Compensation

Overview Acting as a recently hired compensation consultant, you will assist the burgeoning online music firm e-sonic to develop an internally consistent and market- competitive compensation system that recognizes the achievements of individual contributors. The major portion of the project is divided into three milestones, which will build upon the previous milestone. The milestones are submitted in Modules Three, Five, and Six. The final version of the entire project will be due at the end of Module Seven. Sample report outlines are included in the project text found in MyManagementLab. Each of the sections for this assignment will be submitted via Brightspace.

Outcomes The project helps students to meet the following course outcomes:

• Students will gain an understanding of the evolution and administration of compensation and benefit programs for organizations • Students will explore wage theory, principles and practices, unemployment security, worker income security, group insurance, disability insurance,

and pension plans and how these compensation and benefit items are balanced to provide incentive and recruitment of a high-performance workforce

• The connection between the organization’s mission, objectives, policies, and the implementation and revision of their respective compensation and benefit systems will be analyzed to gain a deeper understanding of the importance of such systems to the organization’s overall human resource management

• At the conclusion of this course, students will be able to demonstrate the acquisition and application of theories and concepts that support the enhancement and proficiency in 7 primary competencies: strategic approach, research, teamwork, communication, analytical skills, problem solving, and legal and ethical practices

Preparation 1. Read the Building Strategic Compensation Project narrative linked in the course menu of the MyManagementLab home page. Note: Section 3:

Recognition of Individual Achievements WILL NOT be included in the course project.

2. Download the Comp Analysis Software Microsoft Excel file. Directions on accessing this file are located in the Module Resources section of Module One. To run on a PC, the file requires Microsoft Excel 2007 or later. To run on a Mac, the version requires Excel 2011 or later. o NOTE: Users of the CompAnalysis software must set the macros to a low level in order for the software to work. If the macros are set on too high of a

security level, then the software will be disabled and will not work properly. Navigate to the Tools menu, click Macros, and then click Security. Lower the security level, save the spreadsheet, close, and re-open.

o Click on the External Market Survey feature, which will be used in Section 2 of the project, titled Market Competitiveness. Make your decisions first by following the directions in the Building Strategic Compensation Project (Appendix 3 in the student version, Appendix 5 in the instructor’s version) and jot down the pertinent information on paper.

o After completing the External Market Survey section, move on to the Merit Pay Planning feature, which will be used in Section 3 of the project, titled Recognition of Individual Achievements. Input your choices as indicated in CompAnalysis and analyze the data.

Milestones Milestone One: Strategic Analysis The development of a strategic analysis guides all decisions made regarding your compensation systems throughout the project. The strategic analysis reveals firm-specific challenges, objectives, and initiatives that allow you to align the goals of a compensation system effectively with those of the company strategy. The strategic analysis allows you to better understand the external market challenges e-sonic faces in addition to its internal capabilities. As a consultant, a thorough understanding of e-sonic’s business environment allows you to better align your competitive system design with e-sonic’s goals, challenges, and objectives. Follow the outline below when completing this portion of the project. The strategic analysis is fully described in the MyManagementLab Building Strategic Compensation Systems casebook for faculty and students, linked in the course menu in MyLab. Follow the explanations and outline to complete this milestone. Strategic Analysis Outline:

1. Executive Summary (Concisely conveys the project objectives and main findings. The executive summary is completed last, but included first in the strategic analysis.)

2. Strategic Analysis a) Identification of e-sonic’s industry based on the North American Industry Classification System (NAICS) b) Analysis of e-sonic’s external market environment

i. Industry Profile ii. Competition iii. Foreign Demand iv. Long-Term Industry Prospects v. Labor-Market Assessment

c) Analysis of Internal Capabilities i. Functional Capabilities ii. Human Resource Capabilities

Each section of the final project should be 5–7 pages in length. The Strategic Analysis section is due at the end of Module Three. It will be graded with the Milestone One Rubric.

Milestone Two: Section 1: Internally Consistent Job Structures Section 1 introduces you to the specification of internally consistent job structures. Through writing job descriptions, the development of job structures, and both the development and implementation of a point evaluation method to quantify job differences objectively, you build the framework for internal equity. In Section 1, you will focus on building an internally consistent compensation system. An internally consistent compensation system design will clearly define the relative value of each e-sonic sample job, creating a job hierarchy and an objective rationale for pay differences. As an e-sonic consultant, you are offered a sample of e-sonic jobs in Section 1. Currently, e-sonic employs 100 people and will be hiring many more. However, for the purpose of this simulation, you are asked to work with the sample of four jobs offered (see Appendix 2 for sample jobs, located in the MyManagementLab project tab). Limiting the number of jobs removes one level of complexity from the simulation and allows you to focus on learning the functions of compensation system design. The framework you develop classifying sample jobs can easily be adapted in the future to include all e-sonic positions. Section 1 Outline:

1. Create Job Descriptions 2. Create Job Structures 3. Build Point Evaluation Method

a) Select benchmark jobs. b) Choose compensable factors based upon benchmark jobs. c) Define factor degree statements. d) Determine weights for each compensable factor.

4. Calculate Point Values for e-Sonic Jobs a) Determine point value for each compensable factor. b) Use the job evaluation worksheet to calculate point values for each position. c) Distribute points for each compensable factor across degree statements. d) Rate jobs using point method. e) Individually rate jobs to ensure reliability. f) Resolve any discrepancies in point totals. g) Rank jobs in each job structure according to results of your point evaluation.