Solution Manual For Strategic Compensation: Human Resource Management Approach, 10th Edition

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Strategic Compensation:A Human ResourceManagement ApproachTenth EditionJoseph J. MartocchioSolution ManualLori Long

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iiiTable of ContentsCHAPTER 1Strategic Compensation: A Component of Human Resource Systems.........................1I.OverviewII.Defining Strategic CompensationIII.Compensation as a Strategic Business PartnerIV.Strategic Compensation DecisionsV.Building Blocks and Structure of Strategic Compensation SystemsVI.Fitting the Compensation Function in an Organization’s StructureVII.Stakeholders of the Compensation SystemVIII.Developing Skills for your CareerIX.Key TermsX.Discussion Questions and Suggested AnswersXI.Preparing for My Career: Compensation in ActionXII.End of Chapter Cases; Instructor Notes, and Questions and Suggested StudentResponsesXIII.Crunch the Numbers!: Questions and Suggested Student ResponsesXIV.Working Together: Team Exercise with Suggested Student ResponsesXV.Assisted-Graded QuestionsXVI.Additional Case from the MyLab Management website; Instructor Notes andQuestions and Suggested Student ResponsesCHAPTER 2Contextual Influences on Compensation Practice........................................................19I.OverviewII.Interindustry Wage DifferentialsIII.Pay Differentials Based on Occupational CharacteristicsIV.Geographic Pay Differentials

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ivV.Labor UnionsVI.Employment Laws That Influence Compensation TacticsVII.Key TermsVIII.Discussion Questions and Suggested AnswersIX.Preparing for My Career: Compensation in ActionX.End of Chapter Cases; Instructor Notes, and Questions and SuggestedStudent ResponsesXI.Crunch the Numbers! Questions and Suggested Student ResponsesXII.Working Together: Team ExerciseXIII.Assisted-Graded QuestionsXIV.Additional Case from the MyLab Management Website; Instructor Notes andQuestions and Suggested Student ResponsesCHAPTER 3Traditional Bases for Pay: Seniority and Merit............................................................35I.Seniority and Longevity PayII.Merit PayIII.Performance AppraisalIV.Strengthening the Pay-for-Performance LinkV.Possible Limitations of Merit Pay ProgramsVI.Key TermsVII.Discussion Questions and Suggested AnswersVIII.Preparing for My Career: Compensation in ActionIX.End of Chapter Cases; Instructor Notes, and Questions and Suggested StudentResponsesX.Crunch the Numbers!: Questions and Suggested Student ResponsesXI.Working Together: Team Exercise with Suggested Student ResponsesXII.Assisted-Graded QuestionsXIII.Additional Case from the MyLab Management Website; Instructor Notes, andQuestions and Suggested Student ResponsesCHAPTER 4Incentive Pay....................................................................................................................52I.Exploring Incentive PayII.Contrasting Incentive Pay with Traditional PayIII.Individual IncentivesIV.Group IncentivesV.Company-Wide IncentivesVI.Designing Incentive Pay ProgramsVII.Key TermsVIII.Discussion Questions and Suggested AnswersIX.Preparing for My Career: Compensation in ActionX.End of Chapter Cases; Instructor Notes, and Questions and Suggested StudentResponsesXI.Crunch the Numbers! Questions and Suggested Student Responses

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vXII.Working Together: Team Exercisewith Suggested Student ResponsesXIII.Assisted-Graded QuestionsXIV.Additional Cases from the MyLab Management Website; Instructor Notes, andQuestions and Suggested Student ResponsesCHAPTER 5Person-Focused Pay.........................................................................................................68I.Defining Person-Focused Pay: Competency-Based, Pay-for-Knowledge, andSkill-BasedII.Usage of Person-Focused Pay ProgramsIII.Reasons to Adopt Person-Focused Pay ProgramsIV.Varieties of Person-Focused Pay ProgramsV.Contrasting Person-Focused Pay with Job-Based PayVI.Advantages and Disadvantages of Person-Focused Pay ProgramsVII.Key TermsVIII.Discussion Questions and Suggested AnswersIX.Preparing for My Career: Compensation in ActionX.End of Chapter Cases; Instructor Notes, and Questions and Suggested StudentResponsesXI.Working Together: Team ExerciseXII.Crunch the Numbers! Questions and Suggested Student ResponsesXIII.Assisted-graded QuestionsXIV.Additional Cases from the MyLab Management Website; Instructor Notes, andQuestions and Suggested Student ResponsesCHAPTER 6Building Internally Consistent Compensation Systems...............................................81I.Internal ConsistencyII.Job AnalysisIII.Job EvaluationIV.Job Evaluation TechniquesV.Internally Consistent Compensation Systems and Competitive StrategyVI.Key TermsVII.Discussion Questions and Suggested AnswersVIII.Preparing for My Career: Compensation in ActionIX.End of Chapter Cases; Instructor Notes, and Questions and Suggested StudentResponsesX.Crunch the Numbers! Questions and Suggested Student ResponsesXI.Working Together: Team Exercise with Suggested Student ResponsesXII.Assisted-Graded QuestionsXIII.Additional Case from the MyLab Management Website; Instructor Notes, andQuestions and Suggested Student Responses

