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