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CONTENTS
PREFACE
FOREWORD: BASIC CONCEPTS AND CONSIDERATIONS IN
TEACHING COMPENSATION MANAGEMENT
PART I—TEACHING NOTES FOR COMPENSATION MANAGEMENT
IN A KNOWLEDGE-BASED WORLD, Tenth Edition
CHAPTER 1Compensation in a Knowledge-Based Global Economyx
CHAPTER 2The Reward System: Compensation and Noncompensation Dimensions x
CHAPTER 3The World of Pay and Compensationx
CHAPTER 4Organizational Structure: Strategic and Tactical Compensation Issues x
CHAPTER 5Legislation and Compensationxx
CHAPTER 6Job Analysisxx
CHAPTER 7Job Descriptionxx
CHAPTER 8Job Evaluationxx
CHAPTER 9A Point-Factor Method of Job Evaluationxx
CHAPTER 10Surveying Market Pay and Compensation Practicesxx
CHAPTER 11Designing a Base Pay Structurexx
CHAPTER 12Team-Based Pay in a Knowledge-Based Worldxx
CHAPTER 13Measuring and Paying for Performancexx
CHAPTER 14Short-Term Incentivesxx
CHAPTER 15Long-Term Incentives and Wealth Buildingxx
CHAPTER 16Executive and International Compensationxx
CHAPTER 17Benefits and Servicesxx
CHAPTER 18Pay Delivery Administrationxx
PART II—A BANK OF MULTIPLE CHOICE AND MATCHING QUESTIONS BY CHAPTER
CHAPTER 1xx
CHAPTER 2xx
CHAPTER 3xx
CHAPTER 4xx
CHAPTER 5xx
CHAPTER 6xx
CHAPTER 7xx
CHAPTER 8xx
CHAPTER 9xx
CHAPTER 10xx
CHAPTER 11xx
CHAPTER 12xx
CHAPTER 13xx
CHAPTER 14xx
CHAPTER 15xx
CHAPTER 16xxx
CHAPTER 17xxx
CHAPTER 18xxx
ANSWERS TO TEST BANK QUESTIONS xxx
PART III NOTES FOR THE EXERCISE BOOK
INTRODUCTION TO THE INSTRUCTOR'S MANUAL FOR THE EXERCISE BOOK xxx
TERM PROJECT Developing a Compensation Policy and Administration Manualxxx
EXERCISE 1Determining Exemption Status and Payxxx
EXERCISE 2Identifying Job Analysis Methodsxxx
EXERCISE 3Determining Time Requirements for a Job Analysis Projectxxx
EXERCISE 4Analyzing Nancy Horn's Jobxxx
EXERCISE 5Writing a Job Description xxx
EXERCISE 6Job Evaluation Using the FESxxx
EXERCISE 7Job Evaluation Using Market Pricingxxx
EXERCISE 8Evaluating Job Evaluation Systems xxx
EXERCISE 9Determining Whether to Make or Buy a Surveyxxx
EXERCISE 10Developing and Implementing a Pay Surveyxxx
EXERCISE 11Gathering Pay Survey Dataxxx
EXERCISE 12Pay Structure Design: Recognizing Pay Structure Architecturexxx
EXERCISE 13Single Vs. Multiple Pay Structuresxxx
EXERCISE 14Pay Compression At Olympia Software Systemsxxx
EXERCISE 15Developing a Skill-Based Pay Plan for Clerical Team at OEMxxx
EXERCISE 16Performance Appraisal and Merit Pay at Olympia Data Design (ODD)xxx
EXERCISE 17Scheduling Shifts and Weekend Work at ODD Computer Operationsxxx
EXERCISE 18Gainsharing at Olympia Central Servicesxxx
EXERCISE 19Establishing a Short- and Long-Term Compensation
Package for Employees of ODDxxx
EXERCISE 20Designing an Incentive Compensation Plan xxx
EXERCISE 21Containing the Costs of Benefitsxxx
EXERCISE 22Developing a Merit Increase Budgetxxx
EXERCISE 23Using Compa-Ratios to Analyze Pay Increase Requestsxxx
EXERCISE 24Spending Matrix Developmentxxx
EXERCISE 25Merit Guide Chart and Pay-for-Performance Allocationsxxx
EXERCISE 26Using Maturity Curves to Make Pay Decisionsxxx
EXERCISE 27Request for Pay Adjustmentxxx
EXERCISE 28Performance Measurement, Merit Pay, and Due Processxxx
PART IV—COURSE OUTLINESxxx
10, 20, AND 40 MEETING COURSE OUTLINESxxx
ONE INSTRUCTOR'S COURSE OUTLINExxx
PREFACE
This manual is designed to aid instructors using the Tenth Edition of Compensation Management in a Knowledge-Based World and the accompanying Exercise Book.
