Foundations of a Compensation Strategy
The most effective compensation strategy is one that develops a clear link between the following components:
- Job Description (i.e., work that an employee is expected to perform).
- Performance Evaluation (i.e., work that the employee has performed).
- External Salary Survey and Internal Salary Comparison (i.e., pay provided to each employee).
Examine the interrelationship between these three components by describing the purpose of each component and how it affects the others. Then explain how all three components would be used to determine the compensation for an employee. Your examination should include a salary evaluation for a position you are familiar with (Administrative Assistant, Human Resource Manager, Maintenance Worker, etc). The salary evaluation should give results for each of the three components and detail how pay is finally determined for this position based on the three components.
Example of the salary evaluation portion of your analysis:
Purchasing Manager.
Primary functions from the Job Description: To plan, direct, and coordinate the activities of buyers, purchasing officers, and related workers involved in purchasing materials, products and services.
Organizational performance evaluation system:
- Outstanding – 6% Increase
- Exceeds expectations – 4% Increase
- Meets expectations – 2% Increase
- Does not meet expectations – No Increase
External Salary Survey: (salary survey, which you can typically obtain online) Monthly salary range at $4,300 – $5,200.
Internal Salary Comparison: (the relationship of this position to similar positions in your organization) Position is similar to Accounting Manager, and should be paid within the same monthly salary range of $4,400 – $4,900.
Submit your analysis in a two- to three-page paper formatted to proper APA 6th Edition specifications. Include a minimum of two scholarly references to support your analysis.
INFORMATION———
Designing, implementing, and managing effective and appropriate pay structure architecture allows an organization to attract and retain key talent and control costs regardless of business strategy. How does one know which structure is right for the organization? The answer to this question is not an easy one but can be answered with a series of questions: What is the mission of the organization? What does the organization expect to accomplish through the pay structure? What are the compensable factors associated with the work being done? What are the internal equity factors? What is the competitive environment (that is what is the competition doing and paying)? What is the organization’s size? What is its structure? How many different jobs (classifications)? What is the nature of the work done? Is a union involved? (I can hear you already: So many questions to answer and so little time to answer them.) But you can see these and many more questions needs to be answered before you can get to work on a structure.
Once one has determined the purpose and the characteristics of the organization, one can begin to craft the structure. There are four basic designs for salary structures: traditional, market-based, broadbands, and step structures with entry points, mid-points, and maximum rates of pay. The most common approach in initially designing a structure is to group similar jobs into “pay grades” (page 279-281 – see 284-285 of the text). This often results in “pay ranges” or “pay bands” (more organizations are clustering pay grades into wide bands commonly called “Broadbanding” – see 284-285 of the text).
Remember, a salary range structure is a group of jobs and salary ranges in an organization. The salary range is the span between the maximum and minimum for a job or job group. There are dozens of models in the text and in other sources. The important issue is that, in my view, should not be an inflexible tool used to limit managerial decision making or creativity. One should consider in advance how the salary structure design will impact the organization through its flexibility, philosophy, control, and ability to adapt to business needs as they emerge.
A well-designed salary structure also creates flexibility for managers. The salary structure allows managers to reward performance, skill development, and critical skills without employees leaving the pay range for their position or the need to promote them just for money’s sake. A poorly designed structure limits managers ability to make decisions, limits promotions from within, creates dissatisfaction among high performing employees, and, as a results, increases turnover and ultimately increases labor costs.
It’s important to note here that nearly 55% of organizations use multiple pay structures as a part of a purposed design to meet organizational objectives. This phenomenon is often due the employment size of the organization and the length of the scalar chain. It can also be the result of a geographically diverse organization, one with many divisions, or one with a union or even several unions.
What is clear in our study of pay structures and system architecture is that the designers cannot operate without concern for the entire organization, its place in the market, and its response to the flow of business strategy. Typically, the narrower the system’s view of the employee’s ability to move through the system and the greater the limit of managerial discretion, the greater the potential of employee dissatisfaction and job turnover. On the other hand, the more flexible a pay system is in meeting the discretionary actions of managers in meeting employee expectations, the less capable the system is in containing labor costs. Pay system architects then must be able to strike a balance for the organizations they serve so as to meet the business goals while appropriately integrating the organization’s philosophy. No easy job it is.
As you think about the paper due this week (Foundations of a Compensation Strategy), consider the “micro” elements in developing an entire pay strategy. Think of the connections address in the question itself and how you would use those relationships to craft a strategy. Use sources available to you on your job and in the text. Remember that you do not have to create an entire system or strategy; only one job or classification and the elements and relationships.
Week 3 Deliverables:
Week Three Learning Outcomes
This week students will:
• Analyze the pros and cons of a chosen job evaluation method
• Assess critical pay survey problems
• Evaluate the interrelationship of performance factors and compensation
Overview
Week Three Quiz Day 6 Objective Assessment 6
Foundations of a Compensation Strategy Day 7 Written Assignment 10
Examine the Interrelationship Between the Three Components
Distinguished – Provides an expertly crafted examination of the interrelationship between the three components. Exhibits a complete understanding of the purpose of each component and how it affects the others.
Proficient – Provides an examination of the interrelationship between the three components. Exhibits a sufficient understanding of the purpose of each component and how it affects the others.
Basic – Provides an examination of the interrelationship between the three components. Exhibits a rudimentary understanding of the purpose of each component and how it affects the others.
