Section Sixexternal equity or other adjustments can sometimes
legitimately alter the relationship, on average there should be a
positive correlation. While it is hoped that an effective
performance evaluation system will reduce the frequency of
litigation, another indicator of effectiveness may be its track
record in litigation.
Compensation Systems
The human resource function has been faulted for the
existence of compensation systems that are not congruent with
organizational strategies. Several aspects of compensation
systems must be evaluated in order to determine their value in
strategy implementation. The compensation mix is a critical
issue that needs monitoring. Unfortunately, while there is
movement toward more variable compensation in the United
States, the compensation mix does not yet promote workforce
stability, as it does in Japan. In the United States, the bulk of
employees’ compensation comes in the form of fixed levels of
salaries or wages over time, regardless of the performance of
their companies or the state of the economy. When demand for
their company’s product diminishes or performance factors
cause profits to decline, employees are laid off. One means of
providing more employment stability is to change the
compensation mix by building in a larger proportion of variable
compensation, such as profit sharing or bonuses, which is the