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viCHAPTER 7Building Market-Competitive Compensation Systems................................................98I.Market-Competitive Pay Systems: The Basic Building BlocksII.Compensation SurveysIIIIntegrating Internal Job Structures with External Market Pay RatesIV.Compensation Policies and Strategic MandatesV.Key TermsVI.Discussion Questions and Suggested AnswersVII.Preparing for My Career: Compensation in ActionVIII.End of Chapter Cases; Instructor Notes, and Questions and Suggested StudentResponsesIX.Crunch the Numbers! Questions and Suggested Student ResponsesX.Working Together: Team Exercise with Suggested Student ResponsesXI.Assisted-Graded QuestionsXII.Additional Cases from the MyLab Management Website; Instructor Notes, andQuestions and Suggested Student ResponsesCHAPTER 8Building Pay Structures That Recognize Employee Contributions ..........................113I.Constructing a Pay StructureII.Designing Merit Pay SystemsIII.Designing Sales Incentive Compensation PlansIV.Designing Person-focused ProgramsV.Pay Structure VariationsVI.Key TermsVII.Discussion Questions and Suggested AnswersVIII.Preparing for My Career: Compensation in ActionIX.End of Chapter Cases; Instructor Notes, and Questions and Suggested StudentResponsesX.Crunch the Numbers! Questions and Suggested Student ResponsesXI.Working Together: Team Exercise with Suggested Student ResponsesXII.Assisted-Graded QuestionsXIII.Additional Cases from the MyLab Management Website; Instructor Notes, andQuestions and Suggested Student ResponsesCHAPTER 9Discretionary Benefits...................................................................................................132I.Origins of Discretionary BenefitsII.Categories of Discretionary BenefitsIII.Legislation Pertinent to Discretionary BenefitsIV.Designing and Planning the Benefits ProgramV.The Benefits and Costs of Discretionary BenefitsVI.Key TermsVII.Discussion Questions and Suggested AnswersVIII.Preparing for My Career: Compensation in Action

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viiIX.End of Chapter Cases; Instructor Notes, and Questions and Suggested StudentResponsesX.Crunch the Numbers! Questions and Suggested Student ResponsesXI.Working Together: Team Exercise with Suggested Student ResponsesXII.Assisted-Graded QuestionsXIII.Additional Cases from the MyLab Management Website; Instructor Notes,Questions and Suggested Student ResponsesCHAPTER 10Legally Required Benefits.............................................................................................151I.Origins of Legally Required BenefitsII.Categories of Legally Required BenefitsIII.Health Insurance Program Design AlternativesIV.Additional Health Care LegislationV.The Benefits and Costs of Legally Required BenefitsVI.Key TermsVII.Preparing for My Career: Compensation in ActionVIII.Discussion Questions and Suggested AnswersIX.End of Chapter Case; Instructor Notes, and Questions and Suggested StudentResponsesX.Crunch the Numbers! Questions and Suggested Student ResponsesXI.Working Together: Team Exercise with Suggested Student ResponsesXII.Assisted-Graded QuestionsXIII.Additional Cases from the MyLab Management Website; Instructor Notes, andSuggested Student ResponsesCHAPTER 11Compensating Executives..............................................................................................173I.Contrasting Executive Pay with Pay for Nonexecutive EmployeesII.Defining Executive StatusIII.Executive Compensation PackagesIV.Principles and Processes for Setting Executive CompensationV.Executive Compensation Disclosure RulesVI.Executive Compensation: Are U.S. Executives Paid Too Much?VII.Key TermsVIII.Discussion Questions and Suggested AnswersIX.Preparing for My Career: Compensation in ActionX.End of Chapter Cases; Instructor Notes, and Questions and Suggested StudentResponsesXI.Crunch the Numbers! Questions and Suggested Student ResponsesXII.Working Together: Team Exercise with Suggested Student ResponsesXIII.Assisted-Graded QuestionsXIV.Additional Cases from the MyLab Management Website; Instructor Notes, andQuestions and Suggested Student Responses

