Strategic Compensation

by Martocchio, Joe

• ISBN13: 9780131868779
• ISBN10: 0131868772
• Edition: 4th
• Format: Paperback
• Copyright: 2009-01-01
• Publisher: Pearson College Div

Summary

This book is well suited to a variety of students, including undergraduate and masterrs"s degree students studying compensation. Martocchio provides a framework for understanding strategic compensation that can be used by all business professionals and business majors.

Table of Contents

Preface	xix
PART I: SETTING THE STAGE FOR STRATEGIC COMPENSATION	1	(97)
Strategic Compensation: A Component of Human Resource Systems	1	(33)
Chapter Outline	1	(1)
Learning Objectives	1	(2)
Exploring and Defining the Compensation Context	3	(9)
What is compensation?	3	(4)
Core compensation	7	(2)
Employee benefits	9	(3)
A Historical Perspective on Compensation: The Road toward Strategic Compensation	12	(2)
Strategic versus Tactical Decisions	14	(4)
Competitive strategy choices	16	(1)
Tactical decisions that support the firm's strategy	17	(1)
Compensation Professionals' Goals	18	(6)
How HR professionals fit into the corporate hierarchy	18	(1)
How the compensation function fits into HR departments	19	(4)
The compensation department's main goals	23	(1)
Stakeholders of the Compensation System	24	(7)
Summary	31	(1)
Key Terms	31	(1)
Discussion Questions	31	(1)
Exercises	32	(1)
Endnotes	33	(1)
Strategic Compensation in Action: Strategic Analysis and Contextual Factors	34	(33)
Chapter Outline	34	(1)
Learning Objectives	34	(1)
Strategic Analysis	35	(12)
External market environment	38	(8)
Internal capabilities	46	(1)
Factors That Influence Companies' Competitive Strategies and Compensation Practices	47	(17)
National culture	47	(2)
Organizational culture	49	(3)
Organizational and product life cycles	52	(12)
Summary	64	(1)
Key Terms	64	(1)
Discussion Questions	65	(1)
Exercises	65	(1)
Endnotes	66	(1)
Contextual Influences on Compensation Practice	67	(31)
Chapter Outline	67	(1)
Learning Objectives	67	(1)
Compensation and the Social Good	68	(2)
Employees' goals	69	(1)
Employers' goals	69	(1)
Government's goals	69	(1)
Employment Laws That Influence Compensation Tactics	70	(16)
Income continuity, safety, and work hours	71	(8)
Pay discrimination	79	(5)
Accommodating disabilities and family needs	84	(1)
Prevailing wage laws	85	(1)
Contextual Influences on the Federal Government as an Employer	86	(1)
Labor Unions as Contextual Influences	87	(1)
Market Influences	88	(6)
Summary	94	(1)
Key Terms	95	(1)
Discussion Questions	95	(1)
Exercises	95	(1)
Endnotes	96	(2)
PART II: BASES FOR PAY	98	(102)
Traditional Bases for Pay: Seniority and Merit	98	(37)
Chapter Outline	98	(1)
Learning Objectives	99	(1)
Seniority and Longevity Pay	99	(10)
Historical overview	104	(2)
Who participates?	106	(1)
Effectiveness of seniority pay systems	106	(1)
Design of seniority pay and longevity pay plans	107	(1)
Advantages of seniority pay	108	(1)
Fitting seniority pay with competitive strategies	108	(1)
Merit Pay	109	(3)
Who participates?	109	(1)
Exploring the elements of merit pay	109	(3)
Performance Appraisal	112	(14)
Types of performance appraisal plans	112	(10)
Exploring the performance appraisal process	122	(4)
Strengthening the Pay-for-Performance Link	126	(3)
Link performance appraisals to business goals	126	(1)
Analyze jobs	126	(1)
Communicate	127	(1)
Establish effective appraisals	127	(1)
Empower employees	127	(1)
Differentiate among performers	127	(2)
Possible Limitations of Merit Pay Programs	129	(2)
Failure to differentiate among performers	129	(1)
Poor performance measures	129	(1)
Supervisors' biased ratings of employee job performance	129	(1)
