The Relative Importance of the Dimensions of Organizational Justice at Iranian Public ...2)/11.pdf · 2013-09-13 · The Relative Importance of the Dimensions of Organizational Justice

Arabian Journal of Business and Management Review (OMAN Chapter) Vol. 3, No.2;Sep. 2013

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The Relative Importance of the Dimensions of Organizational Justice at Iranian Public Organization's Compensation

System

Naser Mirsepasi (Professor) Department of Public Management, Science and Research Branch, Islamic Azad University,

Tehran, Iran Gholamreeza Memarzadeh (Assistant Professor)

Department of Public Management, Science and Research Branch, Islamic Azad University, Tehran, Iran

Hosein Alipour (Assistant Professor) Department of Public Management, Science and Research Branch, Islamic Azad University,

Tehran, Iran Esmail Ghaderi (PhD Student)

Department of Public Management, Science and Research Branch, Islamic Azad University, Tehran, Iran

Abstract As human resources have become viewed as more critical to organizational success, many organizations have realized that it is the people in an organization that can provide a competitive advantage (Gratton, 1998, pp: 13-14). Some ways that human resources become a competitive advantage are through attracting and retaining employees with unique professional and technical capabilities, investing in training and development of those employees, and compensating them in ways that keep them competitive with their counterparts in other organizations (Barney & Wright, 1998, pp: 31-46).The aim of this study is to find the relative importance and prioritization of organizational justice dimensions in Iranian public organization's compensation system. The research method is a descriptive one-and simple stratified random sampling was applied in selecting the sample population and then based on Morgan's sample volume formula 150 questionnaires were distributed. The validity of the study was confirmed through using expert support and questionnaires, reliability and measuring Cranach's alpha (=./83). For data analysis the relative importance technique was applied. The finding of this research indicate that distributive justice (2=./295) has the highest relative importance and has the greatest effect on the effectiveness of human resources management in the research findings some recommendations are provided to improve the justice perception in compensation system in public organizations. Keywords: Human Resource Compensation System, Distributive Justice, Procedural Justice, Interactional Justice, Informational Justice INTRODUCTION Compensation decisions must be viewed strategically. Because so many organizational funds are spent on compensation-related activities, it is critical for top management and HR executives to view the “strategic” fit of compensation with the strategies and objectives of the organization. The changes in the global marketplace for products and services have led to organizational changes in business philosophies, strategies, and objectives. Increasingly, organizations are recognizing that compensation philosophies must change also (Mathis & Jackson, 2007, p.418). People want to be treated fairly in all facets of compensation, including base pay, incentives, and benefits. This is the concept of equity, which is the perceived fairness of the relation between what a person does (inputs) and what the person receives (outcomes). Inputs are what a person brings to the organization and include educational level, age, experience, productivity, and other skills or efforts.


