Using Graded Pay Structure to Reduce Workplace Conflict

Introduction

Organisations are adopting different rewards system to enable their employees to consistently provide high-quality services. However, despite the system used, the basic principle of the reward system is that it should enhance equity, consistency, fairness, and continuous development (Armstrong & Taylor, 2014, 736). The reward management process within the organisation integrates the aspects such as design, implementation, and maintenance. The core goal of the rewards system should be to improve the individuals, teams and the organisation’s performance. This report will outline why the grading structure has to be adopted and the payment be done using the broadband pay design. The report recommends the adoption of competency-based pay as a key factor towards pay progression. The report also recommends that the organisation undertake job evaluation to develop an integral understanding and solution on matters relating to the organogram, job grade, details of job description and the pay per grade.

Job Evaluation Criteria

ABC has to reward employees depending on the values that they create to inspire positive behaviour and outcomes. Proper rewards system motivates people to be more committed and engaged to produce high-quality services to the institution. This is critical in the development of performance culture and it can also be used as a strategy towards attracting and retaining people with high competency within the organisation (Armstrong & Murlin, 2007, 152). Organisations have to align the employee’s values to organisations goals for the rewards system to be effective.

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 Armstrong and Taylor (2014) job evaluation systematic process that is aimed at establishing an employee relative job value and the size of the job to facilitate the establishment of the internal relativeness. Therefore, the aim of undertaking the job evaluation process is to gain information that will help in designing, and maintaining defensible and equitable pay structures and pay grade (Armstrong, 2018, 38). An effective job evaluation mechanism should provide an objective basis of grading jobs within the grade structure to enhance consistency in decision making on matters relating to job grading. Job evaluation needs to be in tandem with HR principle that emphasises on offering equal pay for the work that has the obligation of Equal value.

The rumbling observed in the institution and claims that the employees at the IT department receive more pay compared to the rest is due to either lack of communication and use of subjective job evaluation process. When there is a perception of biases within the organisation, employees become demotivated and the quality of their work reduces (Armstrong, 2014, 328). According to the equity theory, people are motivated when treated equitably (Armstrong & Murlis, 2007, 168). It is evident that the employees perceive biases towards the IT department. Job evaluation strategy can take two forms either analytical job evaluation or non-analytical job evaluation.

The perception identified in the organisation can be classified as either procedural, interactional, distributive, and informational perception. Distributive justice implies the fairness of the outcome while informational justice emphasises the accountability and the ability of the employees to be informed of any events within the organisation. The interactional perception involves the employees’ attitude towards how they are treated within the organisation. In the organisational justice theory, treating employees unfairly may make the employees have a negative attitude towards the management and as a result, the cases of insubordination and violating organisational policies, and providing substandard work will be inevitable.

The expectancy theory outlines that employees are more likely to be motivated if the rewards achieved is proportionate to the effort provided. And therefore, the rewards need to be achievable and worthwhile for the employee to be motivated to provide the high quality of job (Armstrong & Murlin, 2014, 320). The Maslow hierarchy of needs outlines that human beings are motivated when they satisfy their hierarchical needs. Employees within the organisation are at a different category within the Maslow’s hierarchy, therefore when they satisfy the more basic needs they move up to higher needs (Ogbonnaya et al., 2016, 66). However, the implication of Maslow’s theory is that when a need is satisfied it no longer motivates the employees and therefore the organisation has to identify more advanced ways of satisfying the higher needs. The approach that the organisation should take includes job classification, paired-comparison ranking, internal benchmarking and market pricing.

With the recent restructuring of the organisation, most of the employees do not understand their place within the organisation. There has been a consistent case of job overlap which can lead to redundancy. Therefore, job classification facilitates the identification of the number, job characteristics, grades in the job grade and the pay structure in which the job will be placed. Therefore, job classification provides comprehensive details concerning the placement and pay of a particular job or groups of jobs within the organisation. Classification also fosters the understanding of the skills, responsibility, and decision making the authority of a given job. The complaint by the women employees at ABC is valid because the classification and role distinction within the organisation is still ambiguous and thus job classification will provide a clear-cut distinction on the competency required in a given grade and thus reducing role overlap and redundancy (Armstrong & Brown, 2018, 156).

Paired comparison ranking provides a more complex approach to whole job ranking through the use of statistical techniques (Armstrong, 2014, 763). The paired comparison approach involves comparing one job as a whole distinct from other jobs and thus when the job is considered of higher value it gains more point than the one compared to its which the institution thought had similar value. After comparing different task, they are ranked from ‘A’ to the last value. The merit of paired comparison approach of job evaluation is that is offered the most effective approach of comparing two jobs and determines which one has a greater role than the other.

