1. Chapter 1: Strategic Compensation
MGT 4543 • Compensation Management

2. Be prepared for class… Today, I will call on you for answers.
Borrow a book if you do not have one yet.
Please do NOT read from your book. We want to stay awake!
What if you did not prepare for today’s class?
My best advice is to follow along, try to keep up, and THINK of a logical answer if you are called on.
That is MUCH better than saying the dreaded, “I don’t know” or “I don’t have a book yet.”

3. Opportunities to get involved with HR professionals
MSU student chapter of SHRM
Sign up to be on the list if you are interested!
Exposure to HR professionals
Networking opportunities
Opportunities to learn more about HR
Golden Triangle Human Resource Association
Dual student membership (if you attend GTHRA meetings)
Society for Human Resource Management (SHRM)

4. Strategic Compensation
What is compensation?
Compare and contrast intrinsic and extrinsic compensation.
Explain core compensation and employee benefits.
Give examples of each.

5. Fixed
Pay
Variable Pay

6. Let’s practice… In each example, is direct or indirect pay being used?
If direct, is it fixed or variable?
1. Kalan gets 100% of his insurance coverage paid by his employer. This translates to $4,000 per year.
_______________________________________________________
2. Ericca receives $500 per week at her job as a childcare worker.
3. Ellis earns $10 and hour and 10% of his gross sales each month.
4. Caine works for an employer that provides free lunches and snacks to employees.
5. Ming is an executive for a major corporation that is traded on the NYSE. Each quarter she receives a stock bonus based on whether or not she meets performance targets.

7. Strategic Compensation
What is a competitive business strategy?
What is a human resource strategy?
What is strategic compensation?
How are these three related?

8. Strategic Management & HRM

9. Competitive Strategic Choices
Cost leadership
What is cost leadership?
How do Ryanair’s compensation practices help it achieve its strategy?
Differentiation
What is differentiation?
Discuss why brand loyalty and research & development frequently go hand-in-hand with differentiation.

10. Competitive Strategic Choices
Compensation professionals support strategic initiatives through the design and implementation of compensation systems.
For a lowest-cost strategy, compensation professionals should focus on _______________________________.
Pay for differentiation differs because this strategy relies on employee creativity and willingness to take _____________.
Differentiation strategies require longer ____________.

11. Building Blocks: Core Compensation & Employee Benefits
Explain each:
Base pay
What are two ways base pay can be disbursed?
Compensable factors
COLAs

12. Building Blocks: Core Compensation & Employee Benefits
Explain each:
Seniority pay
On what theory is seniority pay based?
Merit pay
Incentive pay (variable pay)

13. Building Blocks: Core Compensation & Employee Benefits
Explain each:
Pay-for-knowledge
What type of workers are likely to receive this type of pay?
Skill-based pay

14. Building Blocks: Core Compensation & Employee Benefits
How do discretionary benefits differ from legally required benefits?
How did government legislation about wage levels influence discretionary benefits?
What was the initial purpose of legally required benefits?
Give some examples…your book has plenty!

15. Brief History of Compensation
Industrial revolution
Division of labor;
Change from work _________________ to _________________
Scientific management
Productivity measures
Piecework plans
Welfare practices & governmental regulation
Improving conditions for EEs (e.g., medical insurance for EEs)
Personnel management emerges
Competitive advantage
Employees viewed as a source of ___________________
Pay-for-knowledge, pay-for-skill
Emphasis on recruitment and retention
Pressure of globalized competition

16. Strategic Compensation
What does it mean for compensation systems to be internally consistent?
Why is internal consistency in compensation important?

17. Strategic Compensation
Name and describe the two processes to achieve internal consistency.
Market competitiveness in compensation: How is it achieved? Why does it matter?

18. Strategic Compensation
Fill in the blank:
pay structures – represent pay rate ____________ for jobs of ___________ worth & the framework for recognizing differences in employee ______________.
Explain each:
pay grades
pay ranges

19. X = Job evaluation points
Pay Structure
$37,000
Pay Grade 3
$30,000
Y= Salary
$32,000
Pay Grade 2
$25,000
Pay Range
$27,000
Pay Grade 1
$20,000
X = Job evaluation points

20. Fitting the Compensation Function in an Organization’s Structure
How does compensation fit with human resource practices such as recruitment, relocation, and retention?
Form your answer by reading and thinking about the example in the book.

21. Stakeholders of the Compensation System
What stakeholders must a compensation system satisfy?
Why might satisfying various stakeholders be a challenge for HR departments?