EXERCISE: 10.1: PROBLEMS IN THE PAY SvsrEM*

Chapter 10 discusses the importance ofinternal and exter- , mquls , evlce phesl en In C area O BC lea Sewleee
Hal equity in Structuring an effective pay program. This is becoming increasingly concerned aboutthe costs associ-
ated with the human resource function at CCUA. Exhibit
exercise describes a situation in which perceived inequities 1 0 1 1 presents 3 recent memo from MS Linquist to MS
exist and the organization is already realizing the effects of Na’m‘:e Concerning the problem
these perceptions’ Following l\c/is Linquist’s orders Ms Nance con-
C2
duited hone interviews with 12 former em lo ees the
Learning objeCtlV€S l’ P . . . . p .y
only ones ElV211lEibl€) and distributed questionnaires to her
After completing the exercise, you should be able to Currem Wo1.kfo1.ce_
IT. Detelmme the Critical Variables that must be 1. _The survey results indicated a nuinb.er.of interesting
considered in assessing the fairness ofapay system. tlndlngsv Whlch are éunmlarlzed H1 Exhlblt 1012- The
2. Assess the weights to be given to data related to do‘-mnam reason for 1nd1V1(_iua_1S leaving CCFJA was p_3y°
imemal and external equity The current workforce also indicated strong dissatisfaction
3. Develop a system that can more closely monitor the With Current pay 1eV.e13‘ Although the Survey was “Gt hm‘
effects of pay on Critical personnel data. ited to data processing Hsand computer analyst Is, both
Ms. Nance and Ms. Linquist believe that these two posi-
Procedure tions are of particular concern. Responses from both cur-
rent and past employees from both Job classifications were
Part A; Indipiduat Anazygis similar to those of the entire sample.
After reading the chapter and before class, read the sce- The data WOCCSSOI H Position Cummtly Carries 3
nario below and all exhibits and then answer the questions Salary range Gt $1 1’00 to $1270 Per hf3“T’ The average
on Form 10_1_1_ a§t:a;6%ay of thebsevgn inglumlfieonils is $l2kperkhopr
T 4. , per year ase ont eir ~ our wor wee . n
Part B_. Group Analyst-S addition, employees receive 40 hours of paid leave for the
first year with an increase of 5 hours every 1,000 hours of
In groups or about six, students should first review all of _ H 1 h , 1 b , H, . t
j . d h h service. ea t insurance p us asic i e insurance is pro-
their respective Forms lO.l.l an t en attempt to reac , 5
h U h Id vided by the company at a cost ot $950 per year per
consensus on the questions. T e group s on prepare a 10 CCUA H m 10 10 DP H b “he C
e e . iua i r s. u ur-
concise written response to each of the questions on rgnitjley f, O 1 7% ye e ye

F°rm1O’1‘1° D The ls Mi ai ii ‘i’ mi
e compu er an ys posi ion curre y carries a
salary range of $25,500 to $32,500. The average actual
Scenano salary paid to the eight incumbents is $31 500 Paid leave
Denise Nance i3 313 di1’3CtoT Of the ComPu‘eT Center/U.5eT for CA Hs is 9 days for the first year of sefvice, increasing
A35i5t3n‘3e_ (CCUA) depaflmem Of 3 large amanulaelullng by 2 days for every following year with a limit of 21 days
Company 111 the rural Sellllleasli L3“ Year 3 revenue W35 of paid leave. Health and life insurance coverage costs the
$23.5 million. Profit was in line with expectations. Company $950 pm. year per €mp1m,€e_
Recently» 3 3eYlou5 Pmblem lla5 develeped ln her Cllvl“ Recruitment costs average $450 for each data proces-
sion. A growing percentage of her employees have left the sor Hs and $850 for computer analyst Is. Costs are low for
eempany in the P35‘ Year» which has affected “ml Pmdlle‘ the DP Hs because they have been obtained, primarily
llvlly and eeslsi Wlllle turnover lrl her rleparlrhehr has from the local marketplace. Entry-level individuals are
alW3Y5 been 3 Pmblems rhrngs 3139331 ro ha“? gate“ Our Or hired 75 percent of the time, and the organization spends
hehll Uhr-ll hhwg r_”rhoVer had rhh hrehhrl 20 Pereehr Per considerable resources to train them. By contrast, the com-
year for lower division staff personnel and 15 percent per puter analysts are recruited from the regional market
Year rhr mlddle rlr”l5lor1 emPloYeeS- Prime candidates typically possess either considerable
HoW€Ver» in the Phsr three rhohrh5a CCUA has lhsr rlve experience in a similar position or a college degree in infor-
rlarh Prheesshrs (.50 Pereehr hrlhe lhrall hhd Sh‘ (75 Per‘ mation systems management with light. but related, part-
ceiit) computer analysts. Previously, Ms. Nance had no time (OI. Summer) Work experience!
policy regarding exit interviews or turnover control, but in- MS. Nanci, budgets $255’490 for data pmcgssmg HS
fOI’II1al CllSCuSSlO1’1S With the lnCliViClualS Who have left have and $293,984 for Computer ana1yStS_ The Company is in the
lee re the hYPerhe5l5 rhhrrhhhy erhpleyees leave eeeellse sixth month of its fiscal year. During this fiscal year, the
they reel they are hh‘lerPhlrl- CCUA department has been using a 3.5 percent salary
increase budget to reward its performers and to keep pace
rconiribuiea by James R. Hams and Lee P. siepina. with the marketplace.
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