Files attached below FastCat Phase 2 – Step By Step 1. Strategy on external competitiveness. FastCat will pay all jobs at the going rate in the market (match competitors at 50th percentile). It will also offer benefits, short-term (annual) bonuses, and long-term stock options, so that its total compensation actually leads the market. 2. Design a survey of total compensation at FastCat’s competitors. There are 5 steps to do that. a. Select benchmark jobs in the market that you can match to FastCat jobs. Look at Appendix A, pp. 61-63 in the casebook. Choose the job descriptions that seem to match up best with FastCat jobs (casebook pp. 27-41). Find as many strong matches as you can. Then prepare a chart (see Ex. 16 in casebook, p. 50) that shows each benchmark FastCat job and the job that matches it in the pay survey. To demonstrate the match, apply your job evaluation scheme from Phase 1 to each benchmark job in the survey and report the point totals. There should be a reasonably close match between the points you assigned to each FastCat job and the points you assigned to its corresponding benchmark job. b. Select competitors in FastCat’s external market. Decide which of the 60 companies in the pay survey to look at (see Casebook, Appendix B, p. 64). Since FastCat is a small company, I’d ignore large companies in the survey. Choose companies that offer short- and long-term incentives. For jobs like administrative ones, consider companies outside of the software industry, since many employers are trying to fill them. For more specialized jobs, like engineering and technical, it may make sense to focus more specifically on software and related industries. c. Analyze the pay-survey data using the software provided. There are 3 steps to do this. (1) age the survey data, assuming the market has moved up 5% since the data were collected. The total increase in order to lead/lag the market is 7.5%. (2) Decide which forms of pay to compare. You will have to compare all the firms you choose on base wages in order to identify a “going” rate in the market. You probably also want to look at total cash (base + bonus), and then consider the percentage of STI/base, and also look at total compensation (LTI/base) to get an idea of how much to pay in long-term incentives. (3) Decide which compensation metric to use. Since we will be matching the market, use the 50th percentile. d. Be sure you understand your statistical results. Use the “regression” command in the software to plot your results. You can rerun this as many times as you like, each time changing the mix of companies and job matches. Get comfortable with your data. R2 need not be 100%, but it should generally be .80 or better. See Exhibits 19 and 20 in the Casebook, pp. 53 and 54. e. When you arrive at your final results, use the regression equation to compute an estimated rate of pay for all 24 FastCat jobs (even non-benchmark jobs). Develop a table that shows the predicted rate of pay for each FastCat job. 3. Choose a pay-policy line. You can ignore this, and just use the 50th percentile regression line. 4. Integrate internal and external structures. To do this you will establish grades and ranges (Casebook Ex. 22 and 23, p. 57). Ignore flat rates, bands, and zones. To establish pay grades, look for natural breaks in the job structure (point totals) that you developed in Phase 1. All jobs that fall into the same pay grade are treated equally for compensation purposes. As for ranges, Ex. 23 says that for market-based pay, range spreads typically vary from 47% to 58%, although that may vary by job level. You don’t have to be exact here. Just round off the size of the pay range (the percentage of pay above and below the midpoint of the pay grade) See Exhibit 24 in the Casebook, p. 58, for typical mid-point progressions (percentage differences in pay from one pay-grade midpoint to the next). Don’t worry about having relatively few pay grades, because you are only looking at a sample of 24 FastCat jobs. Enter your data under “Grades & Ranges” in the software. 5. Evaluate your results. Include the “why” (rationale) for the decisions you made along the way. Also, prepare an exhibit that details your final pay structure, including the jobs in each pay grade and the pay range for each grade. Include an executive summary, and then write your report!