WHAT IS COMPENSATION?
• Compensation can be defined as all forms of
financial returns and tangible service and
benefits em...
VIEWS OF COMPENSATION
MANAGERS’ VIEW
• Major expense
• Means to influence
employee’s behavior
• To improve the
organizatio...
WHAT IS A STRATEGY?
• The company’s long-term
plan for how it will
balance its internal
strengths and weaknesses
with its ...
WHAT IS STRATEGIC
COMPENSATION PLANNING?
• Determines how much an organization
want to pay employees and what type
of empl...
WHAT IS STRATEGIC HUMAN
RESOURCES MANAGEMENT?
• Strategic HRM is an
approach that defines
how the organization's
goals wil...
THE MAIN PURPOSE OF
STRATEGIC COMPENSATION
PLANNING IS TO :
• Retain
• Attract
• Motivate
• Develop
SHRM AND THE STRATEGIC
DIRECTION OF AN
ORGANIZATION.
• Strategic HRM is the key to improved business performance.
• Strate...
A ROAD MAP TO EFFECTIVE
COMPENSATION
GOALS OF A STRATEGIC
COMPENSATION POLICY
• To reward employees’ past performance.
• To retain competitive in the labour ma...
WHAT IS A COMPENSATION
SYSTEM?
• A compensation system is a system that is designed to
determine the amount of pay, given ...
TYPES OF COMPENSATION
SYSTEMS
IMPORTANCE OF
COMPENSATION SYSTEMS
WITHIN AN ORGANIZATION
• A well-designed compensation plan becomes one of many
tools a ...
IMPORTANCE OF AN IDEAL
COMPENSATION PLAN
• An ideal compensation system will have:
• Positive impact on the efficiency and...
IMPORTANCE OF AN IDEAL
COMPENSATION PLAN
• Sound Compensation/Reward System brings peace in the
relationship of employer a...
IMPORTANCE OF
COMPENSATION SYSTEMS
WITHIN AN ORGANIZATION
• Compensation systems that maintain its competitiveness and
ens...
IMPORTANCE OF AN IDEAL
COMPENSATION PLAN
• Increase morale, efficiency and cooperation.
• Being just and fair would provid...
HOW DO WE DEVELOP A TOTAL
COMPENSATION STRATEGY
HOW DO WE DEVELOP A TOTAL
COMPENSATION STRATEGY
• Define your compensation philosophy.
• Link compensation to your overall...
TOTAL COMPENSATION
STRATEGY
• Strong total compensation strategy must
align with your business strategy.
WHAT IS OUR COMPETITION FOR
THE PEOPLE WE WANT TO HIRE?
• Will we focus on salary, bonus plans tied to
performance, equity...
HOW WILL WE POSITION
OURSELVES IN OUR PAY
MARKET – MIDDLE OF THE
MARKET, ABOVE AVERAGE?
HOW CAN WE BE SURE
THAT OUR PAY PROGRAMS
SUPPORT OUR BUSINESS
PLANS AND OUR CULTURE?
HOW DO WE MAKE SURE
PAY PROGRAMS WORK FOR
EMPLOYEES, MANAGEMENT
AND OUR SHAREHOLDERS?
COMPENSATION STRATEGY
• Understanding how a compensation
strategy may be seen as a source of
sustained competitive advanta...
• Developing the right compensation
strategies is critical to attracting, retaining,
motivating and developing the right
e...
COMPETITIVE ADVANTAGE
• Competitive advantage is achieved when a
business produces surplus profits - greater
than it's com...
COMPENSATION STRATEGIES
• For a business to achieve the results associated
with a competitive advantage it needs the right...
COMPETITIVE ADVANTAGE
• In order to capture and maintain competitive
advantages the company must develop and
implement str...
MICHAEL PORTER IDENTIFIED
TWO BASIC TYPES OF
COMPETITIVE ADVANTAGE:
• “A competitive advantage exists when the firm is
abl...
