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Unit I PowerPoint Presentation Compensation: 
Direct and Indirect = Total Compensation (Research) Per the textbook, compensation can come in the form of financial returns, tangible services, and benefits. The two types of compensation are direct and indirect. Direct consists of pay for work performed. Indirect consists of the perks and benefits associated with the position/employment. Imagine that you are a human resources (HR) manager, and it is your responsibility to identify data to help strategize, benchmark, and develop proper pay compensation for all positions within the organization. There are tons of software, vendors, and/or other services available to help with developing the pay grades, levels, and/or categories; however, the following website provides data and insight into the total compensation package: www.salary.com. You decide to use this website to help you develop your pay model and total compensation strategy. For this assignment, you will create an eight- to ten-slide PowerPoint presentation. You will first choose a job title and a location to present the www.salary.com findings/results. Imagine that you are presenting to your company leaders, and ensure that you identify the following components: core compensation (direct compensation), benefits (indirect compensation), and benchmark benefits with the industry average. Below are the steps to access the material. 1. Go to www.salary.com. 2. Hover over Personal (located at the top of the screen). 3. Click Salaries (from the drop-down menu). 4. Enter job title and location. 5. Click Get My Salary Estimate. 6. Select one job title of your choice. 7. Click Skip This Advertisement. 8. Review the Salary and Benefits, which can be accessed using the navigation panel on the left. (Use this information to create your presentation.) 9. Once you select Benefits (located to the left of the screen), click the Benefits Calculator tab (located at the top of the page). 10. From the Industry drop-down list, select the appropriate industry. 11. Enter the Base Salary. 12. Enter any Bonuses. 13. Click Submit. 14. Once the results are provided, review the Define Employer Contributions tab. The Annual Value of Benefits portion lists the indirect benefits. Enter data for the following fields: 401k, disability, healthcare, pension, and time off (enter as days; on average, most organizations offer 21 days). 15. Click Submit. 16. Review the results within the Compare Benefits to Industry tab. As you create the content slides for your presentation, be sure to use the speaker notes function to explain the content in detail for each of the slides. Note: Keep the 6×6 PowerPoint rule in mind (i.e., slides should only include six to seven lines of content with no more than six to seven words per line). Any illustrations should relate to the content being discussed. Be creative! Include a title slide and a references slide in your presentation; however, please note that these slides do not count toward meeting the total slide count requirement. 
COMPENSATION: DOES IT MATTER? (OR, “SO WHAT?”)
Why should you care about compensation? Do you find that life goes more smoothly when there is at least as much money coming in as going out? (Refer, for example, to the lyrics for the Beatles’ song “Money.”)1 They say something like: it’s true money doesn’t buy everything, but if money can’t buy it, I can’t use it. OK, maybe something of an exaggeration, but.… Yes? Well, of course, it is the same for companies. It really does help to have as much money coming in (actually, more is better) as going out. Until recently, workers at Chrysler got total compensation (i.e., wages plus benefits) of about $76 per hour, whereas U.S. workers at Toyota received $48 per hour and the average total compensation per hour in U.S. manufacturing was $25 (and $16 in Korea, $3 in Mexico). It is one thing to pay more than your competitors if you get something more (e.g., higher productivity and/or quality) in return. But, Chrysler was not. So, the “strategy” was not sustainable. It ended up going through bankruptcy, being bought out by Fiat, and then reducing worker compensation costs as part of its strategy for return to competitiveness. Specifically, Chrysler took steps (as part of its bankruptcy plan) to bring its hourly labor costs down to about $49 more recently.2
General Motors (GM), like Chrysler, has, for decades, paid its workers well—too well perhaps for what it received in return. So what? Well, in 1970, GM had 150 U.S. plants and 395,000 hourly workers. In sharp contrast, GM now has 40 U.S. manufacturing plants and 51,000 U.S. hourly workers.3 In June 2009, GM, like Chrysler, had to file for bankruptcy (avoiding it for a while thanks to loans from the U.S. government—i.e., you, the taxpayer). Not all of GM’s problems were compensation related. Of course, building too many vehicles that consumers did not want was also a problem. But, having labor costs higher than the competition, without corresponding advantages in efficiency, quality, and customer service, does not seem to have served GM or its stakeholders well. Its stock price peaked at $93.62/share in April 2000. Its market value was about $60 billion in 2000. That shareholder wealth was wiped out in bankruptcy. Think of the billions of dollars the U.S. taxpayer had to put into GM. Think of all the jobs that have been lost over the years and the effects on communities that have lost those jobs.
