Building Internally Consistent Compensation Systems : Job Analysis and Job Evaluation

Presented by

2^nd Group

Alexander Siburian 2006608825

Joshua Ady Lubis 2006608970

Seruni Arifah Putri 1906419330

Yily Leoni 2006499162

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Supervised by

Dr. Ir. Manerep Pasaribu, MM

Compensation & Benefit Strategy

Summary Job Analysis

• A job description is the list of tasks, duties, and responsibilities that make up a job
• A job specification is the list of knowledge, skills, abilities, and other characteristics that are necessary for an individual to have to perform the job. Thus, the description focuses on the job and the specification focuses on the person.
• The process begins by looking at people at work. Job-based structures look at what people are doing and the expected outcomes; skill and competency-based structures look at the person. However, the underlying purpose of each phase of the process, called out in the left-hand side of the exhibit, remains the same for both

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Source : Milkovich, G., Newman, J., Gerhart, B. (2019). Compensation (12^th edition) Chapter 4

Job Analysis Approach

• Job analysis is the systematic process of collecting information that identifies similarities and differences in the work.
• Identifying the skills and experience required to perform the work clarifies hiring and promotion standards and identifies training needs. In performance evaluation, both employees and supervisors look to the required behaviors and results expected in a job to help assess performance
• In compensation, job analysis has two critical uses: (1) It establishes similarities and differences in the work contents of the jobs, and (2) it helps establish an internally fair and aligned job structure. If jobs have equal content, then in all likelihood the pay established for them will be equal (unless they are in different geographies)

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Source : Milkovich, G., Newman, J., Gerhart, B. (2019). Compensation (12^th edition) Chapter 4

Job Analysis Procedure

• A group of tasks performed by one person makes up a position. Identical positions make a job, and broadly similar jobs combine into a job family
• In this workplace, jobs follow a steady progression in a hierarchy of increasing responsibility, and the relationship between jobs is clear. So is how to qualify for promotion into a higher-level job. While some argue that such a traditional, stable structure is a shrinking part of the workplace landscape, such structures nevertheless persist, in varying degrees, in many large organizations. Thus, the federal Department of Labor’s description of conventional job analysis provides a useful “how-to” guide.

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Source : Milkovich, G., Newman, J., Gerhart, B. (2019). Compensation (12^th edition) Chapter 4

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What Information should be Collected

Job Data Identification

Job titles, departments, the number of people who hold the job, and whether it is exempt from the Fair Labor Standards Act are all examples of information that identifies a job.

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Job Data Content

This is the heart of job analysis. Job content data involve the elemental tasks or units of work, with emphasis on the purpose of each task.

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Employee Data

We can look at the kinds of behaviors that will result in the outcomes.

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Essential Element and the Americans with disabilities Act

In addition to the job description having sections that identify, describe, and define the job, the Americans With Disabilities Act (ADA) requires that essential elements of  a job—those that cannot be reassigned to other workers—must be specified for jobs covered by the legislation

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Level Analysis

The job analysis terms defined in Exhibit 4.4 are arranged in a hierarchy. The level at which an analysis begins influences whether the work is similar or dissimilar. The three jobs described in the beginning of the chapter—customer representative, engineer, account analyst—all involve use of computers, but a closer look showed that the jobs are very different. At the job-family level bookkeepers, tellers, and accounting clerks may be considered to be similar jobs, yet at the job level they are very different.

How Can The Information be Collected ?

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Conventional Method

The most common way to collect job information is to ask the people who are doing a job to fill out a questionnaire. Sometimes an analyst will interview the jobholders and their supervisors to be sure they understand the questions and that the information is correct. Or the analyst may observe the person at work and take notes on what is being done

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Quantitative Method

Increasingly, employees are directed to a website where they complete a questionnaire online. 15 Such an approach is characterized as quantitative job analysis (QJA) ,

Source : Milkovich, G., Newman, J., Gerhart, B. (2019). Compensation (12^th edition) Chapter 4

JOB ANALYSIS: BEDROCK OR BUREAUCRACY?

• In some organizations, analyzing work content is now conducted as part of workflow and supply chain analysis. Supply chain analysis looks at how an organization does its work: activities pursued to accomplish specific objectives for specific customers.

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• Starbucks shaved 20 seconds off its wait time by redesigning the barista job to include “floating.” Floaters walk the queue, take your order, mark the cup, and hand the cup to the barista who will actually fill your order—all before you get to the cash register. Floaters also “communicate” with the customers to make the experience enjoyable. Notice that as part of a workflow study, job analysis is conducted to understand the work and how it adds

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Source : Milkovich, G., Newman, J., Gerhart, B. (2019). Compensation (12^th edition) Chapter 4

Judging Job Analysis

Reliability

is a measure of the consistency of results among various analysts, various methods, various sources of data, or over time. Reliability is a necessary, but not sufficient, condition for validity.

