Human Research Mangement Methods

MHR 6451, Human Resource Management Methods 1

Course Learning Outcomes for Unit IV Upon completion of this unit, students should be able to:

6. Appraise the impact of different compensation strategies that relate to employee motivation. 6.1 Consider compensation strategies currently being utilized. 6.2 Examine motivational factors that are important to today’s workforce. 6.3 Justify a compensation strategy that supports the motivational needs of knowledge

workers.

Reading Assignment In order to access the following resources, click the links below. Customize benefits to suit needs of different generations. (2009). HR Specialist: Compensation & Benefits,

4(5), 4. Retrieved from https://libraryresources.columbiasouthern.edu/login?url=http://search.ebscohost.com/login.aspx?direc t=true&db=bth&AN=43315422&site=ehost-live&scope=site

Miller, S. (2016). Talk pays when talking pay. HR Magazine, 61(4), 44-52. Retrieved from

https://libraryresources.columbiasouthern.edu/login?url=http://search.ebscohost.com/login.aspx?direc t=true&db=bth&AN=114923046&site=ehost-live&scope=site

Pink, D. (2009, August 25). The puzzle of motivation | Dan Pink [Video file]. Retrieved from

https://www.youtube.com/watch?v=rrkrvAUbU9Y To view the transcript of the video above, click here. WorldatWorkTV. (2012, July 17). Refining the total rewards package through employee input at MillerCoors

[Video file]. Retrieved from https://www.youtube.com/watch?v=_I7nv0B4_NU&feature=youtu.be

To view the transcript of the video above, click here. The following two resources contain the same information. You have a choice between reading the article or watching the SlideShare presentation of the information. Hopkins, C. (2017). How to create a compensation plan in 6 steps. Retrieved from

https://fitsmallbusiness.com/employee-compensation-plan/ Waring, D. (2013). How to design an employee compensation plan [SlideShare slides]. Retrieved from

http://www.slideshare.net/FitSmallBusiness/how-to-design-a-compensation-plan- dave?ref=http://fitsmallbusiness.com/how-to-pay-employees/

Unit Lesson In order to access the following resource, click the link below.

UNIT IV STUDY GUIDE

Appraising Compensation Strategies

MHR 6451, Human Resource Management Methods 2

College of Business – CSU. (2016, September 1). Compensation strategies [Video file]. Retrieved from https://youtu.be/U2wjvBigs7w

To view the transcripts for this video, click here. Compensation Strategies: Managing Employee Retention & Engagement John Dewey, a famous 20th century American philosopher and educator, advocated that if one could establish his or her calling in life and be able to get hold of the chance to do it, it would be the source of contentment (Dewey, 1916). This may be the equivalent of the slogan that is so often used today: Do what you love; love what you do. There is a deep wisdom embedded in Dewey’s words that touches all who seek to discover their own strengths and find meaning and fulfillment in their work. Modern-day organizations are making efforts to hold on to employees who are comfortable being knowledge workers in careers that are without boundaries, moving from employer to employer and collecting valuable skills and competencies that, in turn, enrich and strengthen their personal brand (Arthur & Rousseau, 1996). Gone are the days of job security. Employers realize that keeping good employees is a challenge. Even in an economy of high unemployment, there is still attrition. The knowledge workers carry their expertise with them. They can relocate anywhere, they love to learn, and they know that the more they share knowledge, the more they learn; knowledge is the means of their production. Due to technological advances, competition for talent is on a global scale. The cost of recruiting, selecting, training, appraising, and developing employees has become a huge investment that now drives the demand for retention and engagement tactics to be incorporated into compensation strategies (Drucker, 1999). There is a lot of pressure for an organization to get their compensation strategy right; therefore, let’s start the unit with a brief review of the basics of today’s compensation. The two main components of compensation are direct and indirect financial payments. A time-based direct financial payment is hourly or daily wages paid to production or clerical workers. Managers are salaried and are paid annually, monthly, biweekly, or weekly. The other direct payment options can be performance-based pay, piece-rate pay for production workers, or commission-based pay on sales or bonuses. Indirect financial payments consist of noncash benefits, such as insurance and vacation paid by the employer (Milkovich, Newman, & Gerhart, 2014). As with all strategic plans, compensation rewards must be aligned with the organization’s strategic aspirations. Give the employees the compensation necessary for them to use their knowledge, skills, and attitudes to excel in their opportunities and to achieve corporate goals. If an element of inequitable compensation is in the air, the imbalance affects the employees. The 2016 Compensation Best Practices Report tells us that 73% of employers believe that they pay their workers fairly, while only 36% of employees agree (as cited in Miller, 2016a). It is critical to design structures that reward aptitude and results, and it is even more essential to effectively communicate the solid compensation philosophy to all employees— especially to those employees who may perceive there to be inequality in relation to their associates, industry peers, or even the tycoons in the executive C-suite who are shoveling in the money (Miller, 2016a). Simply sharing the compensation philosophy and educating employees on procedures establishes open communication. For instance, explaining the data sets used to benchmark positions; explaining how you know the data is current; defining salary structures, such as ranges and grades; and explaining where employees are among those ranges are all helpful tactics. Approximately 82% of employees disclosed in the survey that they would be satisfied, even if their pay was below market value, if their employer provided open and direct communication when presenting the reasons. Employers need to provide management with the tools to have these conversations or enlist the human resources community in providing information sessions in the workforce; each session will prove to be a successful, powerful, trust-building engagement tool (Miller, 2016a). Compensation Strategies & Employee Motivation John Stacey Adams, a behavioral psychologist, created the equity theory of motivation, which can be applied to most situations on the job. It argues that wages and environment are not enough to motivate the workforce. At the heart of equity theory is perceived fairness. In your Unit IV Discussion Board video, you will have the opportunity to observe (if you have not already) the behavior of capuchin monkeys and their perceptions of