The first section of the manual is a chapter-by-chapter guide for instructors using the text. Chapter notes, key concepts, and significant points of interest are included in this part of the manual.
The second section of the manual includes matching and multiple choice examination questions for each of the 18 chapters of the Tenth Edition.
The third section of the manual provides instructors with a detailed discussion of each exercise found in the Exercise Book. Instructors are given a set of teaching notes, recommended assignments, and possible solutions for the exercises.
The fourth section of the manual provides instructors with examples of course outlines. The outlines include assignments, learning objectives, and grading policies.
FOREWORD
BASIC CONCEPTS AND CONSIDERATIONS IN
TEACHING COMPENSATION MANAGEMENT
Possibly the most important point you want to relate to the student is that MONEY IS A MOTIVATOR. Managers have a wide variety of things and actions at their disposal that can be used to influence employee behavior. However, no one single element of the total reward package is more pervasive and has wider appeal than MONEY. A major problem with money is that, since its appeal is so widespread and powerful, it is all too often poorly used from both a design and a distribution perspective. And, in cases where money is poorly used within the reward-compensation system of an organization, it may not only be valueless for influencing employee behavior, but also may also act as a NEGATIVE MOTIVATOR and cause dysfunctional behaviors that limit or restrict productivity.
Following closely behind the importance of compensation as an influence on employee behavior is the need to recognize it as the primary cost of the operations for most organizations. In the highly competitive global economy, which in some manner affects all organizations, labor costs must be synchronized with the goods or services provided by the organization.
The intent of the textbook and exercise book and their design from the preface to the last page is to take the reader, the students, and the practitioner on a logical, rational, orderly, and systematic journey through the field of compensation. Every effort is made to identify and describe as vividly and as completely as possible the pitfalls that professionals in compensation design and administration must overcome and the technologies and methodologies available to overcome these pitfalls.
Book Design
Chapters 1 through 5 provide a broad view--a macro-analysis of compensation. Chapter 1 recognizes the importance of money and job-related income in a capitalistic-democratic society. It focuses attention on a seven-class society, the money required to be a member in each one of these seven classes, and the lifestyle available to members in each social class. Chapter 2 looks principally at the human desire to survive, grow, prosper and, in general terms, how the compensation program can facilitate and promote the satisfaction of basic human needs. Chapters 3 and 4 provide the reader-student with a brief overview of the design of pay systems that differentiate pay-rewards for various groups of employees, the similarities and differences of pay and compensation programs throughout the world, and insights into the structure of organizations, the kinds of jobs or classes of jobs that employees occupy, and data on the pay these employees receive. Chapter 5 covers in some detail the most powerful external forces that both directly and indirectly influence the design and administration of all compensation programs--government, legislation, agency enforcement, and court interpretations.
Chapters 6 through 12 take you into a microanalysis of the methodologies available for designing a pay and classification system. These chapters describe how to recognize job differences from the perspective of each unique organization and how to integrate these internal job worth determinants with the realities of the marketplace--what other organizations are paying their employees to perform jobs requiring comparable knowledge and skills that are performed under similar working conditions. Chapters 6 and 7 take you into the world of job analysis and provide detailed procedures for translating job content information into job descriptions. Chapters 8 and 9 identify and describe methodologies available for measuring and scoring job worth. Chapters 10 and 11 take an in-depth look at marketplace considerations and pay grade structures that facilitate the orderly and systematic administration of employee pay. Chapter 12 makes use of all information provided in Chapters 6 through 11 in designing and developing a team-based compensation program.
