Reference no: EM132153670

Developing a Pay Structure

When creating a pay structure at an organization, there are many factors that need to be taken into account. The structure needs to be considered in light of both external market pressures and internal concern for equity and fairness. It should also fit with the organization’s overall business strategy and take into account the various jobs and their importance in day-to-day operations.

In this exercise, please read the following mini-case and answer the questions that follow.

Sally Conroy, HR manager at Valley Ranch Cosmetics, has recently undertaken a comprehensive review of the pay structure at her organization. She and her staff performed job evaluations on all positions, and graded each position on its compensable factors. The biggest issue that became clear during the analysis was the fact that the salespeople are currently paid twice as much as the logistics staff, despite the fact that their job evaluation point scores were roughly the same. After investigating, Sally found out that salesperson retention had been a large problem in the past and so salaries were increased. In addition, the executive team considers sales growth to be a primary objective of the organization; cost control, while important, is secondary in the minds of the executives. The choices Sally faces are to emphasize the external comparisons, in which case the structure needs little adjustment, or to emphasize the internal comparisons, which would call for an increase in logistics pay or a decrease in sales pay.

1. What is the most likely consequence of emphasizing the internal evaluation?

Salespeople will be paid under the market rate

Sales will increase

Nothing much would happen

Logistics employees will be paid under the market rate

2. What would be a likely disadvantage of emphasizing the external evaluation?

It will be difficult to get salespeople to rotate to logistics

Employees in logistics will increase their productivity

Employees in logistics may feel they will lose their jobs to the former sales people and look for jobs elsewhere

3. What is the most likely reason that people in logistics are paid less for similar work than salespeople?

The supply of trained logistics professionals is comparatively high

The founder of the company was biased against logistics

The performance of the logistics department is low

4. What would be an advantage of emphasizing the internal evaluation?

Customer satisfaction would improve

Logistics professionals would feel pressure to perform

Logistics professionals would probably feel that they are being treated more fairly

5. All other things being equal, which of these positions should be paid more?

Positions that are peripheral to the mission

Positions with fewer job evaluation points

Positions that are central to the organization's goals