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viiiCHAPTER 12Compensating the Flexible Work Force:Contingent Employees and Flexible Work Schedules................................................193I.The Contingent WorkforceII.Pay and Employee Benefits for Contingent WorkersIII.Flexible Work Schedules: Flextime, Compressed Work Weeks, andTelecommutingIV.Pay and Employee Benefits for Flexible EmployeesV.Unions’ Reactions to Contingent and Flexible WorkersVI.Strategic Issues and Choices in Using Contingent and Flexible WorkersVII.Key TermsVIII.Discussion Questions and Suggested AnswersIX.Preparing for My Career: Compensation in ActionX.End of Chapter Cases; Instructor Notes, and Questions and Suggested StudentResponsesXI.Crunch the Numbers! Questions and Suggested Student ResponsesXII.Working Together: Team Exercise with Suggested Student ResponsesXIII.Assisted-Graded QuestionsXIV.Additional Cases from the MyLab Management Website; Instructor Notes, andQuestions and Suggested Student ResponsesCHAPTER 13Compensating Expatriates............................................................................................212I.Competitive Advantage and How International Activities Fit InII.Preliminary ConsiderationsIII.Components of International Compensation ProgramsIV.Incentive Compensation for U.S. ExpatriatesV.Establishing Employee Benefits for U.S. ExpatriatesVI.Balance Sheet Approach for U.S. Expatriates’ Compensation PackagesVII.Repatriation Pay IssuesVIII.Key TermsIX.Discussion Questions and Suggested AnswersX.Preparing for My Career: Compensation in ActionXI.End of Chapter Cases; Instructor Notes, and Questions and Suggested StudentResponsesXII.Crunch the Numbers! Questions and Suggested Student ResponsesXIII.Working Together: Team Exercise with Suggested Student ResponsesXIV.Assisted-Graded QuestionsXV.Additional Cases from the MyLab Management Website; Instructor Notes, andQuestions and Suggested Student Responses

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ixCHAPTER 14Pay and Benefits Outside the United States................................................................230I.IntroductionII.Pertinent Concepts for Quantifying Economic Elements in the Discussion of Payand Benefits Outside the United StatesIII.North AmericaIV.South AmericaV.EuropeVI.AsiaVII.Key TermsVIII.Discussion Questions and Suggested AnswersIX.Preparing for My Career: Compensation in ActionX.End of Chapter Cases: Instructor Notes, and Questions and Suggested StudentXI.Crunch the Numbers! Questions and Suggested Student ResponsesXII.Working Together: Team Exercise with Suggested Student ResponsesXIII.Assisted-Graded QuestionsXIV.Additional Cases from the MyLab Management Website; Instructor Notes, andQuestions and Suggested Student ResponsesEPILOGUEChallenges Facing Compensation Professionals.........................................................247I.OverviewII.Possible Increase to the Federal Minimum Wage RateIII.Trends in Performance AppraisalIV.The Compensation-Productivity GapV.Gender Pay GapVI.Pay TransparencyVII.Key TermsVIII.Discussion Questions and Suggested AnswersIX.Assisted-Graded QuestionsX.Additional Cases from the MyLab Management Website; Instructor Notes, andQuestions and Suggested Student ResponsesSample Syllabus.............................................................................................................254Building Strategic Compensation Systems.................................................................256

