Deck 2: Strategy: the Totality of Decisions

Question 1

Explain why managers should tailor their pay systems to support the organization's strategy.

Answer 1

NA

Question 2

Identify the four steps to develop a total compensation strategy.

Answer 2

NA

Question 3

Describe the three tests used to determine whether a pay strategy is a source of competitive advantage.

Answer 3

NA

Question 4

Contrast the "best fit" perspective on compensation with the "best practices" perspective.

Question 5

Re-read again the statements in Exhibit 2.6. Discuss how, if at all, these values might be reflected in a compensation system. Are these values consistent with "let the market decide?"

Question 6

What are the three tests used to determine whether a pay strategy is a source of competitive advantage? Discuss whether these three tests are difficult to pass. Can compensation really be a source of competitive advantage?

Question 7

Contrast the essential difference between the "best fit" (strategic business-based) and "best practice" perspectives on compensation.

Question 8

Explain why performance-based pay may not always be a best practice.

Question 9

Interview a compensation professional about his or her organization's compensation strategy, specifically the five issues - objectives, internal alignment, external competitiveness, employee contributions, and management. How does this organization compare to Google? To Whole Foods? What business strategy does it seem to fit (i.e., cost cutter, customer-centred, innovator, or something else)?

Question 10

Set up a debate over the following proposition: "Best Practices" is superior to the "Best Fit" approach when designing a compensation system.

Question 11

Survey ten people about their total rewards preferences. What conclusions can you draw from the results?

Question 12

Set up a debate over the following proposition: non-financial returns are more important than pay."

Question 13

Research the following compensation consulting firms below:
- Aon Hewitt
- Korn Ferry Haygroup
- Mercer
- Morneau Shepell
- Normandin Beaudry
- Willis Towers Watson
What are their business strategies? What kind of services do they offer? Critically assess whether their strategies and services are unique and/or difficult to imitate.

Question 14

CASE - Difficult to Copy?
-Spend some time looking at the website for Netflix. What can you infer about the business strategy and the organizational culture?

Question 15

CASE - Difficult to Copy?
-What external pressures do you think Netflix faces?

Question 16

CASE - Difficult to Copy?
-Decide whether you think the compensation strategy of Netflix fits its business strategy, organizational culture, and external pressures.

Question 17

CASE - Difficult to Copy?
-How would you change compensation at Netflix?
Discussion
Netflix created a working culture that is transparent, values its values as well as a hard working, team-oriented "no jerks allowed" employment policy. It is also a culture that fosters mutual accountability. Netflix is on track for strong revenue delivery; it has a strong twelve month stock performance and consistent revenue growth. The seven aspects of its culture are:
1) Values are what we value
2) High performance
3) Freedom and responsibility
4) Context, not control
5)Highly aligned, loosely coupled
6) Pay top of market
7) Promotions and development.
Under the Freedom and Responsibility section of its company policies, Netflix contradicts corporate tendencies because it works to increase employee freedom rather than limit it. In creating such a work environment the employer is able to attract creative and innovative people and reap the rewards with sustainable business results. Netflix points out that with the right people, the emphasis is less on new processes and more on the quality of talent pool. Netflix has two rules: prevent irrecoverable disaster and adhere to moral, ethical and legal issues. Netflix expects to hire the best, compensate accordingly and get results. It trusts that staff will use the same level of judgement and act in its best interest. Some highlights for Netflix include:
The best managers figure out how to get the best from people by establishing context, not controlling the people or outcomes.
When employees fail, managers should start by asking themselves what they could have done better to set the right context, insight and guidance.
"Highly aligned, loosely coupled" means group interactions are focused on strategy and goals. Groups will move faster to tactical development and execution in a climate of trust (to get the work done) vs. Audit.
Pay accordingly. Their "goal is to keep each employee at the top of market for that person".
It is okay for employees to test the job market and validate their worth-with the caveat that you talk to your manager about what you find so a salary discussion is transparent, honest and fact based.
You can move from "the minors to the majors" but you have to be a superstar. Opportunity, the competing pool of superstars and timing will play a role in advancement.
Personal develop is a personal responsibility not a corporate responsibility.
What makes Netflix unique is the practical application of its culture-starting at the top and reinforced throughout the company. It is based on reciprocity and respect for strong individual talent and results. Yes, its compensation strategy fits its business strategy, organizational culture and external pressures. Compensation would not change because Netflix pays the market rate, wants to pay the best to attract and retain an excellent talent pool. Refer to the Netflix website: https://www.netflix.com for more information on its movies/TV series rental industry and some of the external pressures/challenges it faces.