30 Sep 3 Page Paper
Strategic compensation is a component of the human resource system. Organizations must determine the importance of many factors when choosing compensation and benefits. Write a three-to-five page essay (not including the title and reference pages) that summarizes the impact and effect of compensation within an organization. Your paper should be written in a scholarly third-person tone; it should be in APA format. In addition to the introduction and conclusion, your paper should address the following:
- Examine how organizations determine the relative importance of compensable factors.
- Evaluate how compensation strategies tie into underlying corporate values.
- Analyze an example which demonstrates how an organization’s compensation and benefits programs have been utilized to obtain corporate strategic goals.
In addition to the text, cite at least two scholarly references to support your discussion.
Carefully review the Grading Rubric (Links to an external site.)for the criteria that will be used to evaluate your assignment.
Week one Notes:
Compensation & Benefits. Throughout this course, you will gain an in-depth knowledge into compensation theories, policies, systems and practices with emphasis directed towards designing effective compensation programs. Overall, this course will provide knowledge of the art of compensation practice and its role in promoting companies competitive advantage. Additionally, this course will examine the context of compensation, the criteria used to compensate employees, compensation design systems, employee benefits, and the contemporary challenges organizations will face in the future. In Week 1, this course will provide an overview of compensation systems as well as assess compensation strategies and their impact on an organization.
Strategic compensation is a human resource management approach employers use to attract, retain, motivate and grow talented employees as organization’s goals and objectives are maintained. The importance of a strategic compensation approach is to meet the organizations goals but to also obtain a competitive advantage. Since the early “1980s, there has been increased recognition in the business field that human resources contribute to the competitive advantage of an organization” (Martocchio, 2017). A competitive advantage results from having the right employee working in the organization. Therefore, to have the best employees, they need to recruit and maintain said employees via a competitive compensation package.
When HR professionals are deciding on a strategic compensation policy there are a few questions that need to be asked including:
- Is compensation strategy suitable for the overall objectives of the competitive business and HR strategies;
- Is the choice and design of the compensation practice suitable for the compensation strategy; and
- Does the implementation of the compensation practices effectively increase employee job performance?
(Martocchio, 2017).
Additionally, organizations should understand the workforce they’re looking to attract, have a realistic budget in mind and be able to implement the compensation plan in a way for all employees to understand regardless of learning style.
The total compensation package is made up of both extrinsic and intrinsic rewards. An intrinsic reward includes personal achievement, professional growth, sense of pleasure and accomplishment. An example of this will be training and considerations the organization would make to improve the self of an employee. Overall, it is the value employees receive from doing their job. While extrinsic compensation is a tangible reward such raises, or other mandatory or discretionary benefits. Most employees are more familiar with the extrinsic rewards are it may deal with retirement plans, health insurance, and/or bonuses.
Overall, for an organization to retain the right employees, it is important to pay the employee a competitive wage and compensation package. Accordingly, an organization shall have a competitive strategy which includes a competitive compensation and benefits package when it comes to retaining and motivating their employees. However, not all employees will be interested in the same compensation and benefits package. For example, an employee who is more focused on retirement may be more interested in a retirement plan as opposed to an employee who is more interested in their wages to pay off student debt. Therefore, the organization will not have a one stop shop when it comes to compensation packages for all employees. This is also true from organization to organization; as each will have a compensation and benefits package that will not be the same as a similar organization. Overall, an organization will strategically develop a compensation and benefits package that will best suit the needs of the organization and the employees. It’s important to be creative during the process to ensure they’re meeting the intrinsic and extrinsic need of the employee as well as organizational goals. Every organization wants to recruit and maintain the best employees for its business and doing so requires a competitive compensation package as employees will compare packages while considering a potential place of employment.
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