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Strategic CompensationStrategic Compensation

Strategic Analysis & Contextual FactorsStrategic Analysis & Contextual Factors

www.buitms.edu.pkwww.buitms.edu.pk

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You Would Learn AboutYou Would Learn About

Strategic Analysis of Compensation

External Market Environment

Internal Capabilities

Factors Influencing Competitive Strategies and

Compensation Practices

National Culture

Organizational Culture

Organizational & Product Life Cycle


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Strategic AnalysisStrategic Analysis

Entails an examination of a companys external

market context and internal factors.

Examples of external market factors include

industry profile, information about competitors,

and long term growth prospects.

Internal factors encompass financial condition

and functional capabilities.


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External Market EnvironmentExternal Market Environment

1. Industry Profile

Describe such basic industry characteristics as sales

volume, the impact of relevant government regulationson competitive strategies, and the impact of recenttechnological advancements on business activity.

2. Competition

Companies take stock of competitors business activitiesto help position themselves in the market


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3. Foreign Demand

Most companies are interested in foreign demand for

their products or services because such demand is anindicator of additional sales revenue potential.

4. Industrys Long Term Prospects

Long term prospects set the backdrop for strategicplanning because these prospects are indicators ofcompanies futures.


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5. Labour Market Assessment

Represent key activities, companies should carefully

assess the labour market to determine the availability ofqualified employees.

6. Occupation Specific Considerations

Qualifications and Trainings

Job Outlook

Typical Earnings Range


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Internal CapabilitiesInternal Capabilities

1. Functional Capabilities

2. Human Resource Capabilities

3. Financial Condition

Operating Requirements

Capital Requirement


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Factors Influence Competitive StrategiesFactors Influence Competitive Strategies& Compensation Practices& Compensation Practices

1. National Cultures

Refers to the set of shared norms and beliefs among

individuals within national boundaries who areindigenous to the area.

a. Power Distance

Is the extent to which people accept a hierarchicalsystem or power structure in companies.

b. Individualism-Collectivism

Is the extent to which individuals value personalindependence or group membership.


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National Culture

Power Distance

IndividualismCollectivism

UncertaintyAvoidance

Masculinity Femininity

Organizational Culture

Traditional Organizational

Hierarchy Flatter Organizational

Structures

Team Orientation

Organizational andProduct Life Cycle

Introduction

Growth

Maturity

Decline

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Social Securities Act Workers

CompensationLaws

Family & MedicalLeave Act

Health Insurance Disability Insurance

Life Insurance

Retirement Plans

Paid Time-off

Accommodationand Enhancement

Cost of Living

Seniority

Merit

Incentive

Person-Focused

Hourly Wages

Annual Salary

CoreCompensation

Adjustment toCore

Compensation

LegallyRequiredEmployee

Benefits

DiscretionaryEmployee

Benefits

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Core JobCharacteristics

Skill Variety

Task Identity

Task Assignment

Autonomy

Feedback

CriticalPsychological State

ExperiencedMeaningfulness

ExperiencedResponsibility for Work

Outcomes

ained Knowledge ofResults for Work

Acti ities

Benefit toEmployers

- Lower Turno er,

- LowerAbsenteeism,

- Enhanced JobPerformance,

- reater JobSatisfaction

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Core CompensationCore Compensation

1. Base Pay

Represents the monetary compensation employeesearn on a regular basis for performing their jobs.

Hourly pay and salary are the main forms of base

pay.


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Adjustment to Core CompensationAdjustment to Core Compensation

1. Cost of Living Adjustments (COLA)

Represent periodic base pay increases that are basedon changes in prices, as indexed by the Consumer

Price Index (CPI). COLAs enable workers to maintain

their purchasing power and standard of living by

adjusting base pay for inflation.

Consumer Price Index (CPI)

Indexes monthly price changes of goods and services that people

buy for day to day living


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2. Seniority Pay

Systems reward employees with permanent additions to

base pay periodically, according to employees length ofservice performing their jobs.

3. Merit Pay

Programme reward employees with permanent increases tobase pay according to differences in job performance.

4. Incentive PayAs compensation, other than base wages or salaries, thatfluctuates according to employees attainment of somestandard, such as a pre-established formula, individual orgroup goals, or company earning


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5. Person Focused Pay

Generally reward employees for acquiring job-related

competencies, knowledge, or skills rather than fordemonstration successful job performances. (Skill BasedPay or Pay for nowledge Plans)


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Employees BenefitsEmployees Benefits

1. Legally Required Benefits

Are protection programmes, that attempt to promoteworker safety and health, maintain family income streams,and assist families in crisis.


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Discretionary BenefitsDiscretionary Benefits

1. Protection Programme

Provide family benefits, promote health, and guard againstincome loss caused by catastrophic factors such asunemployment, disability, or serious illness.

2. Paid Time Off

Provides employees with pay for time when they are not

working, such as vacation.3. Services

Provide enhancements such as tuition reimbursement andday care assistance to employees and their families


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Relationship B/W Strategic & Tactical DecisionsRelationship B/W Strategic & Tactical Decisions

Strategic Decision

Competitive Strategy

Human Resource Strategy

Compensation Strategy

General Tactical HRDecision

Recruitment

Selection

Performance Appraisal

Compensation

Training

Specific Tactical HRDecision (Compensation

Examples)Seniority Pay

Merit Pay

Incentive Pay

Pay for

nowledge

Skill Based Pay

Broad banding

Two Tier Pay Structures

Discretionary Benefits Options


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Compensation Professionals GoalCompensation Professionals Goal

Compensation, Recruitment, and Selection

Compensation & Performance Appraisal

Compensation & Trainings

Compensation & Career Development

Compensation & Labour Management Relation

Compensation & Employee Termination

Compensation & Legislation

Internally Consistent Compensation System

Market Competitiveness

Recognizing Individual Contributions


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Stakeholders of the Compensation SystemStakeholders of the Compensation System

Employees

Line Managers

Executives

Unions

Government


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