1OL_325_Milestone_Two_Guidelines_and_RubricOverview_The_importance

OL 325 Milestone Two Guidelines and Rubric

Overview: The importance of compensation varies depending on the viewpoint, as described by Barry Gerhart and Jerry Newman in Compensation. Society views compensation as a measure of justice; managers may view compensation as a major expense or a motivator; employees view compensation as an entitlement or as an incentive. Regardless of the viewpoint, fairness and equity are essential. Compensation must also be up-to-date, competitive in the market, and easy to understand. Aligned pay structures support the way the work gets done, fit the organization’s business strategy, and are fair to employees. Organizations typically task an in- house human resource (HR) professional or hire an HR consultant to create and maintain the company’s pay structure. Prompt: Salary Surveys: To ensure the pay structure is externally competitive, a salary survey should be conducted, as stated by Lisa Burke in Designing a Pay Structure. For the results of a survey to be valid, the market pay data must be from a relevant labor market. Since most of the office support, HR, and operations jobs will be filled by regional candidates, local pay data should be gathered. A salary survey is developed by your team and sent to industry competitors. Descriptive data such as organization size, industry, annual revenue as well as compensation data for each of the benchmark jobs were collected. Surveys were completed and returned by six organizations that recruit and hire similar positions within a 90-mile radius of Rockville. Base pay data from the responding organizations are reflected in Appendix B of the Final Project Case Study. Organizations are referenced as companies A, B, C, D, E, and F for anonymity. Those who participated also received copies of the results for their contribution. In this assignment, you will address the external competitiveness component of a pay structure using the specifically designed case scenario. Read the Final Project Case Study (linked to in your course) for detailed information on the requirements for this project. Specifically, you must address the critical elements listed below.

External Competitiveness:

A. Calculate the weighted means of base pay for each of the following benchmark jobs: administrative assistant, operations analyst, production worker, and benefits manager from the six companies listed in Appendix B of the final project case study.

B. Calculate the predicted base pay for each of the following benchmark jobs: administrative assistant, operations analyst, production worker, and benefits manager.

C. Create a market pay line using the following benchmark jobs: administrative assistant, operations analyst, production worker, and benefits manager. Clearly label your job evaluation points and salaries.

D. Calculate the adjusted pay rates for each benchmark job based on your company’s decision to lead in base pay by 3%. E. Create pay grades by combining benchmark jobs that are substantially comparable for pay purposes. Clearly label your pay grades and explain why

you combined any benchmark jobs to form a grade.

F. Create pay ranges including minimum and maximum for each of the pay grades based on pay grades created in item E above.

Rubric Guidelines for Submission: Your final project will be a Word document, approximately 8–9 pages in length (plus a cover page and references) and must be written in APA format. Your Word document may include Word tables, Word lists, Excel screenshots, and rationale in written paragraphs. Use double spacing, 12- point Times New Roman font, and one-inch margins.

Critical Elements Proficient (100%) Needs Improvement (70%) Not Evident (0%) Value

External Competitiveness: Weighted Means

Provides correct weighted means for each benchmark job identified

Provides incorrect weighted means for some of the benchmark jobs or provides weighted means for all benchmark jobs with consistent computational errors

Does not provide weighted means for benchmark jobs

External Competitiveness: Predicted Base Pay

Provides correct predicted base pay for each benchmark job identified

Provides incorrect predicted base pay for some of the benchmark jobs or provides predicted base pay for all benchmark jobs with consistent computational errors

Does not provide predicted base pay for benchmark jobs

External Competitiveness: Market Pay Line

Provides correct market pay line for each benchmark job identified with clear labeling of job evaluation points and salaries

Provides incorrect market pay line for some of the benchmark jobs or provides market line but does not clearly label job evaluation points and salaries

Does not provide market pay line for benchmark jobs and does not clearly label job evaluation points and salaries

External Competitiveness: Adjusted Pay Rates

Provides correct adjusted pay rates for each benchmark job identified

Provides incorrect adjusted pay rates for some of the benchmark jobs or provides weighted means for all benchmark jobs with consistent computational errors

Does not provide adjusted pay rates for benchmark jobs

External Competitiveness: Pay Grades

Provides correct pay grades for combined benchmark jobs, labels pay grades incorrectly, and explains why combined benchmark jobs form a grade

Provides incorrect pay grades for combined benchmark jobs or labels pay grades incorrectly or does not explain why combined benchmark jobs form a grade

Does not provide pay grades for combined benchmark jobs, does not label pay grades correctly, and does not explain why combine benchmark jobs form a grade

External Competitiveness: Pay Ranges

Provides correct pay ranges for each pay grade and provides rationale for pay ranges

Provides incorrect pay ranges for some pay grades or does not include rationale

Does not provide pay ranges for pay grades and does not provide rationale

Critical Elements Proficient (100%) Needs Improvement (70%) Not Evident (0%) Value

Articulation of Response Submission has no major errors related to grammar, spelling, syntax, organization, or citations

