Talent Development Ch. 2
Step 1: Assess total compensation implications
-Business strategy and competitive dynamics -HR strategy -Culture/values are reflected in the pay system -Social and political context is wide ranging -Employee preferences are also ride ranging -Union preferences differ by location
Steps to creating a total compensation strategy
1) Assess total compensation implications 2)Map a total compensation strategy 3) Implement strategy 4)Reassess
The five strategic compensation choices:
1) Objectives 2) Internal alignment 3) external competitiveness 4)employee contributions 5) management
Best practices Assumptions:
A set of best pay practices exists -Practices can be applied universally across all situations -Results in better performance with almost and business strategy
Support Business Strategy
Aligns pay systems with organizations business strategy -Better the alignment, more effective is the organization
Best Fit
An organization is likely to achieve competitive advantage if they pay system: Reflects the company's strategies and values -Is responsive to employees and unions needs and is globally competitive
Contingency Notion
Changes in business strategies should result in changes in pay systems
Guidance from the evidence
Consistent research evidence show the following practices matter to objectives: -internal alignment -external competitiveness -employee contributions -managing compensation -compensation strategy Identify what practices pay off best under what conditions
Miles and Snow's framework includes:
Defenders in stable markets competing on costs and prospectors who compete in innovative/new markets
Vicious Circle
Downward momentum, continuous difficulties
Cost Cutter
Efficiency-focused strategy stresses doing more with less by minimizing costs, encouraging productivity increases, and specifying in greater detail exactly how jobs should be performed
HR systems will be most effective when:
Employees ability is developed through selective hiring and training -Compensation system motivates employees and roles allow employees to be involved in decision making
Strategic Perspective
Focuses on those compensation choices that help the organization gain and sustain competitive advantage
Compensation strategies can be based on:
Generic strategy frameworks
Trying to measure an ROI for any compensation strategy implies that people are __________, similar to other factors of production
Human Capital
Step 3: Implement
Implementing the strategy through the design and execution of the comp system
Performance-based pay:
Improves performance when combined with high performance practices and can be the best practice under right circumstances
Align
Includes three aspects: Align with the business strategy, align externally with the economic and sociopolitical conditions and align internally with the overall HR system
Unstated Strategies
Inferred from the pay decisions
Sources of competitive advantage: 3 tests
Is it aligned? Does it differentiate? Does it add value?
The AMO logic:
Is that HR systems will be most effective when roles are designed to allow employees to be involved in decisions and have an opportunity to make an impact, when employee ability is developed through selective hiring and training and development and when the compensation system motivates employees to act on their abilities and take advantage of the opportunity to make a difference
Step 2: Map a total compensation strategy
Offer a picture of a comp strategy -Provide a visual reference -Useful for analyzing a strategy as they are easily understood -Do not tell which strategy is "best: but provides a framework and guidance
Boxall and Purcell use the "AMO theory"
P(performance)=f(A,M,O) -Ability, motivation, Opportunity
Step 4: Reassess
Recognizes that the strategy must change to fit changing conditions, and involves periodic reassessment
Context
Refers to a wide range of factors, including legal and regulatory requirements cultural differences, changing workforce demographics, expectations and the like
Pay system
Reflects the values that guide an employers behavior and underlie its treatment of employees
Virtuous and Vicious Circles
Research indicates that: How you pay matters as much as how much you pay
Customer-focused business strategy
Stresses delighting customers and bases employee pay on how well they do this
Innovator
Stresses new products and short response time to market trends
Michael Porter's framework includes:
The cost leadership strategy focuses on reducing costs, while the differentiator strategy focuses on providing a unique and or/ innovative product/service at premium prices
Strategy
The fundamental directions an organization chooses
Virtuous Circle
Upward momentum, continuous improvement
Stated Strategies
Written compensation strategies