The document discusses compensation strategy and how it should be aligned with and support corporate goals. It defines compensation strategy as utilizing the pay system to direct individual and group efforts towards achieving organizational strategic objectives. The strategy should be guided by and help drive the business strategy by influencing behaviors. It also discusses how the compensation strategy can provide integration with growth strategies, underpin organizational values, drive desired behaviors, attract and retain skilled employees, and achieve organizational changes and objectives.
3. Mohan Madgulkar-Compensation Management/2006
Compensation strategy defined
• The deliberate utilization of the pay system as an essential
integrating mechanism through which the efforts of various
sub-units and individuals are directed towards the achievement
of an organizations’ strategic objectives
• The business strategy in particular, serve as a critical guide in
designing organizations’ systems, because it specifies what the
company wants to achieve, how it wants to behave, and the
kind of performance and performance levels it must
demonstrate to be effective. The strategy should strongly
influence an organization’s design and management style, both
of which should drive the design of reward system. These
reward systems in turn, help to drive performance by
influencing important individual and organizational behavior.
4. Mohan Madgulkar-Compensation Management/2006
Compensation strategies &
corporate goals
• The compensation strategy will be mainly
concerned with the direction the organization
should follow in developing the right mix and
levels of financial and non financial rewards in
order to support the business strategy
• It should be backed up by a realistic action
plan .
5. Mohan Madgulkar-Compensation Management/2006
How reward strategy contributes to the
achievement of corporate goals?
• Provides for the integration of reward policies and processes with key
strategies for growth and improved performance
• Underpins the organizations’ values, especially those concerned with
innovation, teamwork,flexibility , customer service and quality
• Fits the culture and management style of the organization as it is or as it is
planned to be.
• Drives and supports desired behaviors at all levels by indicating to
employees what type of behavior will be rewarded, how this will take place
and how their expectations will be satisfied.
• Provides the competitive edge required to attract and retain the level of
skills the organization needs
• Enables the organization to obtain value for money from its reward
practices
6. Mohan Madgulkar-Compensation Management/2006
Characteristics of reward strategy
• The demand of the business strategy including cost constraints
• How performance can be driven by influencing important individual and organizational
behaviors
• Helping to achieve culture changes
• Meeting objectives for ensuring the organization gets and keeps high quality employees
• Aligning organizational core competence and individual competence
• Underpinning organizational change
• Development of competitive pay structure
• Ensuring that reward policies are used to convey messages about the expectations and values
of the organization
• Achieving the right balance between reward for individuals, team and organizational
performance
• Evolving total reward processes which incorporate the best mix of financial rewards and
employee benefits
• Achieving the flexibility required when administering rewards processes within fast changing
organizations in highly competitive or turbulent environments
• Fitting reward processes to the individuals needs and expectations of employees
7. Mohan Madgulkar-Compensation Management/2006
Tax considerations
• A tax efficient remuneration package can benefit both
employers and employees. From the employees perspective it
can enhance the benefits of working for that employer, from
the employers point of view, it can mean reduced costs.
• In the past , tax efficiency was one of the main reasons for the
proliferation of benefits, but it has become progressively less
important as governments have tightened up the fiscal rules
relating to employee benefits.
• Because fiscal regulations are constantly changing, it is
essential to update the information related to tax law for
salaried persons.
