This document discusses aligning compensation strategy with human resources (HR) strategy and business strategy. It states that compensation strategy should focus on compensation choices that help the organization gain competitive advantage. HR strategy involves developing employee skills and behaviors to help the organization meet its goals through HR policies. Business strategy defines the organization's direction to achieve objectives. The document emphasizes that compensation systems should align with and change according to business strategies. It provides examples of how compensation strategy can align with HR strategy and business strategy in different organizations.

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

7. Compensation Strategies in 3 Firms

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