Compensating CEOs and Executives

Compensating CEOs and Executives

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Job Analysis

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Importance of Job Analysis

  • Writing job descriptions
  • Employee selection
  • Training
  • Personpower planning
  • Performance appraisal
  • Job classification
  • Job evaluation
  • Job design
  • Compliance with legal guidelines
  • Organizational analysis

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Job Description Sections

  • Job Title
  • Brief summary
  • Work activities
  • Tools and equipment used
  • Work context
  • Work performance
  • Compensation information
  • Job Competencies

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Job Description Sections
Job Title

  • Describes the nature of the job
  • Assists in employee selection and recruitment
  • Affects perceptions of job worth and status
  • Job evaluation results
  • Employees feelings of personal worth
  • Affects clarity of resumes

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Would you like to upsize that title?

Traditional Title Upsized Title
Writer Sentence Engineer
Waiter Customer-Chef Intermediary
Garbage Man Sanitation Engineer
Secretary Power Behind the Throne
Window Washer Optical Illuminator Enhancer
File Clerk Data Storage Specialist
Receptionist Director of First Impressions
Grave Digger Cadaver Disposal Facilitator

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Job Description Sections
Brief Summary

  • Useful for recruitment advertising
  • Should be written in an easy to understand style
  • Jargon and abbreviations should not be used

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Job Description Sections
Work Activities

  • Organize by dimensions
  • Similar activities
  • Similar KSAOs
  • Temporal order

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Job Description Sections
Work Activities

  • Task statements
  • List only one activity per statement
  • Statements should be able to “stand alone”
  • Should be written in an easy to understand style
  • Use precise rather than general words

“Responsible for”

“Oversees”

“Handles accounts”

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Job Description Sections
Tools and Equipment Used

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Job Description Sections
Work Context

  • Work schedule
  • Degree of supervision
  • Ergonomic information
  • Physical and Psychological Stress
  • Indoors v. outdoors
  • Lighting/heat/noise/physical space
  • Clean v. dirty environment
  • Standing/sitting/bending/lifting

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Job Description Sections
Work Performance

  • Describes how performance is evaluated
  • This section might include
  • Standards used
  • Frequency of evaluation
  • Evaluation dimensions
  • The person doing the evaluating

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Job Description Sections
Compensation Information

  • Job evaluation dimensions
  • Exempt status
  • Pay grade
  • Job group
  • EEO-1 Category

Officials and managers

Professionals

Technicians

Sales workers

Office and clerical

Craft workers

Operatives

Laborers

Service workers

 

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Job Description Sections
Job Competencies

  • Common Names
  • Job competencies
  • Knowledge, skill, ability, and other characteristics (KSAOs)
  • Job specifications
  • Competencies should be separated
  • Those needed before hire
  • Those that can be learned after hire

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Is competency modeling really different from KSAOs?

Shippmann, J. S., Ash, R. A., Battista, M., Carr, L., Eyde, L. D., Hesketh, B., Kehoe, J., Pearlman, K., Prien, E. P., & Sanchez, J. I. (2000). The practice of competency modeling. Personnel Psychology, 53(3), 703-740.

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Critiquing Job Descriptions
Exercise 2.1

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  • The verbs at the beginning of the sentences are not parallel (e.g., takes v. inspect)
  • Under food preparation, “Handle problems” is too vague
  • Under cleaning, “RK-9” and “10-6” are jargon and wouldn’t make sense to a person unfamiliar with the job
  • Under tools, a cash register is listed yet there are no tasks reported that involve a cash register
  • Under job context, lifting 80-pound crates is mentioned. There are no tasks involving lifting crates.
  • Personal Requirements
  • “Be flexible” is vague. Are we talking about physical flexibility or interpersonal flexibility?
  • “No mental or physical problems” is a violation of the ADA.
  • Counting back change is listed but there are no tasks listed that involve counting back change.

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Writing a Job Description
Exercise 2.2

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Preparing for a Job Analysis
Who Will Conduct the Job Analysis?

  • Internal Department
  • Human resources
  • Compensation
  • Training
  • Engineering
  • Internal task force
  • Supervisors
  • Employees
  • Consultants
  • Interns/class projects

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Preparing for a Job Analysis
Which Employees Should Participate?

