Table Of ContentTHE
COMPENSATION
HANDBOOK
F I F T H E D I T I O N
A S - - -A
TATE OF THE RT
G
UIDETO
C
OMPENSATION
S D
TRATEGYAND ESIGN
LANCE A. BERGER and DOROTHY R. BERGER
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DOI: 10.1036/0071496750
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Contents
Preface vii
About the Editors ix
Contributors xi
Part 1 Introduction
1 Employee Pay:A Riddle Wrapped in a Mystery Inside an Enigma 3
Lance A. Berger
2 Total Rewards and the Future Workforce 11
Steven E. Gross and Shelley Peterson
3 Total Rewards Strategy 21
Thomas B. Wilson
4 Three Trends Shaping the Future of Compensation and
Human Resources 31
Allan Schweyer
5 Demographics:The Tempest Driving Compensation 49
Dorothy R. Berger
Part 2 Base Salary
6 Salary Administration 63
Andrew S. Rosen
7 Merit Pay 85
Myrna Hellerman and James Kochanski
8 Job Analysis,Documentation,and Job Evaluation 95
Bernard Ingster, Ph.D.
9 Salary Surveys 111
Don York and Tim Brown
iii
iv CONTENTS
10 Benchmarking 125
Iain Fitzpatrick and Thomas D. McMullen
11 Skills,Knowledge,and Competency-Based Pay 143
Gerald E. Ledford, Jr, Ph.D., Robert L. Heneman, Ph.D. and Aino Salimäki
12 Broadbanding 159
Kenan S. Abosch
13 Nonmonetary Awards 167
Rodger D. Stotz and Melissa Van Dyke
14 Salary Administration at a Prestigious Cultural Institution:
Pennsylvania Academy of the Fine Arts 187
Leslie Moody
15 Compensation Practices in a Middle Market Company 191
David E. Griffith
16 A Vision for Information Technology in Compensation 197
Steven T. McGuire
Part 3 Variable Compensation
17 Incentive Compensation Program Design 205
Linda E. Amuso and David Knopping
18 Using Variable Pay Programs to Support Organization Goals 215
Erin C. Packwood
19 Rationalizing Variable Pay Plans 227
Kenan S. Abosch
20 Sales Compensation 239
Jerome A. Colletti and Mary S. Fiss
21 Team-Based Incentives 259
Theresa M. Welbourne, Ph.D. and Luis R. Gomez-Mejia, Ph.D.
22 Gainsharing or Profit Sharing 277
Robert L. Masternak
23 Scanlon Gainsharing 295
Paul Davis and Dow Scott, Ph.D.
Part 4 Executive Compensation
24 Executive Compensation Strategy 311
Ted Buyniski and Marvin A. Mazer
25 Long-Term Incentives 323
Jeffrey S. Hyman, Esq.
CONTENTS v
26 Executive Compensation:A Recruiter’s Recommendations 339
Randy Jayne
27 Executive Compensation:An Academic’s Perspective 349
Johannes M. Pennings, Ph.D.
28 Regulation of Executive Compensation 365
Frank P. VanderPloeg, Esq.
29 Executive Employment Agreements 385
Richard L. Alpern
Part 5 Compensation and the Board
30 The Compensation Committee and Executive Pay 397
Seymour Burchman and Blair Jones
31 New Dynamics of CEO Pay 415
David N. Swinford
32 Board Compensation 423
Pearl Meyer and Nora McCord
33 Board Critical Issues in Executive Pay 433
Bruce R. Ellig
Part 6 Performance and Compensation
34 Performance Management Best Practices 447
Thomas B. Wilson and Susan Malanowski
35 Guidelines for Effective Executive Performance Appraisals 459
James F. Reda
36 Forced Ranking 479
Dick Grote
37 The Balanced Scorecard and Compensation 493
Paul R. Niven
38 Performance Metrics and Compensation 511
Mark Graham Brown
39 Using Compensation to Drive Workforce Productivity 521
Christian M. Ellis and Summer F. Barnes
40 Return on Investment of Compensation Expenditures 531
Fred Whittlesey
41 Pay-for-Performance:New Developments and Issues 543
Mark D. Cannon, Ph.D.
vi CONTENTS
Part 7 Talent Management and Compensation
42 Using Compensation to Win the Talent Wars 559
Deborah Rees
43 Talent Management,Organization Transformation,and Compensation 571
Lance A. Berger
44 Work–Life Effectiveness and Total Rewards Strategy 585
Kathleen M. Lingle
45 Compensating and Motivating a Diverse Workforce 597
Martin G. Wolf, Ph.D.
46 Communicating Compensation Programs 607
John A. Rubino
47 Talent Management and Compensation in the Fast Food Industry 617
Jerry M. Newman
Part 8 Global Compensation
48 Expatriate Compensation Practices 627
Geoffrey W. Latta
49 Global Local National Compensation Practices 641
Paul Coleman
50 Global Compensation Processes 653
Robert Mattson and David Turetsky
Index 665
Preface
T
HE COMPENSATION HANDBOOK HAS BEEN recognized as
the most authoritative reference book in the compensation field for over
35 years.
The book’s success has resulted from:
■ Identifying the most significant issues impacting compensation and human
resources practitioners
■ Providing the best straightforward, comprehensive, and understandable
solutions to deal with issues
■ Presenting the thoughts and research of respected and prestigious compensa-
tion leaders
■ Offering unique and innovative approaches not found elsewhere
■ Building on the strong foundation of past editions
■ Imparting the best historical and current compensation tools, methods, and
diagnostics for compensation and human resources professionals to align
their programs with key issues
Each edition of the book has its own novel foundation. The first three editions
focused on the evolution of new compensation techniques and methodologies as
they applied to the business and social environment of their eras. The fourth edition
is based on a framework of compensation diagnostics. It structures prior and cur-
rent approaches into a cohesive set of guiding principles that helps practitioners
to select the most appropriate compensation methodology.
vii
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viii PREFACE
The fifth edition’s objective is to demonstrate to human resources and com-
pensation professionals how they can address a dramatically changing set of
human capital issues. These include:
■ New strategies for winning the talent wars
■ Addressing the retirement of the baby boomers, the greatest talent manage-
ment issue of the twenty-first century
■ Responding to a multicultural, multigenerational workforce
■ The globalization of human capital
Thanks to the contributions of 64 compensation specialists, 45 of whom are
new authors to The Compensation Handbook, this edition contains new, updated,
or revised chapters. This “linkage” to talent management issues provides com-
mon threads and a roadmap for developing a comprehensive approach to com-
pensation program design and implementation. The fourth edition’s structural
integrity is maintained because our readers have expressed their appreciation of
consistency when seeking updated information and solutions to compensation
issues.
We again, as we did for the fourth edition, dedicate this book with apprecia-
tion and affection to Milton L. Rock, consummate compensation and business
guru, whose vision spearheaded the first through third editions of The
Compensation Handbook.
Dorothy R. Berger
Lance A. Berger
