Discuss the relationship between the strategic decisions and compensation practi

Question

Discuss the relationship between the strategic decisions and compensation practices of your current or former organization (Alternately, you may conduct online research to select an organization of your choice). Next, identify at least two (2) advantages and disadvantages associated with the compensation practices.

Based on your response from the first part of the discussion, explain whether the organization’s approach to compensation management is a good fit for its business strategies. Provide rationale to support your information.

Explanation / Answer

For this analysis, we will consider the e-commerce giant Amazon.

Currently, Amazon has increased its focus on developing countries such as India and aims to achieve the number 1 status in the ecommerce category in countries such as India. Their strategy to achieve this was opening an exclusive office in India. Their current strategy to achieve number one status requires them to hire talented staff and retain them.

To achieve this, their compensation strategy is focused around stock options including restricted stock units for their employees which gives them a sense of ownership towards the organization. But, to take full advantage of the stock options offered, the employees must stay with the organization for 3 years or more. This strategy will ensure that talented employees do not leave the organization.

The advantages of this compensation strategy of Amazon are:

Disadvantages of this compensation strategy are:

This strategy of Amazon has worked for them in the past few years but the present times are seeing a rise in employee turnovers at Amazon due to various other reasons. Amazon has second highest turnover rate among all Fortune 500 companies. Since providing stock options to the employees is majorly aimed at reducing attrition rates, under this scenario the compensation strategy does not seem to be working. The company is losing talented employees due to other issues. This requires them to look into the issues being faced by the employees and modify the compensation strategy accordingly.

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