What steps can a company take to align its compensation system with its general business strategy?

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Michael Ugulini eNotes educator| Certified Educator

A company's business objectives are to prosper by way of growth and achieve healthy profit levels. They require motivated and trained employees to help them achieve these goals. Therefore, quality compensation programs for employees will help a company attain the goals set forth by their general business strategy.

A company, to achieve greater sales and profits, can institute an incentive program whereby they provide rewards (monetary and otherwise, for example extra vacation time) in return for employees achieving greater sales. A company can offer never-ending incentives. This is where an employee has no limits on the amount of rewards they can earn. An employer may offer a limit to the rewards an employee can earn, based on the company's budget. Either way, the company is aligning their compensation with their general business strategy.

A company can also decide to increase their basic salary rate or basic hourly wage rate for employees. They can investigate their specific industry, and if their budget allows, decide to pay employees more than the going rates of their competitors. In this way, they are focusing on drawing the best employees from the talent pool of their industry's labor market.

A premier compensation plan lets employees know they are valued. Consequently, most will work hard to achieve the company's goals - this benefits them, and the company, which in turn benefits the employees even more, and the company, and so on. Again, a good compensation program is working in tandem with a company's strategic goals because it's a win-win situation for all involved.