Solutions Manual for Strategic Compensation in Canada
Canadian 6th Edition by Long
2-1
, Chapter 2: A Strategic Framework for Compensation
CHAPTER 2
A Strategic Framework for Compensation
ESSENTIAL OUTCOMES
If nothing else, my students should learn:
1. That, in order to design an effective compensation strategy, it is essential to first
understand the strategic context in which a firm operates, particularly the managerial
strategy in place.
2. How to use the strategic framework for compensation as a tool to help identify the
strategic context for compensation, and the implications for designing the compensation
strategy that best fits a particular organization.
LEARNING OUTCOMES
After completing this chapter, students should be able to:
• Understand the concept of “fit” and explain why a compensation system that is a success
in on firm can be a failure in another.
• Explain how the strategic framework for compensation can be used as a tool for
designing effective reward and compensation systems.
• Describe the main elements in the strategic compensation framework, and explain how
they relate to one another.
• Describe the three main managerial strategies that organizations can adopt, and explain
the implications for the most effective reward and compensation system.
• Describe the main determinants of managerial strategy, and explain how they can be used
to select the most appropriate managerial strategy.
Copyright © 2018 by Nelson Education Ltd 2-2
, Chapter 2: A Strategic Framework for Compensation
• Analyze any organization to determine the most appropriate managerial strategy for that
organization to adopt.
• Discuss how conditions in North America changed during the twentieth century, and
explain how this has affected today’s managerial and compensation strategies.
Copyright © 2018 by Nelson Education Ltd
Full all chapters instant download please go to Solutions Manual, Test Bank site: downloadlink.org
KEY CONCEPTS
Key concepts covered in Chapter 2 include the concept of “fit” as it relates to an organizational
reward system, organizations as systems, the strategic framework for compensation (structural
and contextual variables), and the three main types of managerial strategy. Students need to
understand the implications of each managerial strategy for organizational structure, including
compensation structure. It is important for students to understand that none of the managerial
strategies is inherently superior to the others, but that some managerial strategies will better fit a
given organization than other managerial strategies, depending on the contextual variables
related to environment, corporate strategy, technology, organizational size, and the nature of
work.
STUDENT MOTIVATION
Why should students care about the material in this chapter?
• The previous chapter emphasized that the success of a compensation system depends on
the fit between the compensation system and the organization. Nevertheless, how do we
know if we will have a good fit? The strategic framework provides a tool for helping to
predict this, and for identifying the compensation system that will be the best fit with the
organization and its business strategy.
• As the business environment grows ever more competitive, being able to analyze an
organization and come up with the compensation strategy and system that will be the best
fit with the organization and its business strategy is a skill that will be highly valued by
employers.
• Because it is such a fundamental building block in designing an effective compensation
strategy and system, an inability to effectively use the strategic framework will make it
Copyright © 2018 by Nelson Education Ltd 2-3
, Chapter 2: A Strategic Framework for Compensation
virtually impossible for the student to achieve the learning objectives of this course or to
become a successful compensation professional.
• A strong understanding of this chapter will help students strengthen their understanding
of other compensation areas.
BARRIERS TO LEARNING
• Some students may be so intimidated by the seeming complexity of the strategic
framework that they give up too easily or do not even attempt to master it. It is crucial for
the instructor to explain the framework piece by piece—while extensively using the
strategies for engagement described below—and to emphasize its importance as a crucial
building block for achieving success in this course. Students need to come to see the
strategic framework as an essential and helpful tool in solving compensation problems.
• Students often confuse the role of the structural variables (used for determining the
managerial strategy actually in use) and the contextual variables (used for determining
what is the most appropriate managerial strategy to adopt). The instructor will need to
continually emphasize this distinction through both lecture and application activities.
Repeated use over time of a clicker question testing student grasp of this distinction will
be very useful in gauging progress toward this understanding.
ENGAGEMENT STRATEGIES
In the opening vignette for Chapter 2 (A Tale of Two Firms), the text provides two diverse
examples to illustrate the concept of fit. Divide students into pairs, and ask them to decide which
compensation system is likely the most effective, in terms of the criteria for success listed in
Compensation Notebook 1.1. Use clickers to ask each pair to indicate their choice. Ask them to
justify their selection of LS Electro-Galvanizing or Koch Foods Chicken Processors. Use the
board to tally the advantages and disadvantages of the two different compensation systems. Use
the concept of fit to note that both systems are effective, but tell them to think about what would
happen if the two firms traded their compensation systems? (Of course, they would both be
deader than the Koch chickens!)
Follow up on this example by asking students to work out the key differences in contextual
variables between the two firms. They should hit on points relating to the firms’ environment,
business strategy, technology, size, and work force. Carry on to ask the broader question, “If fit
between the compensation system and key characteristics of the firm is essential, then what exactly
are these key characteristics, and exactly how do they link to compensation?” Note that the
purpose of this chapter is to provide a strategic framework as a tool for answering this question.
Next, reinforce the concepts of business strategy and organizational structure. Explain and
emphasize that for the organizational system to be effective, these two concepts must fit with other
key variables.
