1. Strategy: The Totality of Decisions
Chapter 3

2. The flow…. Similarities and differences in strategies
Strategic choices
The pay model guides strategic pay decisions
Developing a total compensation strategy

3. Compensation strategies ….
Google
Popular internet search engine company
Merrill Lynch
Financial services firm that advises companies and clients worldwide
Similarities
Both are innovators in their industry
Both formulate their pay strategy to support their business strategy
Both emphasize outstanding employee performance and commitment

4. differences in strategies
Google
Merrill Lynch
Emphasis on innovation
Commitment to cost containment
Recognize contributions
Attract and reward the best
Focus on customer
Attract, motivate and retain the best talent
Fair, understandable policies and practices
Objectives
Pay fairly with ML
Job sized on 4 factors: knowledge /skill,
complexity, business impact, strategic value
Minimize hierarchy
Everyone wears several hats
Emphasize collaboration
Internal
alignment
Different strategies in different industries

5. Different strategies in different industries
Google
Merrill Lynch
Explore novel ideas in benefits and compensation
Generous unique benefits
Market competitive in base and benefits
Market leader in bonus and stock
Externally competitive
Bonus based on individual, unit and company success
Differentiate on bonuses and stock
In high profit years, top bonuses significantly larger
In less profitable years, top performers’ bonuses decrease much less than poorer performers
Recognize individual contributions
Unrivaled stock programs
Employee
contributions
Understandable, consistent message
Intranet support both individual and managers
Love employees, want them to know it
Technology support
Management
Different strategies in different industries

6. Different strategies within the same industry
Microsoft, SAS, Google
Different strategies within the same company

7. Dell computers
Dell computers wanted to ensure that HR objectives fulfill the objectives of both employees and the organization,
Dell required an HR department that could partner with the company’s business units.
Dell divided HR into 2 areas-operations and mgt
HR operations dealt with the supporting employees in general
HR management team identifies personnel needs, determines lines of reporting and formulates organizational charts….
Accountability and roles of dell employees are clear
Dell creates a culture of ownership and develops “shared vision”.

8. Strategic choices
Corporate objectives, strategic plans, vision and values
What business should
we be in?
Business unit strategies
How do we win (gain competitive
advantage) in those businesses?
HR Strategies
How should HR help us win?
How should total compensation help us win?
Social, competitive and regulatory environment
Strategic compensation decisions
Compensation
systems
Employee attitudes
and behaviors
Competitive advantage

9. Tailor the compensation system to the strategy
HR program
alignment
Compensation
systems
Strategy
Business response
Reward innovation in products and processes
Market – based pay
Flexible-generic job descriptions
Innovator: Increase product complexity and shorten product lifecycle
Product leadership
Shift to mass customization
Cycle time
Committed to agile,
risk taking, innovative
people
Focus on competitor’s labor costs
Increase variable pay
Emphasize productivity
Focus on system control and work specifications
Operational excellence
Pursue cost-effective solutions
Do more
with less
Cost cutter:
Focus on efficiency
Customer focused:
Increase customer
expectations
Deliver solutions to customers
Speed to market
Delight customer,
exceed expectations
Customer satisfaction incentives
Value of job and skills based on customer contact

10. Developing a total compensation strategy
Step 1 Assess total compensation implications
Step 2 Map a total compensation strategy
Step 3 Implement strategy
Step 4 Reassess

11. Steps in formulating compensation strategy
Step 1 Assess total compensation implications
Competitive dynamics
Culture / values
Social and political context
Employee/union needs
Other HR systems

12. Our Values
Act with uncompromising honesty and integrity in everything we do.
Satisfy our customers with innovative technology and superior quality, value and service.
Provide our investors an attractive return through sustainable, global growth.
Respect our social and physical environment around the world.
Value and develop our employees' diverse talents, initiative and leadership.
Earn the admiration of all those associated with 3M worldwide.

13. Steps in formulating compensation strategy
Step 2 Map a total compensation strategy
Objectives
Alignment
Competitiveness
Contributions
Management

14. Contrasting maps of Microsoft and SAS
LOW
HIGH
SAS
OBJECTIVES
Prominence
Microsoft
Flexible design
INTERNAL
ALIGNMENT
Hierarchy
Career growth
How much
COMPETITIVENESS
What forms
Work/life balance
Incentives to base
EMPLOYEE
CONTRIBUTIONS
Individual
Share group
success
Line ownership
Transparency
MANAGEMENT
Technology
Choice
Contrasting maps of Microsoft and SAS

15. Steps in formulating compensation strategy
Step 3 Implement strategy
Design system to translate strategy into action
Choose techniques to fit strategy
Step 4 Reassess
Realign as conditions change
Realign as strategy change