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Aligning Compensation Strategy with
HR Strategy & Business Strategy
Dr. G C Mohanta, BE, MSc(Engg), MBA, PhD(Mgt)
Professor
Al-Qurmoshi Institute of Business Management
Hyderabad
Compensation Strategy
 Strategy refers to the fundamental directions that an
organization chooses
 Compensation Strategy focuses on the compensation
choices those help the organization gain and sustain
competitive advantage
Human Resource Strategy
 Human resource strategy is designed to develop the
skills, attitudes and behaviors among staff that will
help the organization meet its goals.
 Human resource strategy consists of principles for
managing the workforce through HR policies and
practices.
 It covers the various areas of human resources
functions such as
recruitment, compensation, performance
management, reward and recognition, employee
relations and training.
Business Strategy
 Business Strategy defines the direction in which
organization is going in relation to its environment
in order to achieve its objectives.
Aligning Compensation Strategy
with Business Strategy
 Compensation systems should align with the
organization's business strategy
 When business strategies change, Compensation
systems should also change
Strategic Compensation Choices
 Five strategic compensation choices are:
 Objectives
 Internal alignment
 External competitiveness
 Employee contributions
 Management
Compensation Strategies in 3 Firms
Aligning Compensation Strategy with HR Strategy
and Business Strategy
Aligning Compensation Strategy with HR Strategy
9
HR Strategy Compensation Strategy
– Attract staff
– Retain effective performers
– Support change
management process
– Establish positive
corporate reputation
– Administer reward
management to maximise
positive impact
– Enhance purchasing power
of employees
– Make Compensation
package simple
– Develop human resources
– Total reward approaches that help to make the
organisation a great place to work
– Competitive pay structure that helps to retain high
quality employee
– Variable pay schemes that contributes to the
motivation of the people
– Performance management process that promotes
continuous improvement
– Performance management processes that identify
learning needs and how they can be satisfied
– Career family structure that defines knowledge
and skills requirement
– Total reward approaches that emphasize the
importance of enhancing the work environment
Aligning Compensation Strategy with Business
Strategy
10
Business Strategy Compensation Strategy
– Achieving competitive advantage
through innovation
– Achieving competitive advantage
through quality
– Achieving competitive advantage
through low costs
– Provide financial incentive/reward and
recognition for innovation
– Link reward to quality performance
– Review all reward practices to ensure they
provide value for money

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Aligning Compensation Strategy with HR Strategy & Business Strategy by Dr. G C Mohanta

  • 1. Aligning Compensation Strategy with HR Strategy & Business Strategy Dr. G C Mohanta, BE, MSc(Engg), MBA, PhD(Mgt) Professor Al-Qurmoshi Institute of Business Management Hyderabad
  • 2. Compensation Strategy  Strategy refers to the fundamental directions that an organization chooses  Compensation Strategy focuses on the compensation choices those help the organization gain and sustain competitive advantage
  • 3. Human Resource Strategy  Human resource strategy is designed to develop the skills, attitudes and behaviors among staff that will help the organization meet its goals.  Human resource strategy consists of principles for managing the workforce through HR policies and practices.  It covers the various areas of human resources functions such as recruitment, compensation, performance management, reward and recognition, employee relations and training.
  • 4. Business Strategy  Business Strategy defines the direction in which organization is going in relation to its environment in order to achieve its objectives.
  • 5. Aligning Compensation Strategy with Business Strategy  Compensation systems should align with the organization's business strategy  When business strategies change, Compensation systems should also change
  • 6. Strategic Compensation Choices  Five strategic compensation choices are:  Objectives  Internal alignment  External competitiveness  Employee contributions  Management
  • 8. Aligning Compensation Strategy with HR Strategy and Business Strategy
  • 9. Aligning Compensation Strategy with HR Strategy 9 HR Strategy Compensation Strategy – Attract staff – Retain effective performers – Support change management process – Establish positive corporate reputation – Administer reward management to maximise positive impact – Enhance purchasing power of employees – Make Compensation package simple – Develop human resources – Total reward approaches that help to make the organisation a great place to work – Competitive pay structure that helps to retain high quality employee – Variable pay schemes that contributes to the motivation of the people – Performance management process that promotes continuous improvement – Performance management processes that identify learning needs and how they can be satisfied – Career family structure that defines knowledge and skills requirement – Total reward approaches that emphasize the importance of enhancing the work environment
  • 10. Aligning Compensation Strategy with Business Strategy 10 Business Strategy Compensation Strategy – Achieving competitive advantage through innovation – Achieving competitive advantage through quality – Achieving competitive advantage through low costs – Provide financial incentive/reward and recognition for innovation – Link reward to quality performance – Review all reward practices to ensure they provide value for money