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What a person receives from the organization, or outcomes, are the rewards obtained in exchange for inputs. Outcomes include pay, benefits, recognition, achievement, prestige, and any tangible or intangible reward received. Individuals judge equity in compensation by comparing the effort and performance they give with the effort and performance of others and the rewards those others receive. But it must be stressed that these comparisons are personal and based on individual perceptions, not just facts. A sense of inequity occurs when the comparison process results in an imbalance between input and outcomes (Cobb and et al, 1997, pp: 1020-1040). It is important for HR professionals and managers to develop, administer, and maintain compensation programs that are perceived equitably by employees. The consequence of an equitable compensation program is that individuals are more likely to be attracted to and take jobs in organizations where employees do not voice widespread concerns about equity. Greater loyalty, less turnover, and higher commitment to achieve organizational performance objectives are more likely if employees believe they are compensated fairly and will share in the growth of the organization. Also, the organization must have policies, procedures, and administrative support systems that are viewed as job-related and are not manipulated by favoritism or personality preferences of managers and supervisors. Finally, external equity is crucial if the organization is going to compete effectively in the labor market. Increasingly in many labor markets, some employers are finding it difficult to attract and retain a workforce with the necessary capabilities to compete in a global marketplace. Regularly tracking external pay data and updating pay structures are integral to ensuring external equity in any organization (Mathis & Jackson, 2007, pp: 427-428). LITERATURE REVIEW Nature of Compensation Compensation is an important factor affecting how and why people choose to work at one organization over others. Employers must be reasonably competitive with several types of compensation in order to hire, keep, and reward performance of individuals in the organization. Types of Compensation Rewards can be both intrinsic and extrinsic. Intrinsic rewards often include praise for completing a project or meeting some performance objectives. Other psycho- logical and social effects of compensation reflect the intrinsic type of rewards. Extrinsic rewards are tangible, having the form of both monetary and nonmonetary rewards. Tangible components of a compensation program are of two general types (Table1). With the direct type of compensation, monetary rewards are provided by the employer. Base pay and variable pay are the most common forms of direct compensation. Indirect compensation commonly consists of employeebenefits. BASE PAY The basic compensation that an employee receives, usually as a wage or salary, is called base pay. Many organizations use two base pay categories,hourly and salaried, which are identified according to the way pay is distributed and the nature of the jobs. Hourly pay is the most common means of payment based on time; employees who are paid hourly are said to receive wages, which are payments directly calculated on the amount of time worked. In contrast, people who are paid salaries receive payments that are consistent from period to period despite the number of hours worked. Being salaried typically has carried higher status for employees than being paid wages. Some organizations haveswitched to an all-salaried approach with their manufacturing and clerical employees in order to create a greater sense of loyalty and organizational commitment. But they still must pay overtime to certain employees in jobs covered by federal and state pay laws. VARIABLE PAY Another type of direct pay is variable pay, which is compensation linked directly to performance accomplishments. The most common types of variable pay for most employees are


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bonuses and incentive program payments. For executives, it is common to have longer-term rewards such as stock options. Variable pay, including executive compensation. BENEFITS many organizations provide numerous extrinsic rewards in an indirect manner. With indirect compensation, employees receive the tangible value of the rewards without receiving the actual cash. A benefit is an indirect reward, such as health insurance, vacation pay, or retirement pensions, given to an employee or group of employees as a part of organizational membership (Mathis & Jackson, 2007, pp: 416-417). Table 1: Components of a Compensation Program

COMPENSATION INDIRECT

Benefits •Medical insurance •Paid time off •Retirement pensions •Workers’ compensation

DIRECT Base Pay •Wages •Salaries Variable Pay •Bonuses •Incentives •Stock options

Compensation Responsibilities Compensation costs are significant expenditures in most organizations. For in- stance, at one large hotel, employee payroll and benefits expenditures comprise about 50% of all costs. Although compensation costs are relatively easy to calculate, the value derived by employers and employees is more difficult to identify. To administer these expenditures wisely, HR specialists and other managers must work together. A typical division of compensation responsibilities is illustrated in Table (2). HR specialists usually guide the overall development and administration of an organizational compensation system by conducting job evaluations and wage surveys. Also, because of the technical complexity involved, HR specialists typically are the ones who develop base pay programs and salary structures and policies. Operating managers evaluate the performance of employees and consider that performance when deciding compensation increases within the policies and guidelines established by the HR unit (Mathis & Jackson, 2007, p. 418). Table2: Typical Compensation Responsibilities

HR Unit Managers • Develops and administers compensation system • Conducts job evaluation and wage surveys • Develops wage/salary structures and policies

• Attempt to match performance and rewards • Recommend pay rates and increases based on guidelines from HR unit • Evaluate employee performance for compensation purposes

Strategic Compensation Compensation decisions must be viewed strategically. Because so many organizational funds are spent on compensation-related activities, it is critical for top management and HR executives to view the “strategic” fit of compensation with the strategies and objectives of the organization. The changes in the global marketplace for products and services have led to organizational changes in business philosophies, strategies, and objectives. Increasingly, organizations are recognizing that compensation philosophies must change also. The example of Bayer Corporation illustrates this alignment. Thecompensation practices that typically exist in a new organization may be different from those in a mature, bureaucratic organization. For example, if a firm wishes to create an innovative, entrepreneurial culture, it may offer bonuses and stock equity programs so that


