d

1. 3
Internal alignment, often called internal
equity, refers to the pay relationships
between the jobs / skills / competencies
within a single organization. The
relationships form a pay structure that can
support the workflow, is consistent
among employees, and directs their
behavior toward organization objectives.

2. 3
Compensation Strategy:
Internal Equity…If done properly, it:
Supports Work Flow
Supports Fairness
Directs Behavior Toward
Organization Objectives
(Motivation)

3. 3
Pay structure, refers to the array of pay
rates for different work or skills within a
single organization. The number of levels,
differentials in pay between the levels, and
the criteria used to determine those
differences create the structure. They may
vary greatly between organizations.

4. 3
Internal Consistency:
A Typical Engineering Job Structure
Hierarchy
Entry Level I Engineer: Limited use of basic principles. Close supervision.
Senior Engineer: Full use of standard principles and concepts. Under
general supervision.
Systems Engineer: Wide applications of principles and concepts, plus
working knowledge of other related disciplines. Under very general
direction.
Lead Engineer: Applies extensive knowledge as a generalist or specialist.
Exercises wide latitude.
Advisor Engineer: Applies advanced principles, theories, and concepts.
Assignments often self-initiated.
Recognized Consultant Engineer: Exhibits an exceptional degree of ingenuity,
Authority – creativity, and resourcefulness. Acts independently to uncover and resolve
Level VI operational problems.

5. 3
What Shapes Internal Structures?
EXTERNAL FACTORS:
Economic Pressures
Government Policies, Laws, Regulations
Stakeholders
Cultures and Customs (not really relevant
in the US today)
ORGANIZATION FACTORS:
Strategy HR Policy
Available Technology Employee Acceptance
Human Capital Cost Implications
(People)
INTERNAL STRUCTURE:
Levels
Differentials
Criteria

6. 3
Which Structure has the Greatest Impact
on Performance? On Fairness?
Structure A Structure B
Layered (Classical) De-layered (Broadband)
Chief Engineer Chief Engineer
Engineering Manager
Consulting Engineer
Senior Lead Engineer
Lead Engineer Consulting Engineer
Senior Engineer
Engineer
Engineer Trainee Associate Engineer

7. 3
Strategic Choice:
Hierarchical vs Egalitarian
Egalitarian
Hierarchical
(Broad bands)
Levels Many Fewer
Differentials Large Small
Criteria Person or Job Person or Job
Supports: Close Fit Loose Fit
Work Organization Individual Performers Teams
Consistent
Application
Performance Equal Treatment
Behaviors Opportunities for Promotion Cooperation

8. 3
Benefits of an Internally Aligned (Equitable)
Structure
Undertake training
Increase experience
Reduce turnover
Pay structure Facilitate career progression
Facilitate performance
Reduce pay-related
grievances
Reduce pay-related work
stoppages

9. 3
What Research Tells Us About the
Effects of Various Structures
 Equity Theory
 Tournament Theory
 Institutional Model: Copy Others

10. 3-
Perceived Equity of a Pay Structure
(Equity Theory)
MY PAY OTHERS’ PAY
My qualifications Their qualifications
My work performed Their work performed
My product value Their product value

11. 3-
Which Structure Fits Your
Organization Best?
How the work is organized
Consistent among employees
Directs behavior toward organization objectives