There is conflict within the organisation in terms of role overlap, undervaluation of job and favouritism in terms of job promotion and pay. To effectively solve this challenge, the organisation has to undertake an internal benchmarking. There is a contention on the job role of the IT department which other employees feel they are favoured more than the other departments. Thus, the organisation needs to undertake an internal analysis to determine if the claim is hypothetical true. ABC Company should, therefore, compare job description and responsibility of the IT Department against those of their counterpart in HR or operations department who are appropriately graded and paid. The Internal job ranking approach involves undertaking a whole job analysis instead of analysing it factor by factor. When undertaking job comparison or job matching, it is important to only select the most appropriate career band as the next step to selecting the next career goals (Shields et al., 2015, 132). The job matching facilitates the provision of the most effective alternative towards HR pay complexities.

It is critical for the organisation to undertake a market pricing strategy to evaluate the job role within the organisation. Market pricing involves acquiring contemporary information relating to market rates to develop a comprehensive decision on the organisation’s pay structures, and individuals pay rates. The approach is effective when used in determining the job content and pay of the executives in an organisation (Ntim et al.,2014, 14). Through this organisation can retain and attract people with high-quality competency. Market analysis can be used by the institution to develop pay structure, pay range which is attached to the respective grades within the organisation (Shields et al., 2015, 234). Market price provides the broadest approach of undertaking job evaluation since the information is obtained from the large population and provide an overview of the trending market rates. The data can be obtained from the salary surveys or rewards consultants (Armstrong & Cumming, 2008 160).

With a wide source of data to undertake the market pricing approach, it is significant to assess the authenticity of the data obtained. Though the Internet is a good source, ABC Company should adopt the rewards consultants because it provides data that is specific to a given situation. The Company should outsource a consultancy firm to help the organisation acquire an in-depth knowledge of matters of pay structure (Rodriguez & Rodriguez, 2015, 860). Through market pricing, the organisation can determine if it is paying its employees competitive salaries or whether the payments are not in tandem with the current trends. Therefore, if ABC undertakes the market pricing approach it will overcome the challenge of higher employee turnover and low motivation and satisfaction level.

The classical labour market theory is based on the belief in the existence of full employment within a free market and thus involuntary unemployment does not exist within the economy. And therefore, the classical labour market theory assumes that the equilibrium exists when the labour supply equals the labour demanded. The classical labour market theory outlines that organisations sometimes cut down the wages and salaries to increase labour demand while reducing the unemployment rate.

Job Evaluation Process

A job evaluation process is aimed at enhancing equity, transparency objectivity, fairness, and accountability. The first step in job evaluation is analysing the current situation of the organisation. The first challenge is that the company organised are a structure without adequately preparing the employees for the change that they should anticipate. There also ambiguity in terms of responsibilities of the frontline staff. Through the front staff are trained to acquire skills to operate the machinery, the female employees feel underutilised by the organisation. There is also misunderstanding regarding lack of job description upgrading despite the increase in the number of employees by two hundred percent.

After analysing the current organisational process, the organisation then defines the objectives and the principle that will guide the pay structure development. The establishment of principle and objectives will enable the organisation to focus on the achievement of specific goals. The goals of the organisation will be to enhance equity, fairness, transparency and accountability in the pay structure by enhancing equal pay for the work of same value; eliminate the cases of role ambiguity by clearly defining the job details of each grade within the organisation, Establish clear communication channel between the management and the employees; Eliminate any cases of biases relating to role profiling and job description across the organisation’s functions.

The third process involves deciding on the program and the methodology that will be used to develop an effective pay structure. The restructuring of the organisation structure affected all functions within the organisation regarding the role description and pay structure. It is therefore recommended that the organisation set up a steering group and task force to provide a wider analysis of the current challenge that the organisation is facing (Brewster, 2017, 33). Task force will facilitate the provision of solid recommendations due to the rigor and comprehensive analytical approach and knowledge they apply in understanding different concepts within the organisation. Task force is also the best approach because it comprises of people with diverse skills, competencies, and therefore when they work collectively as a team, they can present an all-around solution that can be applied in different function and situations. This report suggests the establishment of a task force comprising of management and employee representatives from all functions within the institution and two external experts in rewards management to enrich the quality of recommendation and solutions that will be put forth (Brewster, 2017, 32).

