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Compensation is one of the most important costs in organizations.
Employees exchange their contributions for a set of outcomes, of which compensation is one of the most significant one. On one hand money is considered to be one of the key mechanisms that can be used to attract, retain and motivate competent employees to perform in ways that support organizational objectives. More often than not, a person's earnings also serve as an indicator of power and prestige and are tied to feelings of self-worth. In other words, compensation affects a person economically, sociologically, and physiologically. On the other hand a telling fact is that money never satisfies and even large sums of it may fail to confer wellbeing. The failure is less due to a glitch in the program than due to the inadequacy of psychological assumptions that ground all such plans. As people move up the economic ladder, most almost immediately stop feeling grateful for their elevated circumstances and focus on what they still don't have. For these reasons, mishandling compensation issues is likely to have a strong negative impact on employees and, ultimately, on company's performance. Effectiveness with which compensation is allocated can make a significant difference in gaining or losing a competitive advantage. Thus, how much is paid, and, who gets paid what, are crucial strategic issues for the organization and should be driven by business and HR strategy.
Suggest Effective Compensation Strategy to attract, retain and motivate competent employees and to achieve competitive position in the market.
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