STRATEGIC COMPENSATION

STRATEGIC COMPENSATION 
IN ACTION
STRATEGIC ANALYSIS AND 
CONTEXTUAL FACTORS
STRATEGIC COMPENSATION
STRATEGIC ANALYSIS
•Important to gain competitive
advantage through HRM.
•Compensation to align to company’s
strategies.
•Important to develop and implement
strategic compensation practices.
•Hence strategic analysis important.
 WORK OF COMPENSATION
SPECIALIST
Step 1 Gains knowledge - company’s plans, goals,
strategy, expectations and project goals.
Step 2 Collect data – Industry, organization,
technology, competition etc.
Step 3 Job Matching – Match jobs to compensation
Step 4 Benchmarking – Benchmark jobs to market
supply. Competitive advantage to be
achieved.
Step 5 Provide recommendations and cost
modeling base organizations compensation
philosophy with ability to attract, motivate
and retain talent * Gartner Consultancy
 Strategic Analysis

• Entails
examination of
company’s

– External market
context
– Internal factors
Strategic Analysis
 External
• Community culture
• Competition
• Economics
• Industry
characteristics
• Labor market
• Legal/regulatory
• Technology
• Globalization
Strategic Analysis
Internal
• Corporate philosophy
• Corporate mission
• Business strategy
• Human resources
philosophy and strategy
• Total rewards philosophy
and strategy
• Corporate culture
• Shareholder expectations
• Corporate structure
• Costs/resource
availability
 CONDUCT
 INTRODUCTION

 PHASE 1 – EXTERNAL ANALYSIS.

 PHASE 2 – INTERNAL ANALYSIS.
 PHASE 3- FACTORS INFLUENCING
COMPETITIVE STRATEGIES.

• NATIONAL CULTURE
• ORGANIZATIONAL CULTURE
• ORGANIZATIONAL AND PRODUCT LIFE
CYCLE.
EXTERNAL MARKET ELEMENTS
• INDUSTRY PROFILE
• COMPETITION
• FOREIGN DEMAND
• INDUSTRY’S LONG-TERM PROSPECTS
• LABOR MARKET ASSESSMENT
• LEGAL/ REGULATORAY
AVIATION INDUSTRY
 AVIATION INDUSTRY
•DOMESTIC AND INTERNATIONAL TRAFFIC
GROWING BY 24.2 PER CENT AND 18 PER CENT,
RESPECTIVELY IN APRIL-DECEMBER, 2005.
PRIVATE AIRLINES NOW ACCOUNT FOR 68.9 PER
CENT OF DOMESTIC TRAFFIC.
•MANY PLAYERS – NEW PLAYERS JOINING THE
AVIATION BOOM.
•TWO STRATEGIC GROUPS.
–BUSINESS. JET, KINGFISHER
–LOW COST. IndiGo, DECCAN, SPICE.
•HIGH DEMAND OF PILOTS – LIMITED SUPPLY.
•EACH AIRCRAFT – 12 FULLY TRAINED PILOTS.
•SUPPLY CANT MEET DEMAND. 20% FOREIGN
PILOTS AT CAPTAIN LEVEL.
 AVIATION INDUSTRY
•NO CONSOLIDATION DUE TO HIGH
GROWTH.
•THOUGH LOSS MAKING FOR ALL BUT
AIRLINES SEE FUTURE IN TRAVEL AND
AVIATION SINCE PRICE WARS HAVE MADE
FARES AFFORDABLE FOR AC 2 TIER
TRAVELERS.
•MANY DEMANDS FOR AIRCRAFT – BOEING
AND AIRBUS PLACED.
•DEMAND FOR PILOTS LIKELY TO REMAIN
CONSTANT AT 20% FOR NEXT 5 YEARS.
2000 -3000 PILOTS REQUIRED IN NEXT 2-3
 AVIATION INDUSTRY
•SUPPLY.
– NEW TRAINEES INDIAN CLUBS 20-25%.
–NEW TRAINEES FOREIGN CLUBS 40-50%.
–FROM DEFENCE FORCES 20-30%.
–FROM PREVIOUS PROFESSIONALS 10-15%.
–FOREIGN PILOTS 20-25%.
•COMPENSATIONS AGGRESSIVE FOR NEWER
AND SMALLER AIRLINES.
•TRAINEE AFTER CPL – RS 80,000.
•FIRST OFFICER - RS 1,25,000.
•CAPTAIN ALTPL - RS 2, 25,000.
•FOREIGN ALTPL - RS 4-5 LAKHS.
 Labor - Market Forecasts
• DEMAND OF PILOTS ON RISE.
• FOREIGN PILOTS 2 TIMES MORE
EXPENSIVE. ON CONTACT.
• INVESTMENT OF 25-30 LAKHS ON
PILOT TRAINING.
• LACK OF INFRASTRUCTURE IN INDIA
FOR PILOTS TRAINING.
• 250 AIRCRAFTS BOOKED AT PARIS
AIRS HOW. 3000 NEW PILOTS
REQUIRED.
•www.dgca.nic.in,
www.labourbureau.nic.in
Industry Profile
• Used to determine
compensation practices
• Uses industry characteristics,
like
– Sales volumes. Incentive.
– Government regulations
– Technology advancements.
Knowledge.
 COMPETITION
• Assess competition's business.

• Differentiate
– Type of service.
– Low cost/ cost leadership.
– Retention plans.
FOREIGN DEMAND
• Foreign demand as a
benchmark for compensation.
• Higher foreign demand
translates to higher
compensation.
• Pilots to match foreign

compensation measures over

time.
INDUSTRY’S LONG TERM PROSPECTS
• Important for strategic planning – indicates
company’s future prospects.
• Rise in fuel prices, price wars and lack of
profitability has forced low cost airlines to
stagnate compensations for pilots for past 6
months.
•SPICE and IndiGo have aggressively poached
pilots from Sahara and Deccan due to expansion
policies by offering 10-15% higher packages.
LABOUR MARKET ASSESSMENT
• The labour market assessments are key inputs
to compensation figures.
• Published by :-
– VV Giri National Labour Institute http://www.vvgnli.org.
– Ministry of Labour.
–http://labour.nic.in/
–http://www.labourbureau.nic.in

• Important to assess trends for framing

compensation parameters.
•Other demographic status like education, age
profile, availability in sectors.