Validity

examines the convergence of results among sources of data and methods. If several job incumbents, supervisors, and peers respond in similar ways to questionnaires, then it is more likely that the information is valid.

Acceptability

If job holders and managers are dissatisfied with the initial data collected and the process, they are not likely to buy into the resulting job structure or the pay rates attached to that structure.

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Currency

To be valid, acceptable, and useful (see below), job information must be up to date. Some jobs stay relatively stable over time, while others may change in important ways, even over short time periods.

Usefulness

For pay purposes, job analysis provides work-related information to help determine how much to pay for a job—it helps determine whether the job is similar to or different from other jobs. If job analysis does this in a reliable, valid, and acceptable way and can be used to make pay decisions, then it is useful

A Judgement Call

In the face of all the difficulties, time, expense, and dissatisfaction, why on earth would you as a manager bother with job analysis? Because work-related information is needed to determine pay, and differences in work determine pay differences

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Source : Milkovich, G., Newman, J., Gerhart, B. (2019). Compensation (12^th edition) Chapter 4

Summary Of Article�The Customer Service – Agent

• Bill Ryan bekerja sebagai customer service di perusahaan half. Com yang menangani jasa call center di perusahaan besar e-commerce seperti ebay yang menjembatani antara seller dan buyer
• Based on kasus yang disampaikan, dia selalu ramah kepada buyer yang komplain dengan slogan “Each message should make sense to my grandmother”, terkait pembelian PS, buku dan juga Movie Video
• Persistant dan Problem Solver
• Dari Perusahaan memberikan fasilitas creative corner agar para pekerjanya tidak stress, kebanyakan teman teman dari Bill Ryan dalam kondisi Burn Out
• Jikalau ada problem yang tidak terselesaikan, ybs meminta arahan dari atasannya dan memberitahu konsumen pada kesempatan pertama

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Source : Milkovich, G., Newman, J., Gerhart, B. (2019). Compensation (12^th edition) Chapter 4

Job-Based Structures & Job Evaluation

Job evaluation is process of systematically determining the relative worth of jobs to create a job structure for the organization, based on a combination of job content, skills required, value to the organization, organizational culture & the external market.

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Job evaluation purposes:

• Supports organizational strategy
• Supports workflow
• Fairness for employee
• Motivates behavior toward organization objectives (related to rewards)

Source: Milkovich, G., Jerry, N., & Barry, G. (2019). Compensation (12th ed) Chapter 5. New York: McGraw-Hill Irwin.

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Classification Method

Ranking Method

• Orders the job descriptions from highest to lowest based on a global definition of relative value or contribution to the organization’s success.
• 2 ways:
• Alternation ranking: orders job descriptions alternately at each extreme.
• Paired comparison ranking: uses a matrix to compare all possible pairs of jobs.

• A series od classes covers range of job.
• Job descriptions is compared to the class descriptions to decide which class is the best fit for that job.

Resulting Rank:

1. Master Welder : 5
2. Electrician : 4
3. Shear Operator : 3
4. Punch Press Operator : 2
5. Grinder : 1
6. Receiving Clerk : 0

Source: Milkovich, G., Jerry, N., & Barry, G. (2019). Compensation (12th ed) Chapter 5. New York: McGraw-Hill Irwin.

Point Method

3 characteristics:

• Compensable factors
• Factor degrees numerically scaled
• Weight reflecting the relative importance of each factors

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Conduct in 8 steps:

1. Conduct Job Analysis

1. Determine Compensable Factors

• Characteristics in the work that the organization values, that helps pursue its strategy & achieve its strategy
• Also know as decision making which has 3-dimensional:
• The risk & complexity
• The impact of the decisions
• The time that must pass before the impact is evident
• Compensable factors should be:
• Based on organization’s strategy & value
• Based on the work performed
• Acceptable to the stakeholders affected by the resulting pay structure

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3 Hays Factors as Compensable Element

Accountability:

Measured impact that job is designed to have the success to the enterprise. 2 dimensions: freedom to act & impact

Problem Solver:

Measure the nature & complexity od the issues & challenges that the job has to face. 2 dimensions: environment & challenge

Know-How:

The sum total of knowledge & skill required to do the job completely. 3 dimensions: practical, technical & specialized knowledge & skill; planning, organizing, coordinating & integrating knowledge; communicating & influencing skill

Source: Milkovich, G., Jerry, N., & Barry, G. (2019). Compensation (12th ed) Chapter 5. New York: McGraw-Hill Irwin.

Point Method

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Example of Hay factor Know-How

3. Scale the Factors (usually consist of 4-8 degrees)

Criteria for scaling factors: ensure that the number of degrees is necessary; use understandable terminology; make it apparent how the degree applies to the job

Source: Milkovich, G., Jerry, N., & Barry, G. (2019). Compensation (12th ed) Chapter 5. New York: McGraw-Hill Irwin.

