MNGLecture-Chap002 - CHAPTER 2 STRATEGY THE TOTALITY OF...

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Shelly Cashman Series Microsoft Office 365 & Excel 2019 Comprehensive
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Chapter 10 / Exercise 031
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CHAPTER 2: STRATEGY: THE TOTALITY OF DECISIONS Chapter 2 examines the key aspects of decisions taken during the creation of compensation strategy. The key premise is that the way employees are compensated can be a source of sustainable competitive advantage. The three tests to identify if a pay strategy provides competitive advantage are discussed. The steps involved in developing a total compensation strategy are described: (1) assessing conditions; (2) deciding on the best strategic choices using the pay model (objectives, alignment, competitiveness, contributions, and management); (3) implementing the strategy through the design of the pay system; and (4) reassessing the fit. Two alternative approaches to developing a compensation strategy are highlighted: (1) “best-fit” and (2) “best-practices” approach. The best-fit approach presumes that one size does not fit all. Managing compensation strategically means fitting the compensation system to the business and environmental conditions. In contrast, the best-practices approach assumes a universal best way exists. The focus is not on what the best compensation strategy is but on how to best implement the system and ultimately fit the compensation system to the business and environmental conditions. Lecture Notes : I. Similarities and Differences in Strategies Compensation strategies of three companies (Google, Nucor, and Merrill Lynch) are compared and contrasted in this chapter. All three are innovators in their industry. Their decisions on the five dimensions of compensation strategy (objectives, internal alignment, externally competitive, employee contribution, and management) are both similar and different. All three formulate their pay strategy to support their business strategy. All three emphasize outstanding employee performance and commitment. However, there are major differences (see Exhibit 2.1): Google is a popular internet search engine company. It positions itself as still being, at heart, the feisty start-up populated by nerds and math whizzes. It offers all its employees such generous stock options that many of them have become millionaires. Nucor is a pioneer in recycling steel scrap and other metallics into steel products, including rebar, angles, rounds, channels, flats, sheet, beams, plate and other products. The emphasis is on high productivity, high quality, and low cost products. Nucor provides an opportunity for those who are willing to work hard to make a lot of money by helping the company be productive and profitable. Merrill Lynch , now part of Bank of America, a financial services organization that has had an eventful several years, advises companies and clients worldwide. Merrill Lynch pay objectives are straightforward: to attract, motivate, and retain the best talent. It relies heavily on the human capital of its employees to compete.
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Shelly Cashman Series Microsoft Office 365 & Excel 2019 Comprehensive
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Chapter 10 / Exercise 031
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These three companies operate in different industries and vary in terms of the conditions they face, the customers they serve, and the talent they employ. So the differences in their pay strategies may not be surprising. But, pay strategies can also differ among companies competing

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