Submission has major errors related to grammar, spelling, syntax, organization, or citations that negatively impact readability and articulation of main ideas

Submission has critical errors related to grammar, spelling, syntax, organization, or citations that prevent understanding of ideas

Total 100%

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Airbnb In 2018

John D. Varlaro Johnson & Wales University

John E. Gamble Texas A&M University–Corpus Christi

Airbnb was founded in 2008 when Brian Chesky and a friend decided to rent their apartment to guests for a local convention. To accommo- date the guests, they used air mattresses and referred to it as the “Air Bed & Breakfast.” It was that week- end when the idea—and the potential viability—of a peer-to-peer room-sharing business model was born. By 2018, Airbnb had seen immense growth and suc- cess in its 10-year existence. The room-sharing com- pany had expanded to over 190 countries with more than 4 million listed properties, and had an estimated valuation of $31 billion. Airbnb seemed poised to revolutionize the hotel and tourism industry through its business model that allowed hosts to offer spare rooms or entire homes to potential guests, in a peer- reviewed digital marketplace.

This business model’s success was leveraging what had become known as the sharing economy. Yet, with its growth and usage of a new business model, Airbnb was now faced with resistance, as city officials, owners and operators of hotels, motels, and bed and breakfasts were all crying foul. While these traditional brick-and-mortar establishments were sub- ject to regulations and taxation, Airbnb hosts were able to circumvent and avoid such liabilities due to participation in Airbnb’s digital marketplace. In other instances, Airbnb hosts had encountered legal issues due to city and state ordinances governing hotels and apartment leases. Stories of guests who would not leave and hosts needing to evict them because city regulations deemed the guests apartment leasees were beginning to make headlines.

As local city and government officials across the United States, and in countries like Japan, debated regulations concerning Airbnb, Brian Chesky needed

to manage this new business model, which had led to phenomenal success within a new, sharing economy.

OVERVIEW OF ACCOMODATION MARKET Hotels, motels, and bed and breakfasts competed within the larger, tourist accommodation market. All businesses operating within this sector offered lodg- ing, but were differentiated by their amenities. Hotels and motels were defined as larger facilities accom- modating guests in single or multiple rooms. Motels specifically offered smaller rooms with direct parking lot access from the unit and amenities such as laun- dry facilities to travelers who were using their own transportation. Motels might also be located closer to roadways, providing guests quicker and more con- venient access to highways. It was also not uncom- mon for motel guests to segment a longer road trip as they commuted to a vacation destination, thereby potentially staying at several motels during their travel. Hotels, however, invested heavily in additional amenities as they competed for all segments of trav- elers. Amenities, including on-premise spa facilities and fine dining, were often offered by the hotel. Further, properties offering spectacular views, bol- stering a hotel as the vacation destination, may con- tribute to significant operating costs. In total, wages, property, and utilities, as well as purchases such as food, accounted for 59 percent of the industry’s total costs—see Exhibit 1.

CASE 2

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CAsE 2 Airbnb In 2018 C-7

Bed and breakfasts, however, were much smaller, usually where owner-operators offered a couple of rooms within their own home to accommodate guests. The environment of the bed and breakfast—one of a cozy, home-like ambience—was what the guest desired when booking a room. Contrasted with the hotel or motel, a bed and breakfast offered a more personal- ized, yet quieter atmosphere. Further, many bed and breakfast establishments were in rural areas where the investment to establish a larger hotel may have been cost prohibitive, yet the location itself could be an attraction to tourists. In these areas individuals invested in a home and property, possibly with a his- torical background, to offer a bed and breakfast with great allure and ambience for the guests’ experiences. Thus, the bed and breakfast competed through offer- ing an ambience associated with a more rural, slower pace through which travelers connected with their hosts and the surrounding community. A comparison of the primary market segments of bed and breakfasts and hotels in 2017 is presented in Exhibit 2.

While differing in size and target consumer, all hotels, motels, and bed and breakfasts were subject to city, state, and federal regulations. These regulations covered areas such as the physical property and food safety, access for persons with disabilities, and even alcohol distribution. Owners and operators were sub- ject to paying fees for different licenses to operate. Due to operating as a business, these properties and

the associated revenues were also subject to state and federal taxation.

In addition to regulations, the need to construct physical locations prevented hotels and motels from expanding quickly, especially in new international markets. Larger chains tended to expand by purchas- ing preexisting physical locations, or through merg- ers and acquisitions, such as Marriott International Inc.’s acquisition of Starwood Hotels and Resorts Worldwide in 2016.

A BUsINEss MODEL FOR THE sHARING ECONOMY Startup companies have been functioning in a space commonly referred to as the “sharing economy” for several years. According to Chesky, the previous model for the economy was based on ownership.1 Thus, operating a business first necessitated owner- ship of the assets required to do business. Any spare capacity the business faced—either within production or service—was a direct result of the purchase of hard assets in the daily activity of conducting business.

