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Compensation an Element of Strategy Management. The Pay Model. Pay matters It matters what you pay for It matters how you pay. The Pay Model. Economic and social pressures are forcing managers to rethink how people get paid and what difference it makes.

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Compensation an element of strategy management

Compensationan Element of Strategy Management

SESSION 1 - Compensation - An Element of

Strategic Management


The pay model
The Pay Model

  • Pay matters

  • It matters what you pay for

  • It matters how you pay

SESSION 1 - Compensation - An Element of

Strategic Management


The pay model1
The Pay Model

  • Economic and social pressures are forcing managers to rethink how people get paid and what difference it makes.

  • Organizations provide individuals with money and other benefits in return for their availability, capacity and performance.

  • Traditional approaches to compensation are being questioned.

SESSION 1 - Compensation - An Element of

Strategic Management


The pay model2
The Pay Model

  • For organization, the challenge becomes to:

    • Plan

    • Direct

    • Organize

    • Coordinate and control financial resources

    • Attract

    • Retain and motivate the necessary workforce

    • Ensure the response that will allow the organization to meet its objectives.

SESSION 1 - Compensation - An Element of

Strategic Management


Hierachy of needs
Hierachy of Needs

  • Using Maslow’s terminology (1954), for the individual, the importance of compensation is directly related to his or her needs

    • Physiological

    • Safety

    • Belonging

    • Self-esteem

    • Self-actualization

      as well as the relative importance of these needs.

  • In brief, although compensation is not the only benefit an employee gets from the exchange with the organization,it still remains one of the major one.

SESSION 1 - Compensation - An Element of

Strategic Management


MASLOW’S HIERARCHY OF NEEDS

Self-Actualization

Need for development, creativity and achievement

Continuous training & own development

High level of autonomy & maturity

Being consulted and listen to

Meditation

Gives

advices on work directions

Deepen know-how & culture

Able to manage conflicts

Personal development

Decides as a group

Be autonomous

Ego

Need for self-esteem, power, recognition, prestige

Well recognized & appreciated work activities

Develop autonomy

Express specific competencies

Be recognized and appreciated

Varied and innovated tasks

Earn respect of others

Managerial empowerment

Express opinions

Be appreciated and acknowledged

Be different

Taking part in objective settings

Social

SESSION 1 - Compensation - An Element of

Strategic Management

Need for being loved, belonging, inclusion

Feeling dependant

Belonging to the community

Obtain a social status

as a whole, as well as to sub-group

Be integrated in a group

within the community

Knowledge of information

Being able to express ideas

sharing

Security

Need for a safe environment

Living in a non-threatening area

Need for safety

Job stability

Sense of living in

Being informed

a fair and just society

Be supported

Built a secure living environment

whenever necessary

Taking car of its health

Physiological

Physical survival needs

Water, food

Decent compensation

Sleep, warmth

Working in acceptable

Exercise

environmental conditions

Shelter

PRIVATE LIFE

PROFESSIONAL LIFE


Society
Society

  • Most employers believe that how people are paid

    • affects people’s behaviors at work

    • which affect an organization’s chances of success.

      Compensation systems can help an organization achieve and sustain competitive advantage.

  • Sometimes differences in compensation among countries are listed as a cause of loss of jobs from more developed, higher-wage economies to less developed ones.

    Therefore, understanding productivity differences among international locations is crucial.

SESSION 1 - Compensation - An Element of

Strategic Management


Society cont d
Society (cont’d)

  • Some consumers may view increases in compensation as the cause of price increases. They may not believe that higher labor costs are to their benefit.

  • Economic realities are relevant to compensation management.

    • an organization’s capacity to pay

    • its industrial sector

    • as well as geographic location

  • are all key factors that must be considered.

  • SESSION 1 - Compensation - An Element of

    Strategic Management


    Society cont d1
    Society (cont’d)

    • An organization’s economic reality is not static

      • Today’s decisions about compensation will have an impact on the organization’s financial health for many years and, generally, this impact is difficult to reverse.

