Organizational Structure
To develop and operate a compensation
system that promotes fair treatment, an
organization should consider such
compensation strategies as:
 Relating job worth to differences in job
requirements.
 Recognizing the worth and value of employee
knowledge and skills.
Ch 4
1
Strategic Compensation Issues
 Rewarding employee contributions and the
results achieved.
 Promoting employee continued acquisition and
upgrading of knowledge and skills.
 Supporting team and work-unit cooperative
efforts.
 Designing compensation plans that successfully
compete within established labor markets.
Ch 4
2
Strategic Compensation Issues
 Aligning compensation of all employees with
objectives and goals of the organization.
 Providing a compensation package that
enhances current lifestyles and provides longterm protection for employees and their
dependants.
Ch 4
3
Organizational Characteristics
 Purpose
To provide a good or service of value to customers
or clients.

Division of Labor
The assignment of different tasks to different
people acting individually or in groups.

Hierarchy of Authority
Level-by-level arrangement of managers in order
of increasing authority.
Ch 4
4
Development of an Organization

Establish a Philosophy
Establishes general guidelines for
decisions and actions to be taken by all
members - it describes the values of top
management or the leaders of the
organization. It provides standards.
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Develop Cont.

Identify the Mission
Describes in broad or general value-laden
terms what the organization wishes to
accomplish in the long-term ...the kind of
product it tends to provide and how it
intends to provide it. It identifies desired
results.
Ch 4
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Develop cont.

Develop Policy
Broad guidelines for directing the actions of
employees. It must be sufficiently broad to
relate to different actions and behaviors
required of the various work groups and
members of the organization, and it must
support the mission of the organization.
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Develop cont.

Determine Objectives and Goals
Identifies specific output requirements and
establishes the levels of performance needed to
accomplish the mission.
It is a transition point from strategic to tactical
considerations where the organization must
determine the most efficient and effective means
of accomplishing its mission.
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Develop cont

Define Work Unit Activities
Identifies the principle activities of the work
unit - it further assists in integrating the
top-down established organizational
objectives and goals with the assignment of
each work unit.
Ch 4
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Develop cont.

Group Tasks into Jobs
*Work unit activities become segregated and
assigned to specific individuals.
*These activities become further identified as
the tasks, duties, and responsibilities of a job.
*Specific knowledge and skill requirements
are identified along with a variety of
environmental conditions that make
additional demands on the workers.
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10
Satisfaction And
Individual Performance

Pay Satisfaction
People make decisions about pay based on
comparisons with others.

Job Satisfaction
People want meaningful work, an
opportunity for recognition, reward, and
advancement.
Ch 4
11
Satisfaction cont.

Organizational Satisfaction
People want to be secure in their work,
treated fairly, and philosophically aligned
with the organization
Ch 4
12
Organizational Hierarchy
Board of Directors
Establish policy...identify organizational and
strategic missions...select senior
management and monitors their
performance.
• Chairman of the Board
• Inside and Outside Members
Ch 4
13
Organizational Hierarchy
Senior Management
Responsible for the proper organization and
operation of the firm. Responsible for setting
organizational objectives, establishing operating
polices, and defining operating plans.

President (CEO) (COO)

Executive/Senior Vice Presidents
Ch 4
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Organizational Hierarchy
Operating Managers
Responsible for meeting daily quality, quantity,
and timeliness standards in the goods and
services produced in their units.





Division Heads (VP’s) (GM’s)
Department Heads
Plant Managers
Professionals and Administrators
Intermediate and First Line-Supervisors
Ch 4
15
Organizational Hierarchy
Sales Personnel
Responsible for presenting the output of the
organization to potential customers.
* Compensation methods for sales personnel
vary from salary only, sales commission only,
salary and commission, salary and bonus, and
a combination of salary, bonus, and
commission.
Ch 4
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Organizational Hierarchy
Sales Personnel

Direct customer contact

Customer service

Sales support

Indirect sales

Market analysts
Ch 4
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Organizational Hierarchy
Professionals
Their work normally involves the solution of
complex technical problems that vary widely
and may have a broad range of interpretations.
Normally they hold at minimum an
undergraduate degree and may be required to
have a license or certificate to practice.
Ch 4
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Organizational Hierarchy
Professionals

Engineers

Attorneys

Scientists

Accountants
Ch 4
19
Organizational Hierarchy
Operative Employees
Make up approximately 75% of the
workforce. These employees perform
assignments that range from those given by
a few specific and easily understood oral
instructions to those requiring knowledge of
specific skills and trades.
Ch 4
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Organizational Hierarchy
Operative Employees

Paraprofessionals / Technicians

Administrative support

Skilled craft workers

Semi-skilled workers

Unskilled workers
Ch 4
21
Employee Groupings And
Classifications

Line and Staff

White * Blue * Pink collar

Union and nonunion

Exempt and nonexempt

Regular and Temporary

Full-time and Part-time
Ch 4
22
Exempt - Nonexempt Employees
Under both state and federal (FSLA) statute
employers are required to compensate all
workers who are not otherwise exempt,
overtime pay for all hours worked in a given
work week or day that exceeds a specified
number of hours...subject to special
exceptions and conditions.
Ch 4
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Exempt - Nonexempt Employees
Subject to
established
standards the law
provides exempt
status for
EXECUTIVES
ADMINISTRATORS
PROFESSIONALS
SALES PERSONNEL
FARM WORKERS
INTERSTATE TRANSWORKERS
Ch 4
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Regular and Temporary
Employees

Regular Employee
any person hired for a specific job who is
expected to work on a continuing basis and
meet certain minimum performance and timeon-job requirements.
Ch 4
25
Regular and Temporary
Employees

Temporary Employee
Any person hired for a special project, or on
an as-needed basis, or for seasonal work, or
for any kind of work of a temporary or casual
nature.

Part-time employee
Typically any person working on a continuing
basis who works less than a full-time
employee.
Ch 4
26
Pay Relationships

Pay Equity
Are you paid a Fair wage?
Is there pay equity in the workplace among all
the members of the workforce?

Pay Ratios
The relationship of executive pay to the pay
of lower-level employees in the same
organization.
Ch 4
27