1. Internal alignment: Determining the structure
Chapter 4

2. The Flow…. What shapes internal structures?
Strategic choices in designing internal structures
Guidance from evidence
Consequences of structures

3. Internal alignment Pay structure
Often called, Internal Equity, it refers to the pay relationships among different jobs/skills/competencies within a single organization
Pay structure
It refers to the array of pay rates for different work or skills within a single organization. The number of levels, the differentials in pay between the levels, and the criteria used to determine those differences describe the structure.

4. The pay structure should…
Support the organization strategy,
Support the work flow
Motivate behavior
The pay structure should…

5. Structures Vary Among Organizations
The number of levels of work
The pay differentials between the levels
The criteria

6. Managerial / professional levels at General Electric Plastics (GEP)
Executive
Director
Leadership
Technical/
managerial
Professional
Provides vision, leadership and innovation to major business segments or functions
Directs a significant functional area or smaller business segment
Individual contributors leading projects or programs with defined scope and impact, or managers leading functional components with broad scope and impact.
Individual contributors managing projects or programs with defined scope and responsibility, or first-tier management of a specialty area
Supervisors and individual contributors working on tasks, activities, and/or less complex, shorter duration projects

7. Pay differentials between levels
Consultant Engineer (162,000) 30%
Advisor Engineer (Rs.125,000) 28%
Lead Engineer (98,000) 26%
Systems Engineer (Rs. 78,000) 24%
Senior Engineer (Rs. 63,000) 21%
Engineer (Rs. 52,000)

8. The criteria…. The criteria Use Value and Exchange value
Content
Refers to work performed in a job and how it gets done. Tasks, behaviors, knowledge required etc.
Value
Refers to the worth of the work; its relative contribution to the organization’s objectives.
Use Value and Exchange value
Use value reflects the value of goods or services an employee produces in a job
Exchange value is whatever the employer and employee agree on for a job
Job and person-based structures
Job-based structures relies on the work content – tasks, behaviors and responsibilities
Person-based structures relies on the employee’s skills, knowledge and competencies.

9. What shapes internal structures
External factors
Economic pressures
Govt policies, laws
Stakeholders
Cultures and customs
Organization factors
Strategy
Technology
Human capital
HR policy
Employee acceptance
Cost implications
Internal structures
Levels
Differentials
Criteria

10. Strategic choices in designing internal structures
Tailoring the pay structure to the internal structure
Tailored Versus Loosely coupled
McDonald’s low cost, customer focused business strategy
3M’s constant product innovation and short product- design-to-market cycle times
Egalitarian Versus Hierarchical
Have fewer levels, smaller differentials between adjacent levels
Hierarchies values the differences in work content, individual skills, and contributions to the organization

11. Structure B Delayered
Structure A Layered
Chief Engineer
Chief Engineer
Engineering Manager
Consulting Engineer
Senior Lead Engineer
Consulting Engineer
Lead Engineer
Senior Engineer
Engineer
Associate Engineer
Engineer Trainee

12. Consequences of structures
Efficiency
Fairness
Compliance