HRM textbook

386 PART 4 COMPENSATION
For example, the firm s policy is simply to pay its employees a
competitive salary, by which it means about average for
what other hotels in the city are paying for similar jobs. Lisa
knows that pay policies like these may actually run counter
to what the company wants to achieve strategically, in terms
of creating an extraordinarily service-oriented workforce.
How can you hire and retain a top workforce, and channel
their behaviors toward high-quality guest services, if you
don t somehow link performance and pay? She and her team
therefore turn to the task of assessing and redesigning the
company s compensation plan.
Even a casual review by Lisa Cruz and the CFO made it
clear that the company s compensation plan wasn t designed
to support the firm s new strategic goals. For one thing, they
knew that they should pay somewhat more, on average, than
did their competitors if they expected employees to consistently
exceed expectations when it came to serving guests.
Yet their review of a variety of metrics (including the Hotel
Paris s salary/competitive salary ratios, the total compensation
expense per employee, and the target percentile for total
compensation) suggested that in virtually all job categories
the Hotel Paris paid no more than average, and, occasionally,
paid somewhat less.
The current compensation policies had also bred what
one hotel manager called an I don t care attitude on the
part of most employees. What she meant was that most
Hotel Paris employees quickly learned that regardless of
what their performance was, they always ended up being
paid about the same as employees who performed better
and worse than they did. So, the firm s compensation plan
actually was dysfunctional: It was not channeling employees
behaviors toward those required to achieve the company s
goals. In some ways, it was doing the opposite.
Lisa and the CFO knew they had to institute a new,
strategic compensation plan. They wanted a plan that
improved employee morale, contributed to employee commitment,
reduced employee turnover, and rewarded (and
thus encouraged) the sorts of service-oriented behaviors
that boosted guest satisfaction. After meeting with the company
s CEO and the board, the CFO gave Lisa the go-ahead
to redesign the company s compensation plan, with the
overall aim of creating a new plan that would support the
company s strategic aims.
Questions
1. Draw a diagram showing with arrows how compensation
at Hotel Paris should influence employee performance,
which should in turn influence Hotel Paris
performance. Include at each level examples of relevant
compensation policies, employee behavior, and Hotel
Paris outcomes.
2. Would you suggest that Hotel Paris implement a
competency-based pay plan for its nonmanagerial staff?
Why or why not?
3. Devise a ranking job evaluation system for the Hotel
Paris s nonmanagerial employees (housekeepers, valets,
front-desk clerks, phone operators, waitstaff, groundskeepers,
and security guards) and use it to show the worth
of these jobs relative to one another.
KEY TERMS
employee compensation, 352
direct financial payments, 352
indirect financial
payments, 352
Davis-Bacon Act (1931), 354
Walsh-Healey Public
Contract Act (1936), 354
Title VII of the 1964 Civil Rights
Act, 354
Fair Labor Standards
Act (1938), 354
Equal Pay Act (1963), 357
Employee Retirement Income Security
Act (ERISA), 358
job evaluation, 360
compensable
factor, 360
benchmark job, 361
ranking method, 361
job classification
(or grading) method, 362
classes, 362
grades, 362
grade definition, 362
point method, 363
wage curve, 367
market-competitive
pay system, 367
salary survey, 368
pay (or wage) grade, 371
pay (or rate) ranges, 371
compa ratio, 372
competency-based pay, 376
broadbanding, 378
comparable worth, 380
ENDNOTES
1. Elayne Robertson Demby, Two Stores
Refused to Join the Race to the Bottom
for Benefits and Wages, Workforce
Management, February 2004, pp. 57 59;
www. we g mans.co m/we bapp/wc s/
stores/servlet/CategoryDisplay?langId=
1&storeId=10052&catalogId=10002&
categoryId=256548,accessed March 25,2009.
2. Richard Henderson, Compensation Management
(Reston, VA: Reston Publishing,
1980), pp. 101 127; and Stacey L. Kaplan,
Total Rewards in Action: Developing a
Total Rewards Strategy, Benefits & Compensation
Digest 42 no. 8 (August 2005).
3. Demby, Two Stores Refused to Join the
Race.
4. Ibid.
5. www.wegmans.com, accessed June 1,
2011.
6. Nicholas Wade, Play Fair: Your Life May
Depend on It, The New York Times,
September 12, 2003, p. 12.
7. Robert Bretz and Stephen Thomas, Perceived
Inequity, Motivation, and Final Offer