Point Method

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4. Weight Factors According to Importance

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5. Select Criterion Pay Structure

6. Communicate the Plan & Train Users

7. Apply to Nonbenchmark Jobs

8. Develop Online Software Support

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Source: Milkovich, G., Jerry, N., & Barry, G. (2019). Compensation (12th ed) Chapter 5. New York: McGraw-Hill Irwin.

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Who Should be Involved?

Compensation Analyst

Compensation Manager

Consultant

Senior Management

Employee Comittee

The Design Process Matters

• Procedural fairness are required
• Approval by higher levels of management is required
• Consistent
• Job evaluation committee is needed to avoid political influences

Balancing Chaos & Control

is necessary when it comes to job evaluation

Summary

• Job evaluation is common approach to designing pay differences for different work
• Job evaluation methods: ranking, classification & point
• Job evaluation ultimate use is to help design & manage a work-related, business focused & agreed-upon pay structure
• Job evaluation give impact for employee’s believe that they’re fairly treated, willingness/responsibility on training, focus on adding value to customers, improving quality of products & adaptability

Source: Milkovich, G., Jerry, N., & Barry, G. (2019). Compensation (12th ed) Chapter 5. New York: McGraw-Hill Irwin.

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Clearly define the relative value of each job among all jobs within a company. This ordered set of jobs represents the job structure or hierarchy. Companies rely on a simple yet fundamental principle for building internally consistent compensation systems: Jobs that require higher qualifications, more responsibilities, and more complex job duties should be paid more than jobs that require lower qualifications, fewer responsibilities, and less-complex job duties. Internally consistent job structures formally recognize differences in job characteristics that enable compensation managers to set pay accordingly.

As Figure 6-1 indicates, a benefits manager should earn substantially more than a benefits counselor 1. Benefits managers have far greater responsibility for ensuring effective benefits practices than does the entry-level counselor. The difference in average pay rates between benefits counselor 2 and benefits counselor I jobs should be far less than that between benefits manager and benefits counselor 1 jobs because the differences in responsibility between benefits counselor 2 and benefits counselor 1 are far less than the differences between benefits manager and benefits counselor 1.

Source: Martocchio, Joseph J. (2018). Strategic Compensation: A Human Resource Management Approach (9th edition) Chapter 6

Internally Consistent Compensation Systems

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Job analysis is a systematic process for gathering, documenting, and analyzing information in order to describe jobs. Job analyses describe content or job duties, worker requirements or job specifications, and, sometimes, the job context or working conditions.

Worker requirements represent the minimum qualifications and the knowledge, skills, and abilities (KSAs) that people must have to perform a particular job. Such requirements usually include education; experience; licenses; permits; and specific abilities and skills such as typing, drafting, or editing.

Working conditions are the social context or physical environment where work will be performed. For instance, social context is a key factor for jobs in the hospitality industry. Hospitality industry managers emphasize the importance of employees’ interactions with guests.

Steps in the Job Analysis Process, The job analysis process has five main activities: 1. Determine a job analysis program, 2. Select and train analysts, 3. Direct job analyst orientation, 4. Conduct the study: data collection methods and sources of data, 5. Summarize the results: writing job descriptions.

Finally, job analysts must be familiar with the structure of pertinent job data. Job analysis data are configured in levels, hierarchically from specific bits of information to progressively broader categories that include the prior specific pieces.

1. Management occupations, 2. Business and financial operations occupations, 3. Computer and mathematical occupations, 4. Architecture and engineering occupations, 5. Arts, design, entertainment, sports, and media occupations, 6. Office and administrative support occupations, 7. Military-specific occupations

Summarize the Results: Writing Job Descriptions Job descriptions summarize a job’s purpose and list its tasks, duties, and responsibilities, as well as the skills, knowledge, and abilities necessary to perform the job at a minimum level.

Conduct the Study: Data Collection Methods and Sources of Data Once analysts have gathered and made sense of these preliminary data, they can begin gathering and recording information for each job in the company. Analysts should carefully choose the method of data collection and the sources of data. The most common methods are questionnaires and observation.

Job Analysis

Source: Martocchio, Joseph J. (2018). Strategic Compensation: A Human Resource Management Approach (9th edition) Chapter 6

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The Equal Employment Opportunity Commission (EEOC) guidelines distinguish among the terms knowledge, skill, and ability

Companies must justify pay differences between men and women who perform equal work. Different job titles do not suffice as justification. Instead, companies must demonstrate substantive differences in job functions. Job analysis helps HR professionals discern whether substantive differences between job functions exist. Job analysis is also useful for determining whether a job is exempt or nonexempt under the Fair Labor Standards Act (FLSA). Companies may perform job analysis to see if they comply with the Americans with Disabilities Act (ADA) and the American with Disabilities Act (ADA) Amendments Act of 2008.

EEOC’s interpretive guidelines

Job Analysis Techniques : Human resource professionals can either choose from a variety of established job analysis techniques or custom-design them. Most companies generally choose to use established job analysis techniques because the costs of custom-made job analysis techniques often outweigh the benefits. Besides, many of the established job analysis techniques apply to a wide variety of jobs and both researchers and practitioners have already tested and refined them.