  • Employees have varied needs and view them differently

    • The challenge for the organization therefore is to adopt compensation policies and programs that maximize employee motivation.

  • Compensation is also status, both within the organization and in society.

  • SESSION 1 - Compensation - An Element of

    Strategic Management


    Society cont d2
    Society (cont’d)

    • Supervisors consider it important to be paid more than their subordinates, and on a different basis.

    • The same applies to the various perquisites an organization provides to certain employees.

      • Often, what counts with such benefits is not their monetary value but rather the prestige and status they confer.

  • Organization and individuals pursue different objectives by means of compensation.

  • SESSION 1 - Compensation - An Element of

    Strategic Management


    Society cont d3
    Society (cont’d)

    • For the organization

      • the exchange is designed to recruit and retain the necessary labor, and to elicit employees behavior that will enable it to fulfill its mission.

  • For individuals

    • the objective may come down to satisfying needs. These may differ considerably from one individual to another and may also change with time.

  • Compensation is a contribution for the organization, a reward for the individual.

  • SESSION 1 - Compensation - An Element of

    Strategic Management


    Stockholders
    Stockholders

    • To stockholders, executive pay is of special interest.

    • Linking executive pay to company performance is supposed to increase stockholders’ wealth.

    • Unfortunately, this does not always happen.

    SESSION 1 - Compensation - An Element of

    Strategic Management


    Management
    Management

    • For managers, compensation influences their success in two ways:

      • It is a major expense.

      • Competitive pressures, both internationally and domestically, force managers to consider the affordability of their compensation decisions.

      • Labor costs can account for more than 50 percent of total costs.

      • Unlike other production factors, the organization cannot calculate the cost-effectiveness of this investment with the same degree of accuracy.

    SESSION 1 - Compensation - An Element of

    Strategic Management


    Labor costs
    Labor Costs

    SESSION 1 - Compensation - An Element of

    Strategic Management


    Management1
    Management

    • For managers, compensation influences their success in two ways:

      2. In addition to treating pay as an expense, a manager also uses it to influence employee behaviors and improve organization performance.

      The way people are paid affects

      • the quality of their work;

      • their attitude toward customers;

      • their willingness to be flexible, learn new skills, or suggest innovations.

  • People may become interested in unions or legal action against their employer based on how they get paid.

  • SESSION 1 - Compensation - An Element of

    Strategic Management


    The importance of compensation
    The Importance of Compensation

    • Impacts an employer’s ability to attract and retain employees.

    • Ensure optimal levels of employee performance in meeting the organization’s strategic objectives.

    • Compensation’s components

      • Direct compensation in the form of wages or salary

        • Base pay (hourly, weekly, and monthly)

        • Incentives (sales bonuses and or commissions)

      • Indirect compensation in the form of benefits

        • Legally required benefits (e.g., Social Security)

        • Optional (e.g., group health benefits)

    SESSION 1 - Compensation - An Element of

    Strategic Management


    The elements of compensation
    The Elements of Compensation

    SESSION 1 - Compensation - An Element of

    Strategic Management


    The elements of compensation1
    The Elements of Compensation

    • Organizations regularly adjust pay. This is done by taking into account many factors, such as :

      • changes in the economy

      • the amount of the changes made by other organizations in the community or similar labor market

      • the organization’s ability to pay

      • as well as any increase in an employee’s performance or year of service

    SESSION 1 - Compensation - An Element of

    Strategic Management


    The elements of compensation2
    The Elements of Compensation

    • Sometimes a hardship premium is added to the base pay i.e.

      • overtime premium

      • premiums working with hazardous goods

      • shift premium

      • premiums working under difficult situation

      • distance premium

      • call-back premium

      • weekend/holiday work premium

      • standby premium

    SESSION 1 - Compensation - An Element of

    Strategic Management


    Cash compensation base
    Cash Compensation – Base

    • Base wage is the cash compensation that an employer pays for the work performed.

    • Base wage tends to reflect the value of the work or skills and generally ignores differences attributable to individual employees.