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254Sample SyllabusMartocchio, Strategic Compensation: A Human Resource Management Approach, 10eSuggested Grade DistributionFirst team written report (based onStrategic Analysis inBuilding StrategicCompensation Systems (BSCS):15% of course gradeSecond team written report (based onInternal Consistency part of casebook):15% of course gradeThird team written report (based onMarket Competitiveness part oftheBSCScasebook):15% of course gradeTeam oral report (based onEmployee Contributions part of casebook):15% of course gradeCompensation mid-term exam:15% of course gradeCompensation final exam:20% of course gradeIndividual class participation:5% of course gradeCompensation Team Project:Building Strategic Compensation SystemsThis experiential project is designed to provide you an opportunity to integrate and applyknowledge that you will learn in this course. Teams of 5 class members will beestablished to complete this project that consists of four separate reports (one report forteam for each part of the project. The four reports and due dates are listed below:Written Report 1:Strategic Analysis (Week 3)Written Report 2:Internal Consistency (Week 7)Written Report 3:Market Competitiveness (Week 12)Team Oral Report:Employee Contributions (Week 15)Each team will serve as compensation experts who have been hired by the firm todevelop an integrated compensation plan. An instructor’s grade will be assigned to eachreport for each team. All team members will receive the same grade based on theinstructor’s evaluation.Each part of the case builds uniquely on your answers to prior parts of the case.Each report should be written as recommendations to top management. A good approachto developing the report is to identify and discuss decisions that must be made to meet theobjectives. Each decision should be supported with rationale that is logical and based onthe content presented within your texts. Identify plausible alternatives to your decisions,and discuss possible problems that may be encountered.

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255Each written report should be summarized in a one to three-page executivesummary at the front. This executive summary should contain the major objectives of thereport and the corresponding major findings. Also, the body of the report should followthe outline included at the beginning of each part of theBSCScasebook.Suggested Course Schedule1WeekReading Assignment1Chapter 1: Strategic Compensation A Component of Human Resource Systems(corresponds to the topic of the Strategic Analysis in theBSCScasebook)2Chapter 2: Contextual Influences on Compensation Practice3Team Written Report (StrategicAnalysis) is due.Chapter 6: Building Internally Consistent Compensation Systems (corresponds tothe topic of Section 1 in theBSCScasebook)4Chapter 3: Traditional Bases for Pay: Seniority and Merit&Chapter 4: Incentive Pay5Chapter 4: Incentive Pay (continued)&Chapter 5: Person-Focused Pay6Chapter 9: Discretionary Benefits7Team Written Report (InternalConsistency) is due.Chapter 10: Legally Required Benefits8Mid-Term Exam (Chapters 1-6; 9-10)9Chapter 7: Building Market-Competitive Compensation Systems10Chapter 11: Compensating Executives11Chapter 12: Compensating the Flexible Workforce: Contingent Employees andFlexible Work Schedules12Team Written Report (MarketCompetitiveness) is due.Chapter 8: Building Structures that Recognize Employee Contributions(corresponds to the topic of Employee Contributions in theBSCScasebook)13Chapter 13: Compensating Expatriates14Chapter 14: Pay and Benefits Outside the United States15Team Written Report (EmployeeContributions) is due.Chapter 15: Challenges Facing Compensation Professionals16Final Exam (Chapters 7-8 and 11-15)1This course schedule is based on the use of theBSCScase. For course schedules that do not include theBSCScase,the material can be presented in the order in which it appears in the book.

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256Building Strategic Compensation SystemsGreetings! Thank you for adopting theBuilding Strategic Compensation Systemscase inyour course. Your students will benefit tremendously from your decision to provide themwith an experiential learning opportunity.As you know, students will have the student edition of this case, and software (aMicrosoft Excelapplication) accompanies the case to facilitate analyses of compensationdata. Our goal in this instructor’s manual is to help you provide a positive learningexperience for your students. The instructor’s manual includes all of the material that thestudent edition containspluswe provide you with useful tips throughout this manual forworking with students.A detailed summary of the case project follows in the next section. In a nutshell,BuildingStrategic Compensation Systemswill allow students to work in small compensationconsulting teams charged with the responsibility for developing a compensation plan fora company named E-Sonic. The project is divided into four sections, which correspond tofundamental goals of compensation practitioners as described in chapters in theStrategicCompensation: A Human Resource Management Approach(10th edition) textbookpublished by Pearson Education, Inc. (ISBN: 9780135192146):Strategic Analysis:Chapters 1 (and Appendix 1 contained at the end of this manual)Section 1:Chapter 6Section 2:Chapter 7Section 3:Chapters 3 through 5 and 8The strategic analysis and sections may each be completed in two to three weeks, fittingwell with semester-long courses. Instructors whose courses include a variety of additionalactivities or span only seven to ten weeks may have students complete only three of thefour sections in either configuration (Strategic Analysis and Sections 1 and 2, or Sections1 through 3). The instructor may have student groups prepare written reports or give oralpresentations to the class. Report outlines are included in the instructor’s and student’scasebook versions.Of course, we welcome your feedback about this case and will be happy to answerinstructor questions directly. Feel free to contact author Professor Joe Martocchio at theUniversity of Illinois (martocch@illinois.edu or 217-244-4098).Sincerely,David BarcelonaJoe Martocchio

