Essay on Comensation

1347 Words Aug 22nd, 2011 6 Pages
The Impact of Compensation Practices

February 20, 2011

“The ultimate goal of a pay system is to align the goals and interests of employees with the goals and interests of the organization” – Robert L. Heneman

The Impact of Compensation Practices

The business arena is ever changing. Where people work, how they work, the relationships in the workplace and compensation for their work continues to change. Hence, “It will be the challenge of compensation professionals to devise ways to reward and motivate employees who work under increasingly flexible arrangements” (Bennett, 1995). Most people interchange and have the perspective that pay and compensation are the same when in reality, compensation is more than just monetary
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Advancement was a function of longevity as much as performance. But for businesses operating in the current market, flexibility and creativity will be more important for success than loyalty and long term commitment and tenure. Organizations are now leaner and with less hierarchical structure which then provides much fewer opportunities for promotion to management. The most valued employees of today are those who possess more flexibility and ability to adapt to rapidly changing environments, performing a wide range of functions. “Breadth of knowledge concerning business operations and customer needs is likely to be more highly valued than depth of knowledge in a narrowly defined specialty” (Boyett and Conn, 1991). Hence, compensation strategies would have to change as well. Success in the workplace of today will depend upon several factors that are different from those that contributed to success in traditional organizations. Primary to this is the compensation practices and strategies of the organization. Traditional compensation methods may hold a company back from appropriately rewarding its best workers. When compensation is tied to a base salary and a position, there is little flexibility in the reward system. Thus, new ways of focusing on reward for skills and performance, with the work force sharing in company profit or loss may be essential. New compensation policies allow employees to take part in company

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