PLEASE RESPOND TO THIS, I MUST COMPLETE A PEER REVIEW ON THE BELOW. Thanks
Please demonstrate critical thinking abilities. No fewer than 100 words for post.
For this response, should outside sources be used to support the content within the postings, proper in-text citations and correctly formatted references should be prepared consistent with the APA (6th edition). The list of references should be physically positioned at the end of the postings.
2. Compare/contrast the three tests for any source of competitive advantage: align, differentiate, and add value. Discuss whether these tests are difficult to pass. How can compensation be a source of competitive advantage for an organization?
The three tests can help verify if a pay strategy is a source of advantage. Alignment includes if the pay strategy aligns with the business strategy, with the economic and sociopolitical conditions and if it aligns with the overall HR system. From the three, this is the easiest test to pass.
Differentiation includes having different strategy compared to competitors. Advocates of the strategic approach suggest that sustained advantage comes from how the pay system is supervised (Milkovich, Newman, & Gerhart, 2014). It can be easy to copy a competitor’s pay practice, however, the part that is hard to copy is the way “pay programs fit together” and fit the needs and strategies of the organization (Milkovich et al., 2014). An organization cannot just copy and blindly benchmark and follow the “best practices” to stay relevant instead of staying above competitors (Milkovich et al., 2014). Being able to combine service differentiation with other factors, “such as innovativeness and customer centricity, versus service differentiation alone, can sustain above-industry average performance. Only the combination of service differentiation with other factors can translate into valuable resources that are neither perfectly imitable nor easily substitutable” (Gebauer, Gustafsson, & Witell, 2011). This will help sustain advantage with practices that best fit for the organization’s strategy.
The compensation system should add value if the company can attract and motivate employee’s behaviors to benefit the company and reach its goals. These compensations should be cost-effective so that the company is not seeing a disadvantage in marketing its services. Compensation is one of the biggest controllable expense, trying to calculate the return on investment becomes challenging when trying to determine and calculate the different forms of compensation pay (Milkovich et al., 2014). “Trying to measure an ROI for any compensation strategy implies that people are ‘human capital’… viewing pay as an investment with measurable returns diminished the importance of treating employees fairly” (Milkovich et al., 2014). Trying to measure intangible assets can be an issue, “some are understanding, some are critical, some work long hours and some spend much of their time gossiping. The difficulty is in deciding what kind of work practice matters most” (Donkin, 2002). This test of strategy is the most difficult from the three.
There are different pay practices of compensation that can be easily adapted in organization’s such as base pay and benefits. The strategic perspective suggests the way these practices fit together and with the organization’s strategy that will result in a competitive advantage (Milkovich et al., 2014).
Donkin, R. (2002). Human capital measures. Retrieved from Richard Donkin website: http://www.richarddonkin.com/Archive/x_human_capit…
Gebauer, H., Gustafsson, A., & Witell, L. (2011). Competitive advantage through service
differentiation by manufacturing companies. Journal of Business Research, (64), 12,
1270-1280. Retrieved from: http://dx.doi.org/10.1016/j.jbusres.2011.01.015
Milkovich, G., Newman, J., & Gerhart, B. (2014). Compensation (11th ed.). New York, New York: McGraw- Hill.