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Private consultants or consulting firms charge substantial fees to companies that use their methods, but the U.S. Department of Labor does not charge fees to use its job analysis method. Next, we will review the U.S. Department of Labor’s Occupational Information Network (O*NET)

Job Description

Source: Martocchio, Joseph J. (2018). Strategic Compensation: A Human Resource Management Approach (9th edition) Chapter 6

Job Evaluation Techniques

U.S. Department of Labor’s Occupational Information Network (O*NET)

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The U.S. Department of Labor’s Employment and Training Administration spearheaded the development of O*NET during the 1990s to replace its previous methods of analyzing and describing jobs (Revised Handbook for Analyzing Jobs and The Dictionary of Occupational Titles). O*NET is a database, and it was created for two reasons. First, it is designed to describe jobs in the relatively new service sector of the economy (e.g., wireless telecommunications). Second, O*NET more accurately describes jobs that evolved as the result of technological advances (e.g., software and hardware engineering).

Job Evaluation

Compensation professionals use job evaluation to systematically recognize differences in the relative worth among a set of jobs and establish pay differentials accordingly. Where as job analysis is almost purely descriptive, job evaluation partly reflects the values and priorities that management places on various positions.

Compensable Factors : Compensation professionals generally base job evaluations on compensable factors, which are the salient job characteristics by which companies establish relative pay rates. Most companies consider skill, effort, responsibility, and working conditions, which were derived from the Equal Pay Act. These four dimensions help managers determine whether dissimilar jobs are “equal.”

The Job Evaluation Process, The job evaluation process entails six steps: 1. Determining single versus multiple job evaluation techniques, 2. Choosing the job evaluation committee, 3. Training employees to conduct job evaluations, 4. Documenting the job evaluation plan, 5. Communicating with employees, 6. Setting up the appeals process

Compensation professionals categorize job evaluation methods as either market-based evaluation or job-content evaluation techniques. Market-based evaluation plans use market data to determine differences in job worth. Many companies choose market-based evaluation methods because they wish to assign job pay rates that are neither too low nor too high relative to the market. Setting pay rates too low will make it difficult to recruit talented candidates, whereas setting pay rates too high will result in an excessive cost burden for the employer.

Source: Martocchio, Joseph J. (2018). Strategic Compensation: A Human Resource Management Approach (9th edition) Chapter 6

Sample Job Evaluation Worksheet

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Job-content evaluation plans emphasize the company’s internal value system by establishing a hierarchy of internal job worth based on each job’s role in company strategy. Compensation professionals review preliminary structures for consistency with market pay rates on a representative sample of jobs known as benchmark jobs. Compensation professionals ultimately must balance external market considerations with internal consistency objectives. In practice, compensation professionals judge the adequacy of pay differentials by comparing both market rates and pay differences among jobs within their companies. They consult with the top HR official and chief financial officer when discrepancies arise, particularly if company pay rates are generally lower than the market rates. Upon careful consideration of the company’s financial resources and the strategic value of the jobs in question, these executives decide whether to adjust internal pay rates for jobs with below-market pay rates.

Seven steps to complete the point method.

Step 1: Select Benchmark Jobs

Step 2: Choose Compensable Factors Based on Benchmark Jobs

Step 3: Define Factor Degrees

Step 4: Determine the Weight of Each Factor

Step 5: Determine Point Values for Each Compensable Factor

Step 6: Verify Factor Degrees and Point Values

Step 7: Evaluate All Jobs

Source: Martocchio, Joseph J. (2018). Strategic Compensation: A Human Resource Management Approach (9th edition) Chapter 6

SUMMARY

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Alternative Job-Content Evaluation Approaches, The prevalent kinds of qualitative job evaluation techniques include: Simple ranking plans, Paired comparisons. Alternation ranking, Classification plans.

Internally Consistent Compensation Systems and Competitive Strategy : To this point, This chapter have examined the principles of internally consistent compensation systems and the rationale for building them. Moreover, we reviewed the key processes (i.e., job analysis and job evaluation) that lead to internally consistent compensation systems. Although we made the case for building internally consistent pay systems, these systems do have some limitations. Internally consistent pay systems may reduce a company’s flexibility to respond to changes in competitors’ pay practices because job analysis leads to structured job descriptions and job structures. In addition, job evaluation establishes the relative worth of jobs within the company.

1. This chapter discussed internally consistent pay systems and described two important tools HR and compensation professionals use to build them (job analysis and job evaluation). Job analysis represents a descriptive process that enables HR professionals to systematically describe job duties, worker specifications, and job context. Compensation professionals use job evaluation to assess the relative worth of jobs within companies.

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• Job analysis and job evaluation are an art because they require the HR and compensation professionals’ sound judgments. We discussed the strategic role that job analysis and job evaluation play in companies’ quests for competitive advantage; however, we also pointed out some of the shortcomings of these approaches. Compensation professionals must carefully weigh the possible benefits and consequences of these methods in attaining competitive advantage.

