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Chapter 9 Compensation Management
9
4
COMPENSATION
CHAPTER OBJECTIVES
After studying this chapter, you should be able to:
Explain the objective of effective compensation management.
Discuss the consequences of mismanaged compensation programs.
Describe how wages and salaries are determined.
Identify the major issues that influence compensation management.
Explain the differences between “equal pay for equal work” and “equal pay for work of equal value.’
Evaluate the advantages and disadvantages of incentive systems.
Explain the major approaches to group incentive plans.
Apply the expectancy model of motivation in a human resource system.
POWERPOINT® SLIDES
Canadian Human Resource Management includes a complete set of Microsoft PowerPoint® files for each chapter.
(Please contact your McGraw-Hill Ryerson representative to find out how instructors can receive these files.) In the
lecture outline that follows, a reference to the relevant PowerPoint slide for this chapter is placed beside the
corresponding lecture material. The slide number helps you to see your location in the slide show sequence and to skip
slides that you don’t want to show to the class. (To jump ahead or back to a particular slide, just type the slide number
and hit the Enter or Return key.)
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Part 5
Motivating and Rewarding Human Resources
®
LECTURE OUTLINE (with PowerPoint slides)
Compensation
Management
Slide 1
Compensation
Slide 2
Objectives of
Compensation
Slide 3
COMPENSATION
• Cash and non-cash rewards employees receive in exchange for their
work
• Effective compensation management
-- Employees are more likely to be satisfied and motivated to
contribute to the achievement of organizational objectives

Compensation perceived to be inappropriate
-- Performance, motivation, and satisfaction may decline
dramatically
-- Employee turnover may occur resulting in loss of investment for
recruitment, selection, training, and development
-- Dissatisfaction may be experienced with:
-- Absolute pay (physiological and security needs)
-- Relative pay (social and esteem needs)
OBJECTIVES OF COMPENSATION ADMINISTRATION
Sometimes, objectives may conflict with one another, and trade-offs
must be made

Acquire qualified personnel
-- Compensation needs to be high enough to attract applicants

Retain present employees
-- To prevent turnover, pay must be kept competitive with other
employers

Ensure equity
-- Internal equity requires that jobs of similar value get similar pay
i.e. internal consistency
-- External equity involves paying workers fairly relative to market
rates
• Reward desired behaviour
-- Pay should reinforce desired behaviours i.e. good performance,
loyalty, new responsibilities, etc.
 Control costs
-- Obtain and retain workforce at a reasonable cost i.e. organization
does not overpay or underpay
 Comply with legal regulations
-- Ensures compliance with all government regulations
 Further administrative efficiency
-- Designing the program so that it can be efficiently administered
(secondary consideration only)
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Chapter 9 Compensation Management
Compensation
Management (Phase I)
Slide 4
MAJOR PHASES OF COMPENSATION MANAGEMENT
Phase I: Job Analysis

Initial job analysis (Chapter 2)

Identify and study jobs to learn about the duties, responsibilities, and
working conditions
-- Position descriptions
-- Job descriptions
-- Job standards
Compensation
Management (Phase II)
Slide 5
Phase II: Job Evaluation

Job evaluation
-- Systematic procedures to determine the relative worth or value of
jobs
-- Purpose is to identify which jobs should be paid more than others
-- Provides for internal equity—perceived equity of a pay system in
an organization

Job evaluation methods
-- Job ranking is the simplest and least precise method of job
evaluation. Jobs are ranked subjectively according to their overall
worth to the organization e.g. janitor is ranked as 1, secretary as 2,
and office manager is ranked as 3
-- Job grading (job classification), is a slightly more sophisticated
method than job ranking, but is also not very precise. Jobs are
assigned to pre-determined job classifications according to their
relative worth to the organization
-- Point systems are used more than any other evaluation method. It
evaluates the critical (compensable) factors of each job,
determines different levels or degrees for each factor, and
allocates points to each level. Critical factors generally include:
responsibility, skill, effort, and working conditions
Compensation
Management (Phase III)
Slide 6
Phase III: Wage and Salary Surveys

Discover what other employers in the same labour market are paying
for specific key jobs

