12/11/2009
COMPENSATION MANAGEMENT
CHAPTER 2 (Study unit 2)
St t
Strategy: The
Th Totality
T t lit off D
Decisions
i i
1
Chapter Topics
• Similarities and Differences in Strategies
• Strategic Choices
• Support Business Strategy
• The Pay Model Guides Strategic Pay Decisions
• Developing a Total Compensation Strategy: Four Steps
2
1
, 12/11/2009
Chapter Topics (cont.)
• Source of Competitive Advantage: Three Tests
• “Best Practices” versus “Best Fit”
• Guidance from the Evidence
• Virtuous and Vicious Circles
pp g Compensation
• Your Turn: Mapping p Strategies
g
• Still Your Turn: Pay Matters (Productivity Does, Too)
3
Exhibit 2.1: Three Compensation Strategies
4
2
, 12/11/2009
Learning Objectives
After studying Chapter 2, students should be able to:
• Explain the idea of a strategic perspective to compensation.
• Identify the five dimensions of a compensation strategy and how a
compensation strategy can support an organization’s strategy.
• Discuss how the pay model guides strategic pay decisions.
• Understand the four steps involved in developing a total compensation strategy.
• Discuss how three tests can be used to determine if a pay strategy can be a
source
sou ce o
of co
competitive
pet t e ad
advantage.
a tage
• Describe the key arguments related to the two approaches – best-fit vs. best-
practices – in developing a compensation strategy and system.
5
Similarities and Differences
in Strategies
• Different strategies within the same industry
• Different strategies within the same company
• “Let
Let the market decide our compensation
compensation” philosophy is untenable in the
real world, especially in global environments
THUS: A strategic perspective on compensation is more complex
than it first appears
6
3
COMPENSATION MANAGEMENT
CHAPTER 2 (Study unit 2)
St t
Strategy: The
Th Totality
T t lit off D
Decisions
i i
1
Chapter Topics
• Similarities and Differences in Strategies
• Strategic Choices
• Support Business Strategy
• The Pay Model Guides Strategic Pay Decisions
• Developing a Total Compensation Strategy: Four Steps
2
1
, 12/11/2009
Chapter Topics (cont.)
• Source of Competitive Advantage: Three Tests
• “Best Practices” versus “Best Fit”
• Guidance from the Evidence
• Virtuous and Vicious Circles
pp g Compensation
• Your Turn: Mapping p Strategies
g
• Still Your Turn: Pay Matters (Productivity Does, Too)
3
Exhibit 2.1: Three Compensation Strategies
4
2
, 12/11/2009
Learning Objectives
After studying Chapter 2, students should be able to:
• Explain the idea of a strategic perspective to compensation.
• Identify the five dimensions of a compensation strategy and how a
compensation strategy can support an organization’s strategy.
• Discuss how the pay model guides strategic pay decisions.
• Understand the four steps involved in developing a total compensation strategy.
• Discuss how three tests can be used to determine if a pay strategy can be a
source
sou ce o
of co
competitive
pet t e ad
advantage.
a tage
• Describe the key arguments related to the two approaches – best-fit vs. best-
practices – in developing a compensation strategy and system.
5
Similarities and Differences
in Strategies
• Different strategies within the same industry
• Different strategies within the same company
• “Let
Let the market decide our compensation
compensation” philosophy is untenable in the
real world, especially in global environments
THUS: A strategic perspective on compensation is more complex
than it first appears
6
3