Airbnb and other similar companies, however, operated through offering a technological platform, where individuals with spare capacity could offer their services. By leveraging the ubiquitous usage of smart- phones and the continual decrease in technology

Costs Hotels/ Motels

Bed & Breakfasts

Wages 24% 19%

Purchases 27% 21%

Depreciation 10% 9%

Marketing 2% 2%

Rent and Utilities 8% 11%

Other 13% 22%

EXHIBIT 1 Hotel, Motel, and Bed & Breakfast Industry Costs as Percentage of Revenue, 2017

Source: www.ibisworld.com.

EXHIBIT 2 Major Market segments for Hotels/Motels & Bed & Breakfast/Hostels sectors, 2017

Market Segment B&Bs* Hotels**

Recreation 80% 70%

Business 12% 18%

Other, including meetings

8% 12%

Total 100% 100%

*The bed & breakfast market was primarily domestic. **Includes both domestic and international travelers. Approximately 20% was associated with international travelers.

Source: www.ibisworld.com.

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C-8 PART 2 Cases in Crafting and Executing Strategy

this change seemed to be how the consumer had deem- phasized ownership. Instead of focusing on ownership, consumers seemed to prefer sharing or renting. Other startup companies have been targeting these segments through subscription-based services and on-demand help. From luxury watches to clothing, experiencing— and not owning—assets seemed to be on the rise. Citing a more experiential-based economy, Chesky believed Airbnb guests desired a community and a closer rela- tionship with the host—and there seemed to be support for this assertion.4 A recent Goldman Sachs study showed that once someone used Airbnb, their pref- erence for a traditional accommodation was greatly reduced.5 The appeal of the company’s value proposi- tion with customers had allowed it to readily raise capi- tal to support its growth, including an $850 million cash infusion in 2016 that raised its estimated valu- ation to $30 billion. A comparison of Airbnb’s 2018 estimated market capitalization of $31 billion to the world’s largest hoteliers is presented in Exhibit 4.

costs, these companies provided a platform for indi- viduals to instantly share a number of resources. Thus, a homeowner with a spare room could offer it for rent. Or, the car owner with spare time could offer [his or her] services a couple of nights a week as a taxi service. The individual simply signed up through the platform and began to offer the service or resource. The company then charged a small transaction fee as the service between both users was facilitated.

Within its business model, Airbnb received a percentage of what the host received for the room. For Airbnb, its revenues were decoupled from the considerable operating expenses of traditional lodg- ing establishments and provided it with significantly smaller operating costs than hotels, motels, and bed and breakfasts. Rather than expenses related to own- ing and operating real estate properties, Airbnb’s expenses were that of a technology company. Airbnb’s business model, therefore, was based on the revenue- cost-margin structure of an online marketplace, rather than a lodging establishment. With an esti- mated 11 percent fee per room stay, it was reported that Airbnb achieved profitability for a first time in 2016.2 Airbnb’s revenues were estimated to increase from approximately $6 million in 2010 to a projected $1.2 billion in 2017—see Exhibit 3. However, it was announced in an annual investors’ meeting that the company had recorded nearly $3 billion in revenue and earned over $90 million in profit in 2017.3

A CHANGE IN THE CONsUMER EXPERIENCE AND RATE Airbnb, however, was not just leveraging technology. It was also leveraging the change in how the current con- sumer interacted with businesses. In conjunction with

EXHIBIT 3 Airbnb Estimated Revenue and Bookings Growth, 2010–2017 (in millions)

2010 2011 2012 2013 2014 2015 2016 2017

Estimated Revenue $6 $44 $132 $264 $436 $675 $945 $1,229

Estimated Bookings Growth 273% 666% 200% 100% 65% 55% 40% 30%

Source: Ali Rafat, “Airbnb’s Revenues Will Cross Half Billion Mark in 2015,” Analysts Estimate, March 25, 2015, skift.com/2015/03/25/ airbnbs-revenues-will-cross-half-billion-mark-in-2015-analysts-estimate/.

EXHIBIT 4 Market Capitalization Comparison, 2018 (in billions)

Competitor Market Capitalization

Marriot International Inc. $49

Airbnb $31

Hilton Worldwide Holdings. $25

Intercontinental Hotels Group $11

Source: Yahoo Finance (accessed April 2018); “Airbnb Announces It Won’t Go Public in 2018,” Business Insider, http://www.busines- sinsider.com/airbnb-announces-it-wont-go-public-in-2018-2018-2 (accessed April 20, 2018).

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CAsE 2 Airbnb In 2018 C-9

Finally, there were accusations of businesses using Airbnb’s marketplace to own and operate accommodations without obtaining the proper licenses. These locations appeared to be individu- als on the surface, but were actually businesses. And, because of Airbnb’s platform, these pseudo- businesses could operate and generate revenue with- out meeting regulations or claiming revenues for taxation.