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employees can participate in the growth and success of the company, but set its base pay and benefits at relatively modest levels. However, for a large, stable organization, highly structured pay and benefit programs may be more common. Compensation Philosophies There are two basic compensation philosophies, which should be seen as opposite ends of a continuum. At one end of the continuum in Figure (1) is theentitlement philosophy; at the other end, the performance-oriented philosophy. Entitlement Orientation The entitlement philosophy can be seen in many organizations that traditionally have given automatic increases to their employees every year. Further, most of those employees receive the same or nearly the same percentage increase each year. Employees and managers who subscribe to the entitlement philosophy believe that individuals who have worked another year are entitled to a raise in base pay, and that all incentives and benefit programs should continue and be increased, regardless of changing industry or economic conditions. Commonly, in organizations following an entitlement philosophy, pay increases are referred to as cost-of-living raises, whether or not they are tied specifically to economic indicators. Following an entitlementphilosophy ultimately means that as employees continue their employment lives, employer costs increase, regardless of employee performance or other organizational competitive pressures. Market comparisons tend to be made within an industry, rather than more broadly considering compensation in firms of all types. Bonuses in many entitlement-oriented organizations are determined very paternalistically and often do not reflect operating results. Instead, the CEO or owner acts as Santa Claus at the end of the year, passing out bonus checks that generally do not vary from year to year. Therefore employees “expect” to receive the bonuses as another form of entitlement. Performance Orientation Where a performance-oriented philosophy is followed; no one is guaranteed compensation just for adding another year to organizational service. Instead, pay and incentives are based on performance differences among employees. Employees who perform well get larger compensation increases; those who do not perform satisfactorily receive little or no increase in compensation. Thus, employees who perform satisfactorily should keep up or advance in relation to a broad view of the labor market for their jobs, whereas poor or marginal performers should fall behind. Bonuses are paid based on individual, group, and/or organizational performance results. Few organizations are totally performance-oriented in all facets of their compensation practices. However, breaking the entitlement mode is increasingly occurring in the organizational restructuring common throughout many industries. A study of public-sector HR managers found that there is a desire and need to shift toward more performance-oriented compensation practices in many public-sector organizations.How fast that occurs, given the historical traditions and the strength of public-sector unions, remains to be seen (Murphy and Gebhart, 1998, pp: 68-78). FIGURE 1: Continuum of Compensation Philosophies Strategic Compensation Design Designing a compensation system for an organization requires knowledge of the strategic issues facing the organization and the culture of the organization. Organizations today are facing more pressures and greater demands for flexibility from their managers and employees. As Table (3) on the next page notes, compensation strategies used in organizations have shifted. Organizations that are more static have fixed salaries, limited participation in bonuses, and other features clearly

EntitlementPerformance

•Seniority-based •Across-the-board raises •“Guaranteed” movement of scales •Industry comparisons only •“Santa Claus” bonuses

•No raises for length of service •No raises for longer-service poor performers •Market adjusted pay structures •Broader industry comparison


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focused internally. However, dynamic, rapidly changing organizations have more varied compensation systems that reward current performance and growth (Mathis & Jackson, 2007, p.420). Table 3: Changing Compensation Strategies

Tomorrow Today Yesterday •Low fixed salary, more variable pay •Variable pay as add-on to salary •Fixed salary

•Variable pay common throughout organization

•Variable pay emerging throughout the organization

•Bonuses/perks for executives only

•Portable benefits •Flexible benefits •Fixed benefits, reward long tenure

•Skill-based career, interim employment

•Industry-based career "moving around”

•Company-based career "moving up”

•Networked “virtual” organizations •Flatter, team-based organizations •Hierarchical organizations

•Customized, integrated pay systems; pay, benefits, intangibles

•Total compensation(Look at benefits, too) •pay plans "Cookie cutter”

Variable Pay: Incentives for Performance Variable pay is compensation linked to individual, team, and/or organization performance. Traditionally also known as incentives, variable pay plans are attempts to tie additional tangible rewards given to employees for performance beyond normal expectations. The philosophical foundation of variable pay rests on several basic assumptions:

