The Pay Mix Exercise

Keywords: Compensation, Pay Mix, Sorting/Motivational Effects

Abstract: The pay mix exercise, targeted toward late undergraduate and graduate students studying compensation, focuses on the strategic use of pay to attract, retain, and motivate employees. Working in groups, students weigh the sorting and motivational effects of four unique pay mixes and align the pay mixes with various positions. Students learn that employees' preferences and expectations for the various components of a compensation package differ. In addition, they evaluate how each pay mix results in sorting and motivational effects that influence a firm's ability to attract and retain employees and align their behaviors with organizational objectives.