Source: Martocchio, Joseph J. (2018). Strategic Compensation: A Human Resource Management Approach (9th edition) Chapter 6

ARTICLE DISCUSSION #3

A Model Capturing Ethics and Executive Compensation

Source:

Rodgers, W., & Gago, S. 2003. A Model Capturing Ethics and Executive Compensation. Journal of Business Ethics 48: 189–202, 2003. Kluwer Academic Publishers. Printed in the Netherlands.

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INTRODUCTION

Artikel bertujuan mengembangkan kerangka kerja pengetahuan desain kompensasi eksekutif dengan pertimbangan etika, diklasifikasikan dalam 6 etika dipengaruhi konsep kebebasan dan kesetaraan untuk model pengambilan keputusan. (Rodgers & Gago, 2003).

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Pertama, struktur etika egois, mengutamakan kepentingan individu, menuntut maksimalisasi harga saham sebagai tujuan perusahaan, melibatkan para pemangku kepentingan dan manfaat didapat lebih besar dari pengurangan penipuan dan praktik ketidakadilan, dll (Rodgers and Gago, 2001).

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Kedua, tema deontologis atau ketaatan pada prinsip-prinsip individu dan penilaian terkait dengan keputusan tertentu berbasis aturan hukum perusahaan dan pemerintahan terkait kompensasi eksekutif. Misalnya, peraturan federal pasar modal persyaratan pengungkapan dan larangan penipuan. (Rodgers and Gago, 2001).

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Ketiga, utilitarianisme hanya mengizinkan sebagian solusi dengan tidak menangani masalah serius regulasi reformasi pasar. (Rodgers and Gago, 2001).

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Keempat, relativistic muncul karena perilaku pasar & lingkungan cenderung tidak stabil dan tidak terduga dan tidak ada keseragaman tindakan mempengaruhi kompensasi para pemangku kepentingan. Meta-teori dimana manajemen perusahaan menggunakan diri sendiri atau lingkungan sekitar untuk menentukan standar etika. (Rodgers and Gago, 2001).

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Kelima, etika kebajikan atau pendekatan identitas organisasi membantu mengukur pelaku pasar yang bersifat jangka pendek dan menghilangkan harapan jangka panjang pada kekuatan pasar. Pengembangan karakter kebajikan level manajemen sebagai moralitasnya fungsi utama. (Rodgers and Gago, 2001).

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Keenam, etika perawatan, berfokus pada kesediaan menerima perbedaan dan perspektif yang sebelumnya tidak diakui, perusahaan harus membangun solidaritas antara stake holder. Perusahaan mengakui tindakan yang dipengaruhi individu atau organisasi dapat dipengaruhi oleh tindakan. (Rodgers and Gago, 2001).

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Keenam sudut pandang etika memungkinkan perusahaan membangun & bertransaksi bisnis (konsep kebebasan) tanpa dibebani kontrol yang berat (persamaan) dan mendesain sistem kompensasi eksekutif yang lebih adil dan melibatkan kepentingan para pemangku kepentingan. (Rodgers & Gago, 2003).

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Executive Compensation Issues

Kurang dari 5% gaji CEO mewakili faktor kinerja informasi keuangan (Tosi et al., 1997), sedikit faktor kontingensi atau kontekstual yang mempengaruhi gaji CEO dan kriteria yang digunakan untuk menetapkannya, misal harga saham turun, tetapi gaji CEO terus meningkat (Strauss, 2002).

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Kirchmeyer (2002) menegaskan perempuan mencapai pendapatan yang lebih rendah daripada laki-laki dalam posisi manajerial. Selain itu, Appold dkk. (1998) menemukan laki-laki terpengaruh secara negatif oleh kehadiran eksekutif perempuan, sedangkan perempuan tidak terpengaruh secara positif, maka perlu merevisi peraturan perusahaan.

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Reformasi dan revisi PP diperlukan terkait masalah kompensasi eksekutif berikut: (Byrne, 2002b)

(1) auditor harus memberikan laporan akuntansi kualitas kinerja klien dan menyediakan pasar premium untuk perusahaan dengan performa tinggi;

(2) dewan direksi harus dilibatkan dalam risiko manajemen, selain verifikasi informasi keuangan;

(3) mengubah aturan akuntansi dari celah dan legalisme yang digerakkan oleh prinsip Akuntansi Internasional Dewan Standar;,

(4) mengharuskan setiap kantor akuntan menempatkan 3-4 orang diluar keluarga untuk mengurangi perkawinan sedarah

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Knowledge processing model

Model Pemrosesan Pengetahuan mengkonseptualisasikan suatu bilangan berbagai isu penting bagi organisasi (Culbertson & Rodgers, 1997; Rodgers & Gago, 2001)

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(Rodgers

1992, 1997).