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fairness followed by their reactions to those perceptions of fairness. Once you have viewed this video, compare your own reactions when faced with perceptions of unfairness in the workplace: If you compared yourself to your coworker and saw that she got a grape and you received a cucumber for doing the same task, how would you feel? Among humans, the equity theory of motivation suggests that people are motivated to sustain equilibrium between what they perceive as their contributions and rewards. If the person perceives disequilibrium, a tension will develop that motivates the person to reduce that tension (“Adams’ Equity Theory,” n.d.; Milkovich et al., 2014). A practical example might be if an employee is motivated and perceives that he is being paid well for his performance, but he then discovers that everyone in the department—even those who are underperforming— receives the same pay due to the performance increase. This discovery causes a tension or imbalance and motivates the employee to speak with his supervisor. As a result, he finds that the supervisor agrees with him that performance-based pay must be fair and consistent; therefore, she obtains a promotion for him! He once again maintains balance. This scenario could also play out as follows: His supervisor says he has some excellent points; however, there is nothing she can do. His tension remains, the employee becomes a toxic influence on the environment (cucumbers are flying everywhere), and he decides to leave the organization for a better opportunity—or he is fired. Let’s hope he gets a promotion! Legal Considerations Altering Compensation Strategies Legal considerations also influence a pay plan’s design. For example, on May 18, 2016, the Fair Standards Labor Act (FSLA) that governs minimum wage and overtime pay made a big change involving overtime pay (U.S. Department of Labor, n.d.). There is a short video providing an overview of the new law, and this website also provides the details and the formula for computing what employees are exempt from in the FSLA, especially regarding overtime pay: U.S. Department of Labor. (n.d.). The overtime rule. Retrieved from https://www.dol.gov/featured/overtime/ To view the transcript of the video above, click here. As a result of this change, there may be changes to employee benefits such as sick time and vacation accrual, long-term disability, or life insurance. There is no doubt that many employees will feel they are being demoted; it may be the first time they will need to punch a time clock. However, employers and human resources have known about this change for some time, and their careful planning and communication can be used as an opportunity to build trust while educating the employees on why this change is happening (Miller, 2016b). Please read the article titled “Talk Pays When Talking Pay,” which is listed in the required reading section of this unit; it provides guidance for employers when they are having those pay conversations with employees. An employer’s thoughts must be led by regulatory governance when making compensation decisions. A review of federal, state, and industry regulations needs to be considered for any limitations or guidance. Even when planning compensation restructuring, compensation-related laws must be considered early on. Below are some of the laws enforced by the Equal Employment Opportunity Commission (EEOC) and the U.S. Department of Labor (DOL), and these must be considered by employers. These are not required readings for this unit but are helpful in understanding this topic:

 Compliance and Assistance - Wages and the Fair Labor Standards Act (FLSA)

 Equal Pay Act of 1963 and Lilly Ledbetter Fair Pay Act of 2009

 Title VII of the Civil Rights Act of 1964

 Executive Order 11246—Equal Employment Opportunity

 Davis-Bacon and Related Acts

 McNamara-O’Hara Service Contract Act (SCA)

 Overview of USERRA Two approaches that employers use for setting pay rates are the market-competitive pay plan and the job evaluation method. The purpose of these methods and the steps involved could be defined for employees to gain a better understanding and to be better prepared when changes do occur. For example, ranking, job classification, point method, and factor comparison could be explained in the job evaluation method. How

