Chapter
2
Strategic Perspectives
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Learning Objectives
After studying Chapter 2, students should be able to:
1.
2.
3.
4.
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Corporate objectives
strategic plans,
vision, and values
What business
should we be in?
How should total
compensation help
us win?
Business unit
strategies
HR strategies
How should HR
help us win?
Social, competitive,
and regulatory
environment
Strategic
compensation
decisions
Strategic Choices
Compensation
systems
Employee
attitudes and
behaviors
Competitive
advantage
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Objectives
Microsoft
Firepond
Support recruiting,
motivation, and retention of
MSMS-caliber talent
Reinforce teamteam-based
culture
Reduce costs, increase
productivity
Encourage high
standards of excellence,
original thinking, a passion
for the process of discovery
and a willingness to take
risks
Reward fresh ideas, hard
work and a commitment to
excellence
Internal
Alignment
Value diverse
perspectives as a key to
discovery
Reflect responsibilities,
required competencies, and
business impact
2-5
Administration
Employee
Contribution
Externally
Competitive
Microsoft
Lead in total
compensation
Lag in base pay
Lead with bonuses, stock
options
Open, transparent
communications
Centralized administration
Performance and
leadership feedback
everyone is a leader
Firepond
Demonstrate respect for
individual talent and the
limitless potential of a
highly motivated team
Administrative ease
Software supported
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Pay-Design Process
!Before any new compensation program is
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Strategic Alignment
VISION/MISSION
CORE BELIEFS
DESIRED CULTURE
BUSINESS OBJECTIVES
REWARD
PLANS
PERFORMANCE
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!Innovator
!Cost Cutter
!Customer Focused
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Cost Cutter:
Focus on
Efficiency
Customer
Focused:
Increase
Customer
Expectations
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Business
Response
Product
Leadership
Shift to Mass
HR Program
Alignment
Committed to
Agile, Risk Taking,
Innovative People
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Compensation
System
Reward Innovation
in Products and
Processes
Customization and
Innovation
MarketMarket-Based Pay
Cycle Time
Job Descriptions
Operational
Excellence
Focus on
Competitors Labor
Costs
Increase Variable
Pay
Emphasize
Productivity
Focus on System
Control and Work
Specifications
Pursue CostCost-
Flexible Generic
effective Solutions
Customer Intimacy
Deliver Solutions to
Customers
Speed to Market
Delight Customer,
Exceed
Expectations
Customer
Satisfaction
Incentives
Value of Job and
Skills Based on
Customer Contact
2002 by The McGraw-Hill Companies, Inc. All rights reserved.
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4.
4. Reassess
Reassess the
the Fit
Fit
Realign
Realign as
as Conditions
Conditions Change
Change
Realign
Realign as
as Strategy
Strategy Changes
Changes
2.
2. Fit
Fit Policy
Policy Decisions
Decisions to
to Strategy
Strategy
Objectives
Objectives
Alignment
Alignment
Competitiveness
Competitiveness
Contributions
Contributions
Administration
Administration
3.
3. Implement
Implement Strategy
Strategy
Design
Design System
System to
to Translate
Translate Strategy
Strategy
into
into Action
Action
Choose
Choose Techniques
Techniques to
to Fit
Fit Strategy
Strategy
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Organization
Organization
Strategy
Strategy
HR
HR // Compensation
Compensation
Policies
Policies
Competitive
Competitive
Advantage
Advantage
Socioeconomic
Socioeconomic //
Political
Political Environment
Environment
HR
HR // Compensation
Compensation
Policies
Policies
Organization
Organization
Strategy
Strategy
Competitive
Competitive
Advantage
Advantage
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!
!
!
!
!
!
!
!
!
!
!
!
!
!
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Virtuous Circle
Risk/Return
BALANCE
Vicious Circle
Organization
Performance
DECREASES
Risk/Return
IMBALANCE
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Increased Employee
Performance
Decreased Employee
Performance
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High
Low
TRANSACTIONAL
Hired Guns
(Stockbrokers)
Cult - like
(Microsoft)
Workers as Commodity
(Employers of Migrant
Farm Workers)
Family
(Starbucks)
Low
McGraw-Hill/Irwin
High
RELATIONAL
2002 by The McGraw-Hill Companies, Inc. All rights reserved.
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Summary
! A strategic perspective on compensation takes the
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Summary (continued)
! The best practices approach assumes that there exists a
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Summary (continued)
! Recent studies have begun to research what aspect of the
McGraw-Hill/Irwin
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Review Questions
1.
2.
3.