How can companies develop compensation systems that are both internally consistent and market competitive?
A company’s compensation system is one of the factors that attract employees and especially those that have been in the industry for a long time. Small companies may not be able to pay the highly qualified personnel. However, a good compensation package can attract them. Designing a favorable compensation program is quite tricky for any company whether a startup company or a long existing company. If unrealistic compensation methods are applied the probability of a company collapsing are very high (Dechow, Myers, & Shakespeare 13). Some of the sustainable methods include:
Working with the available resources
While designing the compensation system, it would be very unreasonable to work with numbers that are not real. Working with such numbers will not give the actual facts of the limitations available.
Choosing the most cost effective method
Compensation systems may sometimes be very expensive to design and maintain. This is the reason why it is important to conduct a study and analyze on the best to choose from focusing on the short and long term effects it will have on the company. Opting to choose the most cost friendly method means that the company has the chance of remaining in the business.
What are some of the challenges to this goal?
The first challenge is lack of enough capital especially for the startup companies (Bryant & Allen 174).The new comers are supposed to compete with companies that have raised a lot of dollars over the years they have been in the business. The second challenge is a challenge of having the personnel with right skills to perform effectively. At times, this very qualified personnel may be stuck in the very big companies who are able to pay them as per their qualifications.
Thirdly we have limited competition due to the fact that big companies want to compete only with their counter parts living the small companies behind.
Works Cited
Bryant, Phil C., and David G. Allen. "Compensation, benefits and employee turnover: HR strategies for retaining top talent." Compensation & Benefits Review 45.3 (2013): 171-175.
Dechow, Patricia M., Linda A. Myers, and Catherine Shakespeare. "Fair value accounting and gains from asset securitizations: A convenient earnings management tool with compensation side-benefits." Journal of accounting and economics 49.1 (2010): 2-25.
