solution manual for Compensation 5th Canadian Edition by George Milkovich

solution manual for Compensation 5th Canadian Edition by George Milkovich

CHAPTER 2
STRATEGIC PERSPECTIVES
LEARNING OUTCOMES
After studying Chapter 2 students should be able to:
 Explain why managers should tailor their pay systems to support the
organization’s strategy. Identify the four steps to develop a total compensation
strategy.
 Describe the three tests used to determine whether a pay strategy is a source of
competitive advantage.
 Contrast the “best fit” perspective on compensation with the “best practices”
perspective.
CHAPTER SUMMARY

1. The four steps to develop a total compensation strategy are: (1) assess total
   compensation implications, including business strategy and competitive dynamics,
   HR strategy, culture/values, social and political context, employee/union preferences
   and fit with other HR systems; (2) map out a total compensation strategy;(3)
   implement the strategy; and finally, (4) assess and realign the strategy to ensure
   achievement of the objectives.
2. To improve organizational effectiveness, managers should align the compensation
   strategy to the organization’s strategy.
3. The three tests used to determine whether a pay strategy is a source of competitive
   advantage are (1) Does it align? (2) Does it differentiate? And (3) Does it add value?
4. The “best fit” perspective on compensation suggests that compensation be aligned, or
   fit. With the specific business strategy adopted by the organization. given its
   environment, in order to maximize competitive advantage. The “best practices”
   perspective suggests there is one set of best pay practices that can be applied
   universally across situations and strategies, attracting superior employees who then
   create a winning strategy.

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