18 • Compensation

Managing compensation means answering the "So What" question. So what is the impact of this policy,
this technique, this decision? While it is possible to design a system that is based on internal alignment,
external competitiveness, and employee contributions, what difference does it make? Does the decision help
the organization achieve its objectives?
The ground under compensation management is shifting. While not yet an earthquake, the tremors are
there. The traditional focus on how to administer various techniques is long gone, replaced by more strategic
thinking—managing pay as part of the business. The coming jolt will go beyond simply managing pay as
an expense to better understanding and analyzing the impact of pay decisions on people's behaviors and
organizations' success. The impact of pay decisions on expenses is one result that is easily measured and well
understood. But other measures such as pay's impact on attracting and retaining the right people, and engaging
these people productively, are not yet widely used in the management of compensation. Efforts to do so are
increasing and the perspective is shifting from "How To" toward trying to answer the "So What" question.46
Pay Techniques
The remaining portion of the pay model in Exhibit 1.5 shows the techniques that make up the pay system. The
exhibit provides only an overview since techniques are discussed throughout the rest of the book. Techniques
tie the four basic policies to the pay objectives.
Uncounted variations in pay techniques exist; many are examined in this book. Most consultant firms tout
their surveys and techniques on their Web pages. You can obtain updated information on various practices by
simply surfing the Web.

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6 John Boudreau and Pete Ramstad, Beyond Cost-Per-Hire and Time to Fill: Supply-Chain Measurement for Staffing (Los Angeles:
Center for Effective Organizations, 2006); Ed Lawler, Dave Ulrich, Jac Fitz-Enz, and James Madden, HR Business Process Outsourcing
(San Francisco: Jossey-Bass, 2004); D. Scott, D. Morajda, T. McMullen, and R. Sperling, "Evaluating Pay Program Effectiveness,"
WorldatWork Journal 15(2) (Second Quarter 2006), pp. 50-59; S. Raza, Optimizing Human Capital Investments for Superior Shareholder
Returns (New York: Hewitt Associates, 2006); M. Huselid and B. Becker, "Improving HR Analytical Literacy: Lessons from Moneyball,"
chapter 32 in M. Losey, S. Meisinger, and D. Ulrich, The Future of Human Resource Management (Hoboken, NJ: Wiley, 2005).