Section C: Reward and Compensation Strategy. Next, develop your reward and compensation strategy by following the first four steps in Figure 6.1 (page 189 of the textbook). You need to define the type of employee behaviors that your client firm needs, define the role that compensation will play in producing those behaviors, determine the compensation mix, and determine the compensation level. If different behaviors are required from different job families, then you will need to repeat this process for each job family.
The outcome of all this should be summarized for each job family in a compensation strategy template (shown on the following page). All jobs listed on the same compensation strategy template will have the same mix of compensation elements and the same compensation level relative to the market (i.e., lag the market by a certain percentage, lead the market by a certain percentage, or match the market). Note, however, that this does not mean that all jobs on the same template will receive the same dollar amount of pay; it just means they are all subject to the same compensation strategy. Figure 6.2 (page 224 of the textbook) provides an example of a filled-in compensation strategy template. You should carefully read the example that surrounds Figure 6.2. You will need at least two compensation strategy templates—one for those jobs you are putting under a pay-for-knowledge system (PKS) and at least one for the jobs you will be putting under a job evaluation (JE) system (you will not be putting any jobs under market pricing). In fact, it is 52 likely you will need three or four templates for your JE jobs. Every job listed in the “partial listing of job descriptions” at the end of your client description must appear on a compensation strategy template (except for any jobs you may eliminate by job redesign). For any new jobs that you create, you must prepare a job description, and that job must appear on a compensation strategy template. In creating job families, the first thing to decide is which jobs will be included under the pay-for knowledge system. (Material in Chapter 4 will be useful in making this decision.) The remaining jobs will fall under job evaluation, and you need to consider how many distinct groupings of behaviors (job families) you should have. (Incidentally, you do not need to include top management—the CEO and the two vice presidents—in a job family. Those three jobs will not be included in your compensation system.) Bear in mind that creating a high number of job families creates a very complex compensation structure but that too few job families may result in an inappropriate compensation strategy for some jobs. In this case, fewer than three JE job families is likely too few, while more than five JE job families is probably too many. To successfully complete this section, you will need to use the concepts found in Chapters 4, 5, and 6. The quality of this section (and the mark you receive for it) depends on how well you can demonstrate application of these concepts. Incidentally, don’t forget to include the behavioral objectives you are setting for the compensation system (see Table 6.2, page 195 of the textbook).