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1 The Pay Model 1
Why Should We Care about Compensation? 2
What Is Compensation? 2
Society 2
Stockholders 3
Managers 4
Employees 4
Global Views 5
Forms of Pay 5
Cash Compensation: Base Pay 6
Cash Compensation: Merit Increases and Cost-of-Living Adjustments 6
Cash Compensation: Incentives 6
Long-Term Incenti ves 6
Benefits: Insurance and Pensions 7
Benefits: Work/Life Programs 7
Benefits: Allo\.vances 7
Total Earnings Opportunities: Present Value of a Stream of Earnings 7
Relational Returns from Work 8
.Net Worth: What Do Employees Want? 8
The Organization as a Network of Returns 9
A Pay Model 9
Strategic Compensation Objectives 10

Vil
VIII CONTENTS

Ethics 11
Four Policy Choices 11
Pay Techniques 12
Book Plan 13
Conclusion 13
Chapter Summary 14
Key Terms 14
Review Questions 14
Experiential Exercises 15
Case: Inside Internships 15
2 Strategy: The Totality of Decisions 16
Similarities and Differences in Strategies 17
Different Strategies within the Same Industry 18
Different Strategies within the Same Company 18
Strategic Choices 19
Support Business Strategy 19
Support HR Strategy 21
The Pay Model Guides Strategic Pay Decisions 21
Stated versus Unstated Strategies 22
Developing a Total Compensation Strategy: Four Steps 22
Step One: Assess Total Compensation Implications 22
Step Two: Map a Total Compensation Strategy 25
.Net Worth: Netflix: Freedom and Responsibility in Rewards 25
Steps Three and Four: Implement Strategy and Reassess the Fit 26
Source of Competitive Advantage: Three Tests 26
Is It Aligned? 26
Does It Differentiate? 26
Does It Add Value? 27
"Best Fit" versus "Best Practices" 27
Guidance from the Evidence 27
Virtuous and Vicious Circles 28
Conclusio n 28
Chapter Summary 29
Key Terms 29
Review Questions 29
Experiential Exercises 29
Case: Difficult to Copy? 30

PART I
Internal Alignment: Determining the Structure 31
3 Defining Internal Alignment 33
Jobs and Compensation 34
 CONTENTS ix

Compensation Strategy: Internal A]jgnment 34

Supports Organization Strategy 34
Supports Workflow 34
Motivates Behaviour 35
Structures Vary between Organjzations 36
Number of Levels 36
Differentials 36
Criteria: Content and Value 37
What Factors Shape Internal Structures? 38
Economic Pressures 38
Government Policies, Laws, and Regulations 39
External Stakeholders 39
Cultures and Customs 40
.Net Worth: Executive Pay versus Average Canadian Pay 40
Organization Strategy 41
Organization and Work Design 42
Human Capital 42
Overall HR Policies 42
Internal Labour Markets: Combining External and Organizational Factors 42
Employee Acceptance: A Key Factor 43
Pay Structures Change 44
Strategic Choices in Designing Internal Structures 44
Trulored versus Loosely Coupled 44
Egalitarian versus Hierarchical 44
Guidance fron1 the Evidence 46
Equity Theory: Fairness 46
Tournament Theory: Motivation and Performance 46
Institutional Theory: Copy Others 46
(More) Guidance from the Evidence 47
Consequences of Structures 48
Efficiency 48
Fairness 48
Legal Compliance 48
Conclusion 48
Chapter Summary 49
Key Terms 49
Review Questions 50
Experiential Exercises 50
Case: The Orchestra 50

4 Job Analysis 53
Structures Based on Jobs, People, or Both 54
Job-Based Approach: Most Common 55
x CONTENTS

Why Perform Job Analysis? 55

Job Analysis Procedures 56
What Information Should Be Collected? 58
Job Data: Identification 58
Job Data: Content 58
Employee Data 61
Level of Analysis 62
How Can the Information Be Collected? 62
Conventional Methods 62
Quantitative Methods 64
Who Collects the Information? 64
Who Provides the Information? 64
What about Discrepancies? 64
Job Descriptions Summarize the Data 65
Usi ng Generic Job Descriptions 66
.Net Worth: National Occupational Classification 66
Describing Managerial/Professional Jobs 67
Verify the Description 68
Job Analysis and Globalization 69
Job Analysis and Susceptibility to Offs horing 69
Job Analysis Information and Comparability across Borders 70
Judging Job Analysis 70
Reliability 70
Validity 70
Acceptability 70
Currency 70
Usefulness 71

A Judgment Call 71
Conclusion 72
Chapter Summary 72
Key Terms 73
Review Questions 73
Experiential Exercises 73
Case: The Customer Service Agent 73
5 Job-Based Pay Structures and Job Evaluation 78
Job-Based Structures: Job Evaluation 79
Defining Job Evaluation: Content, Value, and External Market Links 80
Job Content and Job Value 80
Linking Content with the External Market 80
Other Perspectives on Job Evaluation 80
"How To": Major Decisions 81
Establish the Purpose(s) 81
 CONTENTS xi

