HRM3705 CHAP2 SU 2

12/11/2009




COMPENSATION MANAGEMENT



CHAPTER 2 (Study unit 2)
St t
Strategy: The
Th Totality
T t lit off D
Decisions
i i



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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




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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)



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Exhibit 2.1: Three Compensation Strategies




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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.




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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




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