1. Job analysis can be defined as the mechanism of acquiring all the data and knowledge related to a certain job in order to effectively execute the duties and tasks enlisted in job description and job specification. Job analysis provides the detailed requirements of the job that include the skills, educational qualifications, experience, physical and mental requirements, different responsibilities related to the job (like the safety of others, responsibility towards the machinery, etc.) and working environment with the threats and dangers linked to the job. On the other hand, job evaluation can be defines as the investigation to find out the appropriate compensation of the job by assessing its relative value. The products of the job analysis process are: Job description, job specification and job evaluation whereas the outcome of the job evaluation is the fringe benefits provided to the employee for successfully performing the given job.
2. The pay systems should be designed in a way that they support the overall business strategy of the firm. The following four activities should be considered before the development of the pay system: (1) service orientation, (2) market sensitivity, (3) internal equity and (4) system administration.
- Service Orientation: The play plan should be well designed in order to retain the staff. The affect of the employee turnover is based on the position and the industry, however it has been estimated that the costs of replacement vary from one-third of the salary of a new employee to 1.5 times the salary of the leaving employee.
- Market Sensitivity: The employees know about their market and they develop a mentality of being free agents due to the high demand and lesser availability of technical staff in the job market.
- Internal Equity: The internal equity concept is as important as the concept of market competitiveness or the external equity. The pay plan should be designed such that it fits all the positions together with in a firm. The value of a position in an organization may vary with its corresponding value in the market due to unique functions of that organization. Internal equity describes the treatment of the positions having similar value and complexity within the organization.
- System Administration: The pay system should be designed such that it offers freedom for decision making with respect to the experience and performance variables. An effective pay plan based on the market provides the guidelines for making the compensation decisions.
3. In my opinion the compensation plan for the executives should be justified as it is ethically correct. Now, it is up to the hands of the executive that whether they want to act ethically or not. Justified compensation plan would encourage all the personnel to work hard and perform well in order to acquire the additional benefits. Otherwise, they will endeavor to acquire personal benefits through shortcuts. On the other hand, the excessive compensation package for the executives also hurts the shareholders. The disparity in the compensation packages for the executive and the rest of the employees is threatening for the democratic principles that also damages the leadership development and provides the basis for the condition for social and economic instability. It may also lead to the issues related to the distribution of income or wealth.