Developing a pay structure that is both market competitive and internally consistent can be very important for a company’s success. Having a market competitive pay system can help a company compete with other companies for the market and good talent. Having good employees can make or break an organization so this is important for companies to maintain. Internally consistent pay structures have job analyses clearly defined so that companies can compensate accordingly. This also helps companies avoid losing money over or under paying its employees. To attain this, companies can perform a strategic analysis to become better aware of the standing they have as a company. They can also perform compensation surveys to analyze their competitors compensation information. Compensation surveys are important because they can also be applied to the internal job structure. By accomplishing these things, I think companies can have a compensation system that is both internally consistent and market competitive.
Some challenge to this are that they need to find a way to develop a pay system that is competitive in the market, but also supports their competitive strategy and internal consistency goals. Companies need to be able to match or exceed their competition for the best qualified employees on the job market while also meeting their strategic and financial goals. Along with this comes another potential challenge. Because top leadership plays such a major role in these decisions, it is imperative that a company has good leadership to create strong compensation systems and enforce them.
Sources:
Geier, Jim. “Employee Compensation: A Powerful, Strategic Tool for Your Toolbox.” DVIRC, 28 Oct. 2019, https://www.dvirc.org/insights/employee-compensation-a-powerful-strategic-tool-for-your-toolbox/.
Martocchio, Joseph J. “Chapter 6/7.” Strategic Compensation, Pearson, 2017, pp. 120–167.