Chapters 13 through 17 provide an overview of other major components of a compensation system. Here the book focuses on compensation components that go beyond base pay. Merit pay, pay-for-performance, and recognition of contributions in both the short and long term are key elements of any well-designed, successful compensation program. These five chapters identify and describe ways of rewarding those who make the extra effort, walk the additional mile, and provide the extra contribution. Chapters 13 and 14 focus specifically on how standards are set and performance is measured. The topic of performance review and measurement just may be the most difficult area facing all managers. Like so many subjects that must be addressed by managers, there is no one right way, no cookbook answer. Performance measurement and documentation is a topic that sooner or later causes most managers considerable discomfort. Chapter 15 focuses on long-term incentives and their influence on the design of a complete compensation system.
Chapter 16 introduces the reader to one of the most controversial areas of compensation – the kinds and amounts of compensation provided to the top executives of many organizations. In addition to the discussion of executive compensation practices, the chapter also briefly views the compensation practices of organizations having worldwide operations.
Chapter 17 provides an overview of the field of employee benefits that can easily equal one-third to one-half of the costs of the pay program. This field is far more intricate and complex than the design and administration of the wage and salary program. This chapter is included to make sure that the reader recognizes that benefits are part of the compensation package and that benefit decisions influence pay decisions and vice versa.
Chapter 18 ties together many of the topics described throughout the book. Now, you are introduced to the various tools available to help the practitioner design, operate, monitor, and audit the personnel/human resource compensation programs.
Examination Ideas and Procedures
Testing methods and procedures relate directly to individual choice, but in the great majority of cases, the instructor has no choice as to whether or not to provide a grade at the conclusion of the course. Examinations in this subject can include any or all of the following approaches:
1.Multiple answer-type questions ranging from the simple True-False to a question with three or more optional answers, to matching-type questions with three to six statements to be matched.
2.Essay-type questions where the student responds to a topic that provides the basis for discussion.
3.Unstructured examinations in which a student completes a project after receiving only general guidelines. This type of examination includes classroom reports, term papers, and projects that relate to the management of compensation.
Author Preferences and Thoughts
Over the years, I have avoided True-False questions for testing purposes, but I have been a constant user of multiple-choice questions. This, in itself, is nothing unusual, but the process I have used in developing and administering the examinations may be of interest to you.
At the start of the course (term), I inform the students that they will be held responsible for the development of test questions. The following instructions are stated in the course syllabus:
Each student will submit on a separate sheet of paper one examination question from each chapter of the text. The question will be of the multiple choice type with four optional answers. Each option must, in itself, be a reasonable answer to the question. An optional answer such as (1) none of the above, (2) all of the above, or (3) some combination of the above are all UNACCEPTABLE. The correct answer must be underlined and the page(s) where the correct answer is found in the text must be noted.
If the instructor wishes to keep a file of examination questions, the student may be required to complete the questions on one 8 x 11 sheet of paper, 3 x 5 card, etc.
From the student questions, I then develop the examination. For the class period when the exam is to be given, I provide the examination questions and an answer sheet. I have, at that time, a master answer sheet on which I have marked and numbered answers that permit me to grade the examinations as soon as the students complete them. If the class period has sufficient time, I return the marked answer sheets to the students and review the answers.
At this time, students have the opportunity to question the appropriateness of certain answers and defend their answers that were marked as incorrect. Their response may carry sufficient strength to allow their answer to be accepted as correct. I force the students to identify information in the text, other available information, or logical, rational reasoning that supports their conclusions.
I find that this approach increases student involvement in the testing process and is extremely useful as a final review of the chapter materials, even though, in some respects, it is an after-the-fact review.
There is a bank of multiple-choice questions at the end of this manual to assist instructors who may not want students to be involved in the preceding process.
Another procedure I have been using to improve classroom participation and interest is to include with the syllabus a list of topics from which each student must select one for a classroom presentation and term paper.