    SESSION 1 - Compensation - An Element of

    Strategic Management


    Cash compensation merit pay col adjustments
    Cash Compensation – Merit Pay/COL adjustments

    • Merit pay increases are given as increments to the base pay in recognition of past work behavior.

      • Some assessment of past performance is made, with or without a formal performance evaluation program, and the size of the increase is varied with performance.

      • Thus, outstanding performers could receive an 8 to 10 percent merit increase 8 months after their last increase,

      • whereas an average performer may receive, say, a 3 to 4 percent increase after 12 or 15 months.

  • In contrast to merit pay, cost-of-living adjustments give the same percent increase across the board to everyone, regardless of performance.

  • SESSION 1 - Compensation - An Element of

    Strategic Management


    Cash compensation incentives
    Cash Compensation – Incentives

    • Incentives tie pay increases directly to performance

    • However, incentives differ from merit adjustments.

      • First, incentives do not increase the base wage, and so must be re-earned each pay period.

      • Second, the potential size of the incentive payment will generally be known beforehand.

  • Whereas merit pay programs evaluate

    • past performance of an individual

    • and then decide on the size of the increase

      the performance objective for incentive payments is called out very specifically ahead of time.

  • SESSION 1 - Compensation - An Element of

    Strategic Management


    Cash compensation incentives1
    Cash Compensation – Incentives

    • Incentives can be tied to :

      • the performance of an individual employee

      • a team of employees

      • a total business unit

      • or some combination of individual, team, and unit

  • The performance objective may be :

    • expense reduction

    • volume increases

    • customer satisfaction

    • revenue growth

    • return on investments

    • or increases in total shareholder value

  • the possibilities are endless.

  • SESSION 1 - Compensation - An Element of

    Strategic Management


    Long term incentives
    Long-Term Incentives

    • Long-term incentives are intended to focus employee efforts on multiyear results.

    • Typically they are in the form of stock ownership or options to buy stock at specified, advantageous prices.

    • Stock options straddle the categories of cash compensation and benefits.

      • Some argue that they are not compensation at all, that they are more accurately described as an ownership share granted by owners to employees.

  • The idea behind stock options is that employees with a financial stake in the organization will focus on long-term financial objectives:

    • return on investment, market share, return on net assets, and the like.

  • SESSION 1 - Compensation - An Element of

    Strategic Management


    Benefits income protection
    Benefits – Income Protection

    • Benefits, including

      • income protection

      • work/life balance services

      • and allowances

        are also part of total compensation

  • Some income protection programs are legally required. Different countries have different lists of mandatory benefits

    • medical insurance

    • retirement programs

    • life insurance

    • and savings plans

      are common benefits. They help protect employees from

      the financial risks inherent in daily life.

  • Because the cost of providing benefits has been rising, they are an increasingly important form of pay.

  • SESSION 1 - Compensation - An Element of

    Strategic Management


    Benefits work life focus
    Benefits – Work/Life Focus

    • Programs that help employees better integrate their work and life responsibilities

      • include time away from work (vacations, jury duty)

      • access to services to meet specific needs

        • i.e.drug counseling

        • financial planning

        • referrals for child and elder care

      • Working hours

      • and flexible work arrangements.

    SESSION 1 - Compensation - An Element of

    Strategic Management


    Benefits allowances
    Benefits – Allowances

    • Allowances often grow out of whatever is in short supply.

      • Housing and transportation allowances are frequently part of the pay package.

  • Companies that resist these allowances must come up with other ways to attract and retain talented employees.

    • In many European countries, managers assume that a car will be provided

  • SESSION 1 - Compensation - An Element of

    Strategic Management


    Perquisites
    Perquisites

    • There are various forms of perquisites (perks).

    • They tend to be tax effective even though they are becoming less and less attractive due to some tax harmonization (especially in Europe).

    • Some organizations provide

      • cars for certain employees (very popular in the UK), parking

      • Meals

      • tuition fees

      • financial advice

      • employee’s assistance programs

      • tax effective representation allowances.