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"persepsi" adalah salah satu tahapan pemrosesan dalam model secara implisit atau eksplisit, “informasi” dan persepsi saling bergantung, bagaimana individu dipengaruhi keduanya dalam menafsirkan sesuatu (Tversky dan Kahneman, 1974).

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Tahap pertama, persepsi dan informasi mempengaruhi penilaian; tahap kedua tahap, persepsi dan penilaian mempengaruhi keputusan pilihan.

Penilaian pada proses pembuatan keputusan, membutuhkan lebih banyak analisis informasi dan proses persepsi. Pada tahap penilaian, alat analitis dan wawasan lebih dalam digunakan untuk interpretasi informasi (Rodgers, 1991).

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Executives’ decision-making motivations

6 Model Jalur pembuatan keputusan eksekutif (Rodgers dan Gago, 2001).

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Bagaimana 6 sudut pandang etika berhubungan dengan "kebebasan" dan "kesetaraan“ pada konsep kompensasi eksekutif. (Rodgers dan Gago, 2001).

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Proposisi 1: P → D akan menjadi yang paling dominan jalur untuk keputusan dengan bobot ekstrim pada "kebebasan“, dan tidak ada pertimbangan untuk "kesetaraan" ketika maksimalisasi keuntungan adalah tema yang paling dominan di strategi CEO. (Harris & Raviv, 1978, 1979; Holmstrom, 1979; Shavel, 1987).

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Proposisi 2: Gaji tinggi CEO terkait dengan dewan anggota di luar industri utama perusahaan dan/atau pemilik luar yang kurang aktif; maka P → J → D jalur akan menjadi tampilan paling dominan dari bobot ekstrim hingga sedang pada "kebebasan," dan tidak ada perlakuan yang menguntungkan untuk "kesetaraan.“ (Porac et al. 1999, pp. 113–114)

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Proposisi 3: Gaji tinggi yang luar biasa CEO akan dibenarkan jika kekayaan tambahan yang signifikan dihasilkan untuk pemangku kepentingan lainnya, di mana ketidaksetaraan dikompensasi dalam hal ekonomi; oleh karena itu jalur I → J → D akan menjadi yang paling dominan dengan bobot sedang pada "kebebasan.“ (Pareto, 1967).

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Proposisi 4: Kompensasi CEO akan dihargai berdasarkan kriteria kinerja ekonomi pemegang saham atau kriteria pemangku kepentingan tentang kinerja sosial; karenanya jalur I → P → D akan menjadi yang paling dominan untuk pengambilan keputusan dengan bobot sedang pada keduanya “kebebasan” dan “kesetaraan.” (Jensen & Murphy, 1990) (Sanders & Carpenter, 1998)

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Proposisi 5: Gaji CEO yang ditambah dengan reputasi akan mengikuti keputusan P → I → J → D membuat jalur dengan bobot lebih sedikit pada "kebebasan" dan bobot moderat pada "kesetaraan.“ (Fudenberg & Levine,1989) (Milgrom & Roberts, 1988)

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Proposisi 6: Kompensasi CEO lebih dipantau dengan kepemilikan yang tahan tekanan (tanpa hubungan bisnis); oleh karena itu I → P → J → D jalur lebih dominan dengan bobot yang lebih rendah pada "kebebasan" dan bobot lebih berat pada "kesetaraan.“ (Deckop et al. 1999, p. 425)

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ARTICLE DISCUSSION #4

A MODEL OF PERSON-PAY INTERACTION: HOW EXECUTIVES VARY IN THEIR RESPONSES TO COMPENSATION ARRANGEMENTS

Source:

Wowak, A., Hambrick, D. 2010. A model of person-pay interaction: how executives vary in their responses to compensation arrangements. Strategic Management Journal. 31: 803–821 (2010). Published online Early View in Wiley InterScience (www.interscience.wiley.com).

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INTRODUCTION

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Penelitian mengembangkan model baru wawasan tentang hubungan kompleks antara karakteristik eksekutif, insentif, dan hasil kinerja organisasi dan meningkatkan prediksi efek pengaturan gaji eksekutif, serta mempengaruhi keputusan strategis lainnya, yang menentukan bagaimana karakteristik eksekutif dan insentif beroperasi bersama-sama untuk mempengaruhi keputusan strategis dan kinerja perusahaan. (Wowak, A., Hambrick, D. 2010).

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Memfokuskan tiga atribut tingkat individu (motif & dorongan eksekutif, kerangka kognitif, dan kepercayaan diri), dan bagaimana proposisi eksekutif yang bervariasi dalam pengambilan keputusan beresiko. (Wowak, A., Hambrick, D. 2010).

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Dalam memilih opsi saham akan memperkuat implikasi kemampuan eksekutif, sehingga skema insentif sebagai pilihan-berat yang dapat meningkatkan kinerja eksekutif yang berbakat atau sebaliknya memperburuk kinerja eksekutif yang berkemampuan rendah. Karena opsi saham atau insentif jangka panjang dikaitkan dengan peningkatan pengeluaran investasi, sehingga skema pembayaran ini mempengaruhi tindakan eksekutif dan hasil organisasi (Devers dkk., 2008).