LIST OF TOPICS
1.Kinds and Quality of Relocation Expenses Businesses Offer
2.An Analysis of Travel and Entertainment Expenses
3.Designing and Implementing Geographic Differentials
4.A Discussion of Reporting, Call-Back, Stand-by, and Cleanup Pay Plans
5.Various Types of COLA Plans, Their Strengths, Their Weaknesses
6.BLS's CPI and COLAs
7.The Current Trends in Time-Off-With-Pay -- Vacations, Holidays, and Assorted Days Off
8.A Review of Unemployment Insurance Plans
9.A Review of Workers' Compensation Plans
10.Present and Future of SUBs and GAI
11.Description of Major Components of a Good Basic Health Care Insurance Plan
12.What an Executive Should Know Before Implementing a Self-Insurance Plan
13.The Benefits Provided by a Good Short-Term Disability Plan
14.The Benefits Provided by a Good Long-Term Disability Plan
15.Costs, Benefits, and Related Problems in Having a Subsidized Cafeteria
16.Designing and Operating Wellness Programs
17.Benefits Available Through Social Security
18.What Are Thrift and Savings Plans and How Do They Operate?
19.IRA: What Is It and How Is It Used in Conjunction with Other Pension Plans?
20.ESOPS: What Are They?
21.Strengths and Weaknesses of ESOPs
22.The Major Features of a Good Pension Plan
23.Describe a 501(c)(9) Trust -- Its Appropriate and Possibly Inappropriate Uses
24.Profit-Sharing Plans: What Are They? How Are They Used?
25.Describe a Stock Option Plan
26.Describe a Stock Purchase Plan
27.Describe Stock Grants
28.What Are Phantom Stock Plans?
29.What Is an SAR? Why Is It Becoming so Popular?
30.The Meaning and Impact of the Word "Qualified"
31.Discuss Strengths and Weaknesses of Both Group Term Life and Group Permanent Life Insurance Plans
32.What are Perquisites? Why Are They Popular? Discuss Some of the New More Popular Kinds
33.Describe Split-Dollar Insurance and Its Use
34.What Is Director and Officer (D&O) Liability Insurance? Why Is It So Important?
35.Discounting, Variable Price, Tax Offset, Formula Value, Earn Out: Discuss the Meanings of These Terms Relative to Various Stock Plans
36.Discuss the Value of Performance Share Plans
37.Describe Special Compensation Components Made Available to Expatriates
38.Commission vs. Bonus Plan for Sales Personnel
39.Cash and Bonus Incentive Plans for All or Select Groups of Employees
40.What is a CODA?
41.Discuss the Use of a 401(k) Plan and Its Design Characteristics
42.Discuss Uses of Job Analysis from Organizational Design to Job Design to Pay Setting to Performance Measurement
43.Discuss the Relationship Between Productivity Improvement and Compensation Practices
44.Describe the Influences of World-Wide Competition on Compensation Practices in the USA
45.Describe the Changes in Compensation Practices that Will Occur Because of Potential Court Suits and Productivity Improvement Programs
46.Discuss the Need for Different Kinds of Documentation as Related to Potential Court Suits and Productivity Improvement Programs
47.Discuss Ways Compensation-Human Resources Specialists Use Pay-Compensation Surveys to Either Implement or Defend Certain Compensation-Related Recommendations
48.Discuss Recent Changes in Federal and State Legislation that Are Influencing Compensation Practices
49.Discuss How Computer Technologies Can Revolutionize the Job Analysis and Job Description Writing Processes
50.How Does a Business Integrate Social Security with Its Pension Plan?
This is by no means a complete list; it may be added to at will. It does, however, provide a basic start for student efforts.
A review of these topics quickly focuses on the fact that these subjects have a minimal relationship to the text materials and this is the exact intent of the list. The classroom time spent on text materials focuses primarily on basic wage and salary problems. The course I visualize is on basic compensation management which does focus on the critical tools and techniques of job analysis, job descriptions, job evaluation, pay surveys, pay structure, and pay administration, but it is my feeling that right at the start the student must begin to develop an appreciation and awareness of what total compensation is all about.
By requiring students to make a presentation on one of the listed topics, or possibly a current compensation issue, they do research on the subject and all students gain insight from the presentations. By tying their term papers to the reports, the chance is greater that the student will do a better job in researching and reporting.
PART I
TEACHING NOTES FOR
COMPENSATION MANAGEMENT IN A
KNOWLEDGE-BASED WORLD
Tenth Edition