Compensation Chapter 2 Flashcards
The fundamental business directions that an organization has made in order to achieve its strategic objectives
Strategy
True or False
The greater the alignment or fit between organizational strategy and the compensation system, the less effective the organization.
False
True or False
Pay systems should align with the organization’s business strategy.
True
3 Tests of Competitive Advantage
- Is it aligned?
- Does it differentiate?
- Does it add value?
A business practice or process that results in better performance than one’s competitor
Competitive advantage
Focuses on efficiency and stresses doing more
with less by minimizing costs, encouraging productivity increases, and specifying in greater detail exactly how jobs should be performed
Cost Cutter
Stresses delighting customers and bases employee pay on how well they achieve this goal
Customer-focused based strategy
Focuses on how an organization can recognize and reward employees for their work in helping the organization achieve its objectives
Employee Contributions
TRUE or FALSE
Pay systems should align with the organization’s overall HR strategy and systems which include hiring, training and development
True
TRUE or FALSE
Compensation is key to attracting, retaining, and motivating employees with the abilities necessary to execute the business strategy.
True
Steps in Formulating a Total Compensation Strategy
- Assess Total Compensation Implications
- Map a Total Compensation Strategy
- Implement Strategy
- Reassess the Fit
Suggests that a company is more likely to achieve a competitive advantage if pay practices are aligned with business and overall HR strategies. Reflects the company’s strategies and values.
Best Fit
Suggests that there exists a set of best-pay practices, which can be applied universally across all situations, results in better performance with almost any business strategy.
Best Practices
Step 1, 2, 3, 4 in the Total Compensation Strategy:
Business strategy and competitive dynamics
Step 1 - Assess Total Compensation Implications
Step 1, 2, 3, 4 in the Total Compensation Strategy:
HR strategy
Step 1 - Assess Total Compensation Implications
Step 1, 2, 3, 4 in the Total Compensation Strategy:
Culture/values – pay system mirror image and reputation
Step 1 - Assess Total Compensation Implications
Step 1, 2, 3, 4 in the Total Compensation Strategy:
Social and political context
Step 1 - Assess Total Compensation Implications
Step 1, 2, 3, 4 in the Total Compensation Strategy:
Employee preferences
Step 1 - Assess Total Compensation Implications
Step 1, 2, 3, 4 in the Total Compensation Strategy:
Union Preferences
Step 1 - Assess Total Compensation Implications
Step 1, 2, 3, 4 in the Total Compensation Strategy:
Map a total compensation strategy using the five elements of the pay model.
Step 2 - Map a Total Compensation Strategy
Step 1, 2, 3, 4 in the Total Compensation Strategy:
Decisions in the pay model work in concert and the totality of decisions form the compensation strategy.
Step 2 - Map a Total Compensation Strategy
Step 1, 2, 3, 4 in the Total Compensation Strategy:
Involves implementing the strategy through the design and execution of the compensation system.
Step 3 - Implement
Step 1, 2, 3, 4 in the Total Compensation Strategy:
Recognizes that the strategy must change to fit changing conditions, and involves periodic reassessment. Periodic reassessment is needed to continuously learn, adapt, and improve.
Step 4 - Reassess
True or False
The steps to develop a total compensation strategy are: assess total compensation implications, map out a total compensation strategy, implement the strategy and reassess and realign the strategy to ensure achievement of the objectives.
True