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Beberapa jenis rencana pembayaran dapat mengakibatkan efek berbahaya, daripada hasil manfaat yang diperkirakan (misalnya, Harris dan Bromiley, 2007).

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Alasan mengapa skema kompensasi sering gagal tercapai tujuan : karena ketidaksesuaian antara desain gaji dan strategi perusahaan (Balkin & Gomez Mejia, 1990), antara desain gaji dan karakteristik industry (Hoskisson, Hitt, dan Hill, 1993), dan antara desain gaji dan sistem administrasi lainnya (Shaw, Gupta, dan Delery, 2002).

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Penelitian, karakteristik pribadi eksekutif puncak sangat bervariasi yang mempengaruhi persepsi, motif, tindakan mereka. Misalnya, manajer bervariasi pada kepribadian (Peterson et al., 2003), bervariasi nilai-nilai (Agle, Mitchell, Sonnenfeld, 1999), pengalaman (Bigley & Wiersema, 2002), dan kemampuan (Palia, 2000).

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Karakteristik dan gaji eksekutif sangat simbiosis, lebih banyak hasil kinerja yang diharapkan. Personal atribut dan insentif eksekutif dapat juga menyebabkan hasil kinerja ekstrim tidak menguntungkan, jika seorang eksekutif yang tidak terlalu berbakat mengambil risiko agresif dalam menentukan insentif. Peneliti menekankan pentingnya keselarasan antara lingkungan, strategi, dan karakteristik eksekutif (Finkelstein dan Hambrick, 1996; Lawrence dan Lorsch, 1967).

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Pertama, peneliti mengembangkan model umum bagaimana karakteristik eksekutif bekerja dalam pengaturan kompensasi yang mempengaruhi perilaku eksekutif dan hasil kinerja organisasi dan menarik logika teori harapan (Vroom, 1964) dan teori eselon (Hambrick dan Mason, 1984)

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Kedua, peneliti mengembangkan model CEO dengan jenis instrumen pembayaran opsi saham yang memengaruhi perilaku CEO dan hasil organisasi. Penelitian menunjukkan opsi saham mempengaruhi perilaku eksekutif dan efek dari opsi saham belum tentu bermanfaat karena pengambilan keputusan kompensasi ini sangat beresiko terhadap kinerja perusahaan (Sanders & Hambrick, 2007).

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GENERAL MODEL OF PERSON-PAY INTERACTION

Sanders (2001) menemukan masa jabatan CEO mengurangi hubungan antara pembayaran opsi saham dan akuisisi perusahaan dan aktivitas diversifikasi penginduksi resiko efek opsi saham dari masa jabatan CEO. Cho & Hambrick (2006) menemukan kedua perubahan pada komposisi tim manajemen puncak (TMT) dan meningkatnya penggunaan insentif untuk para eksekutif dikaitkan efek perubahan strategi pembayaran berbasis kinerja, dan efek yang dihasilkan lebih besar daripada efek aditif dari dua elemen saja.

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Penekanan pada efek interaktif karakteristik individu dan rencana pembayaran. Kekurangan model komprehensif bagaimana pengaruh perilaku eksekutif dan kinerja.

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Pengaturan pembayaran eksekutif dengan instrumen tertentu (gaji, bonus, dll.) dan campuran instrument (Finkelstein dan Hambrick, 1988), menggunakan dua jenis pengaruh utama, efek 'penyortiran' dan 'insentif' (Gerhart & Rynes, 2003).

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Gambar 1. Hubungan antara pengaturan gaji, perilaku eksekutif, dan Kinerja kompensasi eksekutif mempengaruhi hasil perusahaan (Balkin dan Gomez-Mejia, 1990).

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Faktor pribadi yang paling kuat yang memoderasi pengaturan pembayaran oleh eksekutif: 1) motif dan dorongan, 2) frame kognitif, 3) kepercayaan diri, 4) kemampuan (Balkin & Gomez-Mejia, 1990

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CEO dapat menggunakan taktik untuk membujuk dewan komisaris untuk mengubah gaji mereka (Westphal, 1998). Varians kombinasi orang-bayar bisa terjadi dengan desain ulang pay plan oleh eksekutif. Dewan mungkin merevisi pembayaran eksekutif karena paket perusahaan lain lebih baik (Abrahamson, 1991). Dewan dapat merevisi insentif untuk eksekutif berdasarkan kinerja dengan harapan memotivasi perubahan besar organisasi (Carpenter, 2000).

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Motif dan Penggerak

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(Finkelstein et al., 2009) Motif berkaitan dengan hasil yang dicapai eksekutif (uang, pujian, keamanan, dll), sebagai 'valensi.' Seorang individu dengan valensi tinggi & hasil tertentu cenderung mengambil tindakan untuk mencapainya. Selain memiliki motif mencapai hasil tertentu, individu memiliki dorongan jenis perilaku atau gaya keputusan tertentu (kebaruan, kesengajaan) (Rokeach, 1973).