Provides for external equity—perceived fairness in pay relative to
what other employers are paying for the same type of work

Sources of Compensation Data:
-- Human Resources Development Canada (HRDC) periodically
conducts surveys in major metropolitan labour markets
-- Consultants provide this service for their clients
-- Canada Human Resource Centres also compile information for
distribution to employers
-- Employer and professional associations may survey member firms
-- Some human resource departments conduct their own wage and
salary surveys due to the problem of varying comparability
encountered with using published surveys
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Motivating and Rewarding Human Resources
Compensation
Management (Phase IV)
Slide 7
Compensation Challenges
Slide 8
Pay Equity
Slide 9
Pay Equity
Slide 10
Phase IV: Pricing Jobs
Pricing jobs includes two activities:

Establishing the pay level for each job involves combining the job
evaluation rankings and the survey wage rates as well as other
considerations e.g. organization’s pay policy
-- Create scattergram and draw a wage-trend line through the dots
that represent key jobs

Creating the compensation structure involves grouping the
different pay levels into a structure that can be managed (i.e. job
classes and rate ranges)
-- Rate range is a pay range for each job class
-- Merit raise is a pay increase given to individual workers
according to an evaluation of their performance
CHALLENGES AFFECTING COMPENSATION

Prevailing Wage Rates
-- Some jobs must be paid more than their relative worth because of
market forces e.g. scarcity of software specialists in the 1990’s
-- Some jobs may be paid less than the established minimum e.g.
new hires with no experience may be paid less than the pay
minimum until they gain experience

Union Power
-- Unions may be successful in using their power to obtain wage rates
higher than their relative worth

Productivity
-- Ultimately, a company cannot pay workers more than they
contribute back to the firm through their productivity

Wage and Salary Policies
-- Policies that cause wages and salaries to be adjusted e.g. to give
non-union workers the same raise as unionized workers

Government Constraints
-- Canada Labour Code is a federal law that regulates labour
relations under federal jurisdiction i.e. minimum wage, overtime
pay, maintaining staff records, etc.
-- All the provinces have minimum wage legislation
PAY EQUITY

Canadian Human Rights Act prohibits discrimination because of
sex, it is illegal for companies to pay women less than men if their
jobs involve equal skills, effort, responsibilities and conditions.
-- Government enforces these provisions

Equal Pay for Equal Work (equal pay) requires an employer to pay
men and women the same wage or salary when they do the same
work
-- Part of the Canada Labour Code since 1971
-- Some exceptions e.g. seniority, sales commissions
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Chapter 9 Compensation Management


Pay Equity
Slide 11
Pay-for-Performance
Slide 12
Incentive Systems
Slide 13
Individual vs. Team-based
Incentives
Slide 14
Equal Pay for Work of Equal Value (pay equity) requires that jobs
of comparable worth to the organization should be equally paid
-- 1978 amendment to the Canadian Human Right Act makes it
illegal to discriminate on the basis of job value (or content)
The wage gap is the historical gap between the income of men and
women i.e. in Canada women earn about 80 per cent as much as men
-- Wage gap exists in part because women have traditionally found
work in lower-paying occupations such as teaching, retail,
nursing, secretarial work. Part of wage gap is also due to career
gaps i.e. when women leave the labour force to care for children
-- Ultimately, 5-10% of the wage gap cannot be explained by any
factor other than gender-based pay discrimination
-- Most provinces have also enacted pay equity legislation
THE PAY-FOR-PERFORMANCE MODEL

Incentive systems provide the clearest link between pay and
performance or productivity

Incentive pay is directly linked to an employee’s performance or
productivity

Benefits of financial incentives:
-- Better performance is reinforced on a regular basis
-- Reinforcement is generally quick and frequent—usually with each
paycheque
-- The worker sees the results of the desired behaviour quickly,
therefore, the behaviour is more likely to continue
-- The employee benefits because wages are given in proportion to
performance rather than indirect measures such as time worked

