2020|Case No.E719| Length 7 pgs.
Too often, leaders fail to view compensation through a holistic and strategic lens. Instead, they make compensation decisions ad hoc to solve a single problem, such as making an offer to a candidate, handling a staff member’s request for a company car, responding to a key employee’s demand to participate in an equity plan, or addressing the concerns of a line worker about health insurance coverage. GSB Lecturer David Dodson calls this approach compensation “whack-a-mole.” When a CEO plays this game, the result almost always is higher costs for the organization, because over time, each individual solution usually ends up being implemented across the entire company. But more critically, the company never receives the benefit of taking into account ‘the bigger picture.” Compensation should not be a series of stopgap measures, but a strategic tool for attracting, motivating, and retaining employees.
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This note is designed to help students understand the strategic importance of establishing thoughtful compensation practices within an organization. After reading this note, students should be able to offer recommendations to a company on how it might improve its compensation practices to attract and retain the right employees.