Lack of open communication between management and employees	129	(1)
Undesirable social structures	129	(1)
Factors other than merit	130	(1)
Undesirable competition	130	(1)
Little motivational value	130	(1)
Linking Merit Pay with Competitive Strategy	131	(1)
Lowest-cost competitive strategy	131	(1)
Differentiation competitive strategy	131	(1)
Summary	131	(1)
Key Terms	131	(1)
Discussion Questions	132	(1)
Exercises	132	(1)
Endnotes	133	(2)
Incentive Pay	135	(38)
Chapter Outline	135	(1)
Learning Objectives	136	(1)
Exploring Incentive Pay	136	(1)
Contrasting Incentive Pay with Traditional Pay	137	(9)
Individual Incentive Plans	146	(4)
Defining individual incentives	147	(1)
Types of individual incentive plans	147	(2)
Advantages of individual incentive pay programs	149	(1)
Disadvantages of individual incentive pay programs	149	(1)
Group Incentives	150	(13)
Defining group incentives	151	(1)
Types of group incentive plans	151	(5)
Advantages of group incentives	156	(7)
Disadvantages of group incentives	163	(1)
Companywide Incentives	163	(3)
Defining companywide incentives	163	(1)
Types of companywide incentive plans	163	(1)
Profit sharing plans	164	(1)
Calculating profit sharing awards	164	(1)
Advantages of profit sharing plans	165	(1)
Disadvantages of profit sharing plans	165	(1)
Employee stock option plans	165	(1)
Designing Incentive Pay Programs	166	(2)
Group versus individual incentives	166	(1)
Level of risk	167	(1)
Complementing or replacing base pay	167	(1)
Performance criteria	167	(1)
Time horizon: short term versus long term	168	(1)
Linking Incentive Pay with Competitive Strategy	168	(1)
Lowest-cost competitive strategy	168	(1)
Differentiation competitive strategy	169	(1)
Summary	169	(1)
Key Terms	170	(1)
Discussion Questions	170	(1)
Exercises	170	(1)
Endnotes	171	(2)
Person-Focused Pay	173	(27)
Chapter Outline	173	(1)
Learning Objectives	173	(1)
Defining Competency-Based Pay, Pay-for-Knowledge, and Skill-Based Pay	174	(2)
What is a ``competency''?	175	(1)
Usage of Pay-for-Knowledge Pay Programs	176	(1)
Reasons to Adopt Pay-for-Knowledge Pay Programs	177	(6)
Technological innovation	177	(1)
Increased global competition	178	(5)
Varieties of Pay-for-Knowledge Pay Programs	183	(4)
Contrasting Person-Focused Pay with Job-Based Pay	187	(2)
Advantages of Pay-for-Knowledge Pay Programs	189	(2)
Advantages to employees	189	(1)
Advantages to employers	190	(1)
Disadvantages of Pay-for-Knowledge Pay Programs	191	(5)
Linking Pay-for-Knowledge Pay with Competitive Strategy	196	(1)
Lowest-cost competitive strategy	196	(1)
Differentiation competitive strategy	197	(1)
Summary	197	(1)
Key Terms	198	(1)
Discussion Questions	198	(1)
Exercises	198	(1)
Endnotes	199	(1)
PART III: DESIGNING COMPENSATION SYSTEMS	200	(125)
Building Internally Consistent Compensation Systems	200	(43)
Chapter Outline	200	(1)
Learning Objectives	200	(1)
Internal Consistency	201	(5)
Job Analysis	206	(24)
Steps in the job analysis process	207	(5)
Legal considerations for job analysis	212	(8)
Job analysis techniques	220	(1)
U.S. Department of Labor's Occupational Information Network (O*NET)	220	(10)
Job Evaluation	230	(3)
Compensable factors	230	(1)
The job evaluation process	231	(2)
Job Evaluation Techniques	233	(6)
The point method	233	(4)
Alternative job-content evaluation approaches	237	(2)
Alternatives to job evaluation	239	(1)
Internally Consistent Compensation Systems and Competitive Strategy	239	(1)
Summary	240	(1)
Key Terms	240	(1)
Discussion Questions	240	(1)
Exercises	241	(1)
Endnotes	242	(1)
Building Market-Competitive Compensation Systems	243	(37)
Chapter Outline	243	(1)
Learning Objectives	243	(1)
Market-Competitive Pay Systems: The Basic Building Blocks	244	(1)
