish clear strategic objectives
Establish tactical objectives
Analyze organizational data
Establish proper base pay rates
Design appropriate commission formula
Test the plan
Control for windfalls

21. Key Issues in Contingent Workforce Compensation
Performance management
Pay for performance