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Most firms will also reward good values such as honesty, commitment, and good relations with customers.
While in most cases, employees will develop positive feelings about internal equity if they feel they are being paid fairly depending on how perfectly reward management works in the organization, but there is always a time when they will compare their salaries with those of others in the industries. This gives rise to the question of external competitiveness. What is the guarantee that an employee will not leave an organization when he learns that other firms are paying hire for the same job and title? In today's dynamic world, no such guarantees exist and retention can become a problem if employees find it easier to switch jobs. It is thus important to take external competitiveness into consideration as well.
In order to remain externally competiveness, organizations normally depend on wage and salary surveys that give an idea about how much is being paid on average for a certain job in a firm. Some firms may also use informal methods to obtain information on comparative...
For example job advertisements are considered a good source of such information when revealed and some people may have internal connections with people in other organizations and hence get this information easily. While firms would want to stay competitiveness where salaries are concerned, the extent to which they can do this is dependent on such factors as general employment conditions, company's financial strength, and strategic goals of the organization.
Organizations clearly understand the need to maintain external competitiveness and internal equity but they may be driven by other factors when determining the extent to which they can take these into consideration. For talent acquisition and retention, it is generally considered important to maintain adequate competitiveness and equity.
References:
Herman R.D. And Associates (1994), the Jossey-Bass Handbook of Nonprofit Leadership and Management, Jossey-Bass, San Francisco, CA
John Bratton & Jeffrey Gold (2003), Human Resource Management Theory and Practice, MacMillan, London
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