    SESSION 1 - Compensation - An Element of

    Strategic Management


    Total earnings opportunities
    Total Earnings Opportunities

    • Compensation decisions have a temporal effect.

      • Say you have a job offer of $50,000.

      • If you stay with the firm five years and receive an annual increase of 4%, in five years you will be earning $60,833 a year.

      • The expected cost commitment of the decision to hire you turns out to be $331,649 in cash.

  • If you add in an additional 25% for benefits, the decision to hire you implies a commitment of over $400,000 from your employer.

  • SESSION 1 - Compensation - An Element of

    Strategic Management


    Total earnings opportunities1
    Total Earnings Opportunities

    • A present-value perspective shifts the comparison of today’s initial offers to consideration of future bonuses, merit increases, and promotions.

    • Sometimes a company will tell employees that its relatively low starting offers will be overcome by larger future pay increases and bonus payouts.

    • In effect, the company is selling the present value of the future stream of earnings.

    SESSION 1 - Compensation - An Element of

    Strategic Management


    Non financial returns
    Non-financial Returns

    • There is no doubt that non-financial returns from work have a substantial effect on employees’ behavior

      • Relational returns from work as

        • recognition and status

        • employment security

        • challenging work

        • and opportunities to learn

          are other factors affecting people’s decisions about work.

    SESSION 1 - Compensation - An Element of

    Strategic Management


    Non financial returns1
    Non-financial Returns

    • Other relational forms might include

      • personal satisfaction from successfully facing new challenges

      • teaming with great co-workers

      • receiving new uniforms, and the like.

        Such factors are part of the total return, which is a broader umbrella than total compensation.

  • Compensation is only one of many.

  • SESSION 1 - Compensation - An Element of

    Strategic Management


    Employment relationships
    Employment Relationships

    • Organizations that pay low cash compensation and offer low relational returns are in the “workers as commodity” category.

      These organizations view labor as input into the production process. In the United States, employers of migrant workers may offer this type of deal.

    • Organizations that offer both high compensation and high relational returns may be characterized as cult-like. Microsoft, Medtronic, and Toyota are examples.

      The strong commitment to the organization shows in the words and actions of employees: “being at the center of technology”, having an impact on the work, working with smart people, the sheer volume of opportunities, shipping winning products, beating competition.

    SESSION 1 - Compensation - An Element of

    Strategic Management


    Employment relationships1
    Employment Relationships

    • Some organizations offer a “family” relationship: high relational and low transactional returns.

      Starbucks is an example; one writer calls it the “touchy-feely coffee company”.

    • Finally, there are the “hired guns”—all-transactional, “show-me-the-cash” relationships.

      Brokerage houses, real estate firms, and auto dealerships fit this category.

    SESSION 1 - Compensation - An Element of

    Strategic Management


    Employment relationships2
    Employment Relationships

    SESSION 1 - Compensation - An Element of

    Strategic Management


    Compensation management model
    Compensation Management Model

    • Compensation techniques and practices are not developed in the abstract. They are founded on a set of objectives and policies based on

      • the nature of the individual,

      • the organization or the environment in which individual and organization evolve.

  • Objectives are what the organization is trying to achieve through various compensation systems

  • Policies are the foundation for managing such a system

  • Techniques and practices represent the means available to the HR specialist for achieving the desired results in accordance with developed policy.

  • SESSION 1 - Compensation - An Element of

    Strategic Management


    Compensation management model1
    Compensation Management Model

    SESSION 1 - Compensation - An Element of

    Strategic Management


    Objectives
    Objectives

    • Setting compensation objectives is important for two reasons:

      • the objectives are guides for developing necessary policies and practices

        • wishing to motivate the workforce to improve productivity should consider using merit increase and various performance bonus systems.

        • wishing to emphasize workforce stability, more weight on the fix portion of cash compensation, offering relatively high salaries in comparison to its reference market.

          2. objectives are ideal criteria for assessing the effectiveness of practice.

    SESSION 1 - Compensation - An Element of

    Strategic Management


    Objectives1
    Objectives

    • The relative importance assigned to each objective may vary from one employer to the next and from one job category to the next.