Problems with financial incentives
-- Administration of an incentive system can be complex—standards
must be established and results measured
-- If standards are imprecise, the incentive system may result in
inequities
-- Employees may not achieve standards due to uncontrollable
factors, such as work delays or machine breakdowns
-- Unions often resist incentive systems because they are concerned
management may change the standards and require employees to
work harder for the same pay
-- Incentive systems may focus efforts on only one aspect e.g. sales
Individual Incentive Plans

Piecework compensates the worker for each unit of output

Production Bonuses are used in conjunction with a base wage rate
or salary and are incentives for exceeding a specified level of output

Commissions involve paying a salesperson a percentage of the
selling price or a flat amount for each unit sold (may or may not be
combined with a base salary)
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

Maturity Curves are a form of incentive for technical and
professional employees that rewards employees for productivity and
experience
Executive Incentives vary widely e.g. cash bonuses, stock options,
etc. that usually relate to the performance of the organization
Team-based Incentive Plans

Team Results determine employee bonuses and salary increases

Production Incentive Plans allow groups of workers to receive
bonuses for exceeding predetermined levels of output

Profit-Sharing Plans share company profits with the workers. Can
create a sense of trust and common fate among workers and
management, however, it is often difficult for employees to perceive
how their efforts make a difference. Most effective in organizations
with open, two-way communication and participative management
that fosters a satisfying work environment

Employee Stock Ownership Plans (ESOPs) give employees
genuine ownership. Recent studies show very positive impacts on
employee motivation, productivity, turnover, sales, long-term growth

Cost Reduction Plans reward employees for ways to reduce costs.
These savings are shared with employees in the form of a bonus (e.g.
Scanlon Plan)

Non-Monetary Rewards can also be highly motivational e.g.
recognition
Pay Secrecy
Slide 15
New Approaches to Pay
Slide 16
Pay Secrecy

Advantages
-- Most employees prefer to have their pay kept secret
-- Gives managers greater freedom
-- Covers up inequities in the internal pay structure

Disadvantages
-- May generate distrust in the pay system
-- Employees may perceive that there is no relationship between pay
and performance
NEW APPROACHES TO PAY

Skill- or knowledge-based pay is a pay system based on the skills
or knowledge that an employee has (in contrast to the more common
job-based pay)
-- Incentives for horizontal learning of skills i.e. job enlargement e.g.
manufacturing jobs
-- Incentives for vertical skills e.g. Volvo rewards employees if the
group is able to function without a supervisor

Variable pay is a performance-linked approach that involves the use
of a variety of methods e.g. business and special incentives,
individual performance incentives, profit-sharing, gainsharing, etc
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Chapter 9 Compensation Management



Changing Compensation
Systems
Slide 17
Broadbanding is a strategy for salary structures that consolidates a
large number of pay grades into a few “broad bands” in order to
assist in flattening large, hierarchical organizations, encouraging
employees to broaden their skills, de-emphasizing promotion, etc.
Tailor-Made Perks allows employees to choose their rewards e.g.
using a point-based system to choose merchandise
International Pay is a challenge for HR managers to develop
policies which consider global trends, national cultures, and
individual differences
CHANGING COMPENSATION SYSTEMS

Traditional
-- Pay = 100% base
-- Entitlement-base increases
-- Few incentive/bonus plans, restricted to executives

Modern
-- Variable component added
-- Performance-driven gains
-- Many kinds of plans, extended throughout the organization
Pay & Organizational
Strategy
Slide 18
PAY AND ORGANIZATIONAL STRATEGY
Because of increased national and international competition
organizations are concerned about maintaining competitive advantage.
Seven areas of focus that affect pay systems are suggested by Lawler:

Motivating performance—money is still a strong motivator and
effective incentive systems can improve individual motivation

Identifying valued rewards—management has to understand what
is important to different people

Relating rewards to performance—employees need to perceive a
connection between their pay and their performance

Setting performance goals—effective goals should be acceptable,
attainable, and developed with employee input

Motivation and punishment—an individual’s motivation to
perform is strongly influenced by the consequences

Motivating skill and knowledge development—an organization
needs to develop the right mix of skills for its business objectives

Fostering attraction and retention—pay and reward systems have
a major impact on the organization’s ability to attract and retain
Employee Motivation
Slide 19
EMPLOYEE MOTIVATION
To be committed and productive, employees must be motivated