  • Choices
  • All employees
  • Random sample
  • Representative sample
  • Convenience sample
  • Potential Differences
  • Job competence
  • Race
  • Gender
  • Education level
  • Viewpoint

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Preparing for a Job Analysis
What Type of Information Should be Gathered?

  • Types of Requirements
  • Formal
  • Informal
  • Level of Specificity
  • Job Loan officer
  • Position Loan officer at the Boone branch
  • Duty Approval of loans
  • Task Investigates loan history to determine if applicant has bad credit
  • Activity Runs credit histories on credit machine
  • Element Enters applicant’s SSN into credit machine
  • Sub element Elevates finger 30 degrees before striking key

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Conducting a Job Analysis
Basic Steps

    • Step 1: Identify tasks performed
    • Step 2: Write task statements
    • Step 3: Rate task statements
    • Step 4: Determine essential KSAOs
    • Step 5: Select tests to tap KSAOs

 

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Conducting a Job Analysis
Step 1: Identify Tasks Performed

    • Gathering existing information
    • Interviewing subject matter experts (SMEs)
    • Individual interviews
    • SME Conferences
    • Ammerman Technique
    • Observing incumbents
    • Job participation

 

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Office Space (DVD Segment 9)

 

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Job Analysis Interview (Aamodt Video)

 

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Conducting a Job Analysis
Step 2: Write Task Statements

  • Required elements to a task statement
  • Action
  • Object
  • Optional elements
  • Where the task is done
  • How it is done
  • Why it is done
  • When it is done

 

 

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Conducting a Job Analysis
Step 2: Write Task Statements

    • Characteristics of well-written task statements
    • One action and one object
    • Appropriate reading level
    • The statement should make sense by itself
    • All statements should be written in the same tense
    • Should include the tools and equipment used to complete the task
    • Task statements should not be competencies
    • Task statements should not be policies

 

 

 

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Poorly written task statement Properly written task statement
Sends purchase requests Sends purchase requests to the purchasing department using campus mail
Drives Drives a five-speed truck to make food deliveries within the city of Toledo
Locks hall doors Uses master key to lock hall doors at midnight so that nonresidents cannot enter the residence hall

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What is Wrong with these Task Statements?

  • Handles customer complaints
  • Type, files, and distributes correspondence
  • Utilizes decision-making skills and abilities
  • In charge of the copy machine
  • Uses the computer to balance department budget
  • Responsible for opening and closing the office
  • Greets visitors
  • Examines supervisor’s daily schedule
  • Oversees the office

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To practice writing task statements, write 10 task statements for your current job or one that you have had recently

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Conducting a Job Analysis
Step 3: Rate Task Statements

    • Tasks can be rated on a variety of scales
    • Importance
    • Part-of-the-job
    • Frequency of performance
    • Time spent
    • Relative time spent
    • Complexity
    • Criticality
    • Research shows only two scales are necessary
    • Frequency
    • Importance

 

 

 

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Rating Scale

Frequency
0 Task is not performed as part of this job
1 Task is seldom performed
2 Task is occasionally performed
3 Task is frequently performed
Importance
0 Unimportant. There would be no negative consequence if the task were not performed or not performed properly
1 Important: Job performance would be diminished if task were not completed properly
2 Essential: The job could not be performed effectively if the incumbent did not properly complete this task

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Using the Ratings

  • Create a chart summarizing the ratings
  • Add the frequency and importance ratings to form a combined rating for each task
  • Include the task in the final task inventory if:
  • Average rating is greater than .5 for both frequency and importance {or}
  • Combined rating is 2.0 or higher

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Raters Combined Average
Scully Mulder
Task # F I CR F I CR F I CR
1 2 0 2 3 0 3 2.5 0.0 2.5
2 2 2 4 2 1 3 2.0 1.5 3.5
3 0 0 0 0 0 0 0.0 0.0 0.0
4 3 2 5 3 2 5 3.0 2.0 5.0

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Conducting a Job Analysis
Step 4: Determine Essential KSAOs

 

 

Knowledge A body of information needed to perform a task
Skill The proficiency to perform a certain task
Ability A basic capacity for performing a wide range if different tasks, acquiring a knowledge, or developing a skill
Other characteristics Personal factors such as personality, willingness, interest, and motivation and such tangible factors as licenses, degrees, and years of experience

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Identifying KSAOs
Exercise 2.3

