Fundamentals of Compensation

HRMGT 194 – Fundamentals of Compensation

Chapter 7 – Written Assignment

Record your responses after each question listed. Please use a different color FONT for each response. Expecting detailed responses with examples/details/ rationale. 1-2 sentence response not acceptable.

You are a compensation analyst for a pharmaceuticals company located in Los Angeles. Define the scope of the relevant labor markets for chemists and for data entry clerks. Describe the rationale for your definitions.

You have been asked to evaluate whether a company’s pay structure is fair to women and minorities. How would you go about answering this question.

You have been asked to evaluate whether your organization’s current pay structure makes sense in view of what competing organizations are paying. How would you identify the organizations with which to compare your organization? Why might your organization’s pay structure differ from those in competing organizations? What are the potential consequences of having a pay structure that is out of line relative to those of your competitors?

Can companies easily develop compensation packages that are both internally consistent and market competitive? What are some of the challenges to this goal?

Explain the three reasons why companies often choose not to develop their own compensation surveys.

Your organization has two business units. One unit is a long-established manufacturer of a product that competes on price and has not been subject to many technological innovations. The other business unit is just being started. It has no products yet, but it is working on developing a new technology for testing the effects of drugs on people via simulation instead of through lengthy clinical trials. Would you recommend the two business units have the same pay

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programs for recognizing individual contributions? Why/Why not?

Nutriment is pursuing a differentiation strategy in order to create product that is not offered by their competitors. In order to successfully attract the right staff to ensure Nutriment has a competitive advantage, the company must ensure that their pay structure is competitive in local market while also managing costs.

Nutriment has different job categories that may require different pay strategies. The administrative positions only require Nutriment to match the compensation of their competitors.

The scientists will be more difficult to attract. As such, it is likely that they will need to take a pay lead strategy for their scientist.

Nutriment may also have some concerns with internal consistency of compensation as the market will likely drive them to offer the scientists pay that is significantly more than that of the administrative staff members.

Respond to the following:

What are some strategic considerations in establish a pay structure at Nutriment?

Should HR suggest a pay policy to lead, leg, or match the market? Explain your recommendation.