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Strategic compensation a human resource management approach

A comprehensive textbook that details how to design and manage compensation systems—including base pay, incentives, and benefits—as a strategic tool to attract, retain, and motivate employees, thereby driving a company's competitive advantage.

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What it’s about

In today's competitive marketplace, a company's success is critically dependent on its ability to attract, retain, and motivate top talent. "Strategic Compensation" provides a comprehensive guide to designing and managing compensation systems that do more than just pay employees; they drive business success. This book moves beyond the traditional administrative view of compensation to a strategic one, showing how pay structures, incentive programs, and benefits can be aligned with an organization's competitive strategy, whether it's cost leadership or differentiation. You will learn the art and science of building internally consistent and externally competitive pay systems, navigating the complex legal landscape, and tailoring compensation for unique employee groups like executives and contingent workers. For any HR professional, manager, or business student, this book is an essential resource for turning compensation from a necessary cost into a powerful tool for achieving competitive advantage.

The through-line

Who it’s for: The reader is an HR professional, compensation manager, or general manager responsible for pay decisions. They want to create a compensation system that is fair, competitive, and effective in driving employee performance and achieving business goals, but they often feel constrained by outdated practices, limited budgets, and complex regulations.
The problem: Designing a compensation system that simultaneously controls costs, complies with myriad laws, attracts top talent in a competitive market, and motivates employees to support the company's strategy. They feel frustrated that their current compensation system is perceived as a mere administrative burden, is ineffective at differentiating performers, and creates feelings of inequity. They are uncertain how to transform compensation into a true strategic asset.
The plan: Understand the strategic context of compensation and align it with your company's competitive strategy.
Master the different bases for pay (traditional, incentive, person-focused) to reward desired contributions.
Build an internally consistent system using job analysis and job evaluation.
Create a market-competitive system by effectively using compensation surveys.
Integrate internal and external data to build a coherent pay structure that recognizes employee contributions.
The payoff: The reader becomes a 'master compensation carpenter,' skillfully designing and implementing a fair, competitive, and legally compliant compensation system. · The company successfully attracts and retains top talent, reducing costly turnover. · Employees are motivated, productive, and their behaviors are aligned with strategic goals.

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Related profiles we’ve built

Additional reading

Human Resource Champions · David Ulrich
The preface references this as a landmark book in the effort to define HR core competencies and the role of HR as a strategic business partner.
The Human Side of the Enterprise · Douglas McGregor
Mentioned in the preface as a key influence in shifting the perspective from 'personnel administration' to 'human resource management,' providing historical context for the evolution of the HR function.
The Compensation Handbook, A State-of-the-Art Guide to Compensation and Design · Berger, L.A., and D.R. Berger, editors
This book provides a deep dive into the practical application of finance and accounting; a broader handbook like this one would provide context on the design elements (internal/external equity) that this book deliberately does not cover in detail.
How to Be a Star at Work: 9 Breakthrough Strategies You Need to Succeed · Robert E. Kelley
Referenced to support the idea that a key trait of high performers is their ability to leverage learning opportunities, which is a core tenet of the book's framework for excelling as a compensation professional.
Average Is Over: Powering America Beyond the Age of the Great Stagnation · Tyler Cowen
Cited to highlight the increasing economic value of individuals whose skills are complementary to computers, underscoring the book's argument that 'soft skills' and strategic thinking are becoming critical for compensation professionals in a data-driven world.
Drive: The Surprising Truth about What Motivates Us · Daniel H. Pink
Cited as a contrasting viewpoint that questions the efficacy of financial incentives, highlighting the importance of autonomy, mastery, and purpose. This is relevant to the book's deep focus on designing effective incentive systems.
Creative Destruction: Why Companies That Are Built to Last Underperform the Market · Sarah Kaplan and Richard N. Foster
Referenced to illustrate the increasing pace of change and business complexity, which provides the context for why compensation professionals need to be more strategic and business-savvy.
Beyond HR: The New Science of Human Capital · John W. Boudreau and Peter M. Ramstad
Listed as an additional resource to provide a deeper dive into the strategic management of human capital, which is a central theme of the handbook.
Pay and organizational effectiveness: A psychological view · Lawler, E. E., III (1971)
This is cited as a foundational text that comprehensively applied psychological theories, particularly expectancy and equity theory, to understand how pay systems affect employee motivation and behavior.
Economics, organization & management · Milgrom, P., & Roberts, J. (1992)
Serves as a key reference for the 'new economics of personnel,' particularly agency theory. The book uses its concepts to frame decisions about behavior- vs. outcome-based contracts and the challenges of incentive design.