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    Lecture 2: Strategic Perspective On Compensation

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    Inzamamul Haque
    The document discusses the strategic perspective on compensation, which involves aligning pay systems with organizational objectives, business strategies, and performance in order to achieve competitive advantage; it provides examples of how to tailor compensation systems to different business strategies like being an innovator or cost cutter; and it outlines best practices for developing a strategic compensation plan, such as assessing competitive dynamics and ensuring internal alignment.

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    Lecture 2: Strategic Perspective On Compensation

    Uploaded by

    Inzamamul Haque
    60 views11 pages
    The document discusses the strategic perspective on compensation, which involves aligning pay systems with organizational objectives, business strategies, and performance in order to achieve competitive advantage; it provides examples of how to tailor compensation systems to different business strategies like being an innovator or cost cutter; and it outlines best practices for developing a strategic compensation plan, such as assessing competitive dynamics and ensuring internal alignment.

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    Strategic-Perspective

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    The document discusses the strategic perspective on compensation, which involves aligning pay systems with organizational objectives, business strategies, and performance in order to achieve competitive advantage; it provides examples of how to tailor compensation systems to different business strategies like being an innovator or cost cutter; and it outlines best practices for developing a strategic compensation plan, such as assessing competitive dynamics and ensuring internal alignment.

    Copyright:

    © All Rights Reserved
    Download as PPT, PDF, TXT or read online from Scribd
    Download as ppt, pdf, or txt
    60 views11 pages

    Lecture 2: Strategic Perspective On Compensation

    Uploaded by

    Inzamamul Haque
    The document discusses the strategic perspective on compensation, which involves aligning pay systems with organizational objectives, business strategies, and performance in order to achieve competitive advantage; it provides examples of how to tailor compensation systems to different business strategies like being an innovator or cost cutter; and it outlines best practices for developing a strategic compensation plan, such as assessing competitive dynamics and ensuring internal alignment.

    Copyright:

    © All Rights Reserved
    Download as PPT, PDF, TXT or read online from Scribd
    Download as ppt, pdf, or txt
    of 11

    Lecture 2: Strategic Perspective on

    Compensation
    MHRDIR 506: Compensation Management

    Course Instructor:
    Nusrat Jahan Arefin
    Assistant Professor
    Department of Public Administration
    Jahangirnagar University
    Date: 22 January, 2021
    What Is the Strategic Perspective?

    The strategic perspective


    involves thinking about
    how pay can assist in
    achieving organization
    success, while not being
    fixated on pay techniques.
    Strategic Alignment

    VISION/MISSION
    CORE BELIEFS
    OBJECTIVES
    BUSINESS STRATEGY

    COMPENSATION
    SYSTEM

    PERFORMANCE
    Generic Business-level Strategies

    • Innovator

    • Cost Cutter

    • Customer Focused
    Tailor the Compensation System to the Strategy
    Business HR Program Compensation
    Strategy
    Response Alignment System

    Innovator: • Product • Committed to • Reward Innovation


    Leadership Agile, Risk Taking, in Products and
    Increase Product Innovative People Processes
    Complexity and • Shift to Mass
    Shorten Product Customization and • Market-Based Pay
    Life Cycle Innovation
    • Flexible – Generic
    • Cycle Time Job Descriptions

    • Focus on
    • Operational • Do More With Less Competitors’ Labor
    Cost Cutter: Costs
    Excellence
    Focus on • Increase Variable
    Efficiency • Pursue Cost- Pay
    effective Solutions • Emphasize
    Productivity
    • Focus on System
    Control and Work
    Specifications

    • Customer
    Customer • Customer Intimacy • Delight Customer,
    Satisfaction
    Focused: Exceed Incentives
    • Deliver Solutions to
    Expectations
    Increase Customers • Value of Job and
    Customer Skills Based on
    • Speed to Market
    Expectations Customer Contact
    Which Pay Decisions Are Strategic?
    • Objectives

    • Alignment

    • Competitiveness

    • Contributions

    • Management
    Key Steps to Formulate
    a Compensation Strategy
    1. Assess Total Compensation Implications
    • Competitive Dynamics
    • Core Culture / Values
    • Social and Political Context
    • Employee / Union Needs
    • Other HR Systems

    2. Map a Total Compensation Strategy


    4. Reassess the Fit
    • Objectives • Contributions
    • Realign as Conditions Change
    • Alignment • Administration
    • Realign as Strategy Changes
    • Competitiveness

    3. Implement Strategy
    • Design System to Translate Strategy
    into Action
    • Choose Techniques to Fit Strategy
    Sources of Competitive Advantage

    • Three tests determine if a pay strategy is a


    source of advantage

    – Is it aligned? Which
    hat is
    unique?

    – Does it differentiate?

    – Does it add value?


    Best Fit vs. Best Practices
    Best Fit Best Practices

    • If design of pay system • Assumptions


    – Reflects company’s – A set of best-pay
    strategy and values practices exists

    – Is responsive to – Practices can be applied


    employees’ needs and universally across all
    situations
    – Is globally competitive

    • Company is more likely to


    achieve competitive
    advantage
    Guidance from the Evidence

    1. Internal alignment

    2. External competitiveness

    3. Employee contributions

    4. Managing compensation

    5. Compensation strategy
    Example: Company XYZ
    • Objectives: How should compensation support business strategy and be
    adaptive to the cultural and regulatory environment?
    • Alignment: How differently should the various types and levels of skills be
    paid within the organization?
    • Competitiveness: How should total compensation be positioned against
    our competitors? What forms of compensation should we use?
    • Contributions: Should pay increases be based on individual and/or team
    performance, on experience and/or continuous learning, on improved
    skills, on changes in cost of living, on personal needs, and/or on each
    business unit’s performance?
    • Management: How open and transparent should pay decisions be to all
    employees? Who should be involved in designing and managing the
    system?

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