Summary

This section of the book examines pay structures within an organization. The premise underlying internal alignment is that internal pay structures need to

be aligned with the organization's business strategy and objectives, the design of the work flow, a concern for the fair treatment of employees, and the

intent of motivating employees. The work relationships within a single organization are an important part of internal alignment.

The structures are part of the web of incentives within organizations. They affect satisfaction with pay, the willingness to seek and accept promotions to

more responsible jobs, the effort to keep learning and undertake additional training, and the propensity to remain with the employer. They also reduce the

incidence of pay$-$related grievances.

The techniques for establishing internally aligned structures include job analysis, job evaluation, and person$-$based approaches for skill$-/$competency$-$based

plans. But in practice, aspects of both jobs and people are used. Although viewed by some as bureaucratic burdens, these techniques can aid in achieving

the objectives of the pay system when they are properly designed and managed. Without them, our pay objectives of improving competitiveness and

fairness are more difficult to achieve.

We have now finished the first part of the book. We discussed the techniques used to establish internal alignment as well as its effects on

compensation objectives. The next part of the book focuses on the next strategic issue in our pay model: external competitiveness.

Review Questions

What are the pros and cons of having employees involved in compensation decisions? What forms can employee involvement take?

Why does the process used in the design of the internal pay structure matter? Distinguish between the processes used to design and administer a

person$-$based and a job$-$based approach.

If you were managing employee compensation, how would you recommend that your company evaluate the usefulness of its job evaluation or person$-$

based plans?

Based on the research on job evaluation, what are the sources of possible gender bias in skill$-/$competency$-$based plans?

How can a manager ensure that job evaluation or skill$-/$competency$-$based plans support a customer$-$centered strategy?