HRM3705 2010 101_2010_3_mnh306ke

You must explain the first step in the development of

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You must explain the first step in the development of a total compensation strategy, concentrating on how these factors are illustrated by the case study. Give a theoretical discussion of the factors that are explained in the model and then give examples from the case study to support the theoretical discussion. You can also use exhibit 2.5 to support the discussion. The first step in the development of a total compensation strategy is to assess the total compensation implications. Think about the organisations past, present and its future and determine what factors in its business environment contributed to the company’s success. The five factors are: competitive dynamics, culture/values, social and political context, employee/union needs and other HR systems. (a) Competitive dynamics It is important to understand the industry in which the business operates and how the organisation plans to compete in that industry. Furthermore, it is important to determine what the company’s strategy is and how the compensation system should support the strategy and how the compensation strategy should be aligned with the business strategy. (b) Culture/values Pay system reflects the values that guide an employer’s behaviour and underlie its treatment of employees. A pay system mirrors the company’s image and reputation. A company’s compensation strategy should reflect the values of the organisation. (c) Social and political context Context refers to a wide range of factors, including legal and regulatory requirements, cultural differences, and workforce demographics. These affect compensation choices. From a strategic perspective, many compensation managers try to shape the social political environment as well as be shaped by it. (d) Employee preferences Employees differ and this is overlooked in formulating a compensation strategy. Individual employees join the organisation, make investment decision, interact with customers, and so forth. Individual employees receive the pay. A major challenge is how to satisfy individual needs and preferences. Offering more choice is one approach. Older, highly paid workers may wish to defer taxes by putting their pay into retirement funds, while younger employees may have high cash needs to buy a house, and so forth. (e) Union preferences Pay strategy must be adapted to the union-management relationship. Union preferences for different forms of pay (eg protecting retirement and health care plans) and their concern with job security affect pay strategy. (f) Other HR systems The pay strategy is also influenced by how it fits with other HR systems in the organisation. If an organisation is decentralised and emphasise flexibility, a centralised and confidential pay system controlled by a few people in a corporate unit will not work. The importance of fit between pay and other HR systems is illustrated in “high performance” systems. High performance systems generally include three features: (1) high skill/knowledge
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