Some jobs contribute more to organizational success than others. Some people perform better than others. Employees who perform better should receive more compensation. A portion of some employees’ total compensation should be given to reward above-

satisfactory performance. Contrast the assumptions above with a pay system based on seniority or length of service: Time spent each day is the primary measure of short-term contribution. In the long term, length of service with the organization is the primary differentiating factor

among people. Differences in individual contributions to the organization are recognized through different

base pay levels. Giving additional performance rewards to some people but not others is divisive and

hampers employees working together (Mathis & Jackson, 2007, p. 458). Types of Variable Pay Variable pay plans can be established that focus on individual performance, team or group performance, and on organization-wide performance. An important feature of variable pay plans is that incentives increase the degree of cooperation in teams, whereas individual incentives do not. Individual incentives are given to reward the effort and performance of individuals. Some of the most common means of providing individuals variable pay are piece-rate systems, sales commissions, and bonuses. Other means include special recognition rewards such as trips or merchandise. Two widely used individual incentives focus on employee safety and attendance. One of the difficulties with individual incentives is that an employee may focus on what is best individually and may block or inhibit performance of other individuals with whom the employee is


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competing. That competition particularly occurs if only the top performer or winner receives incentives. This is one reason why team or group incentives have been developed. When an entire work group or team is rewarded for its performance, more cooperation among the members is required and usually forthcoming. However, competition among different teams for rewards can lead to decline in overall performance under certain circumstances. The most common types of team orgroup incentives are gain sharing plans where employee teams that meet certain goals share in the gains measured against performance targets. Often, gain sharing programs focus on quality improvement, labor-cost reduction, and other measurable results (Frazee, 1997, pp: 21-24). Organization incentives reward people for the performance of the entire organization. This approach reduces individual and team competition and assumes thatall employees working together can generate better organizational results that lead to better financial performance. These programs share some of the financial gains to the firm through payments to employees. The payments often are paid as an additional percentage of each employee’s base pay. Also, organizational incentives may be given as a lump sum amount to all employees, or different amounts may be given to different levels of employees throughout the organization. The most prevalent forms of organization-wide incentives are profit-sharing plans and employee stock plans. For senior managers and executives, variable pay plans often are established to provide stock options and other forms of deferred compensation that minimize the tax liabilities of the recipients. Figure (2)show some of the programs under each type. FIGURE 2: Types of Variable Pay Plans Types of Benefits Many different types of benefits are offered by employers. As Figure 3 indicates, some of the benefits are legally mandated by federal, state, and local laws. Employers have little choice but to pay for these benefits. Mandated benefits are those benefits which employers in the United States must provide to employees by law. Social Security and unemployment insurance are funded through a tax paid by the employer based on the employee’s compensation. Workers’ compensation laws exist in all states. In addition, under the Family and Medical Leave Act (FMLA), employers must offer unpaid leaves to employees with certain medical or family difficulties. Other mandated benefits are available through Medicare, which provides health care for those ages 65 and over. It is funded in part by an employer tax through Social Security. The Consolidated Omnibus Budget Reconciliation Act (COBRA) and the Health Insurance Portability and Accountability Act (HIPAA) mandate that an employer extend healthcare coverage to employees after they leave the organization, and that most employees are able to obtain coverage if they were previously covered in a health plan. Mandated benefits have been proposed for many other areas, but as yet none of the proposals have been adopted. Areas in which coverage has been proposed are as follows: • Universal health-care benefits for all workers • Child-care assistancelth Care Family-Oriented • Pension plan coverage that can be transferred by workers who change jobs • Core benefits for part-time employees working at least 500 hours per year a major reason for these proposals is that federal and state governments wantto shift many of the social costs for health care

•Piece rate •Sales commissions •Bonuses •Special recognitions (trips, merchandise) •Safety awards •Attendance bonuses

