MGT 422 Wage & Salary Administration

Spring, 2004

  Dr. Nancy Brown Johnson


235 Gatton College of Business & Economics
Office Hours:  Tuesday/Thursday
2:00- 3:00 & by appointment


OVERVIEW Compensation of employees is a critical organizational function. Labor costs can represent as much as 85% of total costs in service organizations and 50% in manufacturing. A good compensation and reward system can enhance organizational effectiveness while a poor one can detract from it. The first few weeks of this course will focus on the basic elements of wage and salary administration. From there, we will move on to explore pay for performance systems and more recent compensation trends. Finally, the course will wrap up with special topics such as international compensation.

Course Objectives

1. Obtain working knowledge of basic compensation tools: job evaluation, performance appraisal, wage surveys, and fringe benefits.
2. Gain a conceptual knowledge of basic building blocks of compensation systems: internal, external, individual, and administrative equity.
3. Understand incentive systems effects on motivation, productivity, and workforce flexibility.


Martochhio, Joseph.   2001.  Strategic Compensation. (2nd edition)  Upper Saddle River, New Jersey.



The grade for the class will be based upon two exams and an optional comprehensive final, an individual assignment, three cases, a group project, and presentation.  Grading will be based upon a 90%=A, 83-90%=B, 74-82%=C, 65%-73%=D scale.   Class participation will not be explicitly graded.   However, students who attend and participate in class, tend to perform better on exams and in assignments. Attendance is required during the cases and student presentations.  Should you have a university excused absence during this time, you will be required to turn in a make-up assignment.  All make-up exams will be in the essay format.          

                                    Exam I                                                 75

                                    Exam II                                               75

Assignment 1                                      20

Case 1                                                  10

Case II                                                 10

Case III                                                10

                                    Group Assignment                             75

                                    Presentation                                       25

                                    Final Exam                                          100

                             TOTAL                                     400(300 without final)



Anyone feeling that a dispute exists after the grading of any assignment or examination may submit a written grievance.   This grievance should identify the item in dispute and academic arguments supporting the student’s position.  Grievances must be submitted in the class following the returned assignment.   The instructor agrees to return a written response within one class of the submitted grievance.




Students should behave consistent with what would be expected in business interactions.  Such conduct includes:

§         Respecting the views of other students.

§         Behaving in a way that does not make others uncomfortable

§         Not interrupting others and not speaking while others are speaking

§         Asking for clarification or commenting on assignments in a courteous manner

§         Arriving in class on time

§         Leaving class when dismissed

§         Acting interested in the material

§         Not sleeping or reading the paper during class






Topic/Power Points





January 13



Kerr, S. “On the Folly of Rewarding A While Hoping for B” Kerr, Steven, Academy of Management Executive, 10795545, Feb95, Vol. 9, Issue 1, pp. 7-14.*

January 18

Strategic Compensation

Martocchio Chapter 1, 2


January 20

legal issues in compensation

Martocchio, Chapter 3

Assignment 1

January 25

Pay Discrimination


January 27

External Consistency

Martocchio Chapter 8 

Assignment 1 Due

February 2



February 4

internal consistency

Martocchio Chapter 7

Bridges, W. The End of the Job.  Fortune, 9/19/94.

February 8

job evaluation


February 10

Designing a pay structure  

Martocchio Chapter 9 


February 15



February 17

Bonnie Hardwick from Compensation

Project Assigned

February 22



February 24

Performance appraisal

Martocchio Chapter 4    

March 1

Traditional Basis for Pay:  Seniority, Merit


March 3

Incentive Pay

Martocchio Chapter 5  

March 8

Case 1

Case  1:  Donald Roy  "Quota Restriction & Goldbricking in a Machine Shop”  American Journal of Sociology, 7:5, (March, 1952) 427-452<427:QRAGIA>2.0.CO;2-G *  In order to download the case you will need to use a campus computer or have proxy access to the library.  You may also purchase the case from Johnny Print.

March 10

tournament theory


March 22

Case 2

Case Harvard Business School 9-376-028:  Berg, N.A. and Fast, N.D.  " Lincoln Electric"  Note:  This case is available for download at the above hyperlink Harvard Business Review Press for $6.50.  There are several Lincoln Electric Cases and so make sure the case numbers match.  Some students have had trouble downloading cases using campus computers.  The case can also be purchased from Johnny Print.


March 24

Person Focused Pay

 Martocchio Chapter 6


March 29 

Case 3

Case 3.  Freeman & Kleiner “The Last American Shoe Manufacturers: Changing the Method of Pay to Survive Foreign Competition.”  NBER Working Paper w 6750.  In order to download this case you will need to use a campus computer.  You can also purchase the case from Johnny Print.

March 31

Guest Speaker: Wayne Carter, Consolidated Electric Distributors


April 5


Benefit Trends  (see page 10)

Martocchio Chapter 10 

April 7

Benefits continued

Martocchio Chapter 11 

April 12 

International Compensation

Martocchio Chapter 12

April 14

Joey Pain, UK  Benefits Director

Group Projects Due

April 19



April 21



April 26



April 28

Wrap up


May 3 1:00pm

FINAL EXAM (optional)


*Note:  These links operate through the UK library system which is accessible from all UK computers or by creating a proxy linkage.  Directions for off campus access connections are available at and clicking on “Off Campus Instructions.”