Single versus Multiple Plans 81

Benchmark Jobs 82
Choose between Job Evaluation Methods 83
Job Evaluation Methods 83
Ranking 83
Classification 84
Point Method 85
.Net Worth: Job Evaluation at the Government of Yukon 85
Who Should Be Involved? 94
Evaluating the Usefulness of Results 94
The Design Process Matters 94
Appeals/Review Procedures 95
Political Influences 95
The Final Result: Job Structure 95
Balancing Chaos and Control 96
Conclusion 97
Chapter Summary 97
Key Terms 98
Review Questions 98
Experiential Exercises 98
Case: Job Evaluation at Whole Foods 98
6 Person-Based Pay Structures 104
Person-Based Pay Structures: Skill Plans 106
Types of Skill-Based Plans 106
Purpose of the Skill-Based Structure 107
"How To": Skill Analysis 108
What Information to Collect? 108
Whom to Involve? 109
Establish Certification Methods 109
Outcomes of Skill-Based Pay Plans: Guidance from Research and Experience 110
Person-Based Pay Structures: Competencies l 1l
Defining Competencies 112
Purpose of the Competency-Based Structure 113
.Net Worth: Government of Canada's Competency Profile 114
"How To": Competency Analysis 115
Objective 115
What Information to Collect? 116
Establish Certification Methods 116
Whom to Involve? 116
Resulting Structure 116
Competencies and Employee Selection and Training/Development 119
Guidelines from the Research on Competencies 119
x11 CONTENTS

One More Time: Internal Alignment Reflected in Structures 121

Managing the Plan 121
Evidence of the Usefulness of Results 121
Reliability of Job Evaluation Techniques 121
Validity/Usefulness 122
Acceptability 122
Bias in Internal Pay Structures 122
Three Types of Structure 123
Conclusion 125
Chapter Summary 125
Key Terms 126
Review Questions 126
Experiential Exercises 126
Case: Targeting Teachers' Pay 127

PART II
External Competitiveness: Determining the Pay Level 129
7 Defining External Competitiveness 132
Compensation Strategy: External Competitiveness 133
Control Costs 133
Attract and Retain Talent 133
What Shapes External Competitiveness? 135
Labour Market Factors 136
Labour Demand 137
Marginal Product of Labour 137
Labour Supply 138
Modifications to the Demand Side 139
Compensating Differentials Theory 139
Efficiency Wage Theory 140
Signalling Theory 140
Modifications to the Supply Side 141
Reservation Wage Theory 141
Human Capital Theory 142
Product Market Factors 142
A Dose of Reality: What Managers Say 142
More Reality: Segmented Supply of Labour 143
Organizational Factors 143
Industry and Technology 143
Employer Size 143
Employees' Preferences 144
Organization's Strategy 144
Relevant Markets 144
Defining the Relevant Market 144
 CONTENTS xiii

Competitive Pay Policy Alternatives 145

Pay with Competition (Match) 146
Lead Policy 146
Lag Policy 146
Different Policies for Different Employee Groups 146
Mix of Pay Forms Strategies 146
Pitfalls of Pies 147
Consequences of Pay Level and Mix of Pay Forms Decisions 148
.Net Worth: Compensation Strategy and Market Rates 150
Conclusion 150
Chapter Summary 151
Key Terms 151
Review Questions 152
Experiential Exercises 152
Case: Northern Software 152
8 Designing Pay Levels, Pay Mix, and Pay Structures 153
Major Decisions 154
Specify Competitive Pay Policy 155
The Purpose of a Compensation Survey 155
Adjust Pay Level- How Much to Pay? 155
Adjust Mix-What Pay Forms? 155
Adjust Pay Structure 155
Study Special Situations 155
Estimate Competitors' Labour Costs 155
Select Relevant Market and Competitors 156
Fuzzy Markets 158
Design the Compensation Survey 159
Whom to Involve? 159
How Many Employers to Survey? 159
Which Jobs to Include? 161
What Information to Collect? 162
Interpret Survey Resu lts and Construct a Market Pay Line 165
Verify Data 165
Statistical Analysis 168
Update the Survey Data 170
Construct a Market Pay Line 170
Combine Internal Structure and External Market Rates 171
From Policy to Practice: The Pay Policy Line 171
From Policy to Practice: Grades and Ranges 172
Develop Pay Grades 172
Establish Range Midpoints, Minimums, and Maximums 173
Overlap 173
XIV CONTENTS

Why Bother with Grades and Ranges? 174

From Policy to Practice: Broadbanding 175
.Net Worth: Second-Generation Banded Salary Systems 177
Balancing Internal and External Pressures : Adjusting the Pay Structure 177
Reconciling Differences 177
Market Pricing 178
Conclusion 179
Chapter Summary 179
Key Terms 180
Review Questions 180
Experiential Exercises 180
Case: Calculating Pay Ranges 181