•Gain sharing

•Quality improvement

•Labor-cost reduction

•Profit sharing

•Employee stock options

•Executive stock options

•Deferred compensation

Individual Group Organizatio


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and other expenditures to employers. This shift would relieve some of the budgetary pressures facing governments to raise taxes and cut spending. Voluntary Benefits Most of the other types of benefits are provided by employers voluntarily in order to compete for and retain employees. By offering additional benefits, organizations are recognizing the need to provide greater security and benefit support to workers with widely varied personal circumstances. By offering more benefits, employers hope to strengthen the ties between the organizations and employees as valuable human resources. Also, as the workforce ages and more individuals retire, financial security in retirement is an issue that employees and employers are addressing. In addition, with the changes in work and jobs emphasizing flexibility and choice, both workers and employers are seeing benefits choices as necessary. As a result, flexible benefits and cafeteria benefit plans have expanded. The following sections describe the different types of benefits that were shown in Table4 (Mathis & Jackson, 2007, pp: 494-495). Table4: Benefits Classified by Type

Employer Voluntary Government Mandated Family-Oriented Health Care Security

Family and Medical Leave Act Dependent care Alternative work arrangements

COBRA and HIPAA provisions Medical Dental Vision care Prescription drugs Psychiatric counseling Wellness programs HMO or PPO health-care plans

Workers’ compensation Unemployment compensation Supplemental unemployment benefits (SUB) Severance pays

Time off

Military reserve time off Election and jury leaves Lunch and rest breaks Holidays and vacations Funeral and bereavement leaves

Retirement Security Social Security Early retirement options Pre-retirement counseling Disability retirement benefits Health care for retirees Pension plans Individual retirement accounts (IRAs) 401(k) and 403(b) plans

Financial, Insurance and Related

Social and Recreational Life insurance Legal insurance Disability insurance Financial counseling Credit unions Company-provided car and expense account Educational assistance

Tennis courts Bowling leagues Service awards Sponsored events (athletic and social) Cafeteria and food services Recreation programs

Justice It's often difficult to assess the ability, integrity, and benevolence of authorities accurately, particularly early in a working relationship. What employees need in such circumstances is some sort of observable behavioral evidence that an authority might be trustworthy. Justice provides that sort of behavioral evidence because authorities who treat employees more fairly are usually judged to be more trustworthy. As shown in Table (5), employees can judge the fairness of an authority's decision making along four dimensions: distributive Justice, procedural Justice, interpersonal Justice, and informational Justice.

1- Distributive Justice Distributive Justice reflects the perceived fairness of decision-making outcomes. Employees gauge distributive Justice by asking whether decision outcomes such as pay, rewards, evaluations, promotions, and work assignments are allocated using proper norms. In most business situations, the proper norm is equity, with more outcomes allocated to those who contribute more inputs. The equity norm is typically judged to be the fairest choice in situations in which the goal is to maximize the productivity of individual employees.


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However, other allocation norms become appropriate in situations in which other goals are critical. In team-based work, building harmony and solidarity in work groups can become just as important as individual productivity. In such cases, an equality norm many be judged more fair, such that all team members receive the same amount of relevant rewards. The equality norm is typically used in student project groups, in which all group members receive exactly the same grade on a project, regardless of their individual productivity levels. In cases in which the welfare of a particular employee is the critical concern, a need norm may be judged fairer (Levering & Moskowitz, 2007, pp: 94-114).

2- Procedural Justice In addition to judging the fairness of a decision outcome, employees may consider the process that led to that outcome. Procedural Justice reflects the perceived fairness of decision-making processes. Procedural Justice is fostered when authorities adhere to rules of fair process. One of those rules is voice, which concerns giving employees a chance to express their opinions and views during the course of decision making (Folger, 1977, pp: 108-119). A related rule is correct ability, which provides employees with a chance to request an appeal when a procedure seems to have worked ineffectively. Research suggests that voice improves employees' reactions to decisions, largely because it gives employees a sense of ownership over the decisions that occur at work. In fact, employees value voice even when it doesn't always result in the outcomes they want or when their appeals didn't always reverse the decisions that were made (Korsgaard & Roberson, 1995, pp: 657-669). Why? Because employees like to be heard the expressions of opinions is a valued end, in and of it, as long as employees feel those opinions were truly considered. Aside from voice and correct ability, procedural Justice is fostered when authorities adhere to four rules that serve to create equal employment opportunity. The consistency, bias suppression, representativeness, and accuracy rules help ensure that procedures are neutral and objective, as opposed to biased and discriminatory. These sorts of procedural rules are relevant in many areas of working life. As one example, the rules can be used to make hiring practices fairer by ensuring that interview questions are unbiased and asked in the same manner across applications. As another example, the rules can be used to make compensation practices fairer by ensuring that accurate measures of job performance are used to provide input for merit raises.

