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means of improving productivity, whereas Kenneth Porter of Can-Am Groups

thinks open pay schemes just increase employees dissatisfaction.
There is increasing recognition that some employees warn a more open pay
system. Opening up a system and providing more information to employees
certainly have costs and benefits. However, if an organization wishes to
reduce the manipulative aura surrounding pay, actual or perceived, it must
share additional information about pay with employees. As firms post job
openings to make employees aware of opportunities, information on pay becomes
a critical decision. As a step in deciding how much secrecy or how much
openness is needed, managers first must clearly determine through observation
(listening, talking, discussion in groups) what their employees want to know
about say. Then managers must decide if providing that information will harm
or benefit the firm. Finally, the conditions cited above concerning the
objective measuring of performance, degree of interdependence, and causal
relationships to performance must be carefully weighed.
Pay Security
Current compensation can motivate performance. So can the belief that there
will be future security in compensation. Various plans for providing this
security have been developed: a guaranteed annual wage, supplementary
unemployment benefits, cost-of-living allowances (COLAs), severance pay,
seniority rules, and employment contracts.
A few companies provide a guaranteed annual wag (GAW) to employees who meet
certain characteristics. For this type of plan to work, general employee
management relations must be good, and the demand for the product or service
must be steady. The best known of such plans are those of Procter & Gamble,
Hormel Meats, and the Nunn-Bush Shoe Company. In one plan, the employer
guarantees the employee a certain number of weeks of work at a certain wage
after the worker ha-s passed a probation period (say, two years). Morton Salt
Comp w guarantees 80 percent of full-time work to all employees after one year
of standard employment. Procter & Gamble has invoked its emergency clause only
once since 1923 in 1933, for a brief period at three plants. In the Hormel
and Spiegel plans and others, a minimum income is guaranteed.
In the supplementary unemployment benefits (SUB) approach, the employer adds
to unemployment compensation payments to help the, employee achieve in come
security, if not job security (as in the GAW). The automobile, steel, rubber,
garment, and glass industries, among others, contribute to a fund from which
laid- off employees are paid. During the recession of 19731974, many of these
funds in the auto industry went bankrupt. They provide less income security
than was thought. But studies of plans in which unemployment was less severe
show that the system has helped.
Cost-of-living adjustments (COLAs) are wage increases or decreases pegged to
the rise or fall in the cost of living. In a COLA plan, data from the Bureau
of Labor Statistics are used to make wage and salary adjustments. The consumer
price index (CPI), which measures changes in the price of a hypothetical
basket of goods and services, is used as a cost-of-living index. The
adjustment is not based on performance of the firm. The COLA was created by
unions to protect members from erosion of real wages when inflation rates were
high. Union contracts were negotiated to contain an escalator clause that

permitted an annual review of wages and a pay raise if the increase in the
cost of living warranted it. Nonunion firms also adopted the COLA. Many firms
have used the COLA to compensate employees who