Appendix 8-A: Calculatlng a Market Line Using Regression Analysls 181

9 Employee Benefits 183

Introduction to Employee Benefits 184
Why the Growth in Employee Benefits? 185
Government Impetus 185
Unions 185
Employer Impetus 185
Cost-Effectiveness of Benefits 185
The Value of Employee Benefits 185
Key Issues In Benefits Planning, Design, and Administration 186
Benefits Planning and Design Issues 186
Administration Issues 186
Factors Influencing Benefit Planning 187
Employer Factors 188
Employee Preferences 189
Administering the Benefits Program 190
Employee Benefits Communication 190
Claims Processing 190
Cost Containment 191
Types of Benefits 192
Legally Required Benefits 193
Retirement and Savings Plans 194
Life Insurance 197
Medical Insurance 197
Income Security: Disability Plans 199
Pay for Time Not Worked 199
Employee Assistance Plans (EAPs) 200
Other Benefits 200
Childcare Services 200
.Net Worth: Unlimited Paid Leave-Dream or Reality 200
 CONTENTS xv

Eldercare Services 201

Flexible Benefit Plans 201
Conclusion 202
Chapter Summary 203
Key Terms 203
Review Questions 203
Experiential Exercises 204
Case: Lightning Industries 204

PART Ill
Employee Contributions: Determining Individual Pay 208
10 Pay for Performance: Performance Appraisal and Plan Design 210
What Behaviours Do Employers Care About? Linking Organizational Strategy to Compensation and
Performance Management 211
What Does It Take to Get These Behaviours? What Theory and Research Say 213
What Does It Take to Get These Behaviours? What Compensation Practitioners Say 217
Total Reward System: Other Rewards Besides Money Influence Behaviour! 217
Does Compensation Motivate Behaviour? 219
Do People Join a Firm Because of Pay? 220
Do People Stay in a Firm (or Leave) Because of Pay? 220
Do Employees More Readily Agree to Develop Job Skills Because of Pay? 221
Do Employees Perform Better on Their Jobs Because of Pay? 221
The Role of Performance Appraisals in Compensation Decisions 222
Strategies to Better Understand and Measure Job Performance 222
Strategy One: Improve Appraisal Formats 222
Strategy Two: Select the Right Raters 227
Strategy Three: Understand How Raters Process Information 229
Strategy Four: Train Raters to Rate More Accurately 231
Putting It All Together: The Performance Appraisal Process 231
.Net Worth : A New Era-Performance Management 231
Designing a Pay-for-Performance Plan 232
Efficie ncy 232
Fairness 233
Compliance 233
Linking Pay with Subjectively Appraised Performance 233
Conclusion 234
Chapter Summary 234
Key Terms 235
Review Questions 235
Experiential Exercises 236
Case: Burger Boy 236
XVI CONTENTS

11 Pay-for-Performance Plans 239

What Is a Pay-for-Performance Plan? 240
.Net Worth: Drivers of Change in Variable Pay Plans 241
Specific Pay-for-Performance Plans: Short Term 242
Merit Pay 242
Lump-Sum Bonuses 244
Individual Spot Awards 245
Individual Incentive Plans: Types 245
Individual Incentive Plans: Advantages and Disadvantages 246
Group Incentive Plans 248
Challenges with Group Incentive Plans 249
Types of Group Incentive Plans 250
Gain-Sharing Plans 250
Profit-Sharing Plans 252
Earnings-at-Risk Plans 252
Group Incentive Plans: Advantages and Disadvantages 253
Comparing Individual and Group Incentive Plans 253
The Choice between Individual and Group Incentive Plans 256
Explosive Interest in Long-Term Incenti ve Plans 256
Stock Options 256
Broad-Based Option Plans (BBOPs) 256
Employee Stock Ownership Plans (ESOPs) 256
Compensation of Special Groups 257
Supervisors 258
Corporate Directors 258
Executives 258
Professional Employees 263
Sales Staff 265
Contingent Workers 267
Conclusion 267
Chapter Summary 268
Key Terms 268
Review Questions 268
Experiential Exercises 269
Case: Allocating Merit Increases 269

PART IV
Managing the System 271
12 The Roles of Governments and Unions in Compensation 273
Government as Part of the Employment Relationship 274
Supply of Labour 274
Demand for Labour 274
 CONTENTS XVII

Employment Standards Acts 275

Minimum Wage 275
Paid Vacation 275
Paid Holidays 275
Standard Hours of Work and Overtime Pay 276
Pay on Termination of Employment 276
Minimum Age of Employment 277
Equal Pay for Equal Work by Men and Women 277
Human Rights Laws 277
Pay Equity 277
The Gender Wage Gap 278
Pay Equity Legislation 280
.Net Worth: A 28-Year Quest for Pay Equity at Canada Post 280
Pay Equity Conclusions 282
The Impact of Unions on Wage Determination 283
Union Impact on General Wage and Benefit Levels 283
Union Impact on the Structure of Wages 283
Union Impact on Non-union Firms: The Spillover Effect 284
Union Impact on Wage and Salary Policies and Practices 284
Unions and Alternative Reward Systems 285
Conclusion 286
Chapter Summary 286
Key Terms 287
Review Questions 287
Experiential Exercise 287
Case: Garfield Technology 287

13 Compensation Budgets and Administration 290

Managing Labour Costs 291
Number of Employees and Hours Worked 292
Controlling Average Cash Compensation 293
The Top-Down Approach 293
The Bottom-Up Approach 295
Ethics: Managing or Manipulating 297
Embedded Controls 297
Analyzing Value Added 298
Communication: Managing the Message 301
Amount of Information to Communicate 303
.Net Worth: Pay Communication Impact on Pay Satisfaction 304
Pay: Change Agent in Restructuring 305
Structuring the Compensation Function 305
Centralization-Decentralization 305
Flexibility wi thin Corporate-wide Principles 306
XVIII CONTENTS