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257About the AuthorsDavid Barcelonais a 2005 Graduate of the University of Illinois’ Master’s Program inHuman Resources and Industrial Relations. He previously served as a consultant for arenowned executive compensation consulting firm.Joseph J. Martocchiois Professor of Human Resources and of Psychology at theUniversity of Illinois at Urbana Champaign. He has taught compensation and benefits formore than 20 years.Instructor’s ManualProject SummaryEffective compensation systems achieve three key goals. They provide a firm internalconsistency,marketcompetitiveness,andameansforrecognizingindividualachievement. An internally consistent compensation system clearly defines the relativevalue of each job among all jobs within a company, providing an objective justificationfor their differences in pay. Market competitive pay systems allow firms to attract andretain the best employees by setting pay levels consistent with a firm’s competitivestrategies. Finally, a compensation system that recognizes individual achievement canboostbothemployeemoraleandfirmperformancebyeffectivelyrewardingkeycontributors.Thissimulationprovidesstudentsaframeworkfordevelopingacompensation system, which achieves these goals through three distinct, sequentialsections.The development of a strategic analysis guides all decisions made regarding students’compensation systems throughout the project. The strategic analysis reveals firm-specificchallenges, objectives, and initiatives that allow students to effectively align the goals ofa compensation system with that of their company strategy.Section I introduces students to the specification of internally consistent job structures.Through writing job descriptions, the development of job structures, and both thedevelopment and implementation of a point evaluation method to objectively quantify jobdifferences, students build the framework for internal equity.

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258Section II shifts students’ focus outside of their firm to understand its relationship withthe external marketplace. Market survey data is utilized to compare pay rates of positionsinside the firm with those in the marketplace to establish the foundations of market-competitive pay. The analysis of market data also leads students to the determination ofappropriate pay-policy mixes for each of their job structures.Finally, in Section III, students recognize the contributions of individual employeesthrough the creation of a merit-pay system and put their plan into action by payingemployees within their firm. Hypothetical pay discrepancies are introduced to eachstudent group for resolution within the parameters of their designed compensationsystem.Theyaretaskedwithmanyofthedifficultdecisionsthatcompensationprofessionals face on a daily basis.The following pages provide an outline to guide you and your students through thissimulation. From the Strategic Analysis to Section III, each step in the process is outlinedand explained. In addition, learning objectives are highlighted along with the rationalebehind student exercises.INTRODUCTION PROVIDED TO STUDENTSIntroductionThis simulation teaches fundamentals of compensation system design through a semester-long exercise. Acting as a recently hired compensation consulting team, your studentgroup will assist the bourgeoning online music firm, E-Sonic, to develop an internallyconsistentandmarketcompetitivecompensationsystemwhichrecognizestheachievements of individual contributors. The following introduction offers a backgroundand history of your new client in addition to a description of E-Sonic business objectivesand a project outline. The authors of this casebook wish you well in your studies andhope that you find the simulation both educational and enjoyable.Company BackgroundSonic Records is a market leading recording studio and production house. Sonic Records,having experienced tremendous success in the recording and music distribution industryover the past 30 years, realized that the rules of the game were changing. No longer wouldmusic be distributed solely through traditional channels. Consumers desired instant deliveryof 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 tomusic, spending more than 4 hours each day tuning into their favorite tunes. The demandfor access to instant music access is widespread. According to the data, 85% ofAmericans 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-demandlistening habits. While Americans streamed more than 145 billion on-demand tracksacross audio and video platforms in 2014, they streamed 120 billion in the first half of2015. Music listening is also becoming more mobile as 52% use their smartphones tolisten to music in a typical week, a 9% increase over last year.

