Pay for performance plans - Group Case Assignment Module 11

In this assignment, you are asked to determine the proper use of a merit pay guide. A merit pay guide is a chart that shows the annual salary increases for employees in a given year. Ranking can be done based on historical data (projected) or current performance appraisals (actual). For background, read the article "5 Steps to Creating a Merit Matrix" by Jenni Marquez for PayScale.com. This case uses a merit guide with a salary grid of four ranges and five performance levels. Red Circle Rates (ranges above the maximum the organization wants to pay) are shown at the top of the range. Even though you don't have actual salary amounts, you can draw conclusions about the data, the number of employees, and their positions in the pay boxes. Assume the survey was constructed using the methods in Chapter 8 of your textbook. Employee appraisal, rating scales, and ranking formats are covered in Chapter 10. One other metric called the "compa-ratio" can tell you if salaries (on average) are above or below the mid-point of a range. (The formula is: Average rate actually paid [divided] by the midpoint of the range.) A value less than 1.00 means that most employees are paid below the midpoint while a value above 1.00 means most workers are paid above. For this assignment, you will need to discuss the purpose of pay ranges and the constraints placed on managers then explain what you think is going on. Look at how the "mid point" is defined and comment on the distribution of employees. Any chart that includes a row for red-circled jobs is also an important clue. The Case: Canadian Snow Vehicles Canadian Snow Vehicles is a manufacturer of snowmobiles. During the past four years, profits have dropped 43 percent. This decline is attributed to rising production costs, which triggered the old president's resignation. The new president, Winston McBeade, started his job by declaring a war on costs. The first thing he did was review the merit pay guide for the previous year, which follows.

Exibit 1: Previous year merit guide The second thing Mr. McBeade did was implement the new merit pay guide shown below. However, the new merit pay guide was unsatisfactory. He decided that HR department was not able to perform the task properly and fired the head of the HR department. As an outside consultant, you have been hired to correct this problem and briefed on the situation.

The second thing Mr. McBeade did was implement the new merit pay guide shown below. However, the new merit pay guide was unsatisfactory. He decided that HR department was not able to perform the task properly and fired the head of the HR department. As an outside consultant, you have been hired to correct this problem and briefed on the situation.

Question: What did the compa-ratio tell you about the mid-point for this group of employees?