Environments of Compensation and Benefits Administration

The Technological Environment

We will conclude our look at the Environment of Compensation and Benefits by reviewing the impact of technology.

Technology has made a substantial impact on Human Resources and Compensation and Benefits management. The level of technology an organization uses to produce a product or a service will have a strong influence on its compensation program. Likewise, the information technology employed by an organization to provide information to its employees is also an important influence on its compensation program.

Industry and Technology

Let's take a look at various segments of industry. They include:

• Process production
• Unit or mass production
• Service industries

Organizations engaged in process production (as opposed to mass production and unit production) usually have lower labor-cost ratios and thus more freedom in decisions on wage levels. However, in process production (such as chemical plants), operations are more interdependent and individual performance is more difficult to measure. So, although process industries are in a position to pay well, they are limited in designing pay to motivate performance at the level of the individual. However, plans measuring performance at the level of the group, plant, or company may make good sense.

Unit or mass production (for example, motor vehicles) usually requires less interdependence. Thus, this type of production often permits paying for individual performance. Appropriate pay-for-performance plans, however, usually differ between unit and mass production.

Service industries (for example, health services) can usually be classified in the same way and would seem to be subject to the same variables as unit or mass production industries. But many service organizations specify high interdependence among employees, while many others do not. In some service industries, identifying performance may require more effort.

Pay Systems Based on Employee Skills

Organizations need different pay systems based on whether their employees are semiskilled production workers, skilled workers, engineers and other professionals, or technically trained managers. For example, the first two groups would be expected to resist performance-pay plans, and the latter two to desire them.