Strategic
Compensation
1
The Challenge
To align the
deployment of
human capital with
company strategy
2
Environmental
Factors Affecting
Pay Strategy
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Sociocultural Forces
Demographic Forces
Technological Forces
Economic Forces
Legal and Political Forces
3
Porter’s Five Forces
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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
4
Porter’s Five
Threat of New Entrants
Forces
Model of
Competition
Supplies
Bargaining
Power
Rivalry
Among Firms
Price competition
Product Innovation
Product Differentiation
Buyers
Bargaining
Power
Threat Of Substitutes
5
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Organizational
Factors
Affecting
Pay Strategy
Mission
Competitive Strategy
Leadership
Culture
Organizational Demographics
Labor Market
Degree of globalization
6
Task
Environment
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Labor Market
Product Market
Competition
Stakeholder Demands
Degree of globalization
7
Components
Of Compensation
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Base Pay
Merit Pay
Variable Pay
 Incentive
Pay
 Pay At Risk
 Bonuses
 Gain sharing
 Profit sharing
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Benefits
8
Strategic HR Choices
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Options available in designing its
human resources systems
Strategic to the extent they affect
firm performance favorably or
unfavorably in the long run
9
Strategic Approaches
Market Life Cycle
Competitive Strategy
Miles and Snow
Topology
10
Model #1
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Market Life-Cycle
Corporate Strategies
Start-up
Growth
Maturity
Decline
Turnaround
11
Start-Up
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Harnessing resources
 Money
 People
 Facilities
and Supplies
 Customers
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Overcoming barriers to entry
Building customer loyalty
12
Growth Firms
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Aggressive growth
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Demand outstrips supply
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Evolution
Acquisitions,
Mergers,
Joint
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ventures
Willing to purchase and divest
businesses
13
Mature
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Stay with industry
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Market penetration
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Shake-out
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High product similarity
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Fight for survival
14
Decline
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Cost Reduction
Preserve/recoup Market
share
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Internal efficiencies
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Divestment
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Niche
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Harvesting
15
Turnaround
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Evaluation
Cutting and pruning
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Building
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Nurturing
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Model #2
Business Strategies
Overall cost leadership
Innovation
Quality enhancement
Combined strategy
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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
Overall
Price Leadership
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Innovation
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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
19
Quality
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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
20
Combination
Attempts 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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21
Balancing
Three
Types
Of Equity
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22
Model #3
Miles and Snow
Topology
Defenders
Prospectors
Analyzers
Reactors
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Model #3
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Defenders
Narrow Line of products
Defend Market Position Against Anyone
 Cigarette
companies
 Coca Cola
 Intel
24
Model #3
Prospectors
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New Market
Opportunities
Aggressive search out
new products
Innovation and new
product development
Examples
 Amazon.com
 3M
Company
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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
26
Model #3
Reactors
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Major changes in environment
Slow to Reactor
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Examples
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 Bethlehem
Steel
 The Boeing Company
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