Solving the Compensation Puzzle: Putting Together a Complete Pay and Performance System
Solving the Compensation Puzzle will help you lead senior management through the compensation process, improve employee' performance and reduce turnover. An effective compensation program recognizes that monetary rewards change employee behavior. Employees want appreciation and a pleasant work environment, but they need to believe that extra effort is noticed and rewarded. It is important to have a variety of reward systems, especially for employees who want to know what is "in it for them."...
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Whether creating a new system or filling in the gaps in an established business, this resource acts as a practical tool for dealing with compensation in the workplace. Linking pay and performance, this guidebook demonstrates how to improve a salary administration program and includes facts sheets, templates, and sample forms that can be customized to meet each organization's unique requirements.
Preface and Acknowledgements xiIntroduction: A Step-by-Step Guide to Designing a Pay-for-Performance System 1What Is in This Book? 1Whit Is Not in This Book? 2Chapter 1 A Historical Look at Pay for Performance 5Major Labor Market Trends 5Workforce Trends: Generations Working Side by Side 7Multicultural Issues 9No Middle Class-The Haves vs. The Have Notes 9Now What? 10Chapter 2 Is Pay for Performance Worth the Trouble? 11Components of a Successful Pay-for-Performance System 12Organizational Metrics to Gauge Readiness for a Pay-for-Performance Ban 13Myths and Facts About Merit Pay 13Best Practices in Pay for Performance 14Public Sector and Non-profit Organizations 15Real-Life Example: A Tale of Two Cities: The Importance of Top Management Support 16Compensation Boot Camp: Concepts and Definitions 19Sanity Suggestions 20Chapter 3 Compensation's Role in Human Resource Strategy 21Engaging Key Stakeholders to Support the Compensation Strategy 21The Payoff of a Pay-for-Performance Compensation Strategy 24Important Considerations in Designing a Compensation Strategy 25Goals for the Pay-for-Performance System 2912 Steps for Designing a Pay-for-Performance System 29How to Conduct a Successful Employee Survey 33Real-life Example: The Case Study of the Dog Shelter Where Its Bark Was Worse than HP Bite 34Compensation Boot Camp: Concepts and Definitions 35Sanity Suggestions 35Chapter 4 The Pay-for-Performance Foundation 37The 500-Foot View: Where Are We Going? 37Sticky Design Issues 41What Are the Best Resources? 41When Is an Employee Design Team Not Appropriate?43Compensation Policy Decisions 45Pay Secrecy in Private-Sector Companies 47The Case of Pay Secrecy: The Need-to-Know Theory 47What Is Salary Compression? 48Can Pay Compression Be Resolved? 48Managing Pay for Performance in Financial Downturns 48Create a Three-Year Strategic Plan for Compensation and Benefits 49Transformational vs. Transactional Upgrades 50Real-Life Example: Swimming with the Sharks 51Compensation Boot Camp: Concepts and Definitions 51Sanity Suggestions 52Chapter 5 How to Write a Job Description 53Common Uses for a Job Description 53Simplifying the Process of Writing Job Descriptions 53Enhancing the Quality of Job Descriptions 55Gathering Job Description Information 56Tips for Writing Job Descriptions 56Suggestions for the Supervisor Review Process 57Common Issues that Arise During the Supervisor Review 58The Necessity of Management Approval 59Editing the Job Description: The Final Check 59The FLSA Puzzle: Is the Position Non-Exempt or Exempt? 