Re-engineering and Outsourcing 306

Balancing Flexibility and Control 306
Conclusion 307
Chapter Summary 307
Key Terms 307
Review Questions 308
ExperientiaJ Exercises 308
Case: Two Harbours Teachers 308

Appendix 13-A: Compensation Websites 310

Appendix: lnternatlonal Pay Systems 312

The Global Context 313
The Social Contract 314
Centralized- Localized Decision Making 315
Culture 315
Culture Matters, But So Does Cultural Diversity 316
Trade Unions and Employee Involvement 317
Ownership and FinanciaJ Markets 317
Managerial Autonomy 317
Comparing Costs 318
Cost of Living and Purchasing Power 318
Comparing Systems 320
The Total Pay Model: Strategic Choices 320
NationaJ Systems: Comparative Mindset 320
Japanese National System 320
German National System 323
Strategic Comparisons: Japan, Germany, Canada 324
Evolution and Change in Traditional Japanese and German Models 325
Strategic Market Mindset 326
Localizer: "Think Global, Act Local" 326
Exporter: "Headquarters Knows Best-One Size Fits AU" 326
Globalizer: "Think and Act Globally and Locally" 326
Expatriate Pay 327
Elements of Expatriate Compensation 328
The BaJance Sheet Approach 329
Expatriate Systems' Objec6ves? Que/ Dom,mage! 33 1
Borderless World ~ Borderless Pay? Globalists 332
Conclusion 332

Endnotes EN-1
Glossary GL-1
Name Index NI-1
Subject Index SI-1
A few books can change your life. This is probably not one of them. However, if you read it, you will better understand that pay
matters. After all, you can't pick up a newspaper, power up a computer, or read a blog today without someone talking about pay.
The Great Recession (late 2000s and early 2010s) had huge ramifications for pay. Some employees had their hours cut or pay
reduced. Why? Because it's a more effective way to cut costs without laying off workers. Workers still left on payroll after all the
cost-cutting moves are the best of the best. Layoffs at this point mean cutting the heart out of the organization. Surveys suggest
workers faced with layoffs or reductions in hours will almost always choose shorter workweeks ... at least in the short run! The
recession also focused attention on executive compensation. In some cases, huge bonuses were paid to executives of companies
receiving financial aid from the government.
Pay also matters around the globe. For example, if you are a Russian astronaut, you can earn a bonus of $ 1,000 for every spacewalk
(technicalJy known as "extravehicular activity," or EVA), up to three, per space trip. A contract listing specific tasks to be done
on a space mission permits you to earn up to $30,000 above the $20,000 you earn while you are on the ground. (In contrast to the
Russian astronauts, wealthy Americans are lining up to pay $15 million (plus an additional $20 million in airfare) to the Russian
Space Agency for their own personal EVA.) Conclusion: Pay niatters.
Some problems are global. A British telephone company paid a cash bonus based on how fast operators completed requests for
information. Some operators discovered that the fastest way to complete a request was to give out a wrong number or-even
faster-just hang up on the caller. "We're actually looking at a new bonus scheme," says an insightful company spokesperson.
Conclusion: What you pay for matters.

In this book, we strive to cull beliefs from facts, wishful thinking from demonstrable results, and opinions from research. Yet
when all is said and done, managing compensation is an art. As with any art, not everything that can be learned can be taught.

This fifth Canadian edition continues to respond to the demand on the part of Canadian faculty and students for a Canadian version
of the unique perspective on compensation taken by Milkovich/Newman/Gerhart/Yap.

The textbook is based on the strategic choices in managing compensation. These choices, which confront managers in Canada and
around the world, are introduced in the total compensation model in Chapter 1. This model provides an integrating framework

XIX
xx PREFACE

used throughout. Major compensation issues are discussed in the context of current theory, research, and practice. The practices
illustrate new developments as well as established approaches to compensation decisions.

Each chapter ends with a set of review questions and experiential exercises. The case study at the end of each chapter asks
students to apply the concepts and techniques discussed in the chapter. For example, the case in Chapter 11, "AJJocating Merit
Increases," allows students an opportunity to work through different scenarios in assigning merit increases to employees based on
the employees' performances on the job within a set budget. In addition, each chapter guides the student to a Web Exercise on the
Connect website to point you to some of the vast compensation information on the Internet.

WHAT'S NEW
All the chapters of this edition have been completely revised and more Canadian examples have been added. This edition
reinforces our conviction that, beyond how much, how people are paid really matters. Chapter 2 tells how to craft a total
compensation strategy and examines the research on best practices. The chapters on performance-based pay dig into all forms of
variable pay, such as stock options, profit sharing, gain sharing, and team-based approaches. Person-based plans are contrasted
with job-based plans, including recent developments in skill and competency approaches. Changes in competitive market analysis
caused by the focus on total compensation are covered, as well as the increased use of market pricing and broadbanding.

The employee benefits chapter has been updated. The chapter on compensation budgets and adrrunistration has had several
company examples added to make the material more reality based. We have always used international examples in every section;
we have also updated the appendix on global compensation. Some of the Web exercises, cases, and .Net Worth features have been
updated or replaced.

