Strategic Human Resource Management

Section Three

Strategic Salary Planning

As noted earlier, survey results indicate that over 60 percent of
companies conduct human resource planning for budgetary
purposes. A related budgetary issue is strategic salary planning.
Interestingly, compensation systems are one of the few
business systems that have remained relatively static.
Nonetheless, for effective implementation, such systems must
change if they are incompatible with organizational strategies.
While the importance of having compensation systems that are
compatible with organizational goals is well known, in reality
such compatibility is often not obtained. Strategic salary
planning goes beyond ensuring compatibility and draws on the
rationale of the essence of strategy.^9 Fundamentally, strategic
management rejects the notion of allocating resources in the
manner of competitors and instead advocates concentration of
resources.^10 This rationale for strategic salary planning is
demonstrated in the following:

Realistically, few employers can justify above-

average workers in all positions. An organization’s

business strategy leads to a staffing strategy and

that, in turn, provides a basis for developing the

compensation strategy. It may be that “world-

class” experts are needed in just a few key

positions. If the organization’s success is