9 when would a compensation system contribute to

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9 When would a compensation system contribute to organisational success? 1 when the compensation strategy supports the business strategy 2 when the organisation implemented and evaluated the compensation strategy 3 when the organisation used benchmarking to determine the compensation strategy 4 when a strategic approach is followed in the development of a compensation strategy 5 when the organisation assessed the total compensation implications of the compensation strategy Because there is a mistake in this question, all students were given credit for it. 10 When compensation systems are tailored to reflect top performers’ individual contributions, this may affect the following pay policy adversely: 1 internal alignment 2 external competitiveness 3 management of the pay system 4 emphasis on employee contributions 5 managing pay as part of the business The correct answer is 3. See “Four policy choices” and “Management” in the prescribed book and the information in the paragraph. “Managing compensation systems that are tailor made may be more difficult and time consuming.” Thus management of the pay system may be adversely affected if the system is tailored to reflect the individual contributions of top performers. However, the focus of management of the system is changing and moving towards an approach of managing pay as part of the business, not only as a cost that must be contained. The traditional focus on how to administer various techniques has fallen away, to be replaced by more strategic thinking – managing pay as part of the business. It goes beyond simply managing pay as an expense and moves towards a better understanding of the impact of pay decisions on employee behaviour and organisational success. The impact of pay decisions on expenses is one result that is easily measured and well understood, but other measures such as the impact of pay on attracting and retaining the right people and engaging those people productively are not yet widely used in the management of compensation. Hence, option 3 is correct and
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7 MNH306K/201 options 1, 2, 4 and 5 incorrect. 11 In the current economic climate, unions are negotiating for, and organisations are offering, higher salary increases than in the previous two years. This can be ascribed to the steep rise in cost of living. In terms of competitive advantage this is an example of the following: 1 aligning the compensation strategy with the overall HR system 2 differentiating the compensation strategy from those of competitors 3 a good return on the investment made in salaries and incentives 4 aligning the compensation strategy with the organisation’s business strategy 5 aligning the compensation strategy with economic and socio-economic conditions The correct answer is 5. See “Source of competitive advantage: three tests” and “Align” in the prescribed book.
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