The book includes an HRC (Human Resources Competency) margin icon next to material
that is directly relevant to the total rewards-related competencies within the Certified
Human Resources Professional Competency Framework covered in the National •
Knowledge Exam, one of the requirements for the Certified Human Resources Professional (CHRP) designation from the
Canadian Council of Human Resources Associations. Go to Connect for the full list of total rewards-related HRCs.

ORGANIZATION OF THE CANADIAN EDITION

Co,npensation, fifth Canadian Edition, is divided into four parts:

1. Part I: Internal Alignment: Determining the Structure

2. Part II: External Competitiveness: Determining the Pay Level
3. Part III Employee Contributions: Determining Individual Pay
4. Part IV Managing the System
The "meat" of each chapter in these parts (13 chapters in total) is interspersed with and followed by additional material provided
to supplement the chapter's contents and provide both context and relevance, as follows:
 PREFACE xxt

The Pay Model: The unjque Milkovich Pay Model around which the text is based is introduced up front and is integrated
throughout all subsequent chapter discussions.

EXHIBIT 1.3 The Pay Model

STRATEGIC STRATEGIC
TECHNIQUES
POLICIES OBJECTIVES

Job Job Eva luation/ INTERNAL

INTERNAL ALIGNMENT
Analysis Descriptions Certification STRUCTURE

Market PAY
EXTERNAL COMPETITIVENESS Surveys Policy Lines
Definitions STRUCTURE

Seniority Performance Merit INCENTIVE

EMPLOYEE CONTRIBUTIONS
Based Based Guidelines PROGRAMS

MANAGEMENT Costs Communications Change EVALUATION

xx11 PREFACE

Each chapter includes a .Net Worth boxed feature, which highlights a comprehensive, real-world example of the material in the
chapter.

.NET WORTH
What Do Employees Want?

Based on the 2014 Global Workforce St udy and the Global Talent Management and Rewards Study
conducted by Willis Towers Watson, findings show that two out of three organizations face diffi cu lties in
attracting and retaining top performers and high-potential employees. Across all age groups, base pay
is the most popular reason why workers join or leave an organization. Employees also indicated that
paid vacation time is also a key attraction driver, as they continue to strive for work/life balance and
take a break from work. While job security is a key reason to join an organization, base pay and career
advancement opportunities are the top two drivers when it comes to retention, from the perspectives of
both the employees and the employers.

Below are the top attraction and retention drivers that emerged from the studies:

• Base pay/salary
• Job security
• Career advancement opportunities
• Learning and development opportunities
• Relationship with supervisor/manager
• Challenging work
• Manage/limit work-related stress
• Vacation/paid time off
• Short-term incentives
• Organization's reputation as good employer
• TrusUconfidence in senior leadership
• Length of commute

The Global Workforce Study incorporates input from over 32,000 employees selected from research
panels that represent the populations offull-time workers in large and midsize organizations across a
wide range ofindustries in 26 markets between April and May 2014. The Global Talent Management and
Rewards Study collected input from 1,600 organizations across 31 markets.

Source: "The 2014 Global Workforce Study: Driving Engagement through a Consumer-Like Experience; August 2014. Ci 2014 Global
Worl<:force Study and Global Talent Management and Rewards Study. Used with permission from Willis Towers Watson.

Key Ter ms are highlighted in boldface type in each chapter, and a list of them is provided at the end of the chapter and in the
Glossary.

Key Terms
allowances incentives (variable pay) sa lary
compensation interna l al ignment total rewa rds
cost-of-liv ing merit increase wage
adjustment procedural fa irness work/life programs
exte rnal competit iveness re lational returns

Exhibits are interspersed throughout the text to illustrate concepts and provide a visual framework for students.
 REVIEW QUESTIONS xx111

EXHIBIT 1.1 Gender Wage Gap* in Median Earnings of Full-Time Employees, 2000,
2006, and 2012

45

40
• 2012 0 2006 • 2000 •
<>

*-0:
35

30
111
en
25 •<> ~ • •
•
QI
en
111
~
...
QI
"C
20
• • <>
¢
e
c:
QI
(!)
15
•• <> ~ <>• <> • •
10 ~ o
5

*The gender wage gap is unadjusted and is calculated as the difference between median earnings of men and women relative to
median earnings of men. Estimates of earnings used in the calcu lations refer to gross earnings of full-time wage and salary workers.

Source: LMF1.5: Gender pay gaps for full-time workers and earnings differentials by educational attainment, OECD Family database
www.oecd.org/social/family/database.htm © OECD. All rights reserved.

Review Questions and Experiential Exercises are suggested at the end of each chapter. In response to instructor suggestions,
these real-life exercises require the application of learned concepts and techniques.

Review Questions

1. How do differing perspectives affect our views of compensation?

2. How does the pay model help organize one's thinking about compensation?
3. What can a pay system do for an organization? For an employee? Are these mutually exclusive?

