Importance of compensation packages in attracting and retaining employees

HR Compensation

It is well established that human resources personnel have a direct and forceful impact on the strategic success of any business or economic organization. Ulrich (1997) suggests that "the relationship between HR practices and business results is built on a rather simple premise: better deployment and use of HR practices should correlate with higher business results "(p.303). One tool HR managers have at their disposal is the use of compensation packages and their unique impact on the labor force. The purpose of this essay is to examine compensation packages, in both the monetary and non-monetary form, impact on attracting and maintain a desirable workforce and the possible influence on the overall effectiveness of the organization.

Casico (2010) discussed the aspect of compensation in terms of rewards. He suggested that compensation could be divided into two separate categories; either financial or non-financial rewards. Financial rewards are considered the monetary distribution of profits to employee's salaries and indirect payments such as benefits. Nonfinancial rewards are more vague but they include such ideas as; perceptions of employees being more involved in decision making, recognition, training opportunities and provisions for a supporting and nurturing company climate (p.420). Although financial rewards are more tangible and common, it is important for HR leadership groups not to diminish the subtle qualities that contribute to non-financial rewards. Unfortunately this aspect is commonly overlooked in many instances.

According to the video interview of SYSCO personnel, many of the key players proclaim the importance of a strong human resources department contributing to the overall productivity levels of their operations. Ken Carrig, COO of a very successful and high-profile company, SYSCO, manages a system where human capital is one of the key metrics involved in ranking the overall quality of the company. Within this metric he claims that employee satisfaction is the most important factor in maintaining higher production levels. This emphasis demonstrates the importance of nonfinancial rewards to the larger compensation picture.

Monetary rewards are complicated and complex in their own right. Paying employees in monetary means demands a certain awareness of the subtle politics of the business environment, almost like an art form. Caisco proclaims the importance of balance in maintaining a viable HR management plan. He writes " If pay systems are to accomplish the objectives set for them, ultimately they must be perceived as adequate and equitable. For example, there should be a balance in pay relationships between supervisors and the highest paid subordinates reporting to them " (p.422). The metrics involved in any pay scale must have room to breathe and grow under the supervision of the HR managers that supervise and ultimately implement these impactful decisions.