Compensation Management

Name: Compensation Management
Rating: 4.2 (13 reviews)

The term “compensation”, as a substitute word for wages and salaries, is of recent origin.

Created byManagement Study Guide

Last updated 10/2021

English

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What you'll learn

What is Compensation Management
Economic Theories and Compensation Management
Compensation Management and Job Design
Performance-Related Compensation
Negotiation in Compensation
Attrition and Compensation Management
Executive Compensation
Sales Compensation Plans
Strategic Compensation Management
Quantitative Tools and Innovation in Compensation
International Compensation Management

Course content

1 section • 12 lectures • 1h 5m total length

Compensation-Management-Introduction2:09
Explore compensation management fundamentals, including economic theories, job design, performance-related pay, and negotiation, with a case on redesigning a pharma firm's package to boost take-home pay and curb attrition.
What is Compensation Management6:48
Explore how compensation management strategically aligns wages and salaries with internal and external equity, performance, and productivity, while guiding planning, benchmarking, and administration to optimize costs.
Economic Theories and Compensation Management4:56
Examine classical, neoclassical, and Marxian theories shaping compensation management, from subsistence wages to surplus value and marginal productivity. Analyze productivity-linked benefits, valuation, equity, and pricing under market and institutional perspectives.
Compensation Management and Job Design7:19
Explore compensation management and job design in McDonald's, detailing recruitment, assessment centres, job analysis, and job evaluation to boost motivation and productivity.
Performance-Related Compensation6:27
Align compensation with performance metrics to recognize employee contributions, support cost optimization, and reward high performers. Design performance-based pay through objective standards, appraisal, and development to drive continual improvement.
Negotiation in Compensation3:19
Develop a plan for your target compensation, clearly communicate it to the HR manager, and time your demand to maximize agreement during hiring.
Attrition and Compensation Management2:41
Attrition and compensation management show low pay drives exits at entry and middle levels, while senior staff seek challenges; manage expectations during appraisals to sustain satisfaction as hygiene factors.
Executive Compensation2:26
Explore executive compensation structures, including base salary, annual incentives, long-term capital accumulation, and deferred arrangements. Assess how design processes and performance criteria align pay with shareholder interests amid governance pressures.
Sales Compensation Plans6:03
Explore sales compensation plans by designing, testing, and rolling out incentive structures that align base salary, commissions, and bonuses with measurable sales objectives and organizational goals.
Strategic Compensation Management6:57
Strategic compensation management aligns compensation design with organizational strategy across levels. It draws on multiple schools of thought to support performance, structure, and regulatory compliance, attracting and retaining high-quality professionals.
Quantitative Tools and Innovation in Compensation6:48
Explore how quantitative tools and innovation shape compensation, linking fixed and variable pay with incentives, payroll management, and rational wage policy.
International Compensation Management9:48
Explore international compensation management in a global context, covering base salary, indirect monetary compensation, equalization, benefits, expatriate incentives, and issues like going rate and balance sheet approaches.

Requirements

No prior knowledge is required

Description

Compensation should be viewed as the strategic management of wages and salaries. Compensation management strives for internal and external equity. Internal equity requires that pay be related to the relative worth of a job so that similar jobs get similar pay. External equity means paying workers what other firms in the labor market pay comparable workers.

The objective of efficiency are reflected in attempts to link a part of wages to productivity or profit, group or individual performance, acquisition and application of skills and so on. It can be achieved through high employment levels and low inflation. It implies that employees will move to wherever they receive a net gain. Market rates as affected by supply, demand, and general movements in pay levels. Salary relativities between jobs within the organization depending on the values attached to different jobs.

To an employee, pay is a primary reason for working. For some individuals, it may be the only reason. For most of us, it is the means by which we provide for our own and our family’s needs. Compensation is also important to organization. It represents a large proportion of expenditure. Compensation is also significant in the operation of the economy.

There are 3 core decisions, those involving pay level, pay structure, and pay system. Supporting there are 3 other decisions, concerning pay form, pay treatment for special groups, and pay administration. All the decisions are influenced by a number of environmental and organizational variable. Examples of their variables are the economic, social/cultural, and legal environments; as well as the organization’s structure and workforce.

Compensation decisions are also affected by the dynamics of the particular organization. Employee pay must be consistent within the organization structure. Finally, compensation decisions are affected by the worldwide information highway. The social environment is changing dramatically, following the entry of women into the workforce. Valuing diversity while taking compensation decisions is very important.

Victor Vroom formulated Valence Instrumentality Expectancy (VIE) theory. Valence stands for value, Instrumentality is the belief that if we do one thing it will lead to another, and expectancy is the probability that action or effort will lead to an outcome. An incentive or bonus scheme works only if the link between effort and reward is clear, and the value of the reward is worth the effort.

Who this course is for:

Working professionals
Management
Managers and Supervisors
Finance professionals
Human Resource Staff