1. NETA PowerPoint® Slides to accompany
Prepared by Cheryl Dowell,
Algonquin College,
and
Greg Cole,
Saint Mary’s University

2. A Strategic Framework for Compensation
Chapter 2
A Strategic Framework for Compensation
Copyright © 2014 by Nelson Education Ltd.
2-2

3. Chapter Learning Objectives
Explain why the same compensation system that is a success in one firm can be a failure in another.
Describe an organizational system.
Explain how the strategic framework for compensation can be used as a tool designing effective reward and compensation systems.
Describe the three main sets of elements in the strategic compensation framework, and explain how they relate to one another.
Copyright © 2014 by Nelson Education Ltd.

4. Chapter Learning Objectives
Describe the three main managerial strategies that organizations can adopt, and explain the implications for the most effective reward and compensation system.
Describe the five main determinants of managerial strategy, and explain how they can be used to select the most appropriate managerial strategy.
Analyze any organization to determine the most appropriate managerial strategy for that organization to adopt.
Discuss how conditions in North America changed during the 20th century, and explain how this has affected today’s managerial and compensation strategies.
Copyright © 2014 by Nelson Education Ltd.

5. A Tale of Two Firms: L-S Electro-Galvanizing (LSE) and Koch Foods Which compensation system is the most effective?
Copyright © 2014 by Nelson Education Ltd.
2-5

6. Organizations as Systems
Corporate strategy
Organization structure
Technology
Copyright © 2014 by Nelson Education Ltd.

7. Organizations as Systems
Copyright © 2014 by Nelson Education Ltd.

8. Strategic Compensation Framework
Copyright © 2014 by Nelson Education Ltd.

9. Managerial strategies
Classical
Human relations
High involvement
Copyright © 2014 by Nelson Education Ltd.

10. Managerial Strategies and Reward Systems
Classical managerial strategy: Thinking is completely separate from doing.
Human relations: Similar to the previous approach in terms of job design, although management attempts to arrange jobs to allow social interactions among employees.
High involvement: A major effort is made to create jobs that are both interesting and challenging and that provide workers with autonomy.
Copyright © 2014 by Nelson Education Ltd.

11. Organizational Culture: A Guide to Employee Behaviour
Understandings
Core values
Guiding beliefs
Copyright © 2014 by Nelson Education Ltd.

12. Determinants of the Most Appropriate Managerial Strategy
Contextual variables
Environment
Corporate strategy
Technology
Size of the organization
Nature of the workforce
Copyright © 2014 by Nelson Education Ltd.

13. Miles and Snow Typology of Corporate Strategy
Defender
dominating a narrow product or service market segment
Prospector
identifying and exploiting new opportunities quickly
Analyzer
exploiting new opportunities at a relatively early stage while maintaining a base of traditional products or services
Reactor
firms that do not practise any distinct overall strategy
Copyright © 2014 by Nelson Education Ltd.

14. Porter’s Typology of Corporate Strategy
Low cost
depends on providing low-cost products or services to a broad range of customers
Focused low cost
depends on providing low-cost products or services to a narrow range of customers
Differentiator
depends on providing unique products or services to a broad range of customers
Focused differentiator
depends on providing unique products or services to a narrow range of customers
Copyright © 2014 by Nelson Education Ltd.

15. Thompson’s Typology of Technology
Long-linked: divides the total task of producing a product or service into a series of small sequential steps performed by different employees
Mediating: uses standardized transactions to connect parties wishing a mutually beneficial relationship
Intensive: requires that each item or case be dealt with individually, depending on the specific nature of each case
Copyright © 2014 by Nelson Education Ltd.

16. Perrow’s Typology of Technology
Routine technology: Few exceptions occur during the production process, and those exceptions that do occur can be dealt with in a standardized way.
Nonroutine technology: Many exceptions are inherent in the production process, and there is no standardized way to deal with these exceptions.
Craft technology: Few exceptions occur in the production process, and there is no standardized way to deal with them when they do occur.
Engineering technology: Many exceptions occur in the production or service delivery process, but there are standardized ways of dealing with them.
Copyright © 2014 by Nelson Education Ltd.

17. Woodward’s Typology of Technology
Unit/small batch technology: manufacturing technology that produces one-of-a-kind items or small batches of unique items
Mass/large batch technology: manufacturing technology that produces large amounts of single items in a standardized way
Process technology: manufacturing technology that produces a single product in a continuous flow
Copyright © 2014 by Nelson Education Ltd.

18. Managerial Strategies for Organizations
Contextual variable
Classical
Human relations
High involvement
Thompson’s Typology
Long-linked
Mediating
Intensive
Perrow’s Typology
Routine
Routine or engineering
Craft or nonroutine
Woodward’s Typology
Mass
Process
Process or unit
Product Transformed
Things
People
Ideas
Copyright © 2014 by Nelson Education Ltd.

19. Organization Size
Large organizations generally use classical or human relations strategies.
It is easier to implement high involvement in a small- to medium-sized organization because the larger the organization, the greater the need for some formal structure.
Hewlett-Packard, the computer products firm, has traditionally used this approach.
Copyright © 2014 by Nelson Education Ltd.

20. The Nature of the Workforce
Highly skilled, well-educated, or professional employees are more suited to the high-involvement organization.
A high-involvement strategy requires these characteristics because of the broad job and decision-making responsibility expected of employees.
Classical organizations are specifically designed to utilize employees with relatively low skill levels, and because of their approach to motivation and control, these organizations are most suited to workers who badly need the money the job provides.
Copyright © 2014 by Nelson Education Ltd.

21. Trends in Managerial and Compensation Strategies
All three managerial strategies can be effective if used in the right context. But how are circumstances changing in North America, and how will these changes affect the optimal choice of managerial strategy?
Copyright © 2014 by Nelson Education Ltd.

22. The Evolution of Managerial Strategies
Fundamental socioeconomic changes have taken place in Canada, which have created conditions that are more suitable for high-involvement organizations and less suitable for classical and human relations organizations.
Educational levels have increased, economic security and social security have improved, and social values have become more democratic and egalitarian.
Copyright © 2014 by Nelson Education Ltd.

23. The Evolution of Managerial Strategies
All of these conditions work against classical and human relations organizations.
Many classical firms have found developing countries a much better fit for their preferred managerial strategy and have moved operations there.
Human relations organizations tend to be as rigid and inflexible as classical organizations.
Copyright © 2014 by Nelson Education Ltd.

24. Useful Links Canadian HR Reporter: http://www.hrreporter.com
WorldatWork:
Copyright © 2014 by Nelson Education Ltd.

25. Discussion Questions
“If a compensation system works well for one business, that same compensation system should also work well for other businesses.” Discuss whether this statement is true.
Discuss why it is important to understand which managerial strategy a firm is practising before designing a compensation system for that firm.
Discuss recent trends in compensation practices taking place in North America and explain what may be causing those trends.
Copyright © 2014 by Nelson Education Ltd.