Employee Separation and Retention Study Notes

Chapter 10 Employee Separation and Retention LO 10-01 Distinguish between involuntary and voluntary turnover, and discuss how each of these forms of turnover can be leveraged for competitive advantage ● ● ● ● Involuntary Turnover: Turnover initiated by the organization (often among people who would prefer to stay) Voluntary Turnover: Turnover initiated by the employees (often whom the company would prefer to keep) Employment at Will Doctrine: The doctrine that in the absence of a specific contract, either an employer or employee could sever the employment relationship at any time Number of protected groups has led to an increase in litigation —> one reaction to this dilemma is enduring long stretches of poor performance in order to create the extensive paper trail that would support a negative action, another questionable dilemma is to initiate punitive actions short of termination in an effort to get the employee to quit on his or her own, a third unsustainable reaction is to pay off the employee with thousands of dollars in excess severance pay in return for waiving their right to sue for wrongful discharge LO 10-2 List the major elements that contribute to perceptions of justice and how to apply these in organizational contexts involving discipline and dismissal Principles of Justice ● ● ● ● ● ● Outcome Fairness: The judgment that people make with respect to the outcomes received relative to the outcomes received by other people with whom they identify Procedural Justice: A concept of justice focusing on the methods used to determine the outcomes received The six determinants of procedural justice are consistency, bias suppression, information accuracy, correct ability, representativeness, and ethicality Lack of bias and informational accuracy are the most critical features of the six determinants of procedural justice Interactional Justice: A concept of justice referring to the interpersonal nature of how the outcomes were implemented Four determinants of interactional justice are explanation, social sensitivity, consideration, and empathy Progressive Discipline and Alternative Dispute Resolution ● ● ● ● Effective discipline programs have 2 central components which are documentation (which includes specific publication of work rules and job descriptions that should be in place prior to administering discipline) and progressive punitive measures Progressive Discipline programs go from first offence verbal warning, second offence written warning, third offence threat of suspension, etc Alternative Dispute Resolution (ADR): A method of resolving disputes that does not rely on the legal system. Often proceeds through the 4 stages of open door policy, peer review, mediation, and arbitration Four stages of Alternative Dispute Resolution are open door policy, peer review, mediation, and arbitration Employee Assistance and Wellness Programs ● ● ● ● ● ● Employee Assistance Programs (EAPs): Employer programs that attempt to ameliorate problems encountered by workers who are drug dependent, alcoholic, or psychologically troubled The key to the effectiveness of a EAP is finding the right balance between collecting information that can be used to promote employee health on one hand and the employee’s right to privacy on the other Employee wellness programs take a proactive and preemptive focus on trying to prevent health related problems in the first place One of the major determinants of how far employee wellness programs can push their employees is how central health is to effectively performing the work Financial costs are often the driving force behind these programs, one should not lose sight of the fact that the quality of life enjoyed by employees both on and off the job is also affected Outplacement Counselling: Counselling to help displaced employees manage the transition from one job to another Managing Voluntary Turnover ● Progression of Job Withdrawal: Theory that dissatisfied individuals enact a set of behaviours in succession to avoid their work situation Behaviour ● Whistle blowing: Making grievances public by going to the media or government Physical Job Withdrawal Psychological Withdrawal ● ● Job Involvement: The degree to which people identify themselves with their jobs Organizational Commitment: The degree to which an employee identifies with the organization and is willing to put forth effort on its behalf Chapter 11 Pay Structure Decisions LO 11-01 List the main decision areas and concepts in employee compensation management Pay is a large tool for furthering the organization’s strategic goals ● ● ● ● ● ● ● Pay has a large impact on employee attitudes and behaviours Employee compensation is usually a significant organizational cost and thus requires close scrutiny Total compensation accounts for 9-46% of revenues, depending on the industry Total compensation consists of cash compensation (salary, merit increases, bonuses, stock options, and other incentives) and benefits (health insurance, paid vacation, unemployment compensation) Pay Structure: The relative pay of different jobs (job structure) and how much they are paid (pay level) Pay Level: The average pay, including wages, salaries, and bonuses, of jobs in an organization Job Structure: The relative pay of jobs in an organization Equity Theory: Suggests that people evaluate the fairness of their situations by comparing them with those of other people ● ● The main implication for managing employee compensation is that to an important extent, employees evaluate their pay by comparing it with what others get paid, and their work attitudes