Strategic Compensation in
Action
Strategy
Strategic Compensation in
Action
Starting
with Strategy and
Culture
Effectiveness
Pay as strategic tool
Executive involvement
Strategic Compensation in
Action
Obstacles
Lack of direction
Secrecy
Conflict
Pay as administrative tool
Examples of Strategies and
relevant pay structure
Retrenchment
strategy
Short term , retention, stay bonus
Product development strategy
Long term incentive, base pay above market
rate
Lowest cost strategy
Pay for quantity, short term, lower than market
rate, individual incentives are preferable
Differentiation strategy
Long term, pay for quality, group incentives are preferred
Market
penetration strategy
Incentives that heavily focus on cost control and
margin
Strategic Compensation in
Action
Beyond
the core strategy : An
ongoing process
Culture
as a competitive
advantage
Strategic Compensation in
Action
Competitive
Strategy
Strategic Compensation
Finding the right strategy ?
Reward programs
Culture and how to change the culture
Three Approaches
Start with why employees leave
Building compensation structure identical
to competitor
Strategic analyses
Strategic Analysis
Entails
an Examination of
Companys
External Market Context
Internal Factors
External Market
Elements
Industry Profile
Competition
Foreign Demand
Industrys Long - Term
Prospects
Labor Market Assessment
Internal Capabilities
Functional Capabilities
Human Resources
Capabilities
Financial Condition
Influential Factors for the
Competitive Strategies
National Culture
Organizational Culture
Organizational & Product Life
Cycles
National Culture
Geert
Hofstede theory of cultural
differences
Power Distance
Individualism / Collectivism
Masculinity / Femininity
Uncertainty Avoidance
Time Orientation
Hofstedes Framework: Power
Distance
The extent to which a society accepts that power in
institutions and organizations is distributed unequally.
Low distance
Relatively equal
power between those
with status/wealth and
those without
status/wealth
High distance
Extremely unequal
power distribution
between those with
status/wealth and
those without
status/wealth
Hofstedes Framework:
Individualism
Individualism
The degree to which people prefer to act as
individuals rather than a member of groups
Collectivism
A tight social framework in which people expect
others in groups of which they are a part to look
after them and protect them
Versus
Hofstedes Framework:
Masculinity
Masculinity
The extent to which the society values work roles of
achievement, power, and control, and where
assertiveness and materialism are also valued
Femininity
The extent to which there is little differentiation
between roles for men and women
Versus
Hofstedes Framework: Uncertainty
Avoidance
The extent to which a society feels threatened
by uncertain and ambiguous situations and
tries to avoid them
High Uncertainty Avoidance:
Society does not like
ambiguous situations and tries
to avoid them.
Low Uncertainty Avoidance:
Society does not mind
ambiguous situations and
embraces them.
Hofstedes Framework: Time
Orientation
Long-term Orientation
A national culture attribute that emphasizes the future,
thrift, and persistence
Short-term Orientation
A national culture attribute that emphasizes the present
and the here and now
Values Across Cultures
The
Global framework for
assessing cultures
Assertiveness
Future orientation
Gender differences
Uncertainty avoidance
Power distance
Individualism vs collectivism
In-group collectivist
Performance orientation
Human orientation
Organizational Culture
System of Shared Values &
Beliefs
Producing Behavior Norms
Influences Compensation
Practices
Flattening the Organization
Team Orientation
Organization / Product Life
Cycle Phases
Growth
Maturity
Decline
Growth Phase
New Companies
Differentiation Strategy
Market - Competitive Pay
Systems
Long - Term Incentive
Programs
Funding Emphasis More on R
&D
than on Compensation
Maturity Phase
Established Companies,
Products
Services
Well - Developed Labor Pool
Lowest - Cost Strategies
Pay - for - Knowledge Programs
Skill - Based Pay Programs
Merit Pay Programs
Decline Phase
Companies with Diminishing
Markets
Differentiation Strategy if
Modifying Current Product /
Service
Developing New Product / Service
Lowest - Cost Strategy if
Liquidation
