The Relative Impact of Market, Internal, and Overall Job Values on Pay Competitiveness

Abstract

As a practical imperative, organizations must be able to attract, retain, and motivate qualified employees to remain going concerns. Those that adopt a market-based strategy that focuses on paying market-competitive wages may effectively attract and retain employees and, depending upon their compensation planning process, encourage employees’ belief in the distributive justiceof their organizations’ pay decisions. Alternatively, organizations that adopt an internal equity strategy that focuses on pay decisions that reflect the internal value of employees’ jobs to their organization may effectively retain employees and, depending upon the process used to determine internal job values, encourage employees’ belief in the equity or procedural justice of that process. Compared to these strategies, organizations that rely on measures of overall job value are focusing on neither the market values, nor their internal values of jobs, alone. Instead, they are focusing on the jobs’ overall values, or their amended market values given the influence of the jobs’ internal values to the organization. As such, overall job value impacts, at once, the organizations’ need to attract, retain and motivate employees.

This article evaluates the relative impact of market, internal, and overall job value on the competitiveness of 88 employees’ pay in 41 jobs in a nonprofit organization in the US health care sector. The organization’s pay decisions were made prior to this study and without benefit of a formal salary management plan. Hence, this study represents a retrospective analysis of the relative impact of jobs’ market, internal, and overall value on pay competitiveness.