> Not sure what the solution is, but it's just an observation.
You're constrained (enabled) by the competitive strategy your HCS employs: cost leadership (e.g. Wal-Mart), differentiation (e.g. Apple), or focus (e.g. Southwest Airlines). [0] Strategic focus allows companies to better align their incentives with culture, and it seems to work better.
If your HCS doesn't fall in one of these categories, compensation's even more difficult to solve. On HN, you'll hear a lot of large tech companies (targetting differentiation) claim to have solved ranking and performance compensation when a simple look at Glassdoor and critiques of the trade-off call these claims into question.
The bottom line is that executives have a set budget to allocate and never enough data, yet they also have to make a decision. Thus, you can only get a good (bad) solution and never a perfect solution.
What about Amazon? It seems like they're pursuing both the differentiation and cost leadership strategies.
Of course, they're the world's largest retailer by market cap, so they can afford to do both. And usually I don't even look elsewhere for a product, because I figure that they have either the lowest price or close to the lowest, and will deliver it the fastest. So I guess more differentiation?
If I had to pick one, I'd say cost leadership. Amazon grew through cost leadership, and that's still the company at its core as it a) achieves high asset utilization b) keeps costs low, and c) controls most of its supply chain. What might seem like AMZN using a differentiation strategy is actually just focused cost leadership in mid-up market segments.
You're constrained (enabled) by the competitive strategy your HCS employs: cost leadership (e.g. Wal-Mart), differentiation (e.g. Apple), or focus (e.g. Southwest Airlines). [0] Strategic focus allows companies to better align their incentives with culture, and it seems to work better.
If your HCS doesn't fall in one of these categories, compensation's even more difficult to solve. On HN, you'll hear a lot of large tech companies (targetting differentiation) claim to have solved ranking and performance compensation when a simple look at Glassdoor and critiques of the trade-off call these claims into question.
The bottom line is that executives have a set budget to allocate and never enough data, yet they also have to make a decision. Thus, you can only get a good (bad) solution and never a perfect solution.
[0] https://en.wikipedia.org/wiki/Porter%27s_generic_strategies