Airbnb continued to respond to some of these issues. A report was written and released by Airbnb in 2015 detailing both discrimination on its platform and how it would be mitigated. Airbnb also settled its lawsuit with San Francisco in early 2017. The city was demanding Airbnb enforce a city regulation requiring host registration, or incur significant fines. As part of the settlement, Airbnb agreed to offer more information on its hosts within the city.9 And in 2018, Airbnb began partnering with local municipalities to help collect taxes automatically for rentals within their jurisdic- tions, helping to potentially recoup millions in lost tax revenue.10 11

“WE WIsH TO BE REGULATED, THIs WOULD LEGITIMIZE Us” Recognizing that countries and local municipalities were responding to the local business owner and their constituents’ concerns, Chesky and Airbnb have focused on mobilizing and advocating for con- sumers and business owners who utilize the app. Airbnb’s website provided support for guests and hosts who wished to advocate for the site. A focal point of the advocacy emphasized how those particu- larly hit hard at the height of the recession relied on Airbnb to establish a revenue stream, and prevent the inevitable foreclosure and bankruptcy.

Yet, traditional brick-and-mortar establishments subject to taxation and regulations have continued to put pressure on government officials to level the playing field. “We wish to be regulated; this would legitimize us,” Chesky remarked to Noah in the same interview on The Daily Show.12 Proceeding forward and possibly preparing for a future public offering, Chesky would need to manage how the progressive business model—while fit for the new, global sharing economy—may not fit older, local regulations.

Recognizing this shift in consumer preference, traditional brick-and-mortar operators were respond- ing. Hilton was considering offering a hostel-like option to travelers.6 Other entrepreneurs were con- structing urban properties to specifically leverage Airbnb’s platform and offer rooms only to Airbnb users, such as in Japan7 where rent and hotel costs were extremely high.

To govern the community of hosts and guests, Airbnb had instituted a rating system. Popularized by companies such as Amazon, eBay, and Yelp, peer-to- peer ratings helped police quality. Both guests and hosts rated each other in Airbnb. This approach incentivized hosts to provide quality service, while encouraging guests to leave a property as they found it. Further, the peer-to-peer rating system greatly min- imized the otherwise significant task and expense of Airbnb employees assessing and rating each individ- ual participant within Airbnb’s platform.

NOT PLAYING BY THE sAME RULEs Local and global businesses criticized Airbnb for what they claimed were unfair business practices and lobbied lawmakers to force the company to comply with lodging regulations. These concerns illuminated how due to its business model, Airbnb and its users seemed to not need to abide by these same regula- tions. This could have been concerning on many levels. For the guest, regulations exist for protection from unsafe accommodations. Fire codes and occu- pation limits all exist to prevent injury and death. Laws also exist to prevent discrimination, as tradi- tional brick-and-mortar accommodations are barred from not providing lodging to guests based on race and other protected classes. But, there seemed to be evidence that Airbnb guests had faced such discrimi- nation from hosts.8

Hosts might also expose themselves to legal and financial problems from accommodating guests. There had been stories of hosts needing to evict guests who would not leave, and due to local ordinances the guests were actually protected as apartment leasees. Other stories highlighted rooms and homes being damaged by huge parties given by Airbnb guests. Hosts might also be exposed to liability issues in the instance of an injury or even a death of a guest.

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C-10 PART 2 Cases in Crafting and Executing Strategy

ENDNOTEs 2016, www.bloomberg.com/news/ articles/2016-02-16/goldman-sachs-more- and-more-people-who-use-airbnb-don-t- want-to-go-back-to-hotels. 6 D. Fahmy, “Millennials Spending Power Has Hilton Weighing a ‘Hostel-Like’ Brand,” March 8, 2016, Bloomberg Businessweek, www.bloomberg.com/businessweek. 7 Y. Nakamura and M. Takahashi, “Airbnb Faces Major Threat in Japan, Its Fastest-Growing Market,” Bloomberg, February 18, 2016, www .bloomberg.com/news/articles/2016-02-18/ fastest-growing-airbnb-market-under-threat- as-japan-cracks-down. 8 R. Greenfield, “Study Finds Racial Discrimination by Airbnb Hosts,” Bloomberg, December 10, 2015, www .bloomberg.com/news/articles/2015-12-10/ study-finds-racial-discrimination-by-airbnb- hosts.

1 Interview with Airbnb founder and CEO Brian Chesky, The Daily Show with Trevor Noah, Comedy Central, February 24, 2016. 2 B. Stone and O. Zaleski, “Airbnb Enters the Land of Profitability,” Bloomberg, January 26, 2017, https://www.bloomberg.com/news/ articles/2017-01-26/airbnb-enters-the- land-of-profitability (accessed June 20, 2017). 3 O. Zaleski, “Inside Airbnb’s Battle to Stay Private,” Bloomberg.Com, February 6, 2018, https://www.bloomberg.com/news/arti- cles/2018-02-06/inside-airbnb-s-battle-to- stay-private (accessed April 20, 2018). 4 Interview with Airbnb founder and CEO Brian Chesky, The Daily Show with Trevor Noah, Comedy Central, February 24, 2016. 5 J. Verhage, “Goldman Sachs: More and More People Who Use Airbnb Don’t Want to Go Back to Hotels,” Bloomberg, February 26,