On the other hand, Nucor Steel pays its workers very well relative to what other companies inside and outside of the steel industry pay. But Nucor also has

much higher productivity than is typical in the steel industry. The result: Both the company and its workers do well. Apple Computer is able to keep prices for its iPad and iPhone lower than otherwise by outsourcing manufacturing to China in facilities owned by the Hon Hai Precision Industry Co., Ltd (Foxconn), a Taiwanese company. (See Chapter 7.) As we will see later, doing so generates billions (yes, billions with a “b”) of dollars in cost savings per year. Google and Facebook are companies that are known for paying very well. So far, that seems to have worked in that their high pay allows them to be very selective in who they hire and who they keep and they would say that their talent rich strategy has helped them to foster growth and innovation.
Wall Street financial services firms and banks used incentive plans that rewarded people for developing “innovative” new financial investment vehicles and for taking risks to earn themselves and their firms a lot of money.4 That is what happened—until several years ago. Then, the markets discovered that many such risks had gone bad. Blue Chip firms such as Lehman Brothers slid quickly into bankruptcy, whereas others like Bear Stearns and Merrill Lynch survived to varying degrees by finding other firms (J.P. Morgan and Bank of America, respectively) to buy them. The issue has not gone away. Recently, U.S. Federal Reserve officials have “made it clear that they believe bad behavior at banks goes deeper than a few bad apples and are advising firms to track warning signs of excessive risk taking and other cultural breakdowns.” In the words of one Fed official, “Risk takers are drawn to finance like they are to Formula One racing.” An important driver of risk taking among traders and others is the incentive system that encourages them to be “confident and aggressive” and that often results in those who thrive under this incentive rising to top leadership positions at the banks.5
Does greater expertise in the design and execution of compensation plans play a role in controlling excessive risk taking and other problematic behaviors and encouraging a more positive culture? Congress and the president seemed to think so, because in hopes of avoiding a similar financial crisis in the future they put into place legislation, the Troubled Asset Relief Program (TARP), which included restrictions on executive pay designed to discourage executives from taking “unnecessary and excessive risks.” Another commentator agreed. In an opinion piece in The Wall Street Journal, entitled “How Business Schools Have Failed Business,” the former director of corporate finance policy at the United States Treasury argued that misaligned incentives were a major cause of the global financial crisis (see above) and he wondered how many of the business schools that educated top executives and directors included a course on how to design compensation systems. His answer: not many. Our book, we hope, can play a role in helping to better educate you, the reader, about the design of compensation systems, both for managers and for workers.
How people are paid affects their behaviors at work, which affect an organization’s success.7 For most employers, compensation is a major part of total cost, and often it is the single largest part of operating cost. These two facts together mean that well-designed compensation systems can help an organization achieve and sustain competitive advantage. On the other hand, as we have recently seen, poorly designed compensation systems can likewise play a major role in undermining organization success.
COMPENSATION: DEFINITION, PLEASE
How people view compensation affects how they behave. It does not mean the same thing to everyone. Your view probably differs, depending on whether you look at compensation from the perspective of a member of society, a stockholder, a manager, or an employee. Thus, we begin by recognizing different perspectives.
Society
Some people see pay as a measure of justice. For example, a comparison of earnings between men and women highlights what many consider inequities in pay decisions. In 2013, among full-time workers in the United States, U.S. Bureau of Labor Statistics data indicate that women earned 82 percent of what men earned, up from 62 percent in 1979.8 If women had the same education, experience, and union coverage as men and also worked in the same industries and occupations, the ratio would increase, but most evidence suggests that no more than one-half of the gap would disappear. Thus, under even a best case scenario, such adjustments would increase the women/men earnings ratio to as high as about 90 percent, still leaving a sizable gap.9 Society has taken an interest in such earnings differentials. One indicator of this interest is the introduction of laws and regulation aimed at eliminating the role of discrimination in causing them.10 (See Chapter 17.)
Benefits given as part of a total compensation package may also be seen as a reflection of equity or justice in society. Employers spend about 44 cents for benefits on top of every dollar paid for wages and salaries.11 Individuals and businesses in the United States spend $2.9 trillion per year, or 17.4 percent of its economic output (gross domestic product) on health care.12 Nevertheless, roughly 41 million people in the United States (14 percent of the population) have no health insurance.13 (The Affordable Care Act 
EXHIBIT 1.1 Hourly Compensation Costs for Production Workers in Manufacturing and Economy-wide Productivity (Gross Domestic Product, GDP, per Employed Person), in U.S. Dollars