Experientia I Exercises

1. What is your definition of compensation? Which meaning of compensation seems most appropriate from an
employee's point of view-return, reward, or entitlement? Compare your ideas with someone who has more
experience, with someone from another country, and with someone from another field of study.
2. List all the forms of pay you receive from work. Compare your list to someone else's. Explain any differences.
3. What is the "network of returns" upon your completion of the program at your current institution? Do you think
these are achievable? What are some of the things you can offer your employer?
4. Answer the two questions in this chapter's Conclusion, above (Why do it this way? So what?), for any study or
business article that tells you how to pay people. Such articles can be found in the Wor!datWork Journal or
Compensation and Benefits Review.
XXJV CASE

Learning Outcomes have been highUghted at the beginning of each chapter, and the Chapter Summary relating to these learning
objectives is included at the end of the chapter.

LEARNING OUTCOMES
L01 Explain why managers should tailor their pay systems to support the orga nizatio n's strategy.
L02 Identify the four steps to develop a total compensation strategy.
L03 Describe the three tests used to determine whether a pay strategy is a source of competitive
advantage.
L04 Contrast the "best fit" perspective on compensation with the "best practices" perspective.

D Chapter Summary

1. To improve organizational effectiveness, managers should align the compensation strategy to the organization's strategy.
2. The four steps to develop a total compensation strategy are ( l ) assess total compensation implications, including business
strategy and competitive dynamics, HR strategy, culture/values, social and political context, employee/union preferences,
and fit with other HR systems; (2) map out a total compensation strategy; (3) implement the strategy; and (4) reassess
and reaUgn the strategy to ensure ach ievement of the objectives.
3. The three tests used to determine whether a pay strategy is a source of competitive advantage are as follows: ( 1) Does it
align? (2) Does it differentiate? (3) Does it add value?
4. The "best fit" perspective on compensation suggests that compensation be aligned, or fit, with the specific business
strategy adopted by the organization, given its environment, to maximize competitive advantage. T he "best practices"
perspective suggests there is one set of best pay practices that can be universally applied across situations and strategies,
attracting superior employees who then create a winning strategy.

A Web Exercise for each chapter can be found on the Milkovich Compensation Connect site. The Web exercise will familiarize
students with the wealth of compensation-related material available on the Internet. Also included at the end of each chapter is a
comprehensive Case requiring app)jcation of the chapter material.

Case

Inside Internships
Many recent graduates work as interns as they begin to establish their careers. Career Edge Organization is
a national not-for-profit service provider, established in 1996, that arranges paid internships by partnering with
leading Canadian host employers, including major banks, telecommunications and financial firms, and public-sector
employers like local, provincial, and territorial governments. The first online job board in Canada
(www.careeredge.ca), Career Edge Organization, to date, has recorded over 12,000 internships and continues to
offer paid internships through the Career Edge, Ability Edge, and Career Bridge paid internship programs.

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The Project Gutenberg eBook of History
of the Scottish expedition to Norway in
1612
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Title: History of the Scottish expedition to Norway in 1612

Author: Thomas Michell

Release date: November 17, 2015 [eBook #50474]

Most recently updated: August 8, 2016

Language: English

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*** START OF THE PROJECT GUTENBERG EBOOK HISTORY OF THE

SCOTTISH EXPEDITION TO NORWAY IN 1612 ***
TRANSCRIBER'S NOTE
Macrons over one or more characters are denoted by ̅ (utf8 hex0305); for example can̅ ot
and c̅ o̅ m̅ andement.
A line of asterisks denotes omitted text. Thought breaks, and new sections, are denoted
by blank lines or hr's (horizontal rules).
Obvious typographical errors and punctuation errors have been corrected after careful
comparison with other occurrences within the text and consultation of external sources.
Punctuation or lack of it in the Appendix documents has been left unchanged.
More detail can be found at the end of the book.
 Sketch Map,
SHOWING ROUTES OF MÖNNICHHOFEN AND RAMSAY
 HISTORY OF THE

S c ott i s h E x p e d i t i o n

to N o r way in 1612.

By

THOMAS MICHELL, C.B.,

Her Majesty's Consul General for Norway.

London:
T. N E L S O N A N D S O N S , P AT E R N O S T E R R O W.
EDINBURGH; AND NEW YORK.

CHRISTIANIA: T. BENNETT, Tourist Agent.

1886.
Rights of Translation and Reproduction reserved for the benefit of
the Anglican Church at Christiania.
 Dedicated,

BY GRACIOUS PERMISSION,

TO

His Majesty Oscar II.

KING OF SWEDEN AND NORWAY,
&c. &c. &c.

WITH THE DEEPEST GRATITUDE

AND THE MOST PROFOUND RESPECT OF
THE AUTHOR .
 Preface.

The idea of investigating the story of the Scottish Expedition to

Norway in 1612 occurred to the author on a trip through the
beautiful valleys of Romsdal and Gudbrandsdal in the autumn of
1884—many of the statements made on that subject in guide-books,
and in almost every work on Norway, having appeared incredible
when he left the highway and explored the old bridle-path along
which the Scots marched on their way to Sweden.
Subsequent researches in State Archives, made with the kind
assistance which has been heartily acknowledged in the pages that
follow, resulted in the discovery of official documents hitherto
unavailable, and with their aid the traditional account of the
"Skottetog" has, in its chief outlines, been reduced to strict historical
proportions.
The information thus acquired was utilized by the author in a
lecture delivered in 1885 at the University of Christiania, in the
gracious presence of His Majesty the King of Sweden and Norway,
for the benefit of the Building Fund of the Anglican Church in that
city.
It is with the same practical object that, with the generous co-
operation of the publishers, the lecture has been embodied in the
little book now commended to the attention of those who take an
interest in Scottish history, as well as to that of the British and
American travellers who visit in such largely increasing numbers the
beautiful and hospitable valleys and highlands of Norway, in which
they find so much sympathetic evidence of a common origin of both
race and language.
London, March 1886.
 Contents.

