Focusing on Execution as Well as Strategy

In the latter parts of the 20th century, compensation professionals became obsessed with strategic compensation. The focus was on what types of compensation systems work best under certain business circumstances. While this is an extremely important issue, many lost track of the assumption that is made with strategic compensation; namely, that the compensation strategy selected will be properly designed, implemented, administered, and evaluated. Unfortunately, gains made by strategic thinking in the 20th century were often lost because of poor execution. An example of this gain and subsequent loss is the use of employee competencies as a basis for pay. From a strategic perspective, this approach to compensation is very much in strategic alignment with contemporary organizations such as virtual organizations.^[10] Unfortunately, the use of competencies as a compensation strategy has fallen into disfavor. To pay on the basis of competencies, many organizations simply copied competencies from a competency catalog made available by consultants and then added these competencies to the merit pay system. No concern was given to the reliability and validity of these competencies in a particular organization. Not surprisingly, many competency pay systems failed, not because of strategy, but because of execution.

For human resource professionals to add value to organizations, they must do a better job at execution than in the 20th century. Basic analytical concepts such as reliability and validity have slipped from the tool kit of human resource professionals and need to be replaced as we go forward in the 21st century. In the absence of basic analytical knowledge by human resource professionals, it is very doubtful that new compensation strategies will be implemented successfully.