Motivation can be defined as goal-directed behaviour. It is a
person’s drive to take action because that person want to do so

Expectancy model is a comprehensive model that shows the
application of all human resource functions
-- Important for managers to be able to operationalize this model
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ANSWERS TO REVIEW AND DISCUSSION
QUESTIONS
1. What is the difference between absolute and
relative pay with regard to motivation?
5. Why is the point system superior to all other
systems? Discuss the advantages and disadvantages
of this system.
Absolute pay satisfies physiological and security needs,
while relative pay satisfies social and esteem needs, the
latter having a greater impact on pay satisfaction and
motivation.
The point system is more precise than other methods
because it can handle critical factors in more detail.
This increased accuracy gives the organization greater
assurance that workers are fairly compensated. The
disadvantage of the point system is that it is more timeconsuming, therefore, more difficult and costly to
develop initially.
2. Why is job analysis information, discussed in
Chapter 2, necessary before job evaluations can be
performed?
Job analysis information gives compensation specialists
an understanding of the jobs and their compensable
factors, and of what the key jobs in the organization are.
Without job analysis information, even the simpler
approaches to job evaluation -- job ranking and job
grading -- would be difficult or impossible to do
correctly.
6. If you are told to find out what competitors in
your area are paying their employees, how would
you get this information without conducting a wage
and salary survey?
Published wage and salary surveys can be obtained
from HRDC, Canada Human Resource Centres,
consultants, associations, or possibly from other firms
that have already gathered this information.
3. Suppose when you interview new employees, you
ask them what they think is a fair wage or salary. If
you hire them, you pay them that amount as long as
it is reasonable and not below minimum wage laws.
What problems would you expect?
7. Even after jobs are first priced using a wagetrend line, what other challenges might cause you to
adjust some rates upward?
Again, pay dissatisfaction is highly likely. Although the
recruits may have been glad to receive the pay asked
for, when they learn that others with similar jobs are
getting paid more, dissatisfaction may result. In turn,
performance may suffer, unionization or strikes may
occur, and the attractiveness of the job is likely to
decline.
Absenteeism,
turnover,
psychological
withdrawal, and other negative effects may occur.
The prevailing wage rate, union pressure, scarcity of
recruits, wage and salary policies, minimum wage laws,
and exceptional employee performance may lead to
wages above the wage trend line.
8. Since financial incentives give employees feedback
for good performance and they relate pay to
performance, why do most companies pay wages
and salaries rather than financial incentives?
4. Assume your company has a properly conducted
compensation program. If a group of employees asks
you why they receive different hourly pay rates even
though they perform the same job, how would you
respond?
Several powerful reasons exist to explain the limited use
of incentives. The lack of clear-cut standards or
measures to evaluate performance is a common reason.
Beyond that, there are complexities in the
administration of incentive systems, concerns about the
impact of uncontrollable forces impacting results, union
resistance, and concern that only one aspect of
performance will be addressed.
All employees should be within the same rate range.
Within the rate range, seniority, performance,
productivity, and experience may justify paying
different workers different wage rates.
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Chapter 9 Compensation Management
9. Explain the difference between "equal pay for
equal work" and "equal pay for work of equal
value" and the implications of the difference for a
human resources manager.
11. Discuss the practicality of the expectancy theory
model from a manager’s point of view.
The expectancy model is the most practical motivation
model available. It includes all aspects of the human
resource function, from recruitment to compensation
and promotion. Managers are able to operationalize it in
a step-by-step approach to create a job environment that
is continuously reinforcing desirable behaviour. See the
OLC (http://www.mcgrawhill.ca/college/schwind).
"Equal pay for equal work" has been part of the
Canadian Labour Code for some time. It means that
employers have to pay male and female workers the
same wages if they perform substantially similar work.
Exceptions: where valid seniority and merit pay systems
have been adopted.
12. Why is it so important to explain to employees
the performance-reward relationship?
"Equal pay for work of equal value" is a newer concept
included into the Canadian Human Rights Act. It makes
it illegal to discriminate on the basis of job value (or