P A R T I .— H I S T O R I C A L .

I. SOURCES OF INFORMATION, 11
II. THE CALMAR WAR, AND SWEDISH MEASURES FOR RAISING
MERCENARIES, 18
III. SUCCESSFUL MARCH OF MÖNNICHHOFEN THROUGH
NORWAY, 23
IV. ORGANIZATION OF SCOTTISH LEVIES FOR SWEDEN, AND
THEIR FORCED DISBANDMENT, 32
V. ORDERS OF KING JAMES I. DISOBEYED BY A FEW SCOTTISH
OFFICERS, WHO PROCEED WITH A SMALL PORTION OF
THE LEVIES TO NORWAY, 42
VI. THE LANDING OF ALEXANDER RAMSAY IN ROMSDALEN, 48
VII. DESTRUCTION OF THE SCOTS IN GUDBRANDSDALEN, 52
VIII. THE COMBAT AT KRINGELEN, 56

———

P A R T I I .—T R A D I T I O N .

I. THE SINCLAIR BALLAD, 71

II. NORWEGIAN TRADITIONS COLLECTED BY THE REV. H. P. S.
KRAG, 75

———

P A R T I I I .— A P P E N D I C E S .
Historical Documents.
 I. EXTRACTS FROM THE "SWEDEN AND DENMARK
CORRESPONDENCE, 1612," IN THE PUBLIC RECORD
OFFICE, LONDON, 133
II. COPIES OF DOCUMENTS FROM THE GENERAL REGISTER
HOUSE, EDINBURGH, 160
III. DOCUMENTS FROM STATE ARCHIVES, STOCKHOLM, 173
IV. DOCUMENTS FROM STATE ARCHIVES, COPENHAGEN, 180

———

INDEX TO NAMES OF PERSONS, 187

 Part I.

Historical.
 I.

S O U R C E S O F I N F O R M AT I O N .

More than two centuries and a half have elapsed since the date of
the occurrence so well known in Norway as the "Skottetog," or
Scottish expedition, of which but little has hitherto been
authentically known in Scotland. Notwithstanding, therefore, the
conspicuous position which the so-called "Sinclair Expedition" holds
in the traditions,[1] and to some extent also in the literature and the
art,[2] of Norway, a fresh examination of the subject by the impartial
light of historical truth is justified by the recent discovery of several
documents in the State Archives of England, Scotland, and Sweden.
Although Mönnichhofen's expedition through Stordalen, and the
Scottish invasion of Romsdalen and Gudbrandsdalen which formed
an integral but unsuccessful part of that expedition, took place in
1612, no account of the latter appeared in print earlier than the year
1688, when Puffendorff wrote his "Introduction to Swedish History;"
and it was only three years later that Widikindi, another Swedish
historian, gave a narrative of it in a History of Gustavus Adolphus.
Among Danish historians, Niels Slange was the first of any
eminence to reproduce the now palpable errors of Puffendorff and
Widikindi, in a History of Christian IV., written in 1732.
In 1782, the subject of the Skottetog first became popularized in
Norway by the publication, in a periodical journal called the Dansk
Museum, of the spirit-stirring poem by Edvard Storm, which
Norwegian children still learn by heart and in song, and which has
even been well circulated in the English and German languages.[3]
 THE LANDING OF THE SCOTS IN ROMSDALEN, 1612.
As depicted by the Norwegian artists Tiedemann and Gude. Page 11.

