Type:
Solution Manual
Strategic Compensation A Resource: Human Resource Management Approach Edition:
9th Edition
Author(s):
Joseph J. Martocchio
Building Strategic Compensation Systems Greetings! Thank you for adopting the Building Strategic Compensation Systems case in your course. Your students will benefit tremendously from your decision to provide them with an experiential learning opportunity. As you know, students will have the student edition of this case, and software (a Microsoft Excel application) accompanies the case to facilitate analyses of compensation data. Our goal in this instructor’s manual is to help you provide a positive learning experience for your students. The instructor’s manual includes all of the material that the student edition contains plus we provide you with useful tips throughout this manual for working with students. A detailed summary of the case project follows in the next section. In a nutshell, Building Strategic Compensation Systems will allow students to work in small compensation consulting teams charged with the responsibility for developing a compensation plan for a company named e-sonic. The project is divided into four sections, which correspond to fundamental goals of compensation practitioners as described in chapters in the Strategic Compensation: A Human Resource Management Approach (9th edition) textbook published by Pearson Education, Inc. (ISBN: 9780134320540): Strategic Analysis: Section 1: Section 2: Section 3:
Chapters 1 (and Appendix 1 contained at the end of this manual) Chapter 6 Chapter 7 Chapters 3 through 5 and 8
The strategic analysis and sections may each be completed in two to three weeks, fitting well with semester-long courses. Instructors whose courses include a variety of additional activities or span only seven to ten weeks may have students complete only three of the four sections in either configuration (Strategic Analysis and Sections 1 and 2, or Sections 1 through 3). The instructor may have student groups prepare written reports or give oral presentations to the class. Report outlines are included in the instructor’s and student’s casebook versions. Of course, we welcome your feedback about this case and will be happy to answer instructor questions directly. Feel free to contact author Professor Joe Martocchio at the University of Illinois (martocch@illinois.edu or 217-244-4098). Sincerely, David Barcelona Joe Martocchio 229 Copyright ©2017 Pearson Education, Inc.
About the Authors David Barcelona is a 2005 Graduate of the University of Illinois’ Master’s Program in Human Resources and Industrial Relations. He previously served as a consultant for a renowned executive compensation consulting firm. Joseph J. Martocchio is Professor of Human Resources and of Psychology at the University of Illinois at Urbana Champaign. He has taught compensation and benefits for more than 20 years.
Instructor’s Manual Project Summary Effective compensation systems achieve three key goals. They provide a firm internal consistency, market competitiveness, and a means for recognizing individual achievement. An internally consistent compensation system clearly defines the relative value of each job among all jobs within a company, providing an objective justification for their differences in pay. Market competitive pay systems allow firms to attract and retain the best employees by setting pay levels consistent with a firm’s competitive strategies. Finally, a compensation system that recognizes individual achievement can boost both employee morale and firm performance by effectively rewarding key contributors. This simulation provides students a framework for developing a compensation system which achieves these goals through three distinct, sequential sections. The development of a strategic analysis guides all decisions made regarding students’ compensation systems throughout the project. The strategic analysis reveals firm-specific challenges, objectives, and initiatives that allow students to effectively align the goals of a compensation system with that of their company strategy.
230 Copyright ©2017 Pearson Education, Inc.
Section I introduces students 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 objectively quantify job differences, students build the framework for internal equity. Section II shifts students’ focus outside of their firm to understand its relationship with the external marketplace. Market survey data is utilized to compare pay rates of positions inside the firm with those in the marketplace to establish the foundations of marketcompetitive pay. The analysis of market data also leads students to the determination of appropriate pay-policy mixes for each of their job structures. Finally, in Section III, students recognize the contributions of individual employees through the creation of a merit-pay system and put their plan into action by paying employees within their firm. Hypothetical pay discrepancies are introduced to each student group for resolution within the parameters of their designed compensation system. They are tasked with many of the difficult decisions that compensation professionals face on a daily basis. The following pages provide an outline to guide you and your students through this simulation. From the Strategic Analysis to Section III, each step in the process is outlined and explained. In addition, learning objectives are highlighted along with the rationale behind student exercises.
231 Copyright ©2017 Pearson Education, Inc.
INTRODUCTION PROVIDED TO STUDENTS Introduction This simulation teaches fundamentals of compensation system design through a semesterlong exercise. Acting as a recently hired compensation consulting team, your student group will assist the bourgeoning online music firm, e-sonic, to develop an internally consistent and market competitive compensation system which recognizes the achievements of individual contributors. The following introduction offers a background and history of your new client in addition to a description of e-sonic business objectives and a project outline. The authors of this casebook wish you well in your studies and hope that you find the simulation both educational and enjoyable. Company Background Sonic Records is a market leading recording studio and production house. Sonic Records, having experienced tremendous success in the recording and music distribution industry over the past 30 years, realized that the rules of the game were changing. No longer would music be distributed solely through traditional channels. Consumers desired instant delivery of music online and expected a selection of thousands of artists’ work at their fingertips. A recent study of U.S. music listeners found that 87% of the U.S. population listens to music, spending more than 4 hours each day tuning into their favorite tunes. The demand for access to instant music access is widespread. According to the data, 85% of Americans listen to music online in a typical week, up nearly 15% from last year. Additionally, online listening trends are having a significant impact on our on-demand listening habits. While Americans streamed more than 145 billion on-demand tracks across audio and video platforms in 2014, they streamed 120 billion in the first half of 2015. Music listening is also becoming more mobile as 52% use their smartphones to listen to music in a typical week, a 9% increase over last year. The online music streaming market has seen rapid growth in the United States in subscription services; yet, there are many challenges that must be overcome to be successful. Success relies on many factors such as enforcing the rights of intellectual property. When consumers obtain digital music through online file sharing networks or burning CDs, it ultimately harms companies and the industry. In addition to this threat, a few competitors have already gained a foothold in this market space. These companies make up 70% of the market share in their industry and possess major strengths including their portfolios of millions of songs from some of the biggest labels in music, the ability to allow consumers to download songs onto their phones, and the affordable prices they offer for their services. Despite these challenges, opportunities exist for new entrants. The rise in technological advances such as the smartphone has led to a greater demand in online music, indicating 232 Copyright ©2017 Pearson Education, Inc.