3- Interpersonal Justice In addition to judging the fairness of decision outcomes and processes, employees might consider how authorities treat them as the procedures are implemented. Interpersonal Justice is fostered when authorities adhere to two particular rules. The respect rule pertains to whether authorities treat employees in a dignified and sincere manner, and the propriety rule reflects whether authorities refrain from making improper or offensive remarks. From this perspective, interpersonal injustice occurs when authorities bad-mouth employees; criticize, berate, embarrass, or humiliate them in public; or refer to them with racist or sexist labels (Bies,2001,pp:85-108). Indeed, research indicates that violations of interpersonal Justice Rules reduce employee's job satisfaction, life satisfaction, and organizational commitment while increasing feelings of depression, anxiety, and burnout (Tepper,2000,pp:178-190).

4- Informational Justice Finally, employees may consider the kind of information that authorities provide during the course of organizational decision making. Informational justice reflects the perceived fairness of the communications provided to employees from authorities. Informational justice is fostered when authorities adhere to two particular rules. The justification rule mandates that authorities explain decision- making procedures and outcomes in a comprehensive and reasonable manner, and the truthfulness rule requires that those communications be honest and candid. Although it seems like common sense that organizations would explain decisions in a comprehensive and adequate


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manner, that's often not the case. Ironically, that defense mechanism is typically counterproductive because research suggests that honest and adequate explanations are actually a powerful strategy for reducing retaliation responses against the organization (Shaw et al, 2003, pp: 444-458). In fact, low levels of informational justice can come back to haunt the organization if a wrongful termination claim is actually filed. How? Because the organization typically needs to provide performance evaluations for the terminated employee over the past few years to show that the employee was fired for poor performance. If manager refrained from offering candid and honest explanations on those evaluations, then the organization can't offer anything to justify the termination (Orey, 2007, pp: 52-62). Table 5: The Four Dimensions of Justice

Description Distributive Justice Rules Are rewards allocated according to the proper norm? Equity vs. equality vs. need

Description Procedural Justice Rules Do employees get to provide input into procedures? Voice Do procedures build in mechanisms for appeals? Correct ability Are procedures consistent across people and time? Consistency Are procedures neutral and unbiased? Bias suppression Do procedures consider the needs of all groups? Representativeness Are procedures based on accurate information? Accuracy

Description Interpersonal Justice Rules Do authorities treat employees with sincerity? Respect Do authorities refrain from improper remarks? Propriety

Description Informational Justice Rules Do authorities explain procedures thoroughly? Justification Are those explanations honest? Truthfulness

(Colquitt and et al, 2010, p.127) METHODOLOGY With respect to aim, this study is a functional one regarding the data collection method, the present study is a descriptive one and a subcategory of survey research. In this study the researcher describes and studies the dimensions and indicators of organizational justice in Iranian public organizations' compensation system. For studying these factors, it is necessary to describe the indicators of organizational justice in this domain and also study the present conditions of these indicators in the public organizations. Thus the appropriate method for doing this descriptive research was surveying. Society and Statistical Sample The statistical society involved in this study was a group of people and units sharing at least a feature. The population being studied here was Iranian public organizations. Statistical sample is a limited number of the entire statistical population that represents the main features of the larger community. The present studies statistical sample 96 people, was measured based on Morgan's chart using the following formula. In this study 150 people were considered.

961.0

5.005.96.12

2

22

2

d

QPZn

In this formula, sampling was done with %95 of assurance, bearing in mind %5 of possibility for error. 05.0 ، 025.0

2

و 96.1)025.0( Z

The amounts P and Q were considered with a caution %50. The possibility for the error of measuring tool was considered as %10. Sampling was done using a stratified and random approach.


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The stratified method was applied in determining the organization (ministry) to be studied and the random method was applied in selecting the employees for answering the questionnaires.

