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Ryerson University
Global Management Studies
GMS 401
Kirk Bailey

-Astrategic 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 strategy within same industry Different strategy within same company STRATEGIC CHOICES - Strategy - fundamental business decisions that an organization has made in order to achieve its strategic objectives. - corporate level- What business should we be in? - business level - How do we gain and sustain competitive advantage in this business? - functional level- How should total compensation help this business gain and sustain competitive advantage? Support Business Strategy (exhibit 2.2) - pay systems to align with the business strategy - better the alignment, or fit, between the organization and the compensation system, the more effective the organization. - The innovator vs, cost cutter's vs. customer-focused business strategy - defenders as those that operate in stable markets and compete on cost, - prospectors are more focused on innovation, new markets, - generic strategy frameworks. - look at IBM, southwest and sas Support HR Strategy - Pay systems should align with the organization's business strategy - When business strategies change, pay systems should also change THE PAY MODELGUIDES STRATEGIC PAY DECISIONS 1. Objectives: How should compensation support the business strategy and be adaptive to the cultural and regulatory pressures in a global environment 2. Internal alignment: How differently should the different types and levels of skills and work be paid within the organization? 3. External competitiveness: How should total compensation be positioned against competitors 4. Employee contributions: Should pay increases be based on individual and/or team performance, experience and/or continuous learning, on improved skills, on changes in cost of living, on personal needs, business unit's performance? 5. Management: How open and transparent should the pay decisions be to all employees? - Who should be involved in designing and managing the system? ( Stated versus Unstated Strategies - Their compensation strategy emerges from the pay decisions they have made. - Unstated compensation strategy is inferred from compensation practices. - there is a compensation strategy at work. DEVELOPINGATOTALCOMPENSATION STRATEGY: FOUR STEPS (exhibit 2.4) Step 1:Assess Total Compensation Implications 1. Business Strategy and Competitive Dynamics—Understand the Business - understand specific industry and focusing on factors in the business environment - Competitive dynamics can be assessed globally and locally 2. HR Strategy: Does Pay Play a Supporting Role or a Catalyst for Change - compensation or pay strategy is influenced by how it fits with the overall HR -Ahighly centralized and confidential pay system controlled by a few people in a corporate unit will not support a highly decentralized, flexible, open organization. 3. Culture/Values - core values guide employer' behaviours and are reflected in the pay systems. - mirrors the company's image and reputation. 4. Social and Political Context Context refers to a wide range of factors, including legal and regulatory requirements, cultural differences, changing workforce demographics, expectations eg. (child care, chemical dependency counselling, educational reimbursements, employee assistance programs) 5.Employee Preferences - Offering more choice is one approach. - Older workers (pay into retirement funds) - , younger employees (pay for child care, automobile insurance, financial counselling, or other benefits such as flexible schedules). 6. Union Preferences - Pay strategies also need to be adapte
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