Link between Compensation Strategy and Corporate Culture

The compensation strategy and corporate culture have to be aligned together and it can be issue for many organization. The ambitious compensation strategy is not aligned with the weak corporate culture and it brings many conflicts. It is not about the bad compensation strategy, it is about a completely different behavior and values, which are valued in the organization.

The corporate culture can be fully informal, but it is defined by the values of the top management. The top management can try to change the corporate culture by introducing quite an aggressive compensation strategy, but this effort will fail, when the top management does not change its values and behavior.

Human Resources has to provide the feedback (honest opinion) to the top management during the design of the new compensation strategy. The compensation strategy is not a good tool to change the corporate culture as the employees will not understand the gap between the reality and vision formulated in the compensation strategy.

The top management can change the corporate culture by formulating new vision and by demonstrating new values in their daily behavior and their decisions. When they feel comfortable with the new behavior and new corporate standards, they can support the change by the introduction of the new compensation strategy. But, they should introduce a new business strategy before as the employees can build a logical link between those two strategies.

The compensation strategy reflects the business strategy and the corporate culture and it cannot change the behavior of employees as they can be easily in the conflict between the behavior valued by the manager and the compensation strategy. This conflict brings the frustration and the employees can leave the organization.