Ch 2 * Vanessa Flashcards Preview

Midterm Compensation Management > Ch 2 * Vanessa > Flashcards

Flashcards in Ch 2 * Vanessa Deck (18)
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1
Q

Strategic Perspective:

A

a focus on compensation decisions that help the organization gain and sustain competitive advantage.

2
Q

Strategy:

A

the fundamental business decisions an org. has made to achieve its strategic obj

3
Q

Competitive advantage:

A

a business practice/process that results in better perf. Than one’s competitors

4
Q

why must the comp. system support the business strategy ?

A

The greater the alignment/fit between the org. & comp. system the more effective the org.

5
Q

Tailor the compensation system to the strategy:

Strategy: innovation

A

Comp system: reward innovation in products/processes, market based pay, flexible- generic job description

6
Q

Tailor the compensation system to the strategy:

Strategy: cost cutter

A

Comp system: focus on competitors labour cost, increase variable pay, emphasize productivity, focus on system control and work specifications

7
Q

Tailor the compensation system to the strategy: customer focus

A

Comp system: customer satisfaction incentives, value of job/skills based on customer contract.

8
Q

The pay model guides strategic pay decisions, these decisions form a pattern that become an….

A

organizations compensation strategy

9
Q

Developing a total compensation strategy: four steps

A
  1. Assess total compensation implications - business strategy, competitive dynamics, hr strategy, culture/values, social and political context, employee/union needs, and other hr systems
    1. Decide on total compensation strategy: made up of the five decisions outlined in the pay model
    2. Implement the strategy
    3. Reassess the fit- must change to fit changing conditions, close the loop
10
Q
  • Not all compensation decisions are strategic or a source of competitive advantage
  • Three test determine whether a pay strategy is a source of competitive advantage
A
  1. Is it aligned?
    1. Does it differentiate?
    2. Does it add value
11
Q

Best fit

A

approach suggests that aligning compensation decisions with strategy will be effective

12
Q

Best practice:

A

approach suggests that a set of practices exists that work will almost any strategy

13
Q

• Consistent research evidence that the following practices do matter to the org. objectives:

A
  • Internal alignment
    • External competitiveness
    • Employee contribution
    • Managing compensation
    • Compensation strategy
14
Q

T/F Studies have shown that performance based pay and stock options grants may be example of best practices

A

True, however some studies suggest that performance based pay works best when the org. is performing well

15
Q

Performance pay Upward momentum virtuous circle

A

a. Organization performance increasing
b. Ownership culture
c. Risk balance
d. Pay for performance increase (back to a)

16
Q

Performance Pay • Down ward momentum vicious circle

A

a. Org perf. Decreasing
b. Ownership culture
c. Risk return imbalance
d. Pay for performance decrease (back to a)

17
Q

Strategic Issues

A
  • Equity
    • Relevant labour market
    • System design/administration
    • Performance, membership, seniority
    • Compensation mix
18
Q

Process Issues

A
  • Communication- how systems function, pay information

* Employee involvement- system design, system administration