Aligning compensation strategy with HR strategy & business strategy

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