9 K. Benner, “Airbnb Adopts Rules to Fight Discrimination by Its Hosts,” New York Times, (September 8, 2016) http://www.nytimes .com/2016/09/09/technology/airbnb-anti- discrimination-rules.html (accessed June 20, 2017). 10 S. Cameron, “New TN Agreement Ensures $13M in Airbnb Rental Taxes Collected,” wjhl. com, April 20, 2018, http://www.wjhl.com/ local/new-tn-agreement-ensures-13m-in- airbnb-rental-taxes-collected/1131192392 (accessed April 20, 2018). 11 “Duluth, Airbnb Make Deal on Lodging Tax Collection,” TwinCitiesPioneerPress, April 19, 2018, https://www.twincities.com/2018/04/19/ duluth-airbnb-make-deal-on-lodging-tax-collec- tion/ (accessed April 20, 2018). 12 Interview with Airbnb founder and CEO Brian Chesky, The Daily Show with Trevor Noah, Comedy Central, February 24, 2016.

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OL 325 Final Project Case Study: Designing a Pay Structure

Table of Contents OL 325 Final Project Case Study: Designing a Pay Structure ..................................................................... 3

Internal Consistency ................................................................................................................................ 4

Job Descriptions .................................................................................................................................. 4

Job Evaluation ..................................................................................................................................... 4

Job Families ......................................................................................................................................... 5

External Competitiveness ........................................................................................................................ 6

Weighted Means ................................................................................................................................. 6

Predicted Market Pay Rate .................................................................................................................. 7

Market Pay Line ................................................................................................................................... 8

Adjusted Pay Rates .............................................................................................................................. 9

Pay Grades ........................................................................................................................................ 10

Pay Ranges ........................................................................................................................................ 10

References ............................................................................................................................................ 11

Appendix A—Job Descriptions for Benchmark Jobs ................................................................................ 12

Front Desk Receptionist ..................................................................................................................... 12

Administrative Assistant .................................................................................................................... 13

Operations Analyst ............................................................................................................................ 14

Appendix B—Results from Salary Survey ............................................................................................... 15

Front Desk Receptionist ..................................................................................................................... 15

Administrative Assistant .................................................................................................................... 16

Operations Analyst ............................................................................................................................ 17

Production Worker ............................................................................................................................ 18

Benefits Manager .............................................................................................................................. 19

OL 325 Final Project Case Study: Designing a Pay Structure

The importance of compensation varies depending on the viewpoint (Gerhart & Newman, 2020). Society views compensation as a measure of justice; managers may view compensation as a major expense or a motivator; employees view compensation as an entitlement or as an incentive. Regardless of the viewpoint, fairness and equity are essential. Compensation must also be up-to-date, competitive in the market, and easy to understand. Aligned pay structures support the way the work gets done, fit the organization’s business strategy, and are fair to employees. Organizations typically task an in-house human resource (HR) professional or hire an HR consultant to create and maintain the company’s pay structure. In this final project, you will design a pay structure using this specially designed final project case scenario. You are the human resource director for a premier supplier of rubber floor mats and matting that is expanding its production operations to Rockville, MD. The organization is headquartered in San Antonio, TX. Based on the organization’s mission statement, the company’s goal is to provide top-quality products with customer service that well exceeds expectations and with a strong commitment to continuous improvement. The following personnel are required to start the Rockville operation (the numbers in parentheses indicate the number of positions):

• Director of regional operations • Assistant to the director of operations • Operations analyst (2) • HR director (this is you) • HR administrative assistant • Benefits manager • Lead production worker (3) • Production worker (10) • Production manager • HR generalist • Front desk receptionist

Internal Consistency Review this section for support with Milestone One. Also, refer to Appendix A for the section on job descriptions.

Job Descriptions

Job analysis is central to many HR functions, especially compensation. It is the systematic process of collecting information for a specific job and provides information needed to define that job (Gerhart & Newman, 2020). A job description is a summary of the most important features of a job. We need to understand what tasks, duties, and responsibilities various jobs entail before we can assign fair and competitive pay rates. Writing a job description starts with job analysis. At times, it is appropriate to gather information from other job descriptions such as previous company descriptions or O*NET (an online job analysis resource developed by the Department of Labor). A link to O*NET can be found in Module Three’s Reading and Resources area. A company's job description should be personalized, specific to the job, and tailored to the company. Job descriptions vary by organization but often include the job title, a job summary, essential job tasks, job-relevant knowledge, and skills that an incumbent must possess. A well-written, detailed job description provides a foundation to any internally consistent compensation system. A benchmark job is a job used as a reference point for making pay comparisons. They typically have well-known stable roles with pay rates that are generally acceptable (Gerhart & Newman, 2020). Appendix A contains job descriptions of four benchmark jobs for this case study.

