Click here to view HR Intelligence

Executive Summary

Strategic compensation is a fast-emerging phenomenon. It is driven by discontinuous corporate change and, very broadly, represents four strategic elements in a closed loop, or continuous, process. These are:

translating business issues into compensation or HR interventions
designing and delivering them with key objectives
leading the resultant change process
reviewing or evaluating the outcomes.

This Report finds that strategic compensation is a significant contributor to different forms of competitive advantage - better business results, more effective performance, stronger capability, higher staff attraction and retention levels, heightened motivation and employee satisfaction.

However, underestimating its potential or through poor management, strategic compensation can have its downside, having the power to demotivate, be divisive, create staff turmoil or push valued people into seeking better prospects and fulfilment elsewhere.

Each themed chapter examines recent practices in relation to strategic business and competitive issues, and details critical aspects of the compensation change and management process. Proven approaches come from case studies, case reports, research trends and adviser overviews, which are cross-referenced where appropriate.

Guidelines and summaries help re-think perspectives and practices at different stages of each Chapter within the following framework.

Chapter 1 - The Case for Strategic Compensation
This Chapter examines how discontinuous change requires a more effective mobilization of talent and people towards strategic priorities, details the organizational and employee pay-offs, raises paradoxes in relation to reward, and highlights the critical importance of organization-wide involvement in compensation change.

Chapter 2 - Dimensions of Strategic Compensation
This Chapter reviews the internal HR and compensation impacts of external change or pressures in four sections: compensation challenges, shifting the compensation focus, reward and strategic management frameworks, and effecting cultural change. A case study on Whirlpool Europe and eight case reports are provided.

Chapter 3 - Rewarding and Managing Strategic Performance
This Chapter details how strategic performance is interpreted, rewarded and managed through four themes on the dimensions of pay for performance, different interpretations of this method, rethinking work, performance and contribution, and performance management. Case studies on Unilever plc and Lands' End Direct Merchants, along with nine case reports, illustrate effective approaches.

Chapter 4 - Compensation and Strategic Capability
This Chapter argues that strategic compensation can help redefine and reward competitive capability in sections covering competency-related compensation, paying for skills and knowledge, broadbanding and career banding, and goalsharing. Case studies on Bass Brewers and KI Pembroke, plus nine case reports, demonstrate good practice.

Chapter 5 - Employee Ownership and Engagement
This Chapter highlights how financial participation and non-financial participation/engagement connect to total approaches in compensation through key themes like stock ownership, profit-sharing and profit-related pay, gainsharing and engagement models. Case studies on Tullis Russell Group and Ericsson Inc and seven case reports detail principles and practices.

Chapter 6 - Work-Life Benefits, Recognition and Incentives
This Chapter examines non-cash rewards in relation to strategic compensation in sections covering work-life benefits, achieving work-life balance, recognition and incentives, and the growing importance to employees of the work environment itself. Case studies on Millipore Corporation and TRW Occupant Restraints de Chihuahua, plus seven case reports and case notes, highlight trends and innovations.

Chapter 7 - Strategic Compensation in the Future Organization
This Chapter considers different trends or aspects of rethinking strategic compensation pinpointed by organizations, advisers and research through the four themes of the expedient organization, flexible, lean and contingent working, reward in the team-based organization, and rewarding different types of work population. Case studies on Swiss Re New Markets and Pink Elephant detail many elements of the themes, along with eight case reports and other case notes.

Chapter 8 - Delivering Strategic Compensation
This Chapter raises the critical aspects of implementing total rewards or any form of compensation change in relation to reviewing existing practices, the key elements of total rewards, how rewards are delivered and newer expectations for the compensation/benefits professional's role. Advisers and practitioners provide guidelines based on experience.

For each theme and its sub-sections, both generic and specific questions are raised from case reports, which also show the connections to other aspects of strategic compensation. Each Chapter has an Executive Summary and Overview of Practitioner Guidelines.

The central, recurring issue of this Report is that strategic compensation has a clear business case and can have significantly positive impacts on business performance in relation to competitive issues, individual or group performance and behavioural change. Beyond, as case studies and around 50 case reports show, are superior business results.