Organizational Structure Strategic and Tactical Compensation Issues

Chapter 4

Compensation strategies

To develop and operate a compensation system that promotes fair treatment, an organization should consider compensation strategies such as:
Relating job worth to difference in job requirements Recognizing the worth and value of employee knowledge and skills Rewarding employee contribution and the result achieved Promoting employee continued acquisition and upgrading of knowledge and skills

1. 2. 3. 4.

5. 6.

7.

8.

Supporting team and work unit cooperative efforts Designing compensation plans that successfully compete within established labor markets Aligning compensation of all employees with objectives and goals of the organization Providing a compensation package that enhances current life style and provides long-term protection for employees and their dependents.

Employees-A critical resource

Pay satisfaction Job satisfaction Organizational satisfaction Satisfaction: an employment perspective

Division of labor

The basis of the employer employee exchange process is the

The quality and quantity of rewards normally vary according to the worth of employee contributions as measured by the employer and the value of those contributions as perceived by employees

Division of labor The performance of specialized activities And the provision of rewards to those who make contributions

Creating an organizational hierarchy

One basic approach to distributing rewards focuses on the level of the job in the organizational structure. The higher the level the job is, the greater the responsibility of the incumbent. The structure consist of

A board of directors Senior managers Operating managers Professionals and administrators and Operative employees.

Major groups in the organization structure

Exemption status exempt (excused) from the overtime

requirements (it depends on responsibilities and duties and salary) Exempt group Nonexempt group

Unionization
Nonunion group Union group Increased responsibilities require broader and more complex knowledge and skills. The more diverse the knowledge and higher the level of the skill requirements, the greater the compensation.

Board of directors

It consist of a Chairman and

Inside members and Outside members Regular meeting fees Annual retainer A set of other fees Acquisition of stock Nonqualified stock option plans Restricted stock plans

The compensation package consist of

Long term incentive programs

Board of directors

1. 2. 3.

4.
5.

Following corporate performance measures are being used to determine incentive awards Earning per share Net profits after taxes Return on equity Return on assets and Annual sales or revenue

Outside Board of directors

1.

2.
3.

Some organizations now provide their outside directors withGroup travel insurance Group life insurance Accidental death and dismemberment insurance

Senior management

Consist of executives and senior managers such as CEO COO Vice President etc.

Their compensation relates to the size of the organization

For organizations in different industries, the determinant or size indicator varies. Industries Manufacturing, construction and retail trade Utilities Banks Insurance companies Indicator Total sales volume Operating revenue Total deposit Total premium income

Operating managers

Mid-Level

Department head Branch head Supervisors Entry level professionals Administrators Less than senior managers Pay for performance opportunity Pay varies by size of unit managed

First-Level

Compensation package

Sales personnel

Five basic methods are used for paying sales personnelSalary Sales commission Combination of salary and commission Salary and bonus Combine bonus payments with a salary and commission.

Professionals

Some specialist in the area of

Compensation package

Science Engineering Accounting Finance or Law

Compensation and noncompensation rewards received by peers Play the role of operating managers and rewarded accordingly.

Operative employers
Paraprofessionals Technicians Administrative support Skilled craft workers Semiskilled workers Unskilled workers

White collar- included professionals, administrator Blue collar - skilled and semiskilled worker Pink collar nurses, teachers, retailers etc.

Regular and temporary employees

Regular employees Temporary employees Full-time employees Part-time employees Temporary employment agencies

THANK YOU ALL