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259The online music streaming market has seen rapid growth in the United States insubscription services; yet, there are many challenges that must be overcome to besuccessful. Success relies on many factors such as enforcing the rights of intellectualproperty. When consumers obtain digital music through online file sharing networks orburning CDs, it ultimately harms companies and the industry. In addition to this threat, afew competitors have already gained a foothold in this market space. These companiesmake up 70% of the market share in their industry and possess major strengths includingtheir portfolios of millions of songs from some of the biggest labels in music, the abilityto allow consumers to download songs onto their phones, and the affordable prices theyoffer for their services.Despite these challenges, opportunities exist for new entrants. The rise in technologicaladvances such as the smartphone has led to a greater demand in online music, indicatingpotential growth. In addition, aside from the demand for online music in the UnitedStates, the UK, Japan, and Germany have the world’s largest recorded music markets.The digital music industry’s expansion into international markets affords customersgreater options and gives entrepreneurial companies the opportunity to reach out to alarger consumer market.In response, Sonic Records formed a subsidiary company named E-Sonic. E-Sonic wouldbe responsible for creating an online music store capable of competing with establishedplayers in the industry. Key executives from Sonic Records were chosen to lead the newcompany. E-Sonic’s mission was to create the world’s leading music distribution entity;ensuring Sonic Records’ prominence in the industry’s future.Firm ObjectivesE-Sonic is responsible for delivering quality online music. The music distributionstrategy has transformed in the last 30 years from the delivery of a tangible product ofrecords to a nontangible product of instant music downloads and streaming. E-Sonic fallswithin the national industry classification representing integrated record production anddistribution.Backed financially by Sonic Records, a recording industry mogul, E-Sonic possesses theresourcesandreputationnecessarytobuildaworld-classcompany.Themarketrecognized this. Just last month, E-Sonic conducted a small, but very successful IPO.Although E-Sonic had yet to even launch their online music store, the reputation of itsparent company, Sonic Records, bolstered demand for the new issue. E-Sonic foundersdecided the firm should retain ownership of the majority of the shares, which could laterbe used as incentives for employees crucial to the organization’s long-term success.E-Sonic’s key business objective, as dictated by its parent company Sonic Records, wasto develop the world’s leading online distribution portal. Initially, E-Sonic’s successwould be measured by its ability to capture market share from competitors. These firmsrecognized the changing industry trends early and secured over 70% of annual downloadmarketshare.E-Sonicneededtotargetthesecurrentcustomerswhileattractingnewcomers to the world of online music.

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260Although the idea of offering digital music to millions of customers might initially seemcomplex, the formula for success in the industry has proven relatively simple. Superiormarketing, a robust selection of artists, and a user-friendly Web interface helped currentfirms establish their market leadership.E-Sonicexecutives,withdecadesofexperienceintherecordingindustry,heldestablished relationships with all of the major record labels and most of the smaller ones,affordingthemanadvantageinmusicofferings.However,asrecordingindustryexecutives,E-Sonic’smanagementhadlittleexperienceinsoftwaredevelopment.Further, although marketing expertise was important for success in the traditional musicindustry, company management had no experience with online marketing or marketinginitiatives tailored to their new, tech-savvy, customer base. Located in Los Angeles, E-Sonic hoped to recruit the best and brightest of the music and software developmentindustries. Further, they hoped to create a performance-based culture where employeesfelt rewarded for their contributions.Realizing the challenging task ahead of them, E-Sonic executives had the foresight torecognize that despite their years of experience in the traditional recording business;outside consultants might offer them salient insights. Their new venture would requirehiring employees in all business disciplines, especially those with the marketing andtechnical skills necessary to help establish E-Sonic as the world’s preeminent onlinemusic source. In addition, E-Sonic management understood well the importance ofestablishing a sound compensation system right from the firm’s inception. They knewthat an internally equitable and market competitive compensation strategy could help E-Sonic achieve their business objectives, but they had no expertise in this area. Inresponse, the E-Sonic’s management team has hired you as their compensation consultingstaff. Congratulations and good luck with your new client!Project OutlineAs E-Sonic compensation consultants, your project work will be divided into threedistinct sections preceded by an optional strategic analysis. Effective compensationsystems achieve three key goals. Each section of the simulation addresses one of theseobjectives. First, effective compensation systems provide a firm internal consistency. Aninternally consistent compensation system clearly defines the relative value of each jobamong all jobs in the company, allowing a firm to objectively and legally justifydifferences in pay. In Section I, your consulting team will lay the foundation for aninternally consistent compensation system by creating job descriptions and job structures,building a point evaluation method for comparing jobs, and assigning relative values to asample of E-Sonic positions. The second goal of a successful compensation systemincludes establishing market-competitive pay rates for an organization. In Section II, yourteam will determine appropriate pay-policy mixes, conduct a market pay survey, andcreate pay grades and ranges; allowing E-Sonic to effectively compete for talent in thelabor-market.Finally,inperformance-basedpaycultures,successfulcompensationsystems recognize the contributions of individuals. In Section III, your compensationteam will determine appropriate methods for recognizing the achievements of individual

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