Strategic compensation and organizational performance

HR Compensation

Compensation strategy is a useful tool that many, if not all, human resources managers can and should use in order to maximize their efficiency and effectiveness within the scope of a larger institution. Compensation strategy allows for the principles and character of the organization to show and demonstrates ability to negotiate the challenging aspects of maintaining a competitive advantage within a given industry.

The purpose of this essay is to explain and highlight the importance of strategic compensation as a component of a the larger corporate strategy within an organization. This essay will examine how pay and different forms of pay can be instrumental in finding new ways to motivate, sustain and increase participatory levels within company organizations and provide a footwork for future successes. This essay will also discuss some of the approaches that may be deemed useful by human resources managers in creating and designing a system that is competitive and allows the parent organization to flourish and grow.

Developing a Sustainable Strategy

A compensation strategy must be successfully aligned with the larger corporate strategy if either method is to be operating at full capacity. The human resources division within any organization is dedicated to establishing the human labor capabilities within that organization to a maximum level. HR managers must apply the right human labor skills with the right tasks and simultaneously accurately compensate those individuals for their hard earned work. This balancing act is at the core of all solid compensation management strategies that are executed at the human resources level.

Milkovich & Broderick (1989) wrote " because employees also understand that compensation dollars are important to the organization, the strategic intent of other human resource efforts, such as performance management, recruiting, career development and the like, it is also clearer if their designs are consistent with the compensation program. In short, realization of compensation strategy requires that the money match the message, " (p.2). It is therefore important that human resources personnel can understand and translate the various messages that are communicated throughout the organization and reply with an appropriate response and an appropriate compensation package.

The compensation portion of the human resources department must be sure that the program is holistic and is summarily understood by those who have developed the strategy. Motivating and developing human talent is the number one objective of this approach, and using benefits, in all of their many forms, human resources managers can manipulate the system to apply the right benefits in the right places and all at the right time. This synchronization of benefits is an extremely useful and beneficial skill for managers within human resources departments.

Components of Compensation Strategy

Often, most will think of only pay when it comes to being compensated within a working environment. While certain forms of pay such as base pay, overtime pay, short-term bonuses, cash sharing, long-term performance plans or equity plans, contribute to the majority of benefits, there are also many other ways in which human resources departments can manipulate the system to align their department with larger strategic goals.

Benefits also are very important in designing and offering a suitable compensation programs. These items often include, retirement packages, health care, paid time off, death benefits, and other insurances. Career development is another compensation type that can be incorporated into a well-balanced human resources approach. These include skill enhancers, leadership development, educational opportunities and many more programs that are designed for personal improvement.

Aligning Strategies

While it is important that the alignment between human resources strategy and the larger corporate strategy are fully understood and synchronized, the task itself takes hard work and a strong set of interpersonal skills. Schuster & Zingheim (2012) suggested that "The organization's employees should be focused through HR and total rewards programs so they are working to achieve goals and use skills and competencies to create a balanced performance outcome that adds business value. This means a few essential metrics, not just sales, to achieve balanced overall results. People need to be rewarded for acquiring and applying contemporary skills and competencies that grow and improve the workforce, " (p.20). In other words, pay and compensation should never be placed as the end goal in such an approach, rather, the fundamental achievements of success and honesty should be placed as a higher maxim in this environment.

Important Contributors to A Successful Strategy

Human resources departments must look at an holistic and total approach to managing the very complex and complicated set of human resources that may exist within an organization. Attracting and holding strong and talented labor is the ultimate goal and realizing that no two people are the same can help in modifying and streamlining an approach that can work for all parties involved in this process.