and behaviours are influenced by such comparisons The other implication is that employee perceptions are what determine their evaluation 2 types of employee social comparisons of pay: 1. External Equity Pay Comparisons: Focus on what employees in other organizations are paid for doing the same general jobs (makes employees more content, attraction and retention) 2. Internal Equity Pay Comparisons: Focus on what employees within the same organization, but in different jobs, are paid (makes employees less content, promotion, transfer and job rotation) LO 11-02 Describe the major administrative tools used to manage employee compensation Any organization faces 2 important competitive market challenges in deciding what to pay its employees; product market competition and labor market competition Product Market Competition ● ● ● ● ● ● Organizations must be able to sell their goods and services at a quantity and price that will bring sufficient return on their investment —> Price is one of the most important dimensions An organization that has higher labor costs than its product market competitors will have to charge higher average prices for products of similar quality Product market competition places an upper bound on labor costs and compensation Labor costs are made up of average costs per employee and staffing levels. Average cost per employee is made up of direct payments (wages, salaries, bonuses) and indirect payments (health insurance, social security, unemployment compensation). Financially troubled organizations often seek to cut costs by focusing on one or both of these components Staff reductions, hiring freezes, wage and salary freezes, and sharing benefits costs with employees are ways to make organizations labor costs more competitive Labor Market Competition ● ● ● ● ● ● ● Reflects the number of workers available relative to the number of jobs available Shortages and surpluses influence pay levels Labor market competition includes not only companies that have similar products but also those in different product markets that hire similar types of employees Labor market competitions places a lower bound on pay levels Because organizations have to compete in the labor market, they should consider employees as a resource to invest in rather than just a cost Efficiency Wage Theory: A theory stating that wages influence worker productivity Benchmarking: Comparing an organization’s practices against those of the competition —> In compensation management, benchmarking against product market and labor market competitors is typically accomplished through the use of one or more pay surveys, which provide information on going rates of pay among competing organizations Several factors affect decisions on how to combine surveys. Product market comparisons that focus on labor costs are likely to deserve greater weight when: 1. 2. 3. 4. Labor costs represent a large share of total costs Product demand is elastic (it changes in response to product price changes) The supply of labor is elastic Employee skills are specific to the product market (and will remain so) In contrast, labor market comparisons may be more important when: 1. Attracting and retaining qualified employee is difficult 2. The costs (administrative, disruptive, and so on) of recruiting replacements are high ● ● ● ● ● Rate Ranges: Different employees in the same job may have different pay rates Key Jobs: Benchmark jobs, used in pay surveys, that have relatively stable content and are common to many organizations Nonkey Jobs: Jobs that are unique to organizations and that cannot be directly valued or compared through the use of market surveys Job Evaluation: An administrative procedure used to measure internal job worth that is composed of compensable factors and a weighting scheme Compensable Factors: The characteristics of jobs that an organization values and chooses to pay for (job complexity, working conditions, required education and experience) The Point-Factor System ● After generating scores for each compensable factor on each job, job evaluators often apply a weighting scheme and weights can be generated in 2 ways 1. A priori weights can be assigned, which means factors are weighted using expert judgements about the importance of each compensable factor 2. Weights can be derived empirically based on how important each factor seems in determining pay in the labor market ● ● ● Pay Policy Line: Equation that describes the relationship between a job’s pay and it’s job evaluation points Pay Grades: Jobs of similar worth or content grouped together for pay administration purposes Range Spread: The distance between the minimum and maximum amounts in a pay grade LO 11-04 Discuss the significance of process issues such as communication in compensation management The Important of Process: Participation and Communication Compensation management has been criticized for following the simplistic belief that ‘if the right technology can be developed, the right answers will be found” Participation ● ● ● Employee participation in compensation decision making can take many forms It is important to distinguish between who is affected by the policies and those who must implement the policies The managers implement and are affected, line managers make policies work Communication ● ● ● ● Two-tier wage plans: Worker there longer earning more than new hire working same job Not only actual pay but the comparison standard influences employee attitudes Managers play the most crucial communication role A common issue in deciding when a job needs to be reclassified is because of substantial changes in its content