Of the four pay model policies, internal alignment is the policy that identifies with the positions and the level of importance that each position plays within the organization. Per the textbook, in c

Why do we work? If we are fortunate, our work brings meaning to our lives, challenges us in new and exciting ways, brings us recognition, and gives us the opportunity to interact with interesting people and create friendships. Oh yes—we also get a paycheck. Here in Part 1 of the book, we begin by talking about what we mean by “pay” and how paying people in different ways can influence them and, in turn, influence organization success. Wages and salaries, of course, are part of compensation, but so too, for some employees, are bonuses, health care benefits, stock options, and/or work/life balance programs.

Compensation is one of the most powerful tools organizations have to influence their employees. Managed well, it can play a major role in organizations successfully executing their strategies through their employees. We will see how companies like Costco, Whole Foods, Nucor, the SAS Institute, Microsoft, Alphabet/Google, and others use compensation to attract, motivate, and retain the right employees to execute their strategies. We will also see how companies like Apple sell premium products at attractive price points, to an important degree by using suppliers that have low labor costs. When they are managed less well—as bankruptcies at General Motors, Chrysler (now part of Stellantis), Lehman Brothers, and American Airlines (which stated at the time that it needed to reduce labor costs by $1.25 billion per year to be competitive), for example, might indicate—compensation decisions can also come back to haunt you. In Part 1, we describe the compensation policies and techniques that organizations use and the multiple objectives they hope to achieve by effectively managing these compensation decisions.

Although compensation has its guiding principles, we will see that “the devil is in the details”—how a compensation program is specifically designed and implemented will help determine its success. We want you to bring a healthy skepticism when you encounter simplistic or sweeping claims about whether a particular way of managing compensation does or does not work. For example, organizations, in general, benefit from pay for performance, but there are many types of pay-for-performance programs, and it is not always easy to design and implement a program that has the intended consequences and avoids unintended consequences. (As examples of what can go wrong, search the Web for Wells Fargo or Novartis and the term, scandal.) So, general principles are helpful, but only to a point.

Thus, in Part 1, our aim is to also help you understand how compensation strategy decisions interact with the specific context of an organization (e.g., its business and human resource strategies) to influence organization success. We emphasize that good theory and research are fundamental, not only to understanding compensation’s likely effects, but also to developing that healthy skepticism we want you to have toward simplistic claims about what works and what does not.