MHR 749 Lecture Notes - Fall 2018 Lecture 1 - Company Business, Competitive advantage
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Compensation Management
Lecture 1 Notes Part 2
Strategy
• The fundamental business directions that an organization has made in order to achieve
its strategic objectives
• A strategic perspective focuses on those compensation decisions that help the
organization gain and sustain competitive advantage
• The greater the alignment, or fit, between the organizational strategy and the
compensation system, the more effective the organization
• Different industries may have different pay strategies, but there can be different
strategies within the same industry or different strategies within the same company
• Business strategy – pay systems should align with the organization’s business strategy;
when business strategies change, pay systems should also change
• HR strategy – pay systems should align with the organization’s overall HR strategy and
systems with include hiring, training, and development; employees possess the abilities
to execute business strategy and compensation is key to attracting, retaining and
motivating employees
Strategic Choices
• Corporate objectives, strategic plans, vision, and values – what business should we be
in?
• Business unit strategies – how do we win (gain competitive advantage)?
• HR strategies – how should HR help us win
• Social, competitive, and regulatory environment – how should total compensation help
us win?
• Strategic compensation decisions
• Compensation systems
• Employee attitudes and behaviours
• Competitive advantage
Five Strategic Compensation Choices
• Objectives – use pay, benefits and opportunities for personal development to help gain
employee loyalty and become difficult to imitate
• Internal Alignment – de-emphasize differences, cross-train employees to handle many
jobs
• External Competitiveness – provide health insurance and stock options for all employees
• Employee Contributions – emphasize team performance and shareholder returns
• Management – partners can and do get involved