Below Expectations – Attempts to provide an examination of the interrelationship between the three components, but exhibits a very limited understanding of the purpose of each component and how it affects the others.
Non-Performance – The paper is either nonexistent or fails to discuss the interrelationship between the three components.
Explain How All Three Components Would be Used to Determine the Compensation for an Employee
Distinguished – Provides an expertly crafted and completely accurate explanation of how all three components would be used to determine the compensation for an employee.
Proficient – Provides a sufficiently crafted and accurate explanation of how all three components would be used to determine the compensation for an employee. May be missing minor details or contain minor inaccuracies.
Basic – Provides an explanation of how all three components would be used to determine the compensation for an employee. Explanation may contain some inaccuracies or be missing major details.
Below Expectations – Attempts to provide an explanation of how all three components would be used to determine compensation for an employee; however, explanation may contain major inaccuracies or may be lacking in details.
Non-Performance – The paper is either nonexistent or fails to explain how all three components would be used to determine the compensation for an employee.
Salary Evaluation
Distinguished – Provides a fully completed salary evaluation. Evaluation shows a complete understanding of the three components.
Proficient – Provides a mostly completed salary evaluation. Evaluation shows a sufficient understanding of the three components.
Basic – Provides a partially completed salary evaluation. Evaluation shows a rudimentary understanding of the three components.
Below Expectations – Provides an underdeveloped salary evaluation. Evaluation shows a lack of understanding of the three components.
Non-Performance – The paper is either nonexistent or fails to provide a salary evaluation.
Creative Thinking: Innovative Thinking
Distinguished – Creates new knowledge derived from a novel or unique idea, question, format, or product.
Proficient – Constructs an original idea, question, format, or product.
Basic – Attempts to construct an original or unique idea, question, format, or product.
Below Expectations – Student reinvents available ideas.
Non-Performance – The assignment is either nonexistent or lacks the components described in the instructions.
Critical Thinking: Explanation of Issues
Distinguished – Clearly and comprehensively explains in detail the issue to be considered, delivering all relevant information necessary for full understanding.
Proficient – Clearly explains in detail the issue to be considered, delivering enough relevant information for an adequate understanding.
Basic – Briefly recognizes the issue to be considered, delivering minimal information for a basic understanding.
Below Expectations – Briefly recognizes the issue to be considered, but may not deliver additional information necessary for a basic understanding.
Non-Performance – The assignment is either nonexistent or lacks the components described in the instructions.
Written Communication: Control of Syntax and Mechanics
Distinguished – Displays meticulous comprehension and organization of syntax and mechanics, such as spelling and grammar. Written work contains no errors, and is very easy to understand.
Proficient – Displays comprehension and organization of syntax and mechanics, such as spelling and grammar. Written work contains only a few minor errors, and is mostly easy to understand.
Basic – Displays basic comprehension of syntax and mechanics, such as spelling and grammar. Written work contains a few errors, which may slightly distract the reader.
Below Expectations – Fails to display basic comprehension of syntax or mechanics, such as spelling and grammar. Written work contains major errors, which distract the reader.
Non-Performance – The assignment is either nonexistent or lacks the components described in the instructions.
APA Formatting
Distinguished – Accurately uses APA formatting consistently throughout the paper, title page, and reference page.
Proficient – Exhibits APA formatting throughout the paper. However, layout contains a few minor errors.
Basic – Exhibits basic knowledge of APA formatting throughout the paper. However, layout does not meet all APA requirements.
Below Expectations – Fails to exhibit basic knowledge of APA formatting. There are frequent errors, making the layout difficult to distinguish as APA.
Non-Performance – The assignment is either nonexistent or lacks the components described in the instructions.
Page Requirement
Distinguished – The paper meets the specific page requirement stipulated in the assignment description.
Proficient – The paper closely meets the page requirement stipulated in the assignment description.
Basic – The paper meets over half of the page requirement stipulated in the assignment description.
Below Expectations – A fraction of the page requirement is completed.
Non-Performance – The assignment is either nonexistent or lacks the components described in the instructions.
Source Requirement
Distinguished – Uses more than the required number of scholarly sources, providing compelling evidence to support ideas. All sources on the reference page are used and cited correctly within the body of the assignment.
Proficient – Uses required number of scholarly sources to support ideas. All sources on the reference page are used and cited correctly within the body of the assignment.
Basic – Uses less than the required number of sources to support ideas. Some sources may not be scholarly. Most sources on the reference page are used within the body of the assignment. Citations may not be formatted correctly.
Below Expectations – Uses inadequate number of sources that provide little or no support for ideas. Sources used may not be scholarly. Most sources on the reference page are not used within the body of the assignment. Citations are not formatted correctly.
Non-Performance – The assignment is either nonexistent or lacks the components described in the instructions.

Teddi Reilly | 8/13/2015 12:00 AM | |||||||||||||||||||||||||
Avoiding PlagiarismPlease take note that in this class Originality matters and plagiarism will be reported. Address any questions regarding plagiarism to the course instructor. Students should be aware that Ashford University instructors utilize Turnitin to determine the originality of submitted written work. These tools compare students’ work with texts available in internal databases and through Internet searches. Check out Turnitin Instructions and FAQs for more information on Turnitin and how you can use it to avoid plagiarism in your own paper. Here are some general rules to follow:
(hopefully) avoid fostering plagiaristic tendencies—but work to narrow or define your topic in such a way that plagiarism becomes difficult. |