Strategic Choices. Explain How Understanding and Implementing of Strategic Compensation Could Lead to Competitive Advantage for the Organization
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Question 5: Refer to Exhibit 2.2 – Strategic Choices. Explain how understanding and implementing of strategic compensation could lead to competitive advantage for the organization.
According of Milkovich et al., (2011) strategy is fundamental direction organization choose. Furthermore according to Milkovich and Renae (1989), strategic serve is to guide exploitation of all resources including compensation expenditures.
Strategic Choice
Competitive advantage describes a companys success based on objective in organization, business unit, product and service, customer, and strategic choice by organization. Competitive advantage is companys ability to maintain market share and profitability over sustained period of several years. Employers began recognize that employees are key resources necessary for a companys success, particularly in changing business environments characterized by rapid technological change and business competition from foreign countries. By this, companies begin design human resource management practices to promote competitive advantage. Such as technology leads to the computerization of more tasks, employers combine jobs and give broader responsibilities on workers. For example, technology of advanced in automated manufacturing, employee perform all task such as operator-assembler, material handler, and maintenance. Most of employees must possess higher level of reading skills than before because they must able to read the operating and troubleshooting manuals when problem arise of automated manufacturing equipment that is based on computer technology.
Moreover, compensation practices contribute to competitive advantage by developing more productivity and highly skilled workforces. Such as well-designed merit pay program reinforce excellent performance by awarding pay raises with performance achievement. Pay of knowledge and skill based pay program are key for giving employees necessary knowledge and skill to use in new workplace technology effectively. To be more understanding, I would explain each of steps in strategic choice, implementing of strategic compensation could lead to competitive advantage for the organization.
For the 1st step, corporate objective is a statement of organization purpose and goals. It also about what business should we be. Corporate objective are set at the high level such as sales revenue and profit that organization need to achieve, organization growth (sales volume, revenue, organization grow in long term or shot term), and corporate image and reputation of organization(product and customer service quality and business ethics). As addition, factor that influencing corporate objective, value, and organization vision are state of the economy, competition, corporate culture, political factor, market condition and social attitudes that influence and involve evolve business strategy based on above factor. Such as Hewlett Packard (HP), their corporate objectives are customer loyalty (they earn customer respect and loyalty by providing the highest quality and value), and they also emphasize on profit, organization growth (opportunities for growth builds strengths and competencies), market leadership (delivering useful and innovative products, services and solution), and commitment to employees (demonstrate their commitment). HPs has an excellent corporate objective and have guided the company in the conduct of its business since 19577, it also helps that organization sustain and achieve competitive advantage. According of HPs corporate objective, will help management and HR to determine and deal with strategy compensation for all employees in company. Based on HP corporate objective it reflects employees contribution, responsibility and ability toward to enhance the corporate objective, by this HR must have effective and efficient compensation strategy to reinforce employees. Moreover to gain competitive advantage, organization must aligning staffing and compensation target with corporate objective.
2nd step, business unit strategies deal with how to complete in a particular industry or in particular product market segment. Moreover, business unit strategies it concerned more with how business compete successfully in a particular market. Business unit also consists of strategic decision making about choice of product, meeting needs of consumers, gaining competitive advantage over competitors, and exploiting or creating new opportunities. Business unit strategic also as action that head of department puts into place to achieve specific goals. Therefore, for plotting the strategy is collective effort it need cooperation among many personnel such as operation manager, sales and marketing workface, financial analysts, and human resource supervisor. To gain competitive advantage, chatting and implementing an operating of business unit strategic it requires analytical skills, ability, knowledge and financial expertise of employees and employer it closely reflect with task performance to become effective of business unit. It also will link with compensation strategy to determine salary and performance of employees and employer. Business unit also relates to overall corporate identify. Therefore, effective strategic management plan on how to define a business unit relies on each of the unit specific tasks. Instead of using business unit, Procter & Gamble (P&G) using global business unit(GBU) such as beauty, Health and Well Being and Household Care. Their primary responsibility of GBUs is to develop the overall strategy for their brands and showed competitive advantage of company. P&G stakeholder try to identify consumer need, develop new product innovation and upgrade and build their own through effective commercial innovation and marketing and sales. According to these activities, HR will determine their performance and capability to identify their salary and reward.
3rd step, HR strategies specify use of multiple HR practices. Compensation and benefits executives work lead HR executives and companys chief budget officer to prepare total compensation strategies. Total compensation strategies describe the use of compensation and benefits practices support both human resources strategies and competitive strategies. The ability to attract, retain, and motivate human resource will be primary ingredient in the development of an organization that will be effective and efficient. Compensation strategic planning must be