Identifying Optimal Compensation Strategies

¶ … Strategic Human Resource Management in Small and Growing Firms: Aligning Valuable Resources" by Michael B. Hargis and Don B. Bradley (July 2011)

Citation/Source:

Hargis, M. B. & Bradley, D. B. (2011, July). Strategic human resource management in small and growing firms: Aligning valuable resources. Academy of Strategic Management Journal, 10(2), 105-110.

Major Thesis

According to Hargis and Bradley, there is a growing body of evidence that many of the same types of human resource management challenges that are experienced by larger corporations are no different than those encountered by smaller firms, including the need to identify optimal compensation and reward packages that will help recruit and retain talented employees. At present, though, there remains a dearth of timely and relevant research concerning the impact that human resource management practices have on the performance of small companies. To help fill this gap in the body of knowledge, Hargis and Bradley review and evaluate the types of compensation and reward practices that are used by independent small business owners based on a national sample.

The findings that emerged from this study confirmed a relationship between effectively administered strategic compensation plans and overall performance in the small companies reviewed. In addition, the authors also conclude that, "Compensation practices are one of the most important tools an organization can use to help attract, retain, and motivate key talent in small growing firms" (Hargis & Bradley, 2011, p. 109). While there is also growing evidence that pay alone no longer represents the most important motivational factor for employees, it is also clear that to the extent that employees feel they are not being compensated fairly will be the extent to which they become unengaged from their jobs and the performance of the firm will suffer (Hargis & Bradley, 2011).

Moreover, inadequate compensation rates will adversely affect the ability of small companies to recruit and retain the talented employees they need to achieve and sustain a competitive advantage (Hargis & Bradley, 2011). In sum, the authors suggest that to the extent that the challenge of identifying optimal compensation and reward packages is achieved will be the extent to which small businesses are able to recruit, retain and reap the benefits of a highly motivated workforce, making this a useful study for human resource practitioners as discussed below.

3. Utility

Although the authors did not present any especially earth-shattering results, their findings that small businesses also need effective human resource management practices, including strategic compensation and reward packages, makes this a useful study for human resource practitioners in companies of all sizes and types. In this regard, Hargis and Bradley emphasize that, "Effective human resource management practices, including properly developed employee compensation and reward systems have been linked to higher employee performance and adding value to the corporation" (p. 107). In support of their arguments, Hargis and Bradley provide a useful breakdown of survey results concerning compensation and reward strategies used by small business across the country. In addition, aligning compensation practices with the organization's overarching goals can help improve customer satisfaction and employee morale levels while also translate into improved firm performance (Hargis & Bradley, 2011).