      • In diversified organizations, objectives may even vary from one unit to the next.

    • Because of the multiplicity of these objectives, not all can be achieved; compensation management always involve a compromise. These compromises represent strategic choices.

    SESSION 1 - Compensation - An Element of

    Strategic Management


    Policies
    Policies

    Four Policies

    • Every employer must address the policy decisions :

      • (1) internal alignment

      • (2) external competitiveness

      • (3) employee contributions, and

      • (4) management of the pay system.

        These policies are the foundation on which pay systems are built. They also serve as guidelines for managing pay in ways that accomplish the system’s objectives.

    SESSION 1 - Compensation - An Element of

    Strategic Management


    Policies internal alignment
    Policies - Internal Alignment

    Internal Alignment

    • Internal alignment refers to comparisons

      among jobs or skill levels inside a single organization

    • Jobs and people’s skills are compared in terms of

      their relative contributions to the organization’s business objectives

    SESSION 1 - Compensation - An Element of

    Strategic Management


    Policies external competitiveness
    Policies - External Competitiveness

    External Competitiveness

    • External competitiveness refers to compensation relationships external to the organization:

      • comparison with competitors.

  • Increasingly, organizations claim their pay systems are market-driven, that is, based almost exclusively on what competitors pay

  • SESSION 1 - Compensation - An Element of

    Strategic Management


    Policies external competitiveness1
    Policies - External Competitiveness

    Employee Contributions

    • How much emphasis should there be on paying for performance?

    • Should one programmer be paid differently from another if one has better performance and/or greater seniority?

    • Or should there be a flat rate for programmers?

    • Should the company share any profits with employees?

    • With all employees?

    SESSION 1 - Compensation - An Element of

    Strategic Management


    Policies management
    Policies - Management

    Management

    • Ensuring that the right people get the right pay for achieving objectives in the right way. The system will not achieve its objectives unless it is properly managed.

      • Are we able to attract skilled workers?

      • Can we keep them? Do our employees believe our pay system is fair?

      • Do they understand what is expected of them?

      • Do they understand how their pay is determined?

      • How do the better-performing firms, with better financial returns and a larger share of the market, pay their employees?

      • Are the systems used by these firms different from those used by less successful firms?

      • How do our labor costs compare to those of our competitors?

    SESSION 1 - Compensation - An Element of

    Strategic Management


    Techniques internal consistency
    Techniques - Internal Consistency

    Internal Consistency

    • An organization trying to ensure internal consistency in compensation must :

      • first analyze and describe its jobs, then either :

        • evaluate the jobs

        • do a competency & skill job assessment

        • a maturity curve approach (applicable for certain group of professionals)

    SESSION 1 - Compensation - An Element of

    Strategic Management


    Techniques competitiveness
    Techniques - Competitiveness

    Competitiveness

    • An organization interested in making its pay competitive must first define its labor market Domestic and international for senior management).

    • Having selected the market or markets, the next step is to collect information about the various elements of compensation.

      • Base salary?

      • Total Cash?

      • Working time?

      • Time off?

      • Benefits?

      • Other perks and allowances?

  • Once the survey or surveys have been done, the organization must determine the level of compensation in relation to the market.

  • SESSION 1 - Compensation - An Element of

    Strategic Management


    Techniques employee contribution
    Techniques - Employee Contribution

    Employee Contribution

    • An organization that wishes to recognize the contribution of its employees may use techniques and practices that vary according to what contribution it wishes to emphasize

      • individual performance

      • group performance

      • years of services

      • training

  • The organization must develop an employee performance appraisal system and determine criteria for measuring individual performance

  • SESSION 1 - Compensation - An Element of

    Strategic Management


    Compensation management model2
    Compensation Management Model

    SESSION 1 - Compensation - An Element of

    Strategic Management


    Example the strategic compensation decisions facing starbucks
    Example: The Strategic Compensation Decisions Facing Starbucks

    • Objectives: How should compensation support business strategy and be adaptive to the cultural and regulatory environment?

