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Chapter 4 SBS

This document discusses compensation, or total rewards, frameworks. It presents a 2x2 matrix that categorizes employment relationships based on levels of pay and commitment. It also discusses developing a compensation strategy by assessing factors like competitive dynamics, company culture/values, social/political issues, and employee needs. An effective compensation strategy should be aligned with business strategy, differentiate the company, and add value in a way that creates a virtuous circle rather than a vicious circle.

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46 views12 pages

Chapter 4 SBS

This document discusses compensation, or total rewards, frameworks. It presents a 2x2 matrix that categorizes employment relationships based on levels of pay and commitment. It also discusses developing a compensation strategy by assessing factors like competitive dynamics, company culture/values, social/political issues, and employee needs. An effective compensation strategy should be aligned with business strategy, differentiate the company, and add value in a way that creates a virtuous circle rather than a vicious circle.

Uploaded by

sim25
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PPTX, PDF, TXT or read online on Scribd
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Compensation

Also known as

Total Returns for Work Or Total Rewards


Total Returns for Work
Framework for Analyzing Employment
Relationships
HIGH PAY – LOW COMMITMENT HIGH PAY – HIGH COMMITMENT

Hired Guns Cult - like


(Stockbrokers) (Microsoft)
TRANSACTIONAL

LOW PAY – LOW COMMITMENT LOW PAY – HIGH COMMITMENT

Workers as Commodity Family


Low

(Employers of Migrant (Starbucks)


Farm Workers)

Low RELATIONAL High


Strategic Choices
How do we win (gain
competitive advantage) in those How should HR help us win?
businesses?

Business unit
HR strategies
strategies
Corporate objectives,
strategic plans, vision,
and values Strategic
Social, compensation
What business should we be in? competitive, decisions
and regulatory
environment
Compensation
systems

How should total


compensation help us Employee
win? attitudes and
behaviours

Competitive
advantage
Exhibit 1.5: THE PAY MODEL

POLICIES TECHNIQUES OBJECTIVES

Work Descriptions Evaluation/ INTERNAL


ALIGNMENT
analysis certification STRUCTURE
EFFICIENCY
• Performance
• Quality
Market Surveys Policy PAY
COMPETITIVENESS definitions lines STRUCTURE
• Customers
• Stockholders
• Costs

Seniority Performance Merit INCENTIVE FAIRNESS


CONTRIBUTORS based based guidelines PROGRAMS

COMPLIANCE
MANAGEMENT Costs Communication Change EVALUATION
Strategy Business Response HR Program Compensation
Alignment System
Developing a Compensation Strategy

1. Competitive Dynamics – changing customer, competitors & Labour

Assessing Total 2. Culture/Values – pay system to guide values listed in vision/mission


Compensation Implications
3. Social/Political – changes in legal, workforce, external factors
Factors affecting company success
4. Employee Needs – young staff, senior folks, dual career, var benefits

5. Customization – Allowing employees to choose

6. Unions – addressing union demands

7. How important is the pay strategy compared to other HR strategies


Developing a Compensation Strategy

1. Objective – Prominence: How important is it to overall strategy

Map Total Compensation 2. Alignment – Flexibility, hierarchy, career growth


Strategy
Basis the 5 strategic elements 3. Competitiveness–how much (competitors); What form (variable, work l

4. Employee Contribution – incentives ; individual, group

5. Management – business leaders role, technology, transparency


Developing a Compensation Strategy

1. Design Systems to implement strategy into action

Implement

2. Choose techniques to fit strategy


Developing a Compensation Strategy

1. Realign as conditions change

Re-assess

2. Realign as strategy changes


THE PAY STRATEGY
Pay strategy - A source of sustained competitive advantage – How?

(1) Is it aligned?
(2) Does it differentiate?
(3) Does it add value?

Alignment:
(1) align with the business strategy
(2) align externally with the economic and socio-political conditions
(3) align internally within the overall HR system

Differentiate - sustained competitive advantage comes from how the pay


system is managed

Add Value – tough - “It is easier to count the bottles than describe the
wine”
BEST PRACTICE / BEST FIT

The terms virtuous circle and vicious circle refer to complex chains of events that
reinforce themselves through a feedback loop

Virtuous Circle Vicious Circle

Drive Change Management – by leveraging employee enthusiasm and management


commitment

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