Developing a Pay Structure

This activity is important because 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.

The goal of this exercise is to demonstrate your understanding of how pay structure 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.

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.

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.

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

Multiple Choice

There will be increased turnover in sales.

There will be decreased morale among salespeople.

It will be difficult to get salespeople to rotate to logistics$.$

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

Employees in logistics will increase their productivity.