Compensation Surveys	245	(22)
Preliminary considerations	245	(6)
Using published compensation survey data	251	(4)
Compensation surveys: Strategic considerations	255	(4)
Compensation survey data	259	(6)
Updating the survey data	265	(2)
Integrating Internal Job Structures with External Market Pay Rates	267	(2)
Compensation Policies and Strategic Mandates	269	(1)
Summary	270	(1)
Key Terms	270	(1)
Discussion Questions	271	(1)
Exercises	271	(1)
Endnotes	272	(1)
Appendix: U.S. 2005/2006 Total Salary Increase Budget Survey	273	(7)
Building Pay Structures That Recognize Individual Contributions	280	(45)
Chapter Outline	280	(1)
Learning Objectives	281	(1)
Constructing a Pay Structure	281	(8)
Step 1: Deciding on the number of pay structures	281	(1)
Step 2: Determining a market pay line	282	(1)
Step 3: Defining pay grades	282	(2)
Step 4: Calculating pay ranges for each pay grade	284	(4)
Step 5: Evaluating the results	288	(1)
Designing Merit Pay Systems	289	(6)
Merit increase amounts	290	(1)
Timing	291	(1)
Recurring versus nonrecurring merit pay increases	291	(1)
Present level of base pay	291	(1)
Rewarding performance: The merit pay grid	291	(2)
Merit pay increase budgets	293	(2)
Designing Sales Incentive Compensation Plans	295	(15)
Alternative sales compensation plans	296	(12)
Sales compensation plans and competitive strategy	308	(1)
Determining fixed pay and the compensation mix	309	(1)
Designing Pay-for-Knowledge Programs	310	(4)
Establishing skill blocks	310	(1)
Transition matters	311	(1)
Training and certification	312	(2)
Pay Structure Variations	314	(8)
Broadbanding	314	(7)
Two-tier pay structures	321	(1)
Summary	322	(1)
Key Terms	322	(1)
Discussion Questions	322	(1)
Exercises	323	(1)
Endnotes	324	(1)
PART IV: EMPLOYEE BENEFITS	325	(60)
Legally Required Benefits	325	(20)
Chapter Outline	325	(1)
Learning Objectives	325	(1)
An Overview of Legally Required Benefits	326	(1)
Components of Legally Required Benefits	326	(15)
Social Security Act of 1935	326	(5)
State Compulsory Disability Laws (Workers' Compensation)	331	(6)
Family and Medical Leave Act of 1993	337	(4)
The Implications of Legally Required Benefits for Strategic Compensation	341	(1)
Summary	342	(1)
Key Terms	342	(1)
Discussion Questions	342	(1)
Exercises	343	(1)
Endnotes	344	(1)
Discretionary Benefits	345	(40)
Chapter Outline	345	(1)
Learning Objectives	345	(1)
An Overview of Discretionary Benefits	346	(1)
Components of Discretionary Benefits	347	(19)
Protection programs	347	(15)
Paid time-off	362	(1)
Services	363	(3)
Laws That Guide Discretionary Employee Benefits	366	(4)
Employee Retirement Income Security Act of 1974 (ERISA)	369	(1)
Consolidated Omnibus Budget Reconciliation Act of 1985 (COBRA)	370	(1)
Health Insurance Portability and Accountability Act of 1996 (HIPAA)	370	(1)
Additional Pertinent Legislation	370	(1)
Unions and Employee Benefits	371	(1)
Designing and Planning the Benefits Program	372	(9)
Determining who receives coverage	373	(1)
Financing	374	(1)
Employee choice	374	(1)
Cost containment	374	(1)
Communication	374	(7)
The Implications of Discretionary Benefits for Strategic Compensation	381	(1)
Summary	382	(1)
Key Terms	382	(1)
Discussion Questions	382	(1)
Exercises	383	(1)
Endnotes	384	(1)
PART V: CONTEMPORARY STRATEGIC COMPENSATION CHALLENGES	385	(90)
International Compensation	385	(30)
Chapter Outline	385	(1)
Learning Objectives	386	(1)
Competitive Strategies and How International Activities Fit In	386	(2)
Lowest-cost producers' relocations to cheaper production areas	387	(1)
Differentiation and the search for new global markets	387	(1)
How globalization is affecting HR departments	387	(1)
Complexity of international compensation programs	388	(1)
