BHR 3352: Compensation Strategy, Purpose, and Philosophy in Banking

This essay delves into the compensation strategies and philosophies employed in the banking industry, emphasizing the use of specific numbers to structure employee compensation. It examines how compensation motivates employees and aligns with their talents and creativity. The analysis covers various compensation strategies, including 'meet the market,' 'lead the market,' and 'lag the market,' assessing their benefits and risks. The essay argues that the 'meet the market' strategy is most suitable for the banking industry, enabling employers to set competitive pay levels, attract qualified applicants, and retain existing employees while effectively managing labor costs. The essay concludes by referencing relevant academic sources that support the discussed compensation strategies and their implications.

Running head: COMPENSATION PURPOSE AND STRATEGY 1
Compensation purpose and strategy
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COMPENSATION PURPOSE AND STRATEGY 2
Compensation philosophy
The compensation philosophy selected for this case is Specific numbers in the banking
industry. The banking industry utilizes particular numbers to lay out the compensation structure
for the employees. Employees are motivated by compensation, and they tend to look for jobs
that suit their talent, creativity and give salary compensation or other benefits (Lueg, 2015). The
level and the type of compensation in the banking industry are determined by strategies,
performance, and policies of various banks. Example the industry may decide to use years of
experience when giving compensation. The entry level with no or zero experience working with
any bank will earn $ 30,000. After one year, if he or she maintains good performance, the salary
will be increased to $ 33,000. The numbers of years that one has while working in the banking
industry or another related firm determines the compensation that will be given. The employee
working at the junior level will be satisfied with the compensation that will be given to him or
her hoping that in the next year the salary will increase.
Benefits and risks
For instance, philosophy structure is used in the compensation comparison with both
external and internal competitors. The following are benefits and risks which are linked to
compensation strategies. Benefits to meet the market are; helps the employers in setting pay level
which is average or relative to those in the marketplace (Leekha, Chhabra & Sharma, 2014). The
organization can also retain and attract employees with top talent through maintaining
compensation structure that is competitive. On the other hand, meet the market needs the
employers to be a continuous and huge adjustment in the structure of compensation when the
labor market is tight. Similarly, Lead to the market initiates increased candidates supply,

COMPENSATION PURPOSE AND STRATEGY 3
enhances the chances of selecting highly qualified applicants and increases productivity in
general. The morale of the employees is boosted, and the turnover of employees is reduced. The
risks associated with lead to the market include they only work best for the firms which are
situated in areas which have high competition for labor market (Sisniega et al, 2016). The
employers also need close monitoring to ensure that the expected profits are realized. Lag the
market assist the employers who have inadequate finances to make high pay rates. The
employees can also be rewarded through nonmonetary means to reduce dissatisfaction as well as
turnover. The risks of lead the market is the difficulty in maintaining retain or attract candidates
who are highly qualified. There is also employees turn over and low productivity due to poor
performance.
Meet the market
For the banking industry, it is good to use meet the market strategy. The employers will
be able to compare the pay level for the same level from other banks. After comparison, it will
be easy for them to set a relative pay level (Wang, Qiu, Gao & Wang, 2017). The banking
industry makes sure that their pay rate is competitive as compared to other financial institutions.
In this way, it will be able to attract new and highly qualified applicants. The existing employees
will also be retained or maintained because the compensation structure is competitive. Meet the
market enables the employers to manage their labor cost in a more appropriate ay hence suitable
for the banking industry.

COMPENSATION PURPOSE AND STRATEGY 4
References
Leekha, Chhabra, N., & Sharma, S. (2014). Employer branding: a strategy for improving
employer attractiveness. International Journal of Organizational Analysis, 22(1), 48-60.
Lueg, R. (2015). Strategy maps: the essential link between the balanced scorecard and action.
Journal of Business Strategy, 36(2), 34-40.
Sisniega, A., Stayman, J. W., Cao, Q., Yorkston, J., Siewerdsen, J. H., & Zbijewski, W. (2016,
March). Image-based motion compensation for high-resolution extremities cone-beam
CT. In Medical Imaging 2016: Physics of Medical Imaging (Vol. 9783, p. 97830K).
International Society for Optics and Photonics.
Wang, T., Qiu, J., Gao, H., & Wang, C. (2017). Network-based fuzzy control for nonlinear
industrial processes with predictive compensation strategy. IEEE Transactions on
Systems, Man, and Cybernetics: Systems, 47(8), 2137-2147.