REWARD STRATEGY: VERTICAL &

HORIZONTAL ALIGNMENT

LECTURE 3

LECTURE OBJECTIVES

REWARD STRATEGY DEFINED

AREAS & LEVELS OF ALIGNMENT

CORPORATE STRATEGIES & PAY ISSUES

BUSINESS STRATEGIES & PAY STRATEGY OPTIONS

REWARDS & OTHER HR PRACTICES

REWARD STRATEGY DEFINED

THE DELIBERATE UTILISATION OF THE PAY SYSTEM AS AN ESSENTIAL INTEGRATING MECHANISM THROUGH WHICH THE EFFORTS OF

VARIOUS SUB-UNITS AND INDIVIDUALS ARE DIRECTED TOWARD THE ACHIEVEMENT OF AN ORGANISATIONS STRATEGIC OBJECTIVES,

SUBJECT TO INTERNAL AND EXTERNAL CONSTRAINTS. WHEN PROPERLY DESIGNED, CONTINGENT UPON THE ORGANISATIONS STRATEGIC

OBJECTIVES AND CONSTRAINTS, IT CAN BE AN IMPORTANT CONTRIBUTOR TO THE FIRMS PERFORMANCE.

GOMEZ-MEJIA AND BALKIN (1992)

AREAS OF ALIGNMENT

Corporate Strategy

Business Strategies

Functional Strategies

Operating Strategies

Two-Way Influence

Two-Way Influence

Two-Way Influence

Corporate-Level Managers

Division Managers

Operating Mgrs

Functional Mgrs

LEVELS OF STRATEGY

CORPORATE LEVEL STRATEGY VERTICAL INTEGRATION

INPUT DOMAIN & OUTPUT DOMAIN CONTROL OF TRANSACTION COSTS

RELATED DIVERSIFICATION LEVERAGING CORE COMPETENCIES SHARING ACTIVITIES POOLED NEGOTIATING POWER

UNRELATED DIVERSIFICATION CORPORATE RESTRUCTURING & PARENTING PORTFOLIO MANAGEMENT

CORPORATE LEVEL STRATEGY RELATED DIVERSIFICATION

HAIRCARE: PANTENE, HEAD & SHOULDERS, CLAIROL

HOUSEHOLD CLEANING/CARE: FLASH, FABREZE,

LAUNDRY: DAZ, ARIEL, FAIRY, BOUNCE

PAPER: BOUNTY, PAMPERS

BEAUTY: OIL OF OLAY, MAX FACTOR

RELATED DIVERSIFICATION THROUGH ACQUISITION AND INTERNAL START-UPS

FITS/SYNERGIES SAME WHOLESALE DISTRIBUTION

COMMON RETAIL SETTINGS & SHOPPERS

ADVERTISED & PROMOTED THE SAME WAY

CORPORATE LEVEL STRATEGY -UNRELATED DIVERSIFICATION

EXAMPLES BUSINESS GROUPS

CONGLOMERATE ADVANTAGE ALIGNMENT OF ORGANIZATIONAL PROCESSES WITH CHOICE

OF BUSINESS

ALIGNMENT OF INITIATIVES WITH EACH OTHER

ALIGNMENT WITH OWNERSHIP STRUCTURE

VERTICAL ALIGNMENT

CORPORATE STRATEGY DIVERSIFIED BUSINESS UNITS --- BUSINESS UNIT

PERFORMANCE

LESS DIVERSIFIED BUSINESSES AND MORE COORDINATION BETWEEN UNITS --- CORPORATE PERFORMANCE

VERTICAL ALIGNMENT (CONTD.)

BUSINESS STRATEGY PORTERS MODEL AND MILES AND SNOWS TYPOLOGY BUSINESS STRATEGY AFFECTS PAY AND VICE VERSA

TYPES OF BUSINESS STRATEGIES CUSTOMER SERVICE QUALITY INNOVATION COST PRODUCTIVITY

BUSINESS LEVEL STRATEGY

ANSOFF MATRIX CHOICE OF MARKETS & PRODUCTS

BUSINESS LEVEL STRATEGYMILES AND SNOW TYPOLOGY - EFFECT OF ENVIRONMENT

BUSINESS STRATEGIES & REWARD STRATEGY OPTIONS

Business Strategy Reward Strategy

Achieve added value by improving employee motivation and commitment

Introduce or improve performance pay plans individual, team, gain-sharing.

Achieve added value by improving performance/productivity

Introduce or improve performance pay, plans and performance management processes.

Achieve competitive advantage value by developing and making the best use of distinctive core competences

Introduce competence-related pay

Achieve competitive advantage by technological development

Introduce competence-related or skill-based pay

Achieve competitive advantage by delivering better value and quality to customers.

Recognise and reward individuals and teams for meeting and exceeding customer service and quality standards/targets.

Achieve competitive advantage by developing the capacity of the business to respond quickly and flexibly to new opportunities

Provide rewards for multi-skilling and job flexibility. Develop more flexible pay structures (broad-banding)

Achieve competitive advantage by attracting, developing and retaining high-quality employees.

Ensure that rates of pay are competitive. Reward people for developing their competencies and careers in a broad-banded pay structure.

HORIZONTAL ALIGNMENT

Other HR practicesWithin pay strategy