Performance, Quality Of Perform Life, Profits (1426903)

There are several ways through which organizations can create compensation and reward strategies. How to create a reward plan depends on the compensation philosophy of the organization (Madura 2007). These philosophies include the following: market wage rate, internal equity, and performance based compensation.


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The employer can look at the rates paid by other employers and use this as a base for the compensation plan. The employer can also use market survey data to reward by setting salaries below or above what other employers are paying. The employer can also look at how much he values a certain position or employee (internal equity) and set salaries according to this assessment.

Performance-based compensation involves rewarding employees based on their performance so that they can produce highly. The three crucial steps used for the creation of compensation plans include job analysis, job evaluation and job pricing. Employee benefits and rewards are created by conducting job analysis which involves determining what each job entails, the challenges involved, responsibilities and qualifications required (Callanan & Henry 1987).

Job evaluation follows job analysis so that jobs are compared against each other and challenging jobs graded higher than simple ones. Job pricing is the final step of creating a compensation plan and this involves establishing the rates that each evaluated job should be paid.

The compensation plan for an organization is an integral part of the employer’s strategy to recruit and retain employees. As a result of this, it is important for employers to design a compensation plan that motivates employees to perform higher and achieve job satisfaction.

Appropriate components of employee compensation and benefits include the corporate strategy, costs, organizational culture and equity. Because the compensation plan should reflect the culture of the organization, it should be based on equity as well as control of costs. Despite the type of compensation plan chosen, the resulting outcome should be motivation of employees.

Motivation is one of the key reasons why compensation is carried out. The recruitment and retention strategy guides the employer in determining the ideal compensation plan to use in the organization. Internal equity and regulation of costs are controls that ensure the decided compensation plan is effective in terms of practicability and ability to achieve the recruitment and retention strategy.


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Organizational and market data can be used to perform human resource functions. Human capital is the most difficult to manage because unlike other resources, human beings are unpredictable and dynamic. They deserve to be treated with uttermost care so as to keep them motivated and responsive to change in the organization. The human resources personnel can obtain useful personnel data from the market and within the organization (Cascio, W. E. (2010).

Market surveys can reveal the amounts paid by other organizations in the same industry. This information is useful during the development of recruitment and retention strategies since employers can decide to either attract and retain highly qualified personnel by paying more than competitors or reduce the workforce by paying below the market rate.

Human resource data can also be obtained from within the organization through activities such as job analysis, evaluation and pricing. Human resource personnel can conduct these activities within the organization so as to effectively determine compensation plans that will lead to achievement of the recruitment and retention strategy. Human capital management therefore does not involve overseeing employee behavior only but also collecting and analyzing data from the market and within the organization.


Callanan, J. & Henry, P. (1987). Sales Management and Motivation. New York: F. Watts.

Cascio, W. E. (2010). Managing Human Resources: Productivity, Quality of Work Life, Profits, 8th ed. Boston: McGraw-Hill Company.

Madura, J. (2007). Introduction to Business. Belmont: Thompson/South-Western.

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