Copyright © 2018 by Nelson Education Ltd 2-4
Canadian 6th Edition by Long
2-1
, Chapter 2: A Strategic Framework for Compensation
CHAPTER 2
A Strategic Framework for Compensation
ESSENTIAL OUTCOMES
If nothing else, my students should learn:
1. That, in order to design an effective compensation strategy, it is essential to first
understand the strategic context in which a firm operates, particularly the managerial
strategy in place.
2. How to use the strategic framework for compensation as a tool to help identify the
strategic context for compensation, and the implications for designing the compensation
strategy that best fits a particular organization.
LEARNING OUTCOMES
After completing this chapter, students should be able to:
• Understand the concept of “fit” and explain why a compensation system that is a success
in on firm can be a failure in another.
• Explain how the strategic framework for compensation can be used as a tool for
designing effective reward and compensation systems.
• Describe the main elements in the strategic compensation framework, and explain how
they relate to one another.
• Describe the three main managerial strategies that organizations can adopt, and explain
the implications for the most effective reward and compensation system.
• Describe the main determinants of managerial strategy, and explain how they can be used
to select the most appropriate managerial strategy.
Copyright © 2018 by Nelson Education Ltd 2-2
, Chapter 2: A Strategic Framework for Compensation
• Analyze any organization to determine the most appropriate managerial strategy for that
organization to adopt.
• Discuss how conditions in North America changed during the twentieth century, and
explain how this has affected today’s managerial and compensation strategies.
Copyright © 2018 by Nelson Education Ltd
Full all chapters instant download please go to Solutions Manual, Test Bank site: downloadlink.org
KEY CONCEPTS
Key concepts covered in Chapter 2 include the concept of “fit” as it relates to an organizational
reward system, organizations as systems, the strategic framework for compensation (structural
and contextual variables), and the three main types of managerial strategy. Students need to
understand the implications of each managerial strategy for organizational structure, including
compensation structure. It is important for students to understand that none of the managerial
strategies is inherently superior to the others, but that some managerial strategies will better fit a
given organization than other managerial strategies, depending on the contextual variables
related to environment, corporate strategy, technology, organizational size, and the nature of
work.
STUDENT MOTIVATION
Why should students care about the material in this chapter?
• The previous chapter emphasized that the success of a compensation system depends on
the fit between the compensation system and the organization. Nevertheless, how do we
know if we will have a good fit? The strategic framework provides a tool for helping to
predict this, and for identifying the compensation system that will be the best fit with the
organization and its business strategy.
• As the business environment grows ever more competitive, being able to analyze an
organization and come up with the compensation strategy and system that will be the best
fit with the organization and its business strategy is a skill that will be highly valued by
employers.
• Because it is such a fundamental building block in designing an effective compensation
strategy and system, an inability to effectively use the strategic framework will make it
Copyright © 2018 by Nelson Education Ltd 2-3
, Chapter 2: A Strategic Framework for Compensation
virtually impossible for the student to achieve the learning objectives of this course or to
become a successful compensation professional.
• A strong understanding of this chapter will help students strengthen their understanding
of other compensation areas.
BARRIERS TO LEARNING
• Some students may be so intimidated by the seeming complexity of the strategic
framework that they give up too easily or do not even attempt to master it. It is crucial for
the instructor to explain the framework piece by piece—while extensively using the
strategies for engagement described below—and to emphasize its importance as a crucial
building block for achieving success in this course. Students need to come to see the
strategic framework as an essential and helpful tool in solving compensation problems.
• Students often confuse the role of the structural variables (used for determining the
managerial strategy actually in use) and the contextual variables (used for determining
what is the most appropriate managerial strategy to adopt). The instructor will need to
continually emphasize this distinction through both lecture and application activities.
Repeated use over time of a clicker question testing student grasp of this distinction will
be very useful in gauging progress toward this understanding.
ENGAGEMENT STRATEGIES
In the opening vignette for Chapter 2 (A Tale of Two Firms), the text provides two diverse
examples to illustrate the concept of fit. Divide students into pairs, and ask them to decide which
compensation system is likely the most effective, in terms of the criteria for success listed in
Compensation Notebook 1.1. Use clickers to ask each pair to indicate their choice. Ask them to
justify their selection of LS Electro-Galvanizing or Koch Foods Chicken Processors. Use the
board to tally the advantages and disadvantages of the two different compensation systems. Use
the concept of fit to note that both systems are effective, but tell them to think about what would
happen if the two firms traded their compensation systems? (Of course, they would both be
deader than the Koch chickens!)
Follow up on this example by asking students to work out the key differences in contextual
variables between the two firms. They should hit on points relating to the firms’ environment,
business strategy, technology, size, and work force. Carry on to ask the broader question, “If fit
between the compensation system and key characteristics of the firm is essential, then what exactly
are these key characteristics, and exactly how do they link to compensation?” Note that the
purpose of this chapter is to provide a strategic framework as a tool for answering this question.
Next, reinforce the concepts of business strategy and organizational structure. Explain and
emphasize that for the organizational system to be effective, these two concepts must fit with other
key variables.
Copyright © 2018 by Nelson Education Ltd 2-4
