Case of the Unpopular Pay

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Many managers have bought into expensive fictions about compensation, Haveyoul

SIX DANGEROUS MYTHS ABOUT PAY
BY JEFFREY PFEFFER

pays an average C average of $21.^2hourly wage of $18.07. ^^^^ second pays an an hour. Assuming that other directemployment costs, such as benefits, are the same for the two groups, which group has the higher labor eosts^ • • • • An airline is seeking to compete in the low-cost, low-frills segment of the U.S. market where, for obvious reasons, labor productivity and efficiency are crucial for competitive success. The company pays virtually no one on the basis of individual merit or performance. Does it stand a chance of successl • • • • A company that operates in an intensely competitive segment of the software industry does not pay its sales force on commission. Nor does it pay individual bonuses or offer stock options or phantom stock, common incentives in an industry heavily dependent on attracting and retaining scarce programming talent. Would you invest in this company}
• • • •

ONSIDER TWO GROUPS of Steel miiiimills.

One group

Every day, organizational leaders confront decisions about pay. Should they adjust the company's compensation system to encourage some set of behaviors? Should they retain consultants to help them implement a performance-based pay system? How large a raise should they authorize?
ARTWORK BY CRAIG FRAZIER

SIX DANGEROUS MYTHS ABOUT PAY

In general terms, these kinds of questions come down to four decisions about compensation: • bow mucb to pay employees; • bow mucb emphasis to place on financial compensation as a part of tbe total reward system; • bow mucb empbasis to place on attempting to bold down tbe rate of pay; and • wbether to implement a system of individual incentives to reward differences in performance and productivity and, if so, how much emphasis to place on these incentives. For…...

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