Chapter 10: Reward System Alignment

Source: Heneman, R.L. & Dixon, K., Compensation and Benefits Review (in press), copyright © 2001 by Sage Publications, Inc. Reprinted with permission of Sage Publications, Inc.

Reward system design and implementation is most often guided by best practice surveys (e.g., McAdams & Hawk, 1994) or by normative models established by the compensation profession (e.g., Milkovich & Newman, 2000). This practice of imitating the reward systems of other organizations benefits those organizations that intend to use reward system practices to move company performance from below average industry performance to average industry performance (Barney, 1997). On the other hand, companies need to create unique reward systems (as well as other HR practices) in order to use reward systems to drive company performance above the industry average (Barney & Wright, 1998).