content). Four criteria are to be used for job evaluation - skill, effort, responsibility, and working conditions -and they are used as a composite measure.
If performance is fairly and equitably rewarded,
employees tend to experience job satisfaction (not as it
had been believed: that happy (satisfied) workers
perform well).
Since the Canadian Human Rights Act is relevant only
to organizations under federal jurisdiction, only human
resources managers of these organizations have to pay
attention to it. However, in several provinces, all human
resources managers have to follow the requirements of
their specific pay equity laws.
.
10. Under what circumstances are pay differentials
justified?
The Equal Wage Guidelines of the federal legislation
define seven "reasonable factors" that can justify
differences in wages:
(1)
(2)
(3)
(4)
(5)
(6)
(7)
performance differences (as measured by a
formal appraisal system)
seniority (based on length of service)
red-circling (because of job re-evaluation)
rehabilitation assignments
demotion pay
phased-in wage reductions
temporary training positions
These factors justify a difference in wages only if
they are applied consistently and equitably. It must be
clearly demonstrable that existing wage differences are
not based on sex.
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Part 5
Motivating and Rewarding Human Resources
ANSWERS TO CRITICAL THINKING QUESTIONS
1. Suppose you manage a small business with thirty
employees. You discover that some people are much
more motivated by money and others are motivated
by security. To those who want more money, you
offer an incentive plan in which their income is
determined by their results. The other employees
have a fair salary. What problems might arise?
5. Why is the hiring decision so crucial for
managers with regard to the motivation of
employees? Use the expectancy theory model for
your explanation.
Only if the right candidate is chosen, with the proper
aptitude, attitude, education, experience, skill, etc., will
motivation be likely to work. Only then will an
employee feel that his/her effort will result in high
performance (effort-performance probability). If an
employee does not have the proper aptitude, attitude,
education, experience, skill, etc., then no matter what
management does, it will not result in motivation, i.e.,
the employee will see no probability that his or her
effort will result in high performance.
The other employees, who do not desire money as
strongly, may feel discriminated against because they do
not have an opportunity to earn more money. The result
is likely to be pay dissatisfaction.
2. "Money is a strong motivator" and "in surveys on
what employees want from their job, money ranks 5
or lower." How can you reconcile these two
statements?
5. How should a HR manager find out what
employees value as rewards? Is it acceptable to ask
employees directly? Discuss. Are other methods
preferable? Which? Why?
Employees tend to see money from different points of
views. On the one hand, it fulfills basic needs, on the
other hand it is seen as a status symbol (see discussion
on absolute and relative levels of pay on p. 388).
The best and most valid method is to ask employees
directly what they prefer. There is nothing wrong with
the direct approach. It provides the employee with the
feeling of being involved in the reward process and
gives the supervisor individual feedback. Other methods
used could be focus groups or, on a larger scale, a
survey. These two approaches have the disadvantage of
providing only general information. This may be useful
for an overview of what types of rewards are valued.
However, to be effective, individual preferences are
needed.
3. Obviously, profit-sharing plans are not an option
as an incentive plan in non-profit and government
organizations. Can you think of incentive plans that
will fulfill a similar function?
Cost reduction plans, like the Scanlon plan, would fit
both types of organizations (see discussion on p. 415).
4. "Minimum wages increase unemployment."
Please comment on this statement often made by
economists. Do you agree?
There is no conclusive evidence one way or the other.
Some economists used data to show that an increase in
minimum wages resulted in higher unemployment in
certain geographic areas, but critiques point out that
other causes could account for this rise. A recent study
by another group of economists could not find any
evidence of a negative impact of minimum wages, i.e.,
increased unemployment. So: it's a draw.
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Chapter 9 Compensation Management
ETHICS QUESTION
Comments to Instructors
There is no right or wrong answer to this question. It is for class discussion purposes.
WEB RESEARCH
Comments to Instructors
These exercises have been designed for students to demonstrate their computer and Internet skills to research the required
information. Answers will vary.
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Part 5
Motivating and Rewarding Human Resources
INCIDENT 9.1: COMPENSATION
ADMINISTRATION AT REYNOLDS PLASTIC
PRODUCTS