Preliminary Considerations	388	(5)
Host country nationals, third country nationals, and expatriates: definitions and relevance for compensation issues	392	(1)
Term of international assignment	392	(1)
Staff mobility	392	(1)
Equity: pay referent groups	393	(1)
Components of International Compensation Programs	393	(1)
Setting Base Pay for U.S. Expatriates	394	(1)
Methods for setting base pay	394	(1)
Purchasing power	395	(1)
Incentive Compensation for U.S. Expatriates	395	(3)
Foreign service premiums	396	(1)
Hardship allowances	396	(1)
Mobility premiums	397	(1)
Establishing Employee Benefits for U.S. Expatriates	398	(3)
Standard benefits for U.S. expatriates	398	(1)
Enhanced benefits for U.S. expatriates	399	(2)
Balance Sheet Approach for U.S. Expatriates' Compensation Packages	401	(5)
Housing and utilities	402	(1)
Goods and services	402	(2)
Discretionary income	404	(1)
Tax considerations	404	(2)
Repatriation Pay Issues	406	(1)
Compensation Issues for HCNs and TCNs	407	(5)
Japan	407	(1)
China	407	(1)
Mexico	407	(1)
European Union	407	(5)
Summary	412	(1)
Key Terms	412	(1)
Discussion Questions	412	(1)
Exercises	413	(1)
Endnotes	414	(1)
Compensating Executives	415	(31)
Chapter Outline	415	(1)
Learning Objectives	416	(1)
Contrasting Executive Pay with Pay for Nonexecutive Employees	416	(1)
Principles of Executive Compensation: Implications for Competitive Strategy	416	(1)
Defining Executive Status	417	(2)
Who are executives?	417	(1)
Key employees	418	(1)
Highly compensated employees	419	(1)
Executive Compensation Packages	419	(10)
Components of current core compensation	419	(1)
Short-term incentives	420	(1)
Components of deferred core compensation	421	(6)
Employee benefits: enhanced protection program benefits and perquisites	427	(2)
Principles and Processes for Setting Executive Compensation	429	(7)
The key players in setting executive compensation	429	(6)
Theoretical explanations for setting executive compensation	435	(1)
Executive Compensation Disclosure Rules	436	(1)
Executive Compensation: Are U.S. Executives Paid Too Much?	437	(5)
Comparison between executive compensation and compensation for other worker groups	437	(2)
Strategic questions: Is pay for performance?	439	(1)
Ethical considerations: Is executive compensation fair?	440	(1)
International competitiveness	441	(1)
Summary	442	(1)
Key Terms	442	(1)
Discussion Questions	443	(1)
Exercises	443	(1)
Endnotes	444	(2)
Compensating the Flexible Workforce: Contingent Employees and Flexible Work Schedules	446	(29)
Chapter Outline	446	(1)
Learning Objectives	447	(1)
The Contingent Workforce	447	(9)
Groups of contingent workers	450	(5)
Reasons for U.S. employers' increased reliance on contingent workers	455	(1)
Pay and Employee Benefits for Contingent Workers	456	(5)
Part-time employees	457	(1)
Temporary employees	458	(1)
Leased workers	459	(1)
Independent contractors, freelancers, and consultants	459	(2)
Flexible Work Schedules: Flextime, Compressed Workweeks, and Telecommuting	461	(7)
Flextime schedules	461	(5)
Compressed workweek schedules	466	(1)
Telecommuting	466	(1)
Flexible work schedules: balancing the demands of work life and home life	467	(1)
Pay and Employee Benefits for Flexible Employees	468	(1)
Pay	468	(1)
Employee benefits	468	(1)
Unions' Reactions to Contingent Workers and Flexible Work Schedules	469	(1)
Strategic Issues and Choices in Using Contingent and Flexible Workers	470	(1)
Lowest-cost competitive strategy	470	(1)
Differentiation competitive strategy	471	(1)
Summary	471	(1)
Key Terms	471	(1)
Discussion Questions	472	(1)
Exercises	472	(1)
Endnotes	473	(2)
Glossary	475	(16)
Author Index	491	(4)
Subject Index	495