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Competency KSAO
1. Data entry speed Skill
2. Finger dexterity Ability
3. Driving a car Skill
4. Traffic rules Knowledge
5. A driver’s license Other
6. A friendly personality Other
7. Ten years of experience Other
8. Basic intelligence Ability

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Competency KSAO
9. Physical strength Ability
10. Color vision Ability
11. Being a nonsmoker Other
12. Customer service experience Other
13. Use of PowerPoint Skill, knowledge
14. Willingness to work weekends Other
15. Spelling and grammar Skill, knowledge
16. Writing reports Skill

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Structured Job Analysis Methods
General Information about Worker Activities

  • Position Analysis Questionnaire
  • 194 Items
  • 6 main dimensions
  • Information input
  • Mental processes
  • Work output
  • Relationships with others
  • Job context
  • Other
  • Easy to use
  • Standardized
  • Difficult to read for average employee

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Structured Job Analysis Methods
General Information about Worker Activities

  • Job Structure Profile
  • Designed as a replacement for the PAQ
  • Easier to read than the PAQ
  • Good reliability
  • Job Elements Inventory
  • 153 items
  • 10th grade readability level
  • Correlates highly with PAQ
  • Functional Job Analysis
  • Data
  • People
  • Things

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Structured Job Analysis Methods
Information about KSAOs

    • Job Components Inventory
    • 400 questions
    • 5 main categories
    • Tools and equipment used
    • Perceptual and physical requirements
    • Mathematical requirements
    • Communication requirements
    • Decision making and responsibility
    • Good reliability

 

  • Threshold Traits Analysis
  • 33 items
  • 5 main categories
  • Physical traits
  • Mental traits
  • Learned traits
  • Motivational traits
  • Social traits
  • Reliable
  • Short and quick to use

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Structured Job Analysis Methods
Information about KSAOs

 

    • Job Adaptability Inventory
    • 132 items
    • 8 adaptability dimensions
    • Handling emergencies
    • Handling work stress
    • Solving problems creatively
    • Dealing with uncertainty
    • Learning
    • Interpersonal adaptability
    • Cultural adaptability
    • Physically orienting adaptability

 

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Structured Job Analysis Methods
Information about KSAOs

  • Personality-Related Position Requirements Form
  • 107 items items
  • 12 personality dimensions
  • Fleishman Job Analysis Survey
  • 72 abilities
  • Good reliability

 

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Structured Job Analysis Methods
Information about KSAOs

  • Critical Incident Technique
  • Job incumbents generate incidents of excellent and poor performance
  • Job experts examine each incident to determine if it is an example of good or poor performance
  • 3 incumbents sort incidents into categories
  • Job analyst combines and names categories
  • 3 incumbents resort incidents into combined categories
  • Number of incidents per category provides an idea of the importance of each category

 

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Category Excellent Poor Total
Interest in residents 31 19 50
Availability 14 27 41
Responsibility 12 20 32
Fairness 18 10 28
Self-adherence to rules 0 28 28
Social skills 19 7 26
Programming 13 7 20
Self-confidence 12 8 20
Rule enforcement 4 4 18
Authoritarianism 1 16 17
Counseling skills 12 4 16
Self-control 5 2 7
Confidentiality 1 2 3

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Job Evaluation
Determining the Worth of a Job

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The Ideal Compensation System

  • Will attract and retain desired employees
  • Will motivate current employees while also providing security
  • Is equitable
  • Is in compliance with legal guidelines

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Humor Break

Reaching the end of a job interview, the HR manager asked a young applicant fresh out of business school, “And what starting salary are you looking for?”

 

The applicant said, “In the neighborhood of $140,000 a year, depending on the benefits package.”

 

The interviewer said, “Well what would you say to a package of 5 weeks of vacation, 14 paid holidays, full medical and dental, company matching retirement fund to 50% of salary, and a new company car every two years – say a red Corvette?”

 

The applicant sat up straight and said, “Wow! Are you kidding?”

 

The interviewer replied, “Yeah, but you started it.”

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Determining Internal Pay Equity

  • Determine compensable factors
  • Determine levels for each factor
  • Assign weights to each factor
  • Convert weights to points for each factor
  • Assign points to each level within a factor
  • Assign points to jobs
  • Run regression to determine how well points predict salary midpoints

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Step 1: Determining Compensable Factors

    • Compensable Factors

 

  • Examples
  • responsibility
  • complexity/difficulty
  • skill needed
  • physical demands
  • work environment

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What factors make one job worth more than another?

