Chapter 1: Strategic
Compensation
MGT 4543 • Compensation Management
You will need technology for today’s class activity.
Be prepared…
• Today, I will call on you for answers. Borrow a
book if you do not have one yet.
• Please do NOT read from your book. We want
to stay awake!
• What if you did not prepare for today’s class?
– My best advice is to follow along, try to keep up,
and THINK of a logical answer if you are called on.
That is MUCH better than saying the dreaded, “I
don’t know” or “I don’t have a book yet.”
What does SHRM stand for???
Society for Human Resource Management
http://www.shrm.org/
Opportunities
to get involved with HR professionals
• MSU student chapter of SHRM
–Sign up to be on the e-mail list if you are interested!
• Golden Triangle Human Resource Association
http://gthra.shrm.org/
• SHRM
–http://www.shrm.org/
Opportunities
to get involved with HR
professionals
Why join the MSU Student Chapter of SHRM?
• Exposure to HR professionals
–Networking opportunities
–Opportunities to learn more about HR
• GTHRA & MSU Partnership
–Dual membership (if you attend GTHRA meetings)
–Mentorship program (pilot kickoff was this fall)
• Job shadowing
Strategic Compensation
• What is compensation?
Strategic Compensation
• Explain each:
– base pay
– compensable factors
– COLAs
Strategic Compensation
• Explain each:
– seniority pay
– merit pay
– incentive pay
Strategic Compensation
• Explain each:
– Pay-for-knowledge
• What type of workers are likely to receive this type of
pay?
– Skill-based pay
• What type of workers are likely to receive this type of
pay?
Strategic Compensation
• Explain each:
– Discretionary benefits
• Give some examples…your book has plenty to choose
from!
– Legally-required benefits
• Give some examples…your book has plenty to choose
from!
Brief History of Compensation
• Industrial revolution
– Division of labor;
– Change from work _________________ to _________________
• Scientific management
– Productivity measures
– Piecework plans
• Welfare practices & Gov regulation
– Improving conditions for Ees (e.g., medical insurance for EEs)
– Personnel management emerges
• Competitive advantage
– Employees viewed as a source of ___________________
• Pay-for-knowledge, pay-for-skill
• Emphasis on recruitment and retention
– Pressure of globalized competition
Strategic Compensation
• How do strategy and tactics differ?
• What is strategic management?
Strategic Management & HRM
Strategic Compensation
• Cost leadership
– What is cost leadership?
– How do Ryanair’s compensation practices help it
achieve its strategy?
• Differentiation
– What is differentiation?
– Discuss why brand loyalty and research &
development frequently go hand-in-hand
with differentiation.
Class Activity
Using your technology, identify a company
pursuing one of the following strategies: lowcost strategy or differentiation.
1)
Get out a piece of paper & write your name on it.
2)
Name and describe each company - What good do they produce
or what service do they offer?
3)
Find the company’s mission and summarize it.
4)
List 2 reasons why you believe that the company is pursuing a lowcost or differentiation strategy.
Include this information
on your sheet of paper
to TURN in.
Class Activity
Strategy: Low cost or differentiation (circle one)
Company name: _________________________
Description:_____________________________
Mission:________________________________
2 reasons why you believe that the company is
pursuing a low-cost strategy
• _____________________________________
• _____________________________________
Strategic Compensation
• What does it mean for compensation systems
to be internally consistent?
• Why is internal consistency in compensation
important?
Strategic Compensation
• Describe the two processes to achieve internal
consistency.
• Market competitiveness in compensation:
How is it achieved? Why does it matter?
Strategic Compensation
• Fill in the blank:
– pay structures – represent pay rate ____________
for jobs of ___________ worth & the framework
for recognizing differences in employee
______________.
• Explain each:
– pay grades
– pay ranges
Pay Structure
$37,000
$32,000
P
a
y
R
a
n
g
e
$27,000
Pay Grade 1
__________
Pay Grade 3
__________
__________
$30,000
Pay Grade 2
$25,000
$20,000
200-400
401-600
601-800
Job evaluation points
Strategic Compensation
• What stakeholders must a compensation
system satisfy?
• Why might satisfying various stakeholders be a
challenge for HR departments?