But the first really important contribution towards the history of

the event was made in 1838, when Dean Krag of Vaage dedicated to
the descendants of the Bönder[4] who had fought at Kringelen the
Sagas, or traditions, he had personally collected in Gudbrandsdalen,
annotated with such historical references as were then available.[5]
While the traditions he has so scrupulously preserved for us are of
great interest, if only because they indicate plainly the source of the
information on which Swedish, Danish, and even Scottish accounts
of the expedition into Romsdalen had been chiefly based, he
enriched history with copies of the first and only documents that had
apparently ever been drawn before his time, from State or other
archives, relative to the Scots who landed in Romsdalen. Those
documents were: a Report by the Norwegian Stadtholder, Envold
Kruse, to the Danish Chancellor, dated Aggershuus, 17th September
1612; and three deeds of gift of land (all dated 3rd September 1613)
to Lars Hage, Peder Randklev, and Berdon Sejelstad, for their
bravery and loyal devotion on that occasion.
In that laborious little work Dean Krag pointed out that, with the
exception of Kruse's first Report (of which he had obtained a copy
from Copenhagen), all the writers after Puffendorff (1688) and
Widikindi (1691) had repeated, more or less, only what those two
historians had related. He also showed that Storm's poem had been
preceded by a popular ballad on the same subject, and of which he
collected and printed as much as was still extant in Gudbrandsdalen.
More recent historical research resulted in the discovery, also at
Copenhagen, of a second Report from Envold Kruse, the Stadtholder,
dated 3rd October 1612. It was first published between 1858 and
1860,[6] and was reproduced in a little work printed at Molde in
1877.[7]
The history of the Scottish expedition to Norway in 1612 has,
therefore, until this day been supported in Scandinavian accounts by
only two documents of indisputable authority—namely, the two
Reports of Envold Kruse, of which the second was brought to light
less than twenty years ago.
Nor have Scottish and English historians[8] and writers, so deeply
interested in the question, been more successful in discovering and
making use of authentic contemporary documents. A careful
examination of their several descriptions, both of Mönnichhofen's
expedition and of that of the Scots, reveals the fact that their
information had been derived either from the old Danish and
Swedish historians already mentioned, or more recently from the
traditions current in Gudbrandsdalen. Those accounts may
consequently be dismissed as unworthy of serious attention.
But the Public Record Office in London has at last delivered up its
long-hidden treasures, consisting of the correspondence that passed
between King James I. of England (VI. of Scotland) and Sir Robert
Anstruther, his ambassador or envoy at Copenhagen, on the subject
of the Scottish levies for Sweden in 1612.[9] In the General Register
House, Edinburgh, have also been preserved[10] the acts and
proclamations of the Scottish Privy Council in respect of those
proceedings; while the keeper of the State Archives in Stockholm
has supplied copies of several documents[11] that have not hitherto
been published, amongst which must be mentioned a letter or
commission issued by Gustavus Adolphus II.[12] to Sir James Spens
of Wormiston, a Scottish officer of high rank, found sometimes in the
service of James I., sometimes in that of Sweden.
That commission is of more especial value, since it explains the
connection between the expedition of Mönnichhofen and that of the
Scots.
The former enterprise—an important part of the famed Skottetog
—is not the subject of any Norwegian Sagas, or of any popular
ballads, but Scandinavian historians have dealt with it somewhat
more correctly than with the Scottish expedition, probably because
the Dutch contingent reached Sweden, and thereby supplied living
testimony as to the circumstances that attended its march through
Stordalen into Jemtland.
Nevertheless, the first documents relating to that daring exploit
were not published before 1858, in a Norwegian historical magazine.
These were copies of letters from Steen Bilde, amtmand, or prefect;
Christian Jensson Jude, burgomaster; and Jacob Pederson, lagmand,
[13] all of Trondhjem—addressed to the Danish Chancellor, and dated
severally between the 15th August 1612 and the 19th February
1613.
Some years later—namely, in 1877—Dr. Yngvar Nielsen of
Christiania published[14] "Some Notices respecting Johan von
Mönnichhofen," derived from a series of letters from Swedish agents
at Amsterdam which he found in the State Archives at Stockholm.

FOOTNOTES:
[1] For Norwegian traditions and literature, see Part II.
[2] Two of the most celebrated artists of Norway—Gude and
Tiedemann—have jointly produced a very beautiful, but fanciful,
picture representing the arrival of "Colonel Sinclair" on the coast
of Romsdalen with five or six vessels, and the plundering of the
inhabitants by his followers, one of whom, in the garb of a
Calvinistic priest, is engaged in abducting a fair Norwegian
maiden, while the rest are engaged in looting.
[3] A translation of it is given in Part II.
[4] The Norwegian term for peasant proprietors or yeomen; sing.
Bonde.
[5] A translation in extenso is given of this work in Part II.
[6] Vol. II. of "Samlinger til det Norske Folks Sprog og Historie."
[7] "Skottetoget efter Folkesagnet og Historien." O. O. Olafsen,
Molde, 1877.
[8] See Sir Robert Gordon's "History of the Earldom of
Sutherland;" the "History of Caithness," by J. T. Calder;
Chambers's "Domestic Annals of Scotland;" the "History of
Gustavus Adolphus," by B. Chapman; "Memoirs and Adventures
of Sir John Hepburn, Kt.;" Laing's "Residence in Norway;" Clarke's
"Travels."
[9] Examined and kindly copied by the late Mr. Alfred Kingston of
the Public Record Office, London.
[10] Communicated by Mr. T. Dickson, Curator of the Historical
Department, Register House, Edinburgh, to whom the author is
indebted for much valuable assistance.
[11] Search was made for those documents by the orders of the
King of Sweden and Norway. In this respect the thanks of the
author are due to Mr. C. G. Malmström, Keeper of the State
Archives at Stockholm, and to Mr. C. H. de Lagerheim and Mr. M.
de Björnstjerna of the Swedish Foreign Office, for their researches
and friendly co-operation. His acknowledgments are also due to
Joseph Anderson, LL.D., Keeper of the National Museum,
Edinburgh.
[12] November 16, 1611, for the levying of auxiliary troops in
Scotland. For copy, see p. 173.
[13] A judicial officer attached to a tribunal as a kind of witness of
its proceedings.
[14] Vol. XIV. of the Historisk Tidskrift, or Historical Magazine. Dr.
Nielsen's aid and advice have been invaluable to the author.
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