Methods of Data Collection In order to collect information two approaches were applied: Field and Library. For providing the review of related literature and offering the primary model of the project library approach was applied and field approach was used for measuring the study's variables and exam. Data Collection Tool Data collection tool used in the present study was questionnaire. For getting to know the dimensions of organizational justice of the Iranian public organizations' employees in the field compensation systemimprovement a research- made questionnaire was applied.

Number of Questions Index Dimensions Human Resource

Management

6 Equity vs. equality vs. need Distributive

Justice

Compensation System

Distribution

8

Bias suppression

Procedural Justice

Correctability Representativeness Effectiveness Standardization Accuracy Empowerment Consistency

3 Respect

Interactional Justice Propriety

Feedback

2 Justification Informational

Justice Truthfulness Questionnaire's Validity and reliability

The ranking of Iran's executive organizations based on the total score of general and specific indicators of 1390

Management and Human Resources Development vice-presidency"Shahid Rajaee Project"

Sample size Rate of general indictors (Score roof 1000)

Ranking Name of the Ministry

25 716/99 1 Ministry of the Energy 25 676/11 2 Ministryof Education 25 657/61 3 Ministry of Housingand Urbanism 25 593/91 10 Ministry of Commerce 25 569/68 16 Road & Transportation Ministry

25 457/75 18 Ministry of Welfareand Social Security

150 Sum


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By validity we mean that the measurement tool must measure the intended feature correctly. In other words validity determines that how far the designated tool can measure intended feature. For testing the appropriateness and quality the following measures were done: The present study enjoys a much higher validity through knowing the nature and function of the research, preserving the respondents' mentalities and interests, paying attention to questions writing, selecting the best method for answering, removing ambiguities from the questions (through helps offered by advisors and readers) and paying attention to surveying collected information and their analysis. In this way the main questionnaire was prepared and utilized through the guidance of advisor, reader and other professors in the department of management. By reliability it is meant that how similar, exact and reliable are the finding of the study, if the studied feature is measured with the same questionnaire and conditions. A questionnaire's reliability must have a correlation coefficient of at least ./70. In the present study Cranach alpha was used to measure reliability coefficient. Cranach alpha is measured according to the average of the internal correlation of a series of questions that assess a concept. The closer the Cranach alpha is to 1, the greater the validity of the internal consistency is. The reliability of a questionnaire must have at least Cranach alpha which is./70 and this measured in the distributed questionnaire for the stud's variables as follow. Reliability ****** Method 1 (space saver) will be used for this analysis ****** R E L I A B I L I T Y A N A L Y S I S - S C A L E (A L P H A) Reliability Coefficients N of Cases = 60.0 N of Items = 71 Alpha = .8308 ANALYSIS DATA Johnson, J.W (2000) proposed an alternative solution to the problem g correlated variables. Green et al (1978) attempted to relate the orthogonal variables back to the original variables by using the set of coefficients for deriving the orthogonal variables from the original correlated predictors. Because the goal is to go from the orthogonal variables back to the original predictors, however, the more appropriate set of coefficients are the coefficients that derive the original predictors from the orthogonal variables. In other words, instead of regressing the orthogonal variable on the original predictors, the original predictors are regressed on the orthogonal variable. Because regression coefficients are to the uncorrelated variable rather than to the correlated original predictors, the problem of correlated predictors is not reintroduced with this method. Johnson termed the weights resulting from the combination of the two sets squared regression coefficients epsilons (). They have been more commonly referred to as relative weights (e.g., J.W.Johnson, 2001), which is consistent with the original use of the term used by Hoffman (1960, 1962). A graphic representation of J.W. Johnson's (2000) relative weights is presented in Figure (1-5). In this three-variable example, the original predictors (x ) are transformed to their maximally related orthogonal counterparts(Z ), which are then used to predict the criterion (Y). The regression coefficients of Y on Z are represented byβ , and the regression coefficients of x on Z are represented byλ . Because the Z s are uncorrelated, the regression coefficients of x on Z are equal to the correlations betweenx onZ . Thus, each squared λ represents the proportion of variance in Z accounted for by x (J.W.Johnson, 2000). To compute the relative weight forx , multiply the proportion of variance in each Z accounted for by x by the proportion of variance in Y accounted for by each Z and sum the products. For example, the relative weight for x1 would be calculated as