      Starbucks objectives:

      • Grow by making employees feel valued.

      • Recognize that every dollar earned passes through employees’ hands.

      • Use pay, benefits, and opportunities for personal development to help gain employee loyalty and become difficult to imitate.

    SESSION 1 - Compensation - An Element of

    Strategic Management


    Example the strategic compensation decisions facing starbucks continued
    Example: The Strategic Compensation Decisions Facing Starbucks (continued)

    • Alignment: How differently should the various types and levels of skills be paid within the organization?

      Starbucks:

      • De-emphasize differences.

      • Use egalitarian pay structures, cross-train employees to handle many jobs, and call employees partners.

    SESSION 1 - Compensation - An Element of

    Strategic Management


    Example the strategic compensation decisions facing starbucks continued1
    Example: The Strategic Compensation Decisions Facing Starbucks (continued)

    • Competitiveness: How should total compensation be positioned against our competitors? What forms of compensation should we use?

      Starbucks:

      • Pay just slightly above other fast-food employers.

      • Provide health insurance and stock options for all employees (including part-timers).

      • Give everyone a free pound of coffee every week.

    SESSION 1 - Compensation - An Element of

    Strategic Management


    Example the strategic compensation decisions facing starbucks continued2
    Example: The Strategic Compensation Decisions Facing Starbucks (continued)

    • Contributions: Should pay increases be based on individual and/or team performance, on experience and/or continuous learning, on improved skills, on changes in cost of living, on personal needs, and/or on each business unit’s performance?

      Starbucks:

      • Emphasize team performance and shareholder returns.

      • For new managers in Beijing and Prague, provide training opportunities in the U.S.

    SESSION 1 - Compensation - An Element of

    Strategic Management


    Example the strategic compensation decisions facing starbucks continued3
    Example: The Strategic Compensation Decisions Facing Starbucks (continued)

    • Administration: How open and transparent should pay decisions be to all employees? Who should be involved in designing and managing the system?

      Starbucks:

      • As members of the Starbuck’s “family,” our employees realize what is best for them.

      • Partners can and do get involved.

    SESSION 1 - Compensation - An Element of

    Strategic Management


    Outcome
    Outcome Starbucks

    • Too often, case studies, benchmarking studies of best practices, or consultant surveys are presented as studies that reveal cause and effect

      They are not

      Just because the best-performing companies are using a practice does not mean the practice is causing the performance.

      IBM provides an example of the difficulty of deciding whether a change is a cause or an effect. For a long time IBM pursued a no-layoff policy. Clearly, that policy did not cause the value of IBM stock to increase or improve IBM’s profitability. Arguably, it was IBM’s profitability that enabled its full-employment policy.

    SESSION 1 - Compensation - An Element of

    Strategic Management


    Outcome1
    Outcome Starbucks

    • Compensation research often attempts to answer questions of causality.

      • Does the use of performance-based pay lead to greater customer satisfaction, improved quality, and better company performance?

        Causality is one of the most difficult questions to answer and continues to be an important and sometimes perplexing problem for researchers.

    • Compensation techniques and practices sometimes prove to be so fascinating and complex that we lose sight of their objective.

      This is one of the greatest risks facing the compensation professional. The technique becomes an end in itself.

    SESSION 1 - Compensation - An Element of

    Strategic Management


    Outcome2
    Outcome Starbucks

    • In contrast to the past

      • today’s compensation specialist should not only master the content of various techniques in the field,

        • but should also be a management expert

        • have an in-depth knowledge of the nature of the organization and the environment in which it operates

    SESSION 1 - Compensation - An Element of

    Strategic Management


    Best fit vs best practices
    Best Fit vs Best Practices Starbucks

    • A strategic perspective on compensation takes the position that how employees are compensated can be a source of sustainable competitive advantage.

    • Two alternative approaches are highlighted:

      • A “best fit” / contingent business strategy / environmental context approach; and

      • A “best practices” approach.

    • The “best fit” approach presumes that one size does not fit all. The art of managing compensation strategically involves fitting the compensation system to the different business and environmental conditions.