Incident Comments
This incident illustrates some of the errors that can occur in compensation administration when this human resources
activity is not administered properly. These types of problems are found more often in organizations that lack a formal
compensation program.
1. What laws are probably being violated?
The firm may be violating the minimum wage laws by paying some positions below the current minimum wage. Its
overtime policies probably violate federal or provincial labour codes because the firm is not paying overtime for hours
more than forty per week. By paying those who are heads of households more than others, the firm is probably violating
human rights legislation because this policy almost certainly means men are receiving higher pay than women.
2. What problems do you see with the incentives for a) executives, b) production workers? c) sales people? d)
hourly employees?
a) The problem with executive incentives is that they are discretionary which is likely to result in perceived
inequities leading to the potential for pay dissatisfaction and/or turnover.
b) The incentive system for the production workers may be helpful to reduce accidents, however, the amount of the
incentive may not be motivational, especially given the “lottery” approach used.
c) Sales people are being rewarded for new accounts. This incentive may encourage them to find new accounts
rather than service long-standing customers.
d) Hourly employees may have little, if any, relationship to sales increases. The quality of sales people and the
organization’s products are more likely to affect sales. The incentive seems inappropriate.
3. Himmelman read abut new approaches to pay policies like broadbanding, variable pay, and profit sharing and
wondered whether either one would be a suitable solution for the subsidiary, especially profit sharing to increase
low productivity. How would you advise him?
Broadbanding involves consolidating a large number of pay grades into a few “broad bands”. This approach encourages
employees to broaden their skills and allows for a more flexible workforce. Because jobs at Reynolds Plastic Products
tend to be relatively specialized, broadbanding may result in problems including reduced salary control and perceived
inequities.
Variable pay provides for a performance-linked compensation system. Variable pay may be an effective approach to
enhancing productivity but care will need to be taken to ensure that performance standards are objective, well-developed,
and clearly understood by employees.
Profit-sharing plans share company profits with employees. Employees will likely experience difficulty seeing the link
between their efforts and company profitability. As a result, profit-sharing may not have the desired benefit of increasing
productivity. If Himmelman wants to proceed with implementing profit-sharing he should focus effort to ensure open
and two-way communication between management and employees is developed and maintained to enhance success.
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Chapter 9 Compensation Management
4. Develop a step-by-step plan of the actions you would take and the order in which you would take them if you
were made human resource director of the Reynolds subsidiary.
Immediately, all workers who are being paid less than minimum wage should be given a raise to the prevailing minimum
wage. Overtime should be paid for all hours more than forty during any work week. The policy of paying nontechnical
jobs 15 percent below the prevailing rate should be studied and probably those jobs should be raised to the prevailing
wage rate or to a much smaller differential. Pay differentials for heads of households should be abolished immediately.
Once these "quick fixes" were implemented, it would be advisable to undertake a thorough job evaluation, wage and
salary study and determine what back pay liabilities the firm owes. Beginning with job analysis information, job
evaluation, pay surveys, and pricing jobs in a rational manner, the organization would create an appropriate pay scale for
workers and avoid charges of pay discrimination.
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Part 5
Motivating and Rewarding Human Resources
EXERCISE 9-1: A REALISTIC JOB EVALUATION
SIMULATION
Form groups of 3 to 5 students (3 students may need approximately 20 minutes, 5 students about 45 minutes for
the exercise).
Use the following rules:
1. Each student chooses a job s/he is familiar with (ideally, a job description would be available, but is not
essential). The jobs should be different, but from one organization, e.g., hospital, school, manufacturing plant.
2. Use table shown on p. 429-430.
3. Using Figure 9-5, p. 394, find consensus in your group in choosing the most appropriate point level for each job.
Example: For the job of a janitor, what level of responsibility for the safety of others, Critical Factor 1a, is appropriate?
Probably not a high one, so a good choice may be Level I, 25 points. For a bus driver or an emergency room nurse the
appropriate choice may be Level IV, or 100 points.
