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Compensation and Business Management

Compensation is a significantly efficient tool that business owners can use to influence their employees’ performance. Most business managers have employed this strategy to make sure people work towards achieving the goals of the company. Compensation strategies should be based on the business strategy and direction that the firm intends to take.

Effective compensation strategies must develop a clear connection between the job description, performance evaluation, external salary survey, and internal salary comparison. Job description refers to the clear definition of the purpose of a job. It also clearly states the placement of the job in the organization structure, the significant responsibilities and accountabilities of the job, and the main tasks performed by the individual. For example, a Human Resource Officer is responsible for offering support in the firm’s human resource functions. The job description has a significant influence on the internal salary comparison. Job descriptions are a reliable indicator of related positions in a firm (Cushway, 2008, Pg. 7).

Performance evaluation is the formal review of an employee’s job-related activities and their results within a position. In business firms, its objective is to measure the amount of wealth that the employee added to the firm and/or its customers. Performance evaluation indicates whether the employee’s results matched the market norms. The purpose of performance evaluation is to determine the amount of pay, above the basic pay, that an employee should receive. Employees who display outstanding performances receive better pay than the rest (Bhattacharyya, 2009, pg.167).

The external salary survey gives a range of the ideal monetary compensation that an employee should get. External salary surveys give different ranges depending on the position. For instance, the salary range for Human Resource managers differs from those of supervisors. External salary survey influences the performance evaluation. If the survey requires a high salary for a given position, the expectations from the affected individual should also match their compensation. Internal salary surveys rely on the comparison of the position to similar positions in the organization. Similar positions should be paid within the same salary range. Internal salary comparisons influence the job description for a task. Employees should only receive similar compensations in instances that both positions display considerable similarities.

The job description determines an individual’s compensation depending on the number of tasks performed. Secondly, the contribution of the job to the organization also defines the appropriate compensation for the individual. Jobs that have policymaking roles attract different compensation strategies from operational tasks. Human Resource Managers receive relatively high salaries due to their role in developing employment policies, in the firm. Finally, the job’s position in the organization structure, as indicated in the job description, presents an efficient way of determining the individual’s compensation. Performance evaluation also indicates the amount of compensation that an employee should receive (Bhattacharyya, 2009, pg. 267). It rewards employees who display high output in their tasks. External salary surveys indicate the salary range that individuals holding positions should receive. The salary range should match the ideal market range. Professional accountants should receive relatively similar salaries irrespective of which firm they work with. An internal survey is an equally weighty means of determining an individual’s income. Given the above analysis, we can effectively develop a salary evaluation for a Human Resource Manager.

Primary functions from the Job Description

The Human Resource Officer’s responsibilities include assisting in the different human resource works. These include recruitment, staffing, training and development, performance monitoring, and employee counseling.

Organizational performance evaluation system

  • Outstanding – 10% Increase
  • Exceeds expectations – 6% Increase
  • Meets expectations – 3% Increase
  • Does not meet expectations – 0% Increase

External Salary Survey

  • Monthly salary ranges at $4,100 – $8,300.

Internal Salary Comparison

The position is similar to Sales Manager and should be paid within the same monthly salary range of $4,000 – $7,500.

Given the above salary evaluation, the Human Resource Manager should range from $4,000 – $8,300.


Bhattacharyya, D. K. (2009). Compensation Management. New York: Oxford University Press.

Cushway, B. (2008). The Handbook of Model Job Descriptions. New York: Kogan Page Publishers.