Chapter 2 Flashcards
objective for google
emphasis on innovation commitment to cost containment, recognize contributions, attract and reward the best
objective for nucor
focus on customer, most productive, highest quality
objective for merrill lynch
focus on customer, attract, motivate, and retain the best talent
internal alignment for google
minimize hierarchy, everyone wears several hats, emphasize collaboration
externally competitive google
market leader in pay and benefits, unique benefits
employee contributions for google
recognize individual contributions, significant stock programs
management for google
love employees, want them to know it
internal alignment for merrill lynch
pay fairly internally, job sized on four factors (knowledge/skill, complexity, business impact, strategic value)
externally competitive for merrill lynch
market competitive in base and benefits, market competitive in incentive/bonus and stock
employee contributions for merrill lynch
financial advisors work under a strong incentive system based on client wealth management fees/commissions and total wealth of their client base
management for merrill lynch
understandable, consistent message
internal alignment for nucor
succeed by working together, no defined career paths, but many opportunities
externally competitive for nucor
below market for base, market leader for total cash compensation
employee contributions for nucor
bonuses based on plant production and company profits
management for nucor
not for everyone, no lay-off practice, but income fluctuates
strategy
fundamental directions that an organization chooses
an organization defines its strategy through
the trade-offs it makes in choosing what and what not to do
at the corporate level, the fundamental strategic choice is
what business should we be in
at the business level, the fundamental strategic choice is
how do we gain and sustain competitive advantage in this business
at the function level, the fundamental strategic choice is
how should total compensation help this business gain and sustain competitive advantage
the innovator
stresses new products and short response time to market trends
cost cutter’s efficiency focuses strategy
stresses doing more with less by minimizing costs, encouraging productivity increases, and specifying in greater detail exactly how jobs should be performed
customer focuses business strategy
stresses delighting customers and bases employee pay on how well they do this
firms do not have generic strategies, they have
aspects of cost and innovation
IBM’s current strategy
having a focus on the high-growth high-value segments of the IT industry
the deemphasis on pay for individual performance reduces
the risk that competition among employees will undermine this objective
compensation strategy and HR strategy are central to
successful business strategy execution
assess total compensation implications
business strategy and competitive dynamics, HR strategy, culture/values, social and political context, employee/union needs, other HR systems
map a total compensation strategy
objectives, alignment, competitiveness, contributions, management
reasses
realign as conditions change, realign as strategy changes
implement strategy
design system to translate strategy into action, choose techniques to fit strategy
pay strategy is influenced by
how it fits with other HR systems in the organization
why is unlimited choice bad
challenge to design and manage, not approved by U.S. internal revenues service
Jobs Bank program
1984, United Auto Workers would receive compensation when not needed until they were needed again
strategic perspective implies
it is the way that programs fit together and fit the organization that is hard to copy
what is a company’s largest controllable expense
compensation
calculating return on investments (ROI)
implies that people are “human capital”
three tests of strategy
align, differentiate, add value (most difficult)
best-pay practice vs best fit
people believe best pay practices can be applied universally and yield better performances
internal alignment
both smaller and larger pay differences among jobs inside an organization can affect results
external competitiveness
paying higher than the average paid by competitors can affect results
employee contributions
performance-based pay can affect results
managing compensation
rather than focusing on only one dimension of the pay strategy, all dimensions need to be considered together
compensation strategy
embedding compensation strategy within the broader HR strategy affects results
virtuous circle
organization performance increasing, pay for performance rises, risk return balance, ownership culture, upward momentum, continuous improvement
vicious cycle
organization performance decreasing, pay for performance lowers, risk return imbalance, ownership culture, downward momentum, continuous difficulties
performance-based pay that shares success with employees
does improve employee attitudes
What does declining organization performance do?
increases the risks facing employees (risks of still smaller bonuses, demotions, wage cuts, and even layoffs).
could performance-based pay sometimes be a “worst” practice
yes when incentive systems don’t pay off and they alienate employees or lead to government investigation of possible stock option manipulation
what is the easiest test to pass
alignment
each company’s profile on the strategy map reflects
its main message or “pay brand”