62Job Descriptions and the Americans with Disabilities Act (ADA) 64How to Keep Job Descriptions Up-to-Date 65Employee Job Description Input Form 65Real-Life Example: The Case of the Fishing Company Managers Who Hated Paperwork 66Tips and Takeaways 66Compensation Boot Camp: Job Description Terms and Job Analysis Methods 67Sanity Suggestions 67Chapter 6 Make Sure Employees Are in the Right Salary Range 69External Equity-The Market Study 69How to Prepare for a Market Study 69Major Sources of Salary Information 71How to Make the Salary Survey Decision 75How to Use Salary Survey Information 77How to Match the Organization's Jobs to Its Pay Surveys 77Market Survey Tips 78Matching Jobs Like a Compensation Professional 78Example 79Quality Assurance: The Critical Last Step 79Make Sure the Salary Plan Fits the Organization 80Internal Equity Challenges 81Real-Life Examples: The Case of the Complex Collection 81The Case of the Difficult Blood Draw 81The Case of the Life-Saving Social Worker 81Steps for Completing an Internal Equity Review 82Job Ranking 83Real-Life Example 83Point-Factor Internal Equity System 83Point-Factor System Advantages and Disadvantages 84Steps for Designing a Point-Factor System 85How to Create Salary Grades 86Pay Range Widths: What Do You Need to Know? 87Progression Between Salary Grades 88Real Life-Examples: The Case of a Nice Title, But No Raise 89The Tale of the Housekeeper vs. Janitor Market Pay 89The Case of the Mysteriously Underpaid Tech Support Department 89Compensation Boot Camp: Terms: Market Study 90Sanity Suggestions 91Chapter 7 Performance Appraisal: An Essential Step to Pay for Performance 93Where Do We Stand? 93What Is the Bottom Line? 94Coaching-A Unique Opportunity to Change an Employee's Life 97Real-Life Examples: The Case of the 20-Something Employee 97The Case of the Drinking Employee 98Steps far Making the Final Link to Pay for Performance 101Real-Life Examples: The Case of the "Drive-thru Performance Appraisal" 104The Once-in-a-Lifetime Thank-You 104Sanity Suggestions 105Chapter 8 How to Design, Update and Maintain the New Compensation System 107How to Update a Salary Han for New Jobs 107Real-Life Example: The Case of the Manager's Clever Work Around for More Employee Pay 108Salary and Benefit Information as Part of the Annual Budgeting Process 108Compa-ratio Examples 111Administration of the New Compensation System 111Promotional Adjustments 113Approvals of Compensation Decisions 114Maintaining the Pay-for-Performance Link in Hard Times 114Real-Life Example: The Case of the Employees in the Wrong Place 115Compensation Boot Camp: Compensation Administration Terms 117Sanity Suggestions 118Next Steps 118End Notes 119Index 149About the Author 155Figures 155Figure 1 Key Stakeholders of a Pay System 22Figure 2 Market Position Choices 25Figure 3 Pay Policies: Advantages and Disadvantages 30Figure 4 Roles for Employee Compensation Committee 43Figure 5 Work Plan for a Small Company in a Mid-size City 44Figure 6 Salary Survey Market Data Choices 70Figure 7 Relevant Labor Market 70Figure 8 Three Major Types of Salary Survey Choices 72Figure 9 Suggested Annual Salary Increase Guidelines for FY 2009 104Figure 10 Compensation Forecasting & Budgeting Process 117ToolsTool 1 Compensation Philosophy Questionnaire 121Tool 2 Employee Guidelines for Writing Excellent Job Descriptions 122Tool 3 Action Verb Examples 124Tool 4 Job Description Questionnaire (Non-exempt) 125Tool 5 Job Description Questionnaire (Exempt) 126Tool 6 Completed Job Description Questionnaire (Exempt) 128Tool 7 ABC Company Official Job Description (Exempt) 130Tool 8 Job Description Resource List 132Tool 9 Part A: Market Survey Summary Sample 133Tool 9 Part B: ABC Company List of Exempt Jobs by Grade 134Tool 10 Sample Salary Range Structures 135Tool 11 ABC Company Salary Administration Manual 138CD-ROM ToolsTool 1 Compensation Philosophy QuestionnaireTool 2 Employee Guidelines for Writing Excellent Job DescriptionsTool 3 Action Verb ExamplesTool 4 Job Description Questionnaire (Non-exempt)Tool 5 Job Description Questionnaire (Exempt)Tool 6 Completed Job Description Questionnaire (Exempt)Tool 7 ABC Company Official Job Description (Exempt)Tool 8 Job Description Resource ListTool 9 Part A: Market Survey Summary SampleTool 9 Part B: ABC Company List of Exempt Jobs by GradeTool 10 Sample Salary Range StructuresTool 11 ABC Company Salary Administration ManualTool 12 How to Achieve a Successful Employee SurveyTool 13 Completed Job Description Questionnaire (Non-exempt)Tool 14 ABC Company Official Job Description (Non-exempt)Tool 15 Sample Point-Factor SystemTool 16 Sample Custom Salary SurveyTool 17 Sample Performance Appraisal #1Tool 18 Sample Performance Appraisal #2Tool 19 How to Deliver Quality Performance AppraisalsTool 20 Compensation Survey
