Organization’s Internal Environment Structure

Building blocks

In an organization the management compensates employees as a way of attracting, recruiting and also reducing employees’ turnover (Berger. A. & Berger, D., 2008, p. 63). A competitive market pay system can either be internal or external. In External competitiveness payments made to employees are compared with those of the other organizations especially competitors. On the other hand internal competitiveness is where compensation made to employees in the same organization is compared. Internal equity is the fairness in payments that can be comparable to other employees in the same organisation. On the other hand external equity is the fairness in compensation within an organization that can be compared to the same positions in similar firms or organisation. The internal and external equity helps to develop market competitiveness.

According to Berger, A. & Berger, D (2008 p.64) the salary structure is one of the basic building blocks. Salary structure is determined by ranking jobs or the roles according to an organization’s internal environment. Job clustering which is mainly based on internal equity and the market levels also influences the salary structure. Salary structures show how much a particular job should be paid for according to the organization’s compensation strategy. There are four types of salary structures which include; traditional, flexible, career-based and global. A traditional structure has many grades and it is always technically driven.

The other basic building block of developing a competitive market system is job evaluation. Job evaluation is the process used to ascertain internal equity. There are three sequential steps involved in job evaluation and they include; job analysis, job description and job rating.