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Section A

problem1)i) Discuss the different factors which might influence an organization's compensation strategy.

ii) Describe what is meant by equity and how it is an significant consideration in compensation.

problem2)i) Discuss the concept of job evaluation, including the most common methods used by organizations.

ii) Describe the philosophical basic assumptions behind variable pay plans.

Section B

Case Study:

In a speech to employees, chairman of Praveen Metals said that to survive in dynamic market, they should be able to switch gears and perform differently in response to change. According to him, traditional job titles and descriptions indicated a restricted set of work duties. Paying employees according to these structured duties led to rigidity during times of change. Paying employees according to their competencies seemed to be more rational approach, allowing organization to speedily change employee assignments and motivate their employees to gain skills and become more valuable. The workers will be motivated as they were being paid according to their skill sets.

The chairman felt that by doing this, employees will gain some control over their pay. All in all, such a pay system had potential of being more motivating as well as of retaining employees. More motivated and performance-oriented employees will be drawn to such a system as it allowed them to realize their potential. Such people were often the high achievers and effective employees.

Management initiated skill-based pay in an organization, replacing earlier system of job grades based pay. During this transition, employees assisted in writing skill definitions and benchmarking skills. Jobs, based on job scope and complexity, defined benchmarked competencies. Company conducted training sessions and made sure that employees understood the new system.

Supervisors and team leaders assessed employee application of knowledge. If employees were applying skills beyond their designated skill base pay level, the supervisors initiated certification and approval processes to promote them to next higher level. If employees’ performance was below standard, their pay remained the same. Though, the supervisor and the employee were needed to establish a training plan of action.

After a year of operation, employees were asked to provide inputs in three areas: (1) access to training and job rotation, (2) how well they understood new plan and (3) their view of advancement under new plan. After implementation, following results were identified. Employees, who had the positive perception of their access to training and job rotation during first year of the new pay plan, were also satisfied with their skill based pay in the second year. Employees who understood new plan in year one were also satisfied with their skill based pay benefits in year two. Overall, these employees felt that the system was fair. So, from these findings, the management found that both employee understanding of the pay system and their being able to affect their pay through access to training and job rotation were important for the success of the skill-based pay plan.


a) The chairman suggested the replacement of job grades. Could you suggest some of the modern approaches to wages and compensation determination?

b) According to the Chairman, employees don’t have control over their pay by using traditional approach. Is it possible for employees to have control over their pay?

Management Theories, Management Studies

  • Category:- Management Theories
  • Reference No.:- M93158

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