    SESSION 1 - Compensation - An Element of

    Strategic Management


    Best fit vs best practices continued
    Best Fit vs Best Practices Starbucks (continued)

    • The best practices approach assumes that there exists a universal, best way.

      • The focus is not on the question of what the best strategy is, but how best to implement the system.

      • Agreement on what are the best practices does not exist.

    • The four-step process for forming and implementing a compensation strategy includes:

      • Assessing conditions

      • Deciding on the best strategic choices following the pay model

      • Implementing the strategy through design of the pay system

      • Reassessing the fit

    SESSION 1 - Compensation - An Element of

    Strategic Management


    Best fit vs best practices continued1
    Best Fit vs Best Practices Starbucks (continued)

    • Recent studies have begun to research what aspect of the compensation system really does matter, but the answer is still fuzzy.

    • An essential point is that the deal (the employment relationship) includes both transactional and relational forms of compensation.

    • It is the total deal, the relationship with people, that makes an organization successful.

    SESSION 1 - Compensation - An Element of

    Strategic Management


    Current compensation trends

    Current Compensation Trends Starbucks

    SESSION 1 - Compensation - An Element of

    Strategic Management


    Profile of the individual
    Profile of the Individual Starbucks

    • Cash reward level and perception varies based on the following criteria :

      • The age and experience of the incumbent

      • The level of education

      • The geographical location

      • The market sector

    SESSION 1 - Compensation - An Element of

    Strategic Management


    Profile of the individual1
    Profile of the Individual Starbucks

    • Age and Experience factors

      • Starting career with basic education

        • High supply market

        • Low bargaining level

        • Straight salary approach (except sales jobs)

        • Salary levels usually established by collective agreements

      • Starting career with professional education

        • Same as above, however with a better bargaining level

        • Salary levels are less confined

    SESSION 1 - Compensation - An Element of

    Strategic Management


    Profile of the individual2
    Profile of the Individual Starbucks

    • Age and Experience factors

      • Mid career with basic education

        • Competitive market

        • Still low bargaining level unless acquired new specialized skills

        • Straight salary approach (except sales jobs)

        • Salary levels usually established by collective agreements

      • Mid career with professional education

        • High demand for high performers

        • Top reward environment

        • Salaries highly negotiable

        • Cash incentive highly utilized

        • Deferred incentive considered

    SESSION 1 - Compensation - An Element of

    Strategic Management


    Profile of the individual3
    Profile of the Individual Starbucks

    • Age and Experience factors

      • End career with basic education

        • Highly competitive market

        • Little bargaining level unless acquired highly specialized skills

        • Some Cash incentive opportunities

      • End career with professional education

        • High demand for top performers

        • High visibility

        • Lower bargaining power

        • Salaries less negotiable

        • Cash incentive highly utilized

        • Deferred incentive highly considered

    SESSION 1 - Compensation - An Element of

    Strategic Management


    Geographical location
    Geographical Location Starbucks

    • Salary levels and job opportunities for qualified employees

    SESSION 1 - Compensation - An Element of

    Strategic Management


    Market sector
    Market Sector Starbucks

    • Salary aggressiveness

    SESSION 1 - Compensation - An Element of

    Strategic Management


    How to motivate employees
    How to motivate employees Starbucks

    • To remunerate managers in a competitive way based on their responsibilities as well as their individual performance

      • Establish a coherent salary structure (external equity)

      • Create an internal equity within a competitive market environment

      • Establish a link between individual performance and the job requirement

    SESSION 1 - Compensation - An Element of

    Strategic Management


    Reward system
    Reward System Starbucks

    Reward System

    Job Analysis

    Benefits

    Job Description

    Managing Base

    Pay

    Jpb Evaluation

    Working

    conditions

    SESSION 1 - Compensation - An Element of

    Strategic Management

    Variable Pay

    Long-term

    Incentives

    Recognition

    Awards

    Recruitment

    Selection & Hiring

    Training & Dev’mt

    Career planning

    Perf. evaluation

    HR Planning


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