Professional Documents
Culture Documents
Compensation Strategy
Compensation Strategy
Compensation Strategy
Compensation- an overview
A. Direct Financial Compensation
– Wages, salaries, bonuses, commissions
direct
compensation (benefits)
from the
psychological and/or physical
environment of the
Determinants of individual
compensation
A.The Organization
B. The Labour Market
Strategic Compensation
Decision Making
Decision making focused on
ensuring that compensation plan
design, implementation, and
control activities relate directly to
the achievement of the
organization’s performance goals,
within the constraints of societal
expectations and mandates
Strategic Choices
• Strategy refers to the fundamental
directions that an organization
chooses
– Corporate level: “What business
should we be in?”
– Business unit level: “How to gain and
sustain competitive advantage?”
– Functional level: “How should total
compensation help gain and sustain
competitive advantage?”
•
• A strategic perspective focuses on
those compensation choices that
help the organization gain and
Support business strategy
• Pay systems should align with the
organization's business strategy.
• Culture/values
– A pay system reflects the values
that guide an employer's
behavior and underlie its
treatment of employees
•
Guidance from the Evidence
• Consistent research evidence that
the following practices do matter
to the organization's objectives
– Internal alignment
• Pay differences among internal jobs
can affect results
– External competitiveness
• Paying higher than average paid by
competitors can affect results
– Employee contributions
• Performance-based pay can affect
results
Contd…
– Managing compensation
• Need to consider all dimensions of
pay strategy
– Compensation strategy
• Embedding compensation strategy
within the broader HR strategy
affects results
• “What practices pay off best under
what conditions” is an important
question to be answered
Virtuous and Vicious Circles
• A study concluded that how you
pay also matters as much as how
much you pay
• Studies conclude that performance-
based pay that shares success
with employees improves
employee attitudes, behaviors,
performance – especially when
combined with high-performance
practices
V irtu o u s a n d V icio u s
C ircle s