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FIGURE 1 - Motif seorang eksekutif berasal dari beberapa faktor pribadi (nilai, kepribadian, dan pengalaman). Nilai adalah preferensi yang relatif bertahan lama pada keadaan tertentu atas yang lain (Hofstede, 1980).

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(Chatterjee & Hambrick, 2007) Insentif memiliki efek motif terbesar pada para eksekutif memiliki (motif moderat atau lunak). Pengaruh reward insentif mengubah perilaku individu

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Bingkai kognitif

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Penelitian menunjukkan kognisi manajerial mempengaruhi pengambilan keputusan strategis dan hasil kinerja organisasi (Stephan et al., 2003). Meneliti bagaimana tiap eksekutif berbeda dalam proses kognitif mereka dan bervariasi dalam interpretasi pada kondisi industri (Lant, Milliken, Batra, 1992), pada keyakinan terhadap efekif strategi saat ini (Geletkanycz & Black, 2001), dan pada penilaian peluang (Tyler & Steensma, 1998).

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Percaya diri

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Pepercayaan diri adalah keyakinan subjektif seseorang memiliki kemampuan menghasilkan hasil kinerja dan imbalan tertentu. Bertindak dengan penuh semangat dan inisiatif dalam upaya mencapai hasil tertentu, mis, mendapatkan insentif memerlukan tambahan usaha, ada resiko kerugian / gagal, risiko karir. Teori harapan, keyakinan seseorang bahwa tindakannya diterjemahkan ke dalam kinerja atau 'harapan' (Vroom, 1964).

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Kemampuan

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Pemimpin eksekutif bervariasi dalam keefektifannya dalam organisasi. Keterampilan dan kemampuan eksekutif merupakan sumber daya yang memungkinkan perusahaan berkinerja baik (Castanias & Helfat, 2001), dan perbedaan kemampuan kepemimpinan eksekutif diterjemahkan ke dalam perbedaan kinerja antar organisasi. (Palia, 2000; Smith, Carson, Alexander, 1984).

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CEO attributes influence responses to stock options

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Motives and drives: materialism

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Proposisi 1: Tingkat materialisme eksekutif berinteraksi dengan pembayaran opsi saham mempengaruhi perilaku pengambilan risiko. Semakin besar materialisme eksekutif, semakin kuat hubungan positif antara pembayaran opsi saham dan perilaku pengambilan risiko.

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Bingkai kognitif: fokus regulasi

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Proposisi 2: Fokus orientasi regulasi eksekutif berinteraksi dengan pembayaran opsi saham mempengaruhi perilaku pengambilan risiko. Eksekutif dengan fokus promosi atau fokus pencegahan yang kuat, opsi saham akan sedikit atau tidak berpengaruh pada perilaku pengambilan risiko. Seorang eksekutif dengan orientasi lebih moderat atau lunak, akan ada positif hubungan antara pembayaran opsi saham dan perilaku pengambilan risiko.

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Kepercayaan diri: efikasi diri

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Proposisi 3: Efikasi diri eksekutif berinteraksi dengan pembayaran opsi saham mempengaruhi perilaku pengambilan risiko. Eksekutif dengan self-efficacy rendah, opsi saham akan sedikit atau tidak berpengaruh pada perilaku pengambilan risiko. Eksekutif dengan efikasi diri semakin tinggi, maka semakin kuat atau positif pembayaran opsi saham dan perilaku pengambilan risiko.

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Stock options magnify the effects of CEO ability levels

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Proposisi 4a: Eksekutif dengan kemampuan tinggi akan menghasilkan kinerja lebih baik dengan pengaturan pembayaran intensif opsi saham daripada pembayaran berdasarkan gaji.

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Proposisi 4b: Eksekutif dengan kemampuan rendah akan menghasilkan kinerja lebih buruk dengan pengaturan pembayaran intensif opsi saham daripada lebih banyak pembayaran berdasarkan gaji.

References

Martocchio, Joseph J. (2018). Strategic Compensation: A Human Resource Management Approach (9th edition). Harlow: Pearson

Milkovich, G., Newman, J., Gerhart, B. (2019). Compensation (12th edition). New York: McGraw-Hill Irwin.

Rodgers, W., & Gago, S. (2003). A Model Capturing Ethics and Executive Compensation. Journal of Business Ethics 48: 189–202, 2003. Kluwer Academic Publishers. Printed in the Netherlands.

Rodgers, W., & Gago, S. (2003). A Model Capturing Ethics and Executive Compensation. Journal of Business Ethics 48: 189–202, 2003. Kluwer Academic Publishers. Printed in the Netherlands.

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THANK YOU FOR YOUR ATTENTION!

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Do you have any questions?

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