Job Evaluation A job evaluation is the systematic procedure designed to aid in establishing pay differentials among jobs within an organization (Gerhart & Newman, 2020). The first step is to identify compensable factors. A compensable factor is a characteristic within the work which the company values (Gerhart & Newman, 2020). It is used for evaluating the relative worth of jobs inside an organization. We also need to assign a relative weight to each compensable factor based on their importance to the organization. Keep in mind that all compensable factors added together must total 100%. An example of a compensable factor might be education. The company might weigh this at 25%. Each compensable factor will have varying levels of difficulty. This is referred to as degrees. For example, the degrees for education level might be identified as:

1 = High School/GED 2 = Associate’s 3 = Bachelor’s 4 = Master’s/Graduate

Next, points are calculated by multiplying the degrees by the weights.

Below is an example of how this point structure is applied to the front desk receptionist.

The weight of the skill compensable factor (divided into education level and technical skills) is at 50% since the organization is very knowledge-intensive and depends heavily on its human capital; responsibility (distributed into scope of control and impact of job) is weighted 30% as each job has the potential to affect other jobs; and effort is assigned 20% since problem-solving and task complexity are essential across jobs in the organization. Using the job description as a reference, the degrees for the front desk receptionist position need to be assigned. Education degree 1 is appropriate for this position since a high school diploma or GED is sufficient; technical skills degree 1 is suitable as this position handles basic telephone and email only; responsibility scope of control degree 1 is also sufficient as this position has little control; impact of job degree 2 is fitting since this position greets every person entering the establishment; etc. Lastly, multiply the weights by the degree for each compensable fact. Add the total points of each compensable factor to get your total job evaluation points for the front desk receptionist position.

Job Evaluation for Front Desk Receptionist

Compensable Factor Weight Degree (1, 2, 3, 4) Points

Skill (50%)

-Education Level 25% 1 25

-Technical Skills 25% 1 25

Responsibility (30%)

-Scope of Control 10% 1 10

-Impact of Job 20% 2 40

Effort (20%)

-Problem Solving 10% 1 10

-Task Complexity 10% 1 10

100% 120 points

Table 1

Job Families A job family is a group of jobs involving work of the same nature but requiring different skill and responsibility levels (Gerhart & Newman, 2020). Grouping similar jobs provides a basis for relevant comparisons. Such groupings lead to reasonable pay differences between positions, logical career pathing, and internally consistent job structures. Organizations may use different evaluation methods, pay strategies, or pay structures for different job families within the same organization. Below is an example of two job families for a financial company. Note: This example is not from this case study.

Example of job families:

 Accounting family  Staff accountant  Senior accountant

 Investment family  Investment analyst  Investment accounts manager

Table 2

The positions needed for the new Rockville location fall into several different job families such as production, office support, and human resources.

External Competitiveness

Review this section for support with Milestone Two. Also, refer to Appendix B for your work on weighted means.

Weighted Means The first step in analyzing the pay data is to generate the weighted means for each benchmark job. Weighted means, as compared to simple means, are calculated to better represent the market data (Burke, 2008, as cited in Milkovich & Newman). A simple mean would be calculated by adding up the average base pay rates and dividing by the number of organizations, but small and large companies would both be given the same weight if using a simple mean. A weighted mean gives equal weight to each job incumbent’s wage and, therefore, is more representative of the data. Below is an example of how to calculate a weighted mean. This example uses sample data from surveys of two companies. Note: The numbers used are not from the data in this case study. See Appendix B to complete this section for your milestone.

To calculate the weighted mean: Simple mean = average base and divide by number of companies

(21,000 + 22,000) / 2 = 21,500

Weighted mean = equal weight to each job incumbent’s wage

(1/3 x 21,000) + (2/3 x 22000) = 21,666

Table 3

Predicted Market Pay Rate The next task is to conduct a simple regression using Microsoft Excel. This will allow us to calculate the predicted base pay and create a market pay line, which allows an organization to interpret the market data as usable information. Create a table in Excel for each benchmark job with a column for the job evaluation points from Milestone One—Internal Consistency: Job Evaluation and a column for the weighted average base pay rates from Milestone Two—External Competitiveness: Weighted Means. Next, generate the regression results. Below are the steps of a simple regression in Excel using a sample dataset. Note: The numbers used are not from the data in this case study.

To run a simple regression in Microsoft Excel:  Open Microsoft Excel

 Create a table with the data to be analyzed (job titles, base pay, evaluation points)

 Click on Data tab (ensure Data Analysis tool is set up under add-ons*)

 Click on Data Analysis

 Click on Regression

o In the Input Y Range, select your weighted average base pay data (from previous step)

o In the Input X Range, select your job evaluation points data (from Milestone One)

 Click OK *Refer to activity prompt in Brightspace for instructions on Data Analysis tool setup.

Table 4

The output will provide you with an R Square. This statistic signifies the variance explained in the data. The R Square tells us how well the regression line fits the data. This should be 0.95 or higher. If your number is low, review your data (that is, job evaluation points) for any discrepancies or inconsistencies. Correct any errors and rerun your regression, as needed. Using the regression output, identify the slope and y-intercept. Calculate the predicted market pay rate using the formula y = a + b (x) for each benchmark job. Below is an example of a simple regression output in Excel using a sample dataset. Note: The numbers used are not from the data in this case study.

