Strategic Reward Systems : a Contingency Model of Pay System Design
Strategic Management Journal
Strat. Mgmt. J., 22: 777–792 (2001) DOI: 10.1002/smj.170
STRATEGIC REWARD SYSTEMS: A CONTINGENCY MODEL OF PAY SYSTEM DESIGN
BRIAN K. BOYD1 and ALAIN SALAMIN2 *
1 2
College of Business, Arizona State University, Tempe, Arizona, U.S.A. Ecole des HEC, University of Lausanne, Lausanne-Dorigny, Switzerland, and Compensation Development, Firmenich SA, Meyrin, Switzerland
A limited number of studies have addressed the idea of ‘strategic’ reward systems—the matching of compensation systems to a firm’s strategy. Prior research on this topic has been confined to U.S. firms, however, and a number of key questions remain unanswered. Using a sample of 917 employees from two large Swiss financial institutions, we found that pay systems are linked with divisional strategic orientation, but in a different form than prior studies. Additionally, we identify hierarchical position as an important variable in the tailoring of reward systems. Hierarchy has a significant main effect on pay plan design, and an interactive effect with strategic orientation. Copyright 2001 John Wiley & Sons, Ltd.
An organization’s employees provide an important basis for a sustainable competitive advantage: socially complex—i.e., people-based—resources are considered more durable and less susceptible to imitation than other types of assets (Barney, 1991). As such, the strategic management of human resources can play a key role in an organization’s survival. A firm’s compensation plan plays a prominent role in recruiting, motivating, and retaining employees, and thus is central to building a durable advantage. Consistent with this perspective, early compensation theorists (e.g., Salter, 1973) proposed that firms should match their compensation systems to their strategies. The matching hypothesis has been generally supported, with empirical studies of diversification (e.g., Kerr, 1985), type of product market strategy (e.g., Gupta and Govindarajan, 1984), and type of
Strat. Mgmt. J., 22: 777–792 (2001) DOI: 10.1002/smj.170
STRATEGIC REWARD SYSTEMS: A CONTINGENCY MODEL OF PAY SYSTEM DESIGN
BRIAN K. BOYD1 and ALAIN SALAMIN2 *
1 2
College of Business, Arizona State University, Tempe, Arizona, U.S.A. Ecole des HEC, University of Lausanne, Lausanne-Dorigny, Switzerland, and Compensation Development, Firmenich SA, Meyrin, Switzerland
A limited number of studies have addressed the idea of ‘strategic’ reward systems—the matching of compensation systems to a firm’s strategy. Prior research on this topic has been confined to U.S. firms, however, and a number of key questions remain unanswered. Using a sample of 917 employees from two large Swiss financial institutions, we found that pay systems are linked with divisional strategic orientation, but in a different form than prior studies. Additionally, we identify hierarchical position as an important variable in the tailoring of reward systems. Hierarchy has a significant main effect on pay plan design, and an interactive effect with strategic orientation. Copyright 2001 John Wiley & Sons, Ltd.
An organization’s employees provide an important basis for a sustainable competitive advantage: socially complex—i.e., people-based—resources are considered more durable and less susceptible to imitation than other types of assets (Barney, 1991). As such, the strategic management of human resources can play a key role in an organization’s survival. A firm’s compensation plan plays a prominent role in recruiting, motivating, and retaining employees, and thus is central to building a durable advantage. Consistent with this perspective, early compensation theorists (e.g., Salter, 1973) proposed that firms should match their compensation systems to their strategies. The matching hypothesis has been generally supported, with empirical studies of diversification (e.g., Kerr, 1985), type of product market strategy (e.g., Gupta and Govindarajan, 1984), and type of
References: Strat. Mgmt. J., 22: 777–792 (2001) Strategic Reward Systems Strat. Mgmt. J., 22: 777–792 (2001) 792 Strat. Mgmt. J., 22: 777–792 (2001)