Setting the Stage for Strategic Compensation and Bases for Pay

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Setting the stage for strategic compensation and bases for pay

Paulette Harris

Professor Christopher Zapalski

Compensation Management - BUS 409

July 24, 2011

1. Describe the three main goals of compensation departments.  

Compensation professionals promote effective compensation systems by meeting three important goals:

1. Internal consistency
2. Market competitiveness
3. Recognition of individual contributions.
Internal Consistency – Internal consistent compensation systems clearly define the relative value of each job among all jobs within a company. This ordered set of jobs represents the job structure or hierarchy. Companies rely on a simple, yet fundamental, principle for building internally consistent compensation systems: Employees in jobs that require greater qualifications, more responsibilities, and more complex job duties should be paid more than employees whose jobs requires lesser qualifications, fewer responsibilities, and less –complex job duties. Internally consistent job structures formally recognize differences in job characteristics, which therefore enable compensation managers to set pay accordingly. Market Competitiveness – Market-competitive pay systems play a significant role in attracting and retaining the most qualified employees. Compensation professionals build market competitive compensation systems based on the results of market surveys and compensation surveys. A Strategic analysis entails an examination of a company’s external market context and internal factors. Examples of external market context are the industry profile, information about competitors, and long-term growth prospects. Internal factors encompass the company’s financial condition and functional capabilities - for example, marketing and human resources Strategic analysis permit business professionals to see where they stand in the market based external and internal factors. Compensation surveys collect and then analyze...
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