THE “TOTAL REWARDS” VALUE
PROPOSITION
• Compensation is only one of four issues that have
to be engineered and managed in ...
THE “TOTAL REWARDS” VALUE
PROPOSITION
• A compelling compensation plan becomes a
cohesive link within the total rewards st...
THE KEY
• In sustaining a competitive advantage, creating a
compensation strategy that would envision, create and sustain
...
“If you pick the right
people and give them the
opportunity to spread
their wings- and put
compensation as a carrier
behin...
Strategic role of compensation, strategic compensation policy, total compensation system
Strategic role of compensation, strategic compensation policy, total compensation system
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Strategic role of compensation, strategic compensation policy, total compensation system

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This PowerPoint deals with the Strategic role of compensation in the organization. States how you develop a total compensation strategy and also strategic compensation planning.

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Strategic role of compensation, strategic compensation policy, total compensation system

  1. 1. WHAT IS COMPENSATION? • Compensation can be defined as all forms of financial returns and tangible service and benefits employees receive as part of an employment relationship. • Which includes: • Direct financial compensation • Indirect financial compensation • Non-financial compensation
  2. 2. VIEWS OF COMPENSATION MANAGERS’ VIEW • Major expense • Means to influence employee’s behavior • To improve the organization performance EMPLOYEES VIEW • Return in an exchange with their employer an entitlement or a reward. • Major source of financial security • Entitlement for being an employee of the company • Reward for a job well done.
  3. 3. WHAT IS A STRATEGY? • The company’s long-term plan for how it will balance its internal strengths and weaknesses with its external opportunity and threats to maintain a competitive advantage.
  4. 4. WHAT IS STRATEGIC COMPENSATION PLANNING? • Determines how much an organization want to pay employees and what type of employees they want to attract. • Pay scales, • Reward programs, • Benefits packages • Company perks.
  5. 5. WHAT IS STRATEGIC HUMAN RESOURCES MANAGEMENT? • Strategic HRM is an approach that defines how the organization's goals will be achieved through people by means of HR strategies and integrated HR polices and practices.
  6. 6. THE MAIN PURPOSE OF STRATEGIC COMPENSATION PLANNING IS TO : • Retain • Attract • Motivate • Develop
  7. 7. SHRM AND THE STRATEGIC DIRECTION OF AN ORGANIZATION. • Strategic HRM is the key to improved business performance. • Strategic direction is a course of action that leads to the achievement of the goals of an organization's strategy. • An organization’s strategic direction is a combination of its vision, mission, strategies and its core values.
  8. 8. A ROAD MAP TO EFFECTIVE COMPENSATION
  9. 9. GOALS OF A STRATEGIC COMPENSATION POLICY • To reward employees’ past performance. • To retain competitive in the labour market. • To maintain salary equity among employees. • To mesh employees’ future performance with organizational goals. • To control the compensation budget. • To attract new employees. • To reduce unnecessary turnover.
  10. 10. WHAT IS A COMPENSATION SYSTEM? • A compensation system is a system that is designed to determine the amount of pay, given the many individual in an organization.
  11. 11. TYPES OF COMPENSATION SYSTEMS
  12. 12. IMPORTANCE OF COMPENSATION SYSTEMS WITHIN AN ORGANIZATION • A well-designed compensation plan becomes one of many tools a firm can use to help reach its strategic goals. • Make the compensation system to attract the best for the organization. • Reward the peak performers with systems that match achievement to compensation.
  13. 13. IMPORTANCE OF AN IDEAL COMPENSATION PLAN • An ideal compensation system will have: • Positive impact on the efficiency and results produced by employees. • Better performance and achievement of standard • Enhance the process of job evaluation..
  14. 14. IMPORTANCE OF AN IDEAL COMPENSATION PLAN • Sound Compensation/Reward System brings peace in the relationship of employer and employees. • Adequate compensation retains valuable employees • Creates a healthy competition among them • Encourages employees to work hard and efficiently. • The perfect compensation system provides platform for happy and satisfied workforce. This minimizes the labour turnover. The organization enjoys the stability.
