Compensation And Benefits Strategies

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The purpose of this paper is to analyse and evaluate the best practices in compensation and benefits adopted by organisations in the high tech industry. High technology companies incur a high cost due to retention and recruitment of human resources and thus design of suitable compensation programs are important to their bottom lines. We studied literature to understand the view of academia on the best compensation and benefit strategies in high technology industry. To understand the application of these strategies we selected three ‘fortune 1000’ firms Microsoft, IBM and Netflix and compared their current compensation strategies with the recommended best practises. It was observed that best practices in high technology firms are primarily based on performance priorities to encourage key contributors. However each firm had a customised approach in developing a compensation strategy keeping in view employee needs, business goals and organisation environment. Firms with aggressive performance goals, followed exclusive incentive based compensation plans, while some firms chose to adopt a more holistic reward system. In conclusion this paper highlights that compensation strategies should be built with a ‘best-fit strategy’ rather than ‘best practice strategy’ in mind. There is no one – size – fits all strategy which should be applied to an organisation.

Introduction

“Compensation refers to all forms of the financial returns and tangible services and benefits employees receive as part of an employment relationship.” (Milkovich, Newman and Gerhart, 2010). As per the 2007 Emerging Workforce Study by Spherion Corp. (HR Trendbook, 2008), both monetary compensation and non-financial benefits comprise the key factors of compensation which lead to retention. Compensation programs are measured in terms of general pay effectiveness, contribution to organizational goals and are used as recruitment tools and finally used as a motivational and retention tool (Balkin and Gomez-Mejia, 1987). Meiyu Fang (2004) states that since the high technology industry has higher investments and higher returns than contemporary traditional manufacturing firms. These high technology companies were selected for the study because human resources costs are a major expenditure in such firms and thus design of compensation programs important to their bottom lines. This essay endeavours to understand the best compensation and benefits strategies that high performing organisations in the high technology industry have undertaken.

Summary and Analysis of literature

Key Elements of a compensation plan Milkovich, Newman and Gerhart (2010) suggest a four step strategy for development of a compensation strategy. HR professionals should begin by assessing total compensation implications on business strategy, competitive dynamics, employee and union needs, organisation culture and values. The next step would involve mapping a total compensation strategy keeping in mind the firms’ external competitiveness, internal alignment and employee contributions. Only then should the final implementation of strategy be done and followed by a continuous re assessment of strategy. The challenge is to find a compensation plan which is the best fit with the business strategy in the given environment. The literature (Milkovich, Newman and Gerhart, 2010, p. 53) goes on to recognise that some organisations however would prefer a ‘best practise’

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