4. Choose on of the above jobs, called a key job. A key job is a well-known job, ideally common in many
organizations, e.g., secretary, accountant, tool and die maker in the manufacturing industry, etc. Do a simulated
wage survey. In this exercise it is sufficient to take an educated guess on what the key job is paid in the job
market.
It does not matter whether you choose an hourly wage or a monthly or annual salary, but it has to be the same for each
job.
5. Calculate the pay coefficient by dividing the estimated wage by the point total of the key job, according to the
formula
wage of key job
Pay coefficient pc = ------------------------------point total for key job
=
$
-------point
6. Multiply all job point totals by the pay coefficient. The results are the wages/salaries for all the above jobs. In
reality, this procedure would have to be done by the job evaluation committee for all jobs in the organization,
often in the hundreds.
Comment: This exercise is quite a realistic simulation of what goes on in a job evaluation committee. In all probability,
the opinions in each group will be diverse when it comes to determining the level for each job. The results, of course, are
not realistic since the point table has been created artificially and not by a job evaluation committee, and the pay level of
the key job has been estimated by students. Nevertheless, this exercise should give a good feel for the job evaluation
process, using the point method. It also demonstrates the need to choose members of the committee who are
knowledgeable about the jobs in the organization and are trained in the application of the point method. One more point:
Up until the wage survey, money was not part of the discussion, only points.
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Chapter 9 Compensation Management
CASE STUDY: MAPLE LEAF SHOES LTD.,
PERFORMANCE APPRAISAL ISSUES
Answers to Discussion Questions
1. You are the consultant. Clark has asked you to
submit a proposal for a PS plan for Maple Leaf
Shoes. You wonder about the appropriateness of
such an incentive system for Maple Leaf Shoes, but
promised to look into it. What will you tell Robert
Clark?
Clark seems to have the mistaken belief that profit
sharing plan motivates employees and increases
productivity. There is no evidence of that (see p. 413).
Companies with PS plans tend to have higher
productivity and higher morale, but these companies
have many other characteristics that may cause stronger
employee commitment. "Tend" implies that there are
companies with PS plans which do worse than
companies without one. The consultant should tell Clark
about the limitations of the incentive effect of a PS plan
and point out that many other organizational changes
would be necessary until a truly motivating job
environment would develop, e.g., more participative
management, two-way communication, direct incentive
systems, etc.
2. Do you see a possibility of convincing Maple Leaf
Shoes’ unions to buy in on a PS plan?
It will be a tough selling job. Unions tend to look
negatively at PS plans. But if union representatives
could be shown evidence of some real benefits of a PS
plan to their members it may work. Arranging a meeting
between Maple Leaf union reps and union reps from a
company with an effective PS plan may result in a
change of mind for the Maple Leaf union reps. This
should work even better if the unions would be given a
chance to participate in the development of the plan.
3. What are other incentive plans suitable for Maple
Leaf Shoes?
Piece-rate plans certainly would be very effective, but it
would also be worthwhile to look into a production
incentive plan or a cost-reduction plan (see pp. 409 and
415).
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Part 5
Motivating and Rewarding Human Resources
CASE STUDY: CANADIAN PACIFIC AND
INTERNATIONAL BANK (PAMELA JONES)
The Pamela Jones case is a real case, describing the
experiences of the wife of the author of this case. It
allows students in an almost perfect way to apply the
expectancy model of motivation, but also other models.
Answers to Discussion Question
1.
Analyze this case by using the expectancy theory
model.

Did management make the "right" hiring
decision?
It seems that a proper hiring decision was made.
Pamela had an appropriate education and a
personality test indicated that she had the proper
aptitude for banking. She worked hard and was
dedicated to her employer.

How did management fare with regard to
providing a motivating environment?
Management seems to have done a very inadequate
job in providing a motivating environment for
Pamela Jones.

To what degree did management fulfill the
expectations of Pamela?
Initially, Pamela's expectations were met, but very
soon her work environment deteriorated, causing
her motivation to drop and eventually causing her
to quit.

Was the performance-reward connection clear
to her?
The performance reward link was not clear.

What should management have done to create a
truly motivating environment?
Refer to the OLC
www.mcgrawhill.ca/college/schwind for additional
information about the expectancy model.
9-16