After developing the task force, the team choose the scheme and define the key features of the rewards structure. The team can decide to adopt the job ranking, job family structure, broad-banded structure or job grading structure. The task force will focus on the graded structure to solve the rewards complexities experienced within the ABC firm. The task force will undertake a key function within the organisation and clarify the classification of different function within the new structure because the restructuring had cause uncertainty in terms of pay structure leading to other receiving more pay than others while other receiving less responsibility that other which can affect them when the organisation opts for performance-based pay (Armstrong & Cummins, 2008, 142).

The task force can then evaluate the benchmarking job to ascertain the appropriateness in terms of remuneration, basic pay and role composition. The task force can analyse the job composition of the HR manager, operations manager, and the finance officers. The benchmarking roles act as a reference to which other jobs are valued and compared. The task force analyses the roles against the set elements and factors. The approach which can be taken includes generic role profiles which cover the cluster roles of the team leaders. In this case, they can also adopt a role to role matching or role to grade matching (Ntim et al., 2014, 38). The task force can undertake analytical matching which can be used in the placement and grading of jobs using the evaluation of the benchmarks.

The design grade structure is developed after evaluating the benchmark jobs. According to Armstrong (2018), total rewards system is the most effective rewards concept as it integrates all form of rewards such as intrinsic, extrinsic, external and internal motivation. Broad-banded pay structure is the most effective pay structure in the organisation. Due to the restructuring of the organisation’s organogram to reduce the level of management, the resulting effect was a reduction in grades within the system. The jobs are branded together using both the market rate and internal job evaluation processes. The ABC Company has fewer levels of management which imply that the organisation has adopted a flat organogram. Therefore, in this case, the bands within the organisation are broad covering a multitude of employees within the institution. To enhance equity, it will be essential for the institution to adopt the broadband pay structure.

After identifying the paid design, the task force needs to match the remaining roles to grade. With conflict on equal payment, lack of updating the job description details for three years, matching the skills will make the employees get new roles or have their recent job modified (Armstrong & Brown, 2018, 131). Matching the remaining job will involve undertaking job design strategies such as job enlargement or job enrichment for the female employees who feel the organisation is undervaluing them.

The last step is the implementation where the institution acts on the recommendation of the group. During the implementation, the progress is continuously analysed to ascertain the success of the plan. The quality impact of the scheme will be evaluated with regards to the objectives set at the beginning of the process. Therefore, the task force shall assess whether the pay structure has enhanced equity, transparency, motivation, and fairness. The process should enhance the clarity in a job description and role profiling. The progression on the job payment should be based on the competencies of the person. Competency-based pay involves people receiving financial incentives based on the level of competencies they demonstrate in carrying out their roles (Armstrong, 2007, 180).

Recommendations

The ABC Company should undertake job evaluation to effectively address the internal challenges within the organisation such as the organisation structure, details of the job description, the employees, grade and pay per grade. Despite the resource constraints, the ultimate effect of undertaking job evaluation will have a greater utility on the organisation’s growth as compared to market pricing. Job evaluation is effective because it addresses the integrative rewards and motivation aspect within the organisation which is of greater benefit to an organisation. The most appropriate pay structure that ABC should adopt is the grading pay structure where the employees are graded depending on factors such as the nature of the job and seniority to enhance consistency and fairness. After grading the employees, with the nature of the organisation’s structure, the organisation can adopt broadband pay structure to determine the rate of rewards for each employee. The pay progression of the employee should be based on their competencies. The competency-based pay is effective because it encourages employees to provide high-quality services to the organisation.

Conclusion

ABC Company has to adopt the graded pay structure to reduce the level of conflict witnessed within the institution. Due to the flattening of the organisation structure to minimise the management cost, the most appropriate pay structure design is the broadband pay structure. The pay progression within the company should be based on the competencies of the employees. However, the organisation can integrate the pay structure to achieve the maximum result from the employees.

References

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• Armstrong, M., 2018. Armstrong’s Job Evaluation Handbook: A Guide to Achieving Fairness and Transparency in Pay and Reward. Kogan Page Publishers.
• Brewster, C., 2017. The integration of HR management and corporate strategy. In Policy and practice in European HR management (pp. 22-35). Routledge.
• Ntim, C.G., Lindop, S., Thomas, D.A., Abdou, H. and Opong, K.K., 2017. Executive pay and performance: the moderating effect of CEO power and governance structure. The International Journal of HR Management, pp.1-43.
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