Strategic Compensation

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StrategicCompensat

ion

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The ChallengeTo align the deployment of

human capital with company strategy

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Environmental Factors

AffectingPay Strategy

Sociocultural Forces Demographic Forces Technological Forces Economic Forces Legal and Political Forces

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Porter’s Five Forces Threat of new entrants to the market Bargaining power of the firm’s suppliers Bargaining power of the firm’s customers Threat of Substitute products Intensity of rivalry among competing Firms

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Rivalry Among Firms

Price competitionProduct Innovation

Product Differentiation

Threat of New Entrants

SuppliesBargainingPower

BuyersBargainingPower

Threat Of Substitutes

Porter’s Five ForcesModel of Competition

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Organizational Factors

AffectingPay Strategy Mission

Competitive Strategy Leadership Culture Organizational Demographics Labor Market Degree of globalization

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Task Environment

Labor Market Product Market Competition Stakeholder Demands Degree of globalization

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Components Of

Compensation Base Pay Merit Pay Variable Pay

Incentive Pay Pay At Risk Bonuses Gain sharing Profit sharing

Benefits

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Strategic HR Choices Options available in designing its

human resources systems Strategic to the extent they affect

firm performance favorably or unfavorably in the long run

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Strategic Approaches Market Life Cycle Competitive Strategy Miles and Snow

Topology

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Market Life-CycleCorporate Strategies

Start-up Growth Maturity Decline Turnaround

Model #1

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Start-Up Harnessing resources

Money People Facilities and Supplies Customers

Overcoming barriers to entry Building customer loyalty

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Growth Firms Aggressive growth Demand outstrips supply Evolution

Acquisitions, Mergers, Joint ventures

Willing to purchase and divest businesses

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Mature Stay with industry Market penetration Shake-out High product similarity Fight for survival

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Decline Cost Reduction Preserve/recoup Market share Internal efficiencies Divestment Niche Harvesting

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Turnaround Evaluation Cutting and pruning Building Nurturing

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Business Strategies

Overall cost leadership Innovation Quality enhancement

Combined strategy

Model #2

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Overall Price Leadership

Competitive advantage through lower costs. Financial/accounting driven. Sustained capital investment Low cost distribution system Tight cost control, detailed reports Structured organizations Products designed for ease of manufacturing

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Innovation Focus on the product or service uniqueness. Strong market ability Product engineering Basic research Corporate reputation for quality or technology Amenities to attract skilled labor, scientists, &

creative people

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Quality Focus on providing quality service that

specifically meets the needs of the customer

Philosophy of Quality Continuous Improvement Quality measurement through Statistical

Process Control Goal setting and monitoring Doing it right the first time

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CombinationAttempts to minimize costs by focusing on a specialized market slot with specialized pricing. Alternatively, focuses on cost reduction through quality workmanship

Illinois Tool Works -- Fasteners Gymboree -- creative activities for little kids

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Balancing Three Types

Of Equity

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Miles and Snow Topology

Defenders Prospectors Analyzers Reactors

Model #3

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Defenders Narrow Line of products Defend Market Position Against Anyone

Cigarette companies Coca Cola Intel

Model #3

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Prospectors New Market Opportunities Aggressive search out

new products Innovation and new

product development Examples

Amazon.com 3M Company

Model #3

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Analyzers One product in a stable market and one

product in a changing market

Examples Schering-Plough Corporation Stable drug Garamycin Mainly me-too copy drugs Interferon in new market

Model #3

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Reactors Major changes in environment Slow to Reactor

Examples Bethlehem Steel The Boeing Company

Model #3