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Phase3Instructions.pdf

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Phase III – Operationalizing the Compensation System

Your mission for Phase III of the project is to do two main things: first, you must choose, fully

explain, and justify one performance pay plan and one indirect pay plan (each from a different job

family); second, you must apply your new pay structure to current employees of the client firm.

To successfully accomplish Phase III, you will need to have read and have utilized appropriate

concepts from Chapters 11, 12 and the “Applying Job Evaluation Results” section of Chapter 7.

Phase III Report Headings

Section K: Performance Pay Plan. In this section, you need to take the performance pay plan

for only ONE job family that you are recommending, describe its key characteristics, and explain

why this is beneficial to the firm. For example, if you have a profit sharing plan, who will be

eligible, what proportion of profits will be allocated to the plan, what will be the form of the payout

(e.g. current or deferred; cash or stock), how often will it pay out, and how will it be allocated

across eligible employees are just some of the questions you need to address. In so doing, you

always need to provide your underlying rationale for your choices. Also, discuss the possible

advantages the plan may produce, and the possible disadvantages that may arise. Chapter 11

identifies the key issues in designing the main types of performance pay plans.

Section L: Indirect Pay Plan. In this section you need to describe the characteristics of your

indirect pay plan for only ONE job family, and explain why this is beneficial to the firm. Some of

the questions to be addressed include the following. Will it be a fixed or flex plan? Which benefits

will be included? Will some benefits be contributory? In so doing, you need to provide the rationale

for the choices you make, as well as a discussion of the advantages you think the plan will produce,

and possible disadvantages. Chapter 12 provides the necessary foundation of knowledge for this.

Section M: Application of Your New Pay Structure. In this section, you will apply your new

pay structure to sixty current employees of your client firm. You need to bring their compensation

into line with the new system, indicating how you would deal with each specific employee. I am

looking for you to develop specific criteria and procedures (i.e. a system!) for adjusting the

compensation of employees, especially those who do not currently fit into your new pay structure

(see Chapter 7 pg. 253-254). You may also recommend taking whatever human resource actions

are reasonably necessary (e.g., terminations, retirements, transfers, promotions, new hires).

Provide the rationale for all actions you take. Include printouts of Screens 2 and 3 in this section.

Section N: Recommended Compensation Budget. The outcome of all the previous steps is a

recommended compensation budget for the coming year. Compare this with the current

expenditures, and explain why your new budget will be advantageous to the company. At the same

time, discuss any possible downsides or risks in adopting your recommended budget. See Chapter

13 (pg. 449-454) for ideas. Finally, note that when you discuss what the annual compensation

costs will be under your new system, you need to multiply your “recommended compensation

budget” by 10 because you have applied your new compensation system to only 10% of Zenith

employees. Include a printout of Screen 4 in this section.

The grading sheet for Phase III is as follows (see over):

Phase III Evaluation/Comment Sheet Team _________________________

K. Performance Pay Plan (include merit pay for movement through the pay range) ___/15

________________________________________________________________________________________

L. Indirect Pay Plan ___/10

________________________________________________________________________________________

M. Application of New Pay Structure ___/30

________________________________________________________________________________________

N. Compensation Budget ___/10

________________________________________________________________________________________

Quality of Revisions/Organization of Report/Format/Quality & Clarity of Description/ ___/10

Justification for decisions & Coherence/Consistency

________________________________________________________________________________________

Presentation (evaluation details on separate sheet) ___/15

Total ___/90