Figure (1-5) Graphic Representation of J.W. Johnson's (2000) Relative Weights for Three Predictors


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Run MATRIX procedure: MGET created matrix CR. The matrix has 5 rows and 5 columns. The matrix was read from the record(s) of row type CORR. RSQUARE .578 Raw Relative Weights X1 .295 X2 .134 X3 .084 X4 .065 Relative Weights as Percentage of R-square X1 51.0% X2 23.2% X3 14.5% X4 11.3% ------ END MATRIX -----

Distributive

Justice

Procedural

Justice

Interpersonal

Justice

./317

./430

./385 ./420

./476

Human Resource Compensation System

./295

./134

./084


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Distributive Justice

Procedural Justice

Interpersonal Justice

Informational Justice

Dimensions of justice in the organizations with high

performance0.2690.1020.0720.057

Dimensions of justice in the organizations with low

performance0.1380.0570.0320.024

Optimization 0.2950.1340.0840.065

Human Resource Compensation System

CONCLUSION AND IMPLICATIONS Compensation is an important factor affecting how and why people choose to work at one organization over others. Employers must be reasonably competitive with several types of compensation in order to hire, keep, and reward performance of individuals in the organization. Organizations need to be fluid to move as markets move. That necessitates a more flexible approach to compensation. Compensation systems in organizations must be linked to organizational objectives and strategies. But compensation also requires balancing the interests and costs of the organization with the expectations of employees. A compensation program in an organization should have four objectives: Legal compliance with all appropriate laws and regulations Cost effectiveness for the organization Internal, external, and individual equity for employees Performance enhancement for the organization For organizations, compensation costs must be at a level that both ensures organizational competitiveness and provides sufficient rewards to employees for their knowledge, skills, abilities, and performance accomplishments. Balancing these facets so that the organizations can attract, retain, and reward the performance of employees requires considering several types of compensation. In this study based on the data analysis' findings of the relative importance in human resources' compensation system in Iranian public organizations distributive justice enjoys the highest importance (2=./295) and is was followed by procedural justice (2=./134), interactional justice (2=./084), and information justice (2=./065). Due to the importance of distributive justice and indicators of procedural justice (which include: equity vs. equality vs. need and distribution) the organizations must do the following to increase the level of distributive justice: Make the compensation system simple and understandable: Another equity issue concerns the degree of openness or secrecy that organizations allow regarding their pay systems. Pay information kept secret in “closed” systems includes how much others make, what raises others have received, and even what pay grades and ranges exist in the organization. A growing number of organizations are opening up their pay systems to some degree by informing employees of compensation policies, providing a general description of the basis for the compensation system, and indicating where an individual’s pay is within a pay grade. Such information allows employees to make more accurate


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equity comparisons. It is crucial in an open pay system that managers are able to explain satisfactorily any pay differences that exist. Competency Based Pay: Paying for competencies rewards employees who are more versatile and have continued to develop their competencies. In knowledge-based pay (KBP) or skill-based pay (SBP) systems, employees start at a base level of pay and receive increases as they learn to do other jobs or gain other skills and therefore become more valuable to the employer. Under a KBP or SBP system, press operators increase their pay as they learn how to operate the more complex presses, even though sometimes they may be running only two-color jobs. The HR Perspective describes research on such a plan. When an organization moves to a competency-based system, considerable time must be spent identifying what the required competencies are for various jobs. Then each block of competencies must be priced using market data. Progression of employees must be possible, and they must be paid appropriately for all of their competencies. Any limitations on the numbers of people who can acquire more competencies should be clearly identified. Training in the appropriate competencies is particularly critical. Also important to a competency-based system is a means for certification of employees who have acquired certain competencies. Further, a process must exist for verifying that employees maintain competencies. In summary, use of a competency-based system requires significant investment of management time and needs a continuous commitment by top management. The Fair Labor Standards Act (FLSA): It requires most organizations to pay a minimum wage and to comply with overtime provisions, including appropriately classifying employees as exempt or nonexempt and as independent contractors or employees. References

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