Chapter 7 Internal Consistency Or Market Competitiveness

Unlock access to all the studying documents.

View Full Document

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

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

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%.

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%.

2009 = (217.247- 211.933) / 211.933= 2.5074%

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.

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?

7.15. What can be done to improve this job analysis process?