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managerial and professional jobs are priced is a separate issue and does not use job evaluation but, rather, considers the job’s complexity, the employer’s ability to pay, and the competition for talent (Miller, 2016b). The six important topics in contemporary compensation include the following components: competency-based pay, broadbanding, talent management, comparable worth, broad oversight of executive pay, and the concept of total rewards. Each one of these topics is easily integrated into a new compensation environment. When an employer starts paying employees for the competencies that the job requires rather than paying employees for the job duties, the employer becomes more attractive to the knowledge worker. As jobs change due to new technologies, employees add new skills to their career toolbox. When positions are eliminated, employees can easily move into newly created positions based on their skills and those required of the new job. Broadbanding provides employees with a wide road to travel on from job to job, and it facilitates high- performance management systems that are team- based. Total rewards packages are being refined even more by corporations seeking to please employees in different generational categories. Please read the article titled “Customize Benefits to Suit Needs of Different Generations,” and watch the video about what MillerCoors has done to customize their total rewards package with input from their employees. (Both resources are listed in the required reading for this unit.) Men and women should be paid equally for doing jobs that are comparable. If there is a gender gap in pay, it must be seen and addressed. The Dodd-Frank Law of 2010 gives the board of directors an oversight of executive pay; they are using advisors and are encouraged to exercise diligence in creating executive pay plans. Total rewards now include redesigning more challenging jobs and recognition programs. Aligning total rewards (also known as returns) with strategy means that wages, incentives, and benefits are included into a compensation package that results in producing employee behaviors that are required to accomplish the organization’s competitive strategy (Milkovich et al., 2014).

References Adams’ equity theory: Balancing employee inputs and outputs. (n.d.). Retrieved from

https://www.mindtools.com/pages/article/newLDR_96.htm Arthur, M. B., & Rousseau, D. M. (1996). The boundaryless career. New York, NY: Oxford Press. Dewey, J. (1916.). Democracy and education: An introduction to the philosophy of education. New York, NY:

Macmillan. Drucker, P. F. (1999). Management challenges for the 21st century. New York, NY: Harper Business. Milkovich, G. T., Newman, J. M., & Gerhart, B. (2014). Compensation (11th ed.). New York, NY: McGraw-

Hill/Irwin. Miller, S. (2016a). Bridge the ‘comp chasm’ with trust, transparency: Employers think they pay their workers

fairly; most employees don't agree. Retrieved from https://www.shrm.org/hrdisciplines/compensation/articles/pages/bridge-comp- chasm.aspx#sthash.qiSJRSGe.dpuf

Miller, S. (2016b). How to counter employee perceptions of income inequality. Retrieved from

https://www.shrm.org/publications/hrmagazine/editorialcontent/2016/0516/pages/0516-fair- compensation.aspx#sthash.p2kyztZm.dpuf

U.S. Department of Labor. (n.d.). The overtime rule. Retrieved from https://www.dol.gov/featured/overtime/

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Suggested Reading In order to access the following resources, click the links below. Every person reacts differently to different rewards. This study looks at the effects of different reward strategies on multiple generations. It is an interesting read if you want to learn more about how to motivate people. Bussin, M., & van Rooy, D. J. (2014). Total rewards strategy for a multi-generational workforce in a financial

institution. South African Journal of Human Resource Management, 12(1), 1-11. Retrieved from https://libraryresources.columbiasouthern.edu/login?url=http://search.ebscohost.com/login.aspx?direc t=true&db=bth&AN=103281234&site=ehost-live&scope=site

How to motivate people is often studied and hard to achieve. This video looks at a specific way to view employees in order to effectively motivate them. FastCompany. (2010, September 16). Want to motivate people? Get them out of Maslow’s basement [Video

file]. Retrieved from https://www.youtube.com/watch?v=LjArLRXMH58&feature=youtu.be To view the transcript for this video, click here. This article explores the different biases present in university faculty. These biases can affect the faculty members’ decision-making processes, possibly resulting in less ethical decisions. Medeiros, K. E., Mecca, J. T., Gibson, C., Giorgini, V. D., Mumford, M. D., Devenport, L., & Connelly, S.

(2014). Biases in ethical decision making among university faculty. Accountability in Research: Policies & Quality Assurance, 21(4), 218-240. Retrieved from https://libraryresources.columbiasouthern.edu/login?url=http://search.ebscohost.com/login.aspx?direc t=true&db=bth&AN=93662906&site=ehost-live&scope=site

The article below summarizes information found during a study that examined work and job design. The study utilized a work design questionnaire, and the authors described the different factors that played into work satisfaction, training, and compensation. Morgeson, F. P., & Humphrey, S.E. (2006). The work design questionnaire (WDQ): Developing and validating

a comprehensive measure for assessing job design and the nature of work. Journal of Applied Psychology, 91(6), 1321-1339. Retrieved from https://libraryresources.columbiasouthern.edu/login?url=http://search.ebscohost.com/login.aspx?direc t=true&db=bth&AN=25002064&site=ehost-live&scope=site

This video shows an interview with Compensation Manager of Google John Schirm and Director of Compensation of Google Marc Shoenen. In the interview, the two executives discuss how Google handles compensation issues. WorldatWorkTV. (2014, October 14). Compensation at Google [Video file]. Retrieved from

https://youtu.be/MmLCa9QXAlg To view the transcript for this video, click here.

Learning Activities (Nongraded) Nongraded Learning Activities are provided to aid students in their course of study. You do not have to submit them. If you have questions, contact your instructor for further guidance and information. Check for Understanding: Word Search Puzzle Click here to download a word search puzzle that reinforces the terms covered in this unit. You can print it out or use the highlighting or drawing tools to circle the words directly on the pdf document.