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VI. Discussion Questions and Suggested Answers
7-1. You are a compensation analyst for a pharmaceuticals company, which is
located in Los Angeles, California. Define the scope of the relevant labor
markets for chemists and for data entry clerks. Describe the rationale for
your definitions.
Relevant labor markets represent the fields of potentially qualified candidates for
particular jobs. Companies collect compensation survey data from the appropriate
7.2. Can companies easily develop compensation systems that are both internally
consistent and market competitive? What are some of the challenges to this
goal?
Answer to this question can be found in the MyLab
7.3. Which do you believe is most important for a company’s competitive
advantage: internal consistency or market competitiveness? Explain your
answer.
7.4. Refer to the regression equation presented earlier in this chapter. When b =
0, the market pay line is parallel to the x-axis. Provide your interpretation.
Answer to this question can be found in the MyLab
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7.5. Refer to Table 7-3. Cross out salaries for Company F and Company G.
Calculate the mean and median for the set of Companies A through E.
VII. End of Chapter Case; Instructor Notes, and Questions and Suggested
Student Responses
Case Name: Nutriment’s New Hires
Instructor Notes
Nutriment is pursuing a differentiation strategy in order to create product that is not
offered by their competitors. In order to successfully attract the right staff to ensure
Suggested Student Responses:
7.6. What are some strategic considerations in establishing a pay structure at
Nutriment?
In considering a pay structure that is competitive in the market place, Nutriment should
consider their industry, competitors and other external market factors. They must also
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AACSB: Analytical thinking
7.7. Should Jack suggest a pay policy to lead, lag or match the market? Explain
your recommendation.
Jack should suggest two different strategies for Nutriment. For the administrative staff, a
match strategy is appropriate. Because it is not necessary to pay higher salaries in order
VIII. Crunch the Numbers! Questions and Suggested Student Responses
Updating Salary Survey Data
7.8. By what percent did the cost of goods and services change between December
2013 and June 2014?
December 2013 = 234.697
7.9. (A) By what percent might you expect the average cost of goods and services
to change over the second 6-month period of 2014? Hint: First, calculate the
percentage cost change for the period July through December for each of the
previous years: 2009 through 2013. Second, take the average of these five
figures. This calculation gives us the average percent cost change. We often
rely on multiple years for estimations to give us a more stable picture of
percent cost changes.(B) What is the estimated average salary for December
31, 2014? Hint:[(initial average salary ×average percent cost change) +initial
average salary] ×100%.
A.
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July through December change:
2009 = (217.247-214.726) / 214.726 = 1.1741%
7.10. (A) By what percent might you expect the average cost of goods and services
to change between January 1, 2015 and December 31, 2015? Hint: First,
calculate the percent cost change for the period January through December
for each of the previous years: 2009 through 2013. Second, take the average
of these five figures to calculate the average percent cost change.(B) What is
the estimated average salary for December 31, 2015? Hint:[(December 2014
average salary ×average percentage cost change) +December 2014 average
salary] ×100%.
A.
2009 = (217.247- 211.933) / 211.933= 2.5074%
B.
IX. Assisted-graded Questions
7.11. Is it appropriate to utilize the same pay mix arrangement for clerical
employees and sales professionals? Explain your answer and how the pay
mix arrangements might differ.
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Answer to this question can be found in the MyLab
7.12. Explain what the market pay line is. How is it used in the context of pay
level policies such as market lead, market lag, and market match
Answer to this question can be found in the MyLab
7.13. MyManagementLab Only – comprehensive writing assignment for this
chapter.
Answer to this question can be found in the MyLab
X. Additional Cases from the MyManagementLab Website; Instructor Notes,
and Questions and Suggested Student Responses
Case Name: Analyzing Jobs at Custom Carpet Cleaning
Instructor Notes
Many smaller companies must manage their staff with limited human resource
management expertise. In this case, the company is making an effort to create written job
descriptions, which will be useful in developing an internally consistent compensation
system that is competitive in the market. However, it is unlikely that the process here
will result in a valid and reliable job analysis. Developing job descriptions that are not
thorough or entirely accurate will not effectively support the development of a
compensation system. Many managers in small companies rely upon the Internet for
information. In this case, it might be a good investment for the company to utilize an
outside consultant or find an opportunity for formal training for the Office Manager in
order to conduct an effective job analysis.
Suggested Student Responses:
7-14. Do you think Bob’s approach to job analysis will be effective in creating
useful job descriptions?
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7.15. What can be done to improve this job analysis process?
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