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Step 2: Determine Levels for Each Compensable Factor

  • Education
  • High school degree or less
  • Two year college degree
  • Bachelor’s degree
  • Master’s degree
  • Responsibility
  • Makes no decisions
  • Makes decisions for self
  • Makes decisions for 1-5 employees
  • Makes decisions for more than 5 employees
  • Physical demands
  • Lifts no heavy objects
  • Lifts objects between 25 and 100 pounds
  • Lifts objects more than 100 pounds

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Step 3: Determine Factor Weights

Factor Weight Points
Education 20 200
Responsibility 30 300
Physical demands 15 150
Safety 10 100
Experience 25 250
Total 100% 1000

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Step 4: Assign Points to Each Level

Responsibility Points
Makes no decisions 75
Makes decisions for self 150
Makes decisions for 1-5 employees 225
Makes decisions for > 5 employees 300
Total 300

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Determining Factor Weights
Exercise 2.5

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Step 5: Assign Points to Each Job

Position: Production Supervisor
Factor Points
Education 200
Responsibility 300
Physical demands 150
Safety 100
Experience 250
Total 1000

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Computing a Wage Trend Line
Exercise 2.6

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Job Points Salary
Computer Operator 450 $28,000
Computer Programmer 550 $36,000
Documents Specialist 400 $26,000
Secretary I 500 $27,000
Secretary II 450 $25,000
Computer Analyst 600 $37,000
Clerk 350 $25,000
Supervisor 650 $42,000
Account Representative 500 $28,000
Customer Service Agent 550 $35,000

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44,000
43,000
42,000 Supervisor
41,000
40,000
39,000
38,000
37,000 Comp Anlst
36,000 Comp Prog
35,000 Cust Serv
34,000
33,000
32,000
31,000
30,000
29,000
28,000 Comp Op Acct Rep
27,000 Sec I
26,000 Doc Spec
25,000 Clerk Sec II
24,000
23,000
22,000
21,000
350 400 450 500 550 600 650 700

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Job Points Predicted Salary Salary Difference
Computer Operator 450 $27,869 $28,000 +131
Computer Programmer 550 $33,936 $36,000 +2,064
Documents Specialist 400 $24,835 $26,000 +$1,165
Secretary I 500 $30,902 $27,000 -$3,902
Secretary II 450 $27,869 $25,000 -$2,869
Computer Analyst 600 $36,969 $37,000 +$31
Clerk 350 $21,802 $25,000 +$3,198
Supervisor 650 $40,003 $42,000 +$1,197
Account Representative 500 $30,902 $28,000 -$2,902
Customer Service Agent 550 $33,936 $35,000 +$1,065

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Determining External Pay Equity

  • Worth based on external market
  • Determined through salary surveys
  • Information obtained
  • salary range
  • starting salary
  • actual salaries paid
  • benefits

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Salary Survey Example

# of orgs # of emp Weighted Average Salary Range
Low Q1 Median Q3 High
Production
Foreperson 18 286 $23.21 12.67 19.96 22.67 28.69 37.44
Machinist 9 419 $20.83 10.28 17.79 19.63 22.09 26.80
Planner 9 36 $19.73 17.64 19.68 21.63 24.59 37.44
Production 15 3,487 $18.91 9.49 13.24 16.05 16.62 24.27
Quality Ins 10 45 $15.23 11.00 13.84 15.01 21.31 24.18
Maintenance
Janitor 10 322 $12.00 8.85 10.02 11.15 12.04 20.81
Maint A 17 112 $15.90 10.65 11.54 15.97 20.40 27.78
Mechanic 11 382 $19.80 12.99 18.10 19.30 21.27 25.98

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Potential Salary Survey Problems

  • Response rate
  • organization conducted
  • trade group conducted
  • Finding comparable jobs
  • Do salary surveys perpetuate discrimination?
  • Do salary surveys “fix” salaries at low levels?

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Focus on Ethics
Compensating CEOs and Executives

  • Are CEOs being paid too much or are they worth the high compensation packages they receive?
  • Is it ethical that a CEO receives a bonus when employees are being laid off or having their benefits reduced?
  • Does high compensation for CEOs actually increase company performance?
  • Should a company’s number one focus be n making money for its shareholders?
  • What might be other ethical factors surrounding this issue?

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