Case Study Simulation Phase 2 Compensation Structure & Pay-for-Performance Plan

The Task: For Phase 2, you must:

A. Create a base pay compensation structure using both the job evaluation and market pricing techniques for establishing base pay. This will require you and your team to effectively (20%):

evaluate all of the positions at Zenith

benchmark key jobs

market price benchmarked jobs using salary surveys

determine appropriate pay grades and pay ranges; and

slotting all positions into the appropriate pay grade using the information/data accumulated through the job evaluation and market pricing process.

B. Design a performance-pay plan (i.e. individual, group or organizational) that strategically fits with the managerial strategy your team recommended for Zenith in Phase 1. The performance-pay plan should support the organizational structure (i.e., structural variables) and help to motivate the desired employee behaviour(s) suited to that managerial strategy. Use the list of Zenith job descriptions, salary surveys and simulation templates provided to you to evaluate and market price jobs, develop the compensation structure and design the performance-pay plan.

PHASE 2 (Part A) Establishing a Base Pay Compensation Structure Create a base pay compensation structure using both the job evaluation and market pricing techniques for establishing base pay to ensure both internal and external equity in compensation practices. For job evaluation, you will be using a mix of the Classification/Grading & Points method. *(Refer to Chapters 7, 8, 9 and 10 for guidance).

Step 1: Job Evaluation

i. Using the Job Evaluation template provided to you, evaluate all jobs at Zenith. Use the job descriptions to help you determine the level, or degree, to which each compensable sub-factor is present in, or representative of, the position being evaluated. There is a total of 10 sub-factors representing the four key compensable factors of effort, responsibility, skill, & working conditions. Make sure to enter the points amount that corresponds to the chosen comp. factor level/degree. Each positions job evaluation is represented by an Excel sheet (located at the bottom of the spreadsheet) and labelled with the title of the position.

ii. After evaluating all jobs & calculating each positions total points score, create a table in the excel spreadsheet that displays the job hierarchy as determined by your job evaluation scores (i.e. highest JE points to lowest JE points)

iii. Form groupings from the job hierarchy table based on job evaluation point scores (i.e. positions with a JE points total between 850 & 1000 represent a one group, positions with a JE points total between 600 & 849 represent a second group, etc.). It is up to YOU to decide how many groupings to create and the point ranges for each grouping. These job groupings will represent your preliminary pay grades NOTE: Sometimes, these JE point groupings will inadvertently characterize and reflect typical job families / classifications such as Executive roles, Managerial roles, Specialist roles, etc. THATS A GOOD THING! HOWEVER, having a couple of outliers is normal! (AND NO, the job families/classifications formed through JE should not be the same as the four jobs groups listed in the Zenith job groups & descriptions document!!) You must use the Job Evaluation Template for this section.

Step 2: Job Benchmarking & Market Pricing

i. Using the Base Pay Compensation Structure template, input your pay grades as based on your job evaluation point groupings (again, the # of pay grades is up to you!), listing the job positions included in that pay grade / grouping, as well as the job evaluation points range representing that pay grade.

ii. Determine which Zenith jobs you would like to benchmark & market price (i.e. the positions that you want to compare to the external market via salary surveys) BENCHMARKING REQUIREMENTS: 50% of positions in each established pay grade/grouping MUST be benchmarked for market pricing (i.e. if there are 5 positions in a pay grade, benchmark 3)

iii. Using the Benchmark Market Pricing template and salary survey data (i.e. provided compensation surveys, PayScale, Hays, Randstad, etc.), you must find comparable positions represented in the survey data, considering the factors discussed in class, to determine the markets average base pay for each of your benchmarked Zenith jobs. MARKET PRICING REQUIREMENTS:

You MUST use AT LEAST TWO sources of market survey data to determine the midpoints (average target salary amount) for your benchmark jobs, as based on what the market data dictates for that position.

You must find the average target salary, or midpoint, for each of your pay grades (i.e. adding the target salary/midpoint of each benchmarked job in the pay grade & dividing by the number of jobs in that pay grade do this for all your pay grades) Your market data for benchmark jobs must be tracked in the Benchmark Market Pricing excel spreadsheet provided Important! Dont forget to age your data by 2% per year when you set your pay midpoints!!

Step 3: Set Pay Ranges & Slot Jobs

i. Set Pay Ranges for each pay grade in your base pay compensation structure. Use the data from your benchmarked jobs (market pricing excel spreadsheet). You MUST have a minimum, mid-point, and maximum for each pay range. (HINT: use the average midpoint of each pay grade/grouping from your Benchmark Market Pricing Excel spreadsheet as the midpoints for each corresponding pay grade in your Base Pay Compensation Structure template, & then determine the minimum & maximums of the pay grade based off of that!) NOTE: Pay range spreads are typically 30-50% (from minimum salary to maximum salary in each pay grade for the purposes of this simulation, we will use a pay spread of 40% for all pay grades so 20% from min. to midpoint & 20% from midpoint to max.)

ii. Slot all of Zeniths job positions into the appropriate pay grade you should be slotting the benchmarked jobs based on the positions market average base salary (as established in the market pricing process). The jobs that were not benchmarked, should be slotted based on positions job evaluation score. NOTE: Feel free to move the non-benchmarked positions around to another pay grade as you see fit. You must use the Base Pay Compensation Structure template for this section iii. In your client report, provide rationale for establishing the number of pay grades you did, justification for your selected benchmark positions, and an explanation for how you slotted Zeniths jobs into each pay grade. (Part B) Linking Pay to Performance Performance Pay Plan (25 marks) Your client has also asked you to design a performance pay plan that would support your teams recommended managerial strategy and organizational structure, as well as help to motivate employees to exhibit desired behaviours. Your team must decide which position(s) will be included in the performance pay plan, the category of performance pay that will be offered (i.e. individual, group, organizational), and based on the category of performance pay you choose, which specific kind of performance pay plan (i.e. if you choose individual performance pay, will you recommend merit bonus, piece rate, etc.) In your client report, outline your performance pay plan in detail, answering all of the above questions. Provide justification for your performance pay decision and explain how it will support your managerial strategy and motivate employee behaviour.

Documents to be submitted for PHASE 2:

1. Job Evaluation excel template (with completed evaluations & total points scores for each Zenith position)

2. Base Pay Compensation Structure template (with completed pay grades & pay ranges minimum, midpoints & maximums)

3. Benchmark & Market Pricing excel spreadsheet (with benchmarked jobs & market pricing calculations for each pay grade)

4. Completed client report (with explanation for your base pay compensation structure and performance pay plan)