How to read your simple regression: y = the predicted base pay x = the slope of the line a = the y-intercept b = the slope of the line

Using this dataset above, we can predict the market pay rate for the front desk receptionist position: y = a + b (x) y = y-intercept + slope (evaluation points) y = -23335.92 + 356.31 (120) y = 19,421.28

Table 5

With that information, you will now be able to calculate the predicted base pay for each of the following benchmark jobs: administrative assistant, payroll assistant, operations analyst, production worker, and benefits manager.

Market Pay Line Now that we have our predicted market pay rate, we need to create a market pay line. A market pay line links a company’s benchmark job evaluation points with market rates paid by competitors (Gerhart & Newman, 2020). We can do this by creating a trend line with our predicted salaries. First, place the positions in order smallest to largest based on job evaluation points. Then create a chart in Excel, placing your job evaluation points along the horizontal axis and the salary along the vertical axis. This should form a gradual inclining line. Below is an example of a market line in Excel using a sample dataset. Note: The numbers used are not from the data in this case study.

Example of market pay line:

Figure 1

Adjusted Pay Rates Now that we have our predicted market pay rate and pay line, we need to adjust it based on the organization’s lead pay level strategy. This will be our pay policy line. Since the organization wants to lead the market by 3% across the operations, office support, and HR job families, we need to adjust the market pay line accordingly. In other words, each predicted pay rate can be multiplied by 1.03 to get a new base pay rate that is 3% above the market. Below is an example of a 3% adjusted pay rate based on the previous market line example. Note: The numbers used are not from the data in this case study.

Example of adjusted pay rates:

Job Title Market Pay Adjust Pay Rates

Front desk receptionist $19,421 $20,003

Administrative assistant $29,134 $30,008

Payroll assistant $40,134 $41,338

Operations analyst $54,801 $56,445

Benefits manager $65,802 $67,776

Table 6

Pay Grades Once the pay rates are created, we can construct pay grades for our pay structure. Pay grades characterize groupings of jobs that are comparable for pay purposes (Gerhart & Newman, 2020). They are of similar value to the organization. All the jobs in a pay grade share the same pay range (minimum and maximum pay rates). Examine the following benchmark jobs: administrative assistant, operations analyst, production worker, and benefits manager. Determine which ones are sufficiently similar for compensation purposes. Below is an example of two pay grades. Note: the positions are for illustration purposes only.

Example of pay grades:

 Pay Grade A  Front desk receptionist

 Pay Grade B  Administrative assistant  Payroll assistant

Table 7

Pay Ranges

Pay ranges create upper and lower pay rates for each job in the pay grade (Gerhart & Newman, 2020). These are the limits the employer will pay for a particular job. Each pay grade will have a minimum and maximum pay rate. Percent guidelines are used to determine how far above and below the midpoint the pay range will reach. For example, the maximum might be 10% above the midpoint and the minimum might be 10% below the midpoint. Note: All jobs in a pay grade will have the same minimum and maximum pay rates. Below is an example of pay ranges for two pay grades. Note: The numbers used are not from the data in this case study.

Example of pay ranges:

Pay Grade Minimum Average Maximum

A $18,002 (-10%) $20,003 $22,003 (+10%)

B $32,105 (-10%) $35,673 $39,240 (+10%)

Table 8

References

Burke, L. (2008). Designing a pay structure. SHRM. https://www.shrm.org/certification/for- organizations/academic-alignment/faculty- resources/Documents/Designing%20a%20Pay%20Structure_IM_9.08.pdf

Gerhart, B., & Newman, J. (2020). Compensation (13th ed.). McGraw-Hill Martocchio, J. (2020). Strategic compensation: A human resource management approach (10th ed.).

Pearson. Milkovich, G., & Newman, J. (2008). Compensation. McGraw-Hill Irwin. U.S. Department of Labor. (2020). O*NET Online. https://www.onetonline.org/

Appendix A—Job Descriptions for Benchmark Jobs (U.S. Department of Labor, 2020)

Front Desk Receptionist

Job Summary Answer inquiries and obtain information for the general public, customers, visitors, and other interested parties. Provide information regarding activities conducted at the establishment, location of departments, offices, and employees within the organization. Essential Job Tasks

• Operate telephone to answer, screen, and forward calls, providing information, taking messages, and scheduling appointments.

• Greet persons entering the establishment, determine nature and purpose of visit, and direct or escort them to specific destinations.

• Hear and resolve complaints from customers and the public. • Transmit information or documents to customers, using email, mail, or fax machine. • Analyze data to determine answers to questions from customers or members of the public. • Provide information about the establishment, such as the location of departments or offices,

employees within the organization, or services provided. Job Context Indoor, environmentally controlled; telephone; contact with others. Knowledge, Skills, and Abilities

• Knowledge of principles and processes for providing customer and personal services. This includes customer needs assessment, meeting quality standards for services, and evaluation of customer satisfaction.

• Knowledge of administrative and clerical procedures and systems such as word processing, managing files and records, taking and organizing messages, and other office procedures and terminology.

