Compensation: An Overview

1
Compensation An Overview

• The Compensation Handbook
• Chapters 2 and 4

2
In this session.

• Well look at changes over time in how
  organizations view rewards and compensation and
  why,
• Well discuss what constitutes the criteria today
  for an effective compensation system, and
• Well look at where were going this semester and
  how well get there.

3
Compensation Trends
THEN
NOW

• Lifetime employee
• Corporate ladder (internal growth)
• Pay for time (organizational or job tenure)
• Monetary rewards are primary
• More workers than jobs

• Independent contractor
• Personal development (external growth)
• Pay for competencies and skills
• Monetary rewards are only one among several
  important factors
• More jobs than workers

4
Anatomy of a Compensation System

• Traditional Compensation Systems are
• Internally equitable
• Externally competitive
• Motivating for employees
• Easily administered by staff
• Designed to pay jobs, not individual employees
• Face valid (employees see the underlying
  rationale)

5
Traditional Example
6
Anatomy of a Compensation System

• Non-traditional Compensation Systems
• Are not necessarily seen as internally equitable
• Are designed to hire the best and brightest,
  and to retain them
• Complement employee development
• Are complicated to design and administer
• Are designed to pay individual employees, not
  jobs
• Lend themselves to teams and project work

7
Non-traditional Examples

• Broadbanding
• Skill-based Pay
• Competency-based Pay
• Pay-for-Performance
• Individual and Team-based Incentives

8
Aligning Work Value and Pay
Results
Incentive Pay
Merit Pay
Competencies
Knowledge SkillsAbilities
Base Salary
9
So, Where Are We Going?
10
Next Time

• Well look at some issues in working in teams
  that you may have faced or may face in this (or
  another) class
• How work gets done in effective teams
• Motivation, Ability, and Performance differences
  among team members
• Working with overcontrolling and undercontrolling
  team members