  15. 15. IMPORTANCE OF COMPENSATION SYSTEMS WITHIN AN ORGANIZATION • Compensation systems that maintain its competitiveness and ensure sustainability in the future include: • Good balance of wages • Benefits • Rewards and recognition.
  16. 16. IMPORTANCE OF AN IDEAL COMPENSATION PLAN • Increase morale, efficiency and cooperation. • Being just and fair would provide satisfaction to the workers • Solve disputes between the employee, union and management. • The system should follow the management principle of equal pay. It should motivate and encouragement those who perform better and should provide opportunities for those who wish to excel.
  17. 17. HOW DO WE DEVELOP A TOTAL COMPENSATION STRATEGY
  18. 18. HOW DO WE DEVELOP A TOTAL COMPENSATION STRATEGY • Define your compensation philosophy. • Link compensation to your overall business strategy. • Change the culture and reinforce it with compensation. • Reward the behaviours that drive the results. • Think total compensation. • Measure your return on invested payroll £s.
  19. 19. TOTAL COMPENSATION STRATEGY • Strong total compensation strategy must align with your business strategy.
  20. 20. WHAT IS OUR COMPETITION FOR THE PEOPLE WE WANT TO HIRE? • Will we focus on salary, bonus plans tied to performance, equity in the business, our benefit package?
  21. 21. HOW WILL WE POSITION OURSELVES IN OUR PAY MARKET – MIDDLE OF THE MARKET, ABOVE AVERAGE?
  22. 22. HOW CAN WE BE SURE THAT OUR PAY PROGRAMS SUPPORT OUR BUSINESS PLANS AND OUR CULTURE?
  23. 23. HOW DO WE MAKE SURE PAY PROGRAMS WORK FOR EMPLOYEES, MANAGEMENT AND OUR SHAREHOLDERS?
  24. 24. COMPENSATION STRATEGY • Understanding how a compensation strategy may be seen as a source of sustained competitive advantage for the organization
  25. 25. • Developing the right compensation strategies is critical to attracting, retaining, motivating and developing the right employees for the right positions.
  26. 26. COMPETITIVE ADVANTAGE • Competitive advantage is achieved when a business produces surplus profits - greater than it's competitors
  27. 27. COMPENSATION STRATEGIES • For a business to achieve the results associated with a competitive advantage it needs the right people consistently doing the right things in the right way and for the right reasons.
  28. 28. COMPETITIVE ADVANTAGE • In order to capture and maintain competitive advantages the company must develop and implement strategies to differentiate themselves from the competition. • Read more: http://www.ehow.com/how_7787980_build-sustainable-competitive-advantage.html#ixzz2mHKEn41v
  29. 29. MICHAEL PORTER IDENTIFIED TWO BASIC TYPES OF COMPETITIVE ADVANTAGE: • “A competitive advantage exists when the firm is able to deliver the same benefits as competitors • but at a lower cost (cost advantage), or deliver benefits that exceed those of competing products (differentiation advantage)…
  30. 30. THE “TOTAL REWARDS” VALUE PROPOSITION • Compensation is only one of four issues that have to be engineered and managed in such a way that will sustain the company’s competitive advantage. The others are a compelling future; personal and professional development opportunities and a positive work environment,.
  31. 31. THE “TOTAL REWARDS” VALUE PROPOSITION • A compelling compensation plan becomes a cohesive link within the total rewards strategy that makes up a company’s value proposition for its key talent.
  32. 32. THE KEY • In sustaining a competitive advantage, creating a compensation strategy that would envision, create and sustain a rewards system that will draw a compelling link are • company vision (where), • business strategy (how), • roles and expectations (who and what), • rewards (how much) • and employee vision(relevance). • This is called creating “line of sight”—and any company that expects to have a competitive advantage must achieve it.
  33. 33. “If you pick the right people and give them the opportunity to spread their wings- and put compensation as a carrier behind it-you almost don’t have to manage them”. Jack Welch

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