• Awareness of others’ reactions and understanding why they react as they do. • Gives full attention to what other people are saying, taking the time to understand the points being

made, asking questions as appropriate, and not interrupting at inappropriate times. • Actively looks for ways to help people. • Manages own time and the time of others. • Talks to others to convey information effectively. • Knowledge of the English language including the meaning and spelling of words, rules of

composition, and grammar. • Understands written sentences and paragraphs in work-related documents. • Communicates effectively in writing as appropriate for the needs of the audience.

Administrative Assistant Job Summary Provide administrative support by conducting research, preparing reports, handling information requests, and performing clerical functions such as preparing correspondence, receiving visitors, arranging conference calls, and scheduling meetings. Essential Job Tasks

• Manage and maintain executives’ schedules. • Prepare invoices, reports, memos, letters, financial statements, and other documents, using word processing,

spreadsheet, database, or presentation software. • Read and analyze incoming memos, submissions, and reports to determine their significance and plan their

distribution. • Open, sort, and distribute incoming correspondence, including faxes and email. • File and retrieve corporate documents, records, and reports. • Greet visitors and determine whether they should be given access to specific individuals. • Prepare responses to correspondence containing routine inquiries. • Perform general office duties such as ordering supplies, maintaining records, management systems, and

performing basic bookkeeping work. • Make travel arrangements for executives. Job Context Indoor, environmentally controlled; telephone; contact with others. Knowledge, Skills, and Abilities

• Knowledge of administrative and clerical procedures and systems such as word processing, managing files and records, designing and completing forms, and other office procedures and terminology.

• Knowledge of computer hardware and software. • Knowledge of the structure and content of the English language including the meaning and spelling of words,

rules of composition, and grammar. • Gives full attention to what other people are saying, taking time to understand the points being made, asking

questions as appropriate, and not interrupting at inappropriate times. • Monitors/assess performance of self, other individuals, or organizations to make improvements or take

corrective action. • Manages own time and the time of others. • Talks to others to convey information effectively. • Understands written sentences and paragraphs in work-related documents. • Communicates effectively in writing as appropriate for the needs of the audience. • Adjusts actions concerning others' actions.

Operations Analyst Job Summary Formulate and apply mathematical modeling and other optimizing methods using a computer to develop and interpret information that assists management with decision making or other managerial functions. Frequently concentrates on collecting and analyzing data using decision support software. Essential Job Tasks

• Analyze information obtained from management to conceptualize and define operational problems. • Collaborate with senior managers and decision-makers to identify and solve a variety of problems and to clarify

management objectives. • Define data requirements and then gather and validate information, applying judgment. • Study and analyze information about alternative courses of action to determine which plan will offer the best

outcome. • Prepare management reports defining and evaluating problems and identifying solutions. • Formulate mathematical or simulation models of problems, relating constants and variables, restrictions,

alternatives, conflicting objectives, and their parameters. Job Context Indoor, environmentally controlled; telephone; contact with others. Knowledge, Skills, and Abilities

• Knowledge and application of arithmetic, algebra, geometry, calculus, and statistics. • Knowledge of the practical application of engineering science and technology. This includes applying principles,

techniques, procedures, and equipment. • Knowledge of computer hardware and software including applications and programming. • Identifies complex problems and reviews related information to develop and evaluate options and implement

solutions. • Uses logic and reasoning to identify the strengths and weaknesses of alternative solutions, conclusions, or

approaches to problems. • Analyzes needs and product requirements to create a design. • Determines how a system should work and how changes in conditions, operations, and the environment will

affect outcomes. • Considers the relative costs and benefits of potential actions to determine the course of action. • Understands the implications of new information for both current and future problem solving and decision

making. • Knowledge of the English language including the meaning and spelling of words, rules of composition, and

grammar. • Understands written sentences and paragraphs in work-related documents. • Communicates effectively in writing as appropriate for the needs of the audience.

Appendix B—Results from Salary Survey (adapted from Burke, 2008)

Front Desk Receptionist

Company # of Job Incumbents Average Base Pay

A 1 $27,000

B 2 $25,500

C 1 $29,500

D 2 $31,000

E 2 $26,500

F 1 $26,000

Administrative Assistant

Company # of Job Incumbents Average Base Pay

A 4 $37,500

B 4 $32,000

C 3 $33,000

D 5 $39,000

E 4 $36,500

F 4 $35,000

Operations Analyst

Company # of Job Incumbents Base Pay

A 2 $63,500

B 4 $59,000

C 3 $61,000

D 5 $67,000

E 3 $63,500

F 3 $65,000

Production Worker

Company # of Job Incumbents Base Pay

A 9 $27,500

B 12 $25,000

C 11 $31,000

D 13 $33,000

E 8 $29,000

F 10 $28,500

Benefits Manager

Company # of Job Incumbents Base Pay

A 1 $62,000

B 2 $57,500

C 1 $63,000

D 1 $67,000

E 2 $62,000

F 1 $65,000

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