Coming soon · Book Profile
Strategic Pay: Aligning Organizational Strategies and Pay Systems
Edward Lawler argues that pay systems, when strategically aligned with a company's business strategy and management style, can be a powerful and lasting source of competitive advantage rather than merely a cost of doing business.
A profile of this book is on the way.
What it’s about
Strategic Pay reframes compensation from an unavoidable expense into a strategic lever for organizational effectiveness. Drawing on thirty years of research and consulting, Lawler shows how pay systems shape motivation, attraction and retention, culture, organizational structure, and cost flexibility. He walks through the full menu of pay-for-performance options (incentive pay, merit pay, gainsharing, profit sharing, employee ownership), the choice between paying the job versus paying the person (job evaluation versus skill-based pay), how to set total compensation levels and mix, and the critical process issues of participation and communication. Through two contrasting case studies—a traditional manufacturer and a global technology company—he demonstrates that there is no single right pay system; the right design must fit the organization's strategy and the behaviors it needs. The book equips general managers, not just compensation experts, to make pay choices that win acceptance and deliver real performance improvements.
The through-line
- Who it’s for
- A general manager or compensation decision maker who wants to use pay to improve organizational effectiveness and gain competitive advantage.
- The problem
- The organization's pay system is driven by history and imitation rather than strategy, producing high costs and weak performance. The manager feels frustrated and uncertain, sensing pay is wasted money but not knowing how to fix it.
- The plan
- Start with the business strategy and the behaviors needed for success.
- Establish and communicate a set of core reward principles.
- Choose pay-for-performance approaches that fit the strategy.
- Decide whether to pay the job or the person.
- Set total compensation levels and mix to match the market and management style.
- The payoff
- Pay becomes a lasting competitive advantage. · Employees are motivated, the right talent is attracted and retained, and a performance-oriented culture emerges. · Labor costs are aligned with the ability to pay and competitors' costs.
See our guide
- Compensation Analyst →
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- Design A Compensation System →
- Do Human Resources And People Management Well →
- HR Business Partner →
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- HR Generalist →
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- Learning & Development Specialist →
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- Learning & Development Specialist →
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- Recruiter / Talent Acquisition →
- Recruiter / Talent Acquisition →
- Recruiter / Talent Acquisition →
- Design Short-Term Incentive And Variable Pay →
- Set Strategy And Build Durable, Measurable Advantage →
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Additional reading
- Immunity to Change: How to Overcome It and Unlock Potential in Yourself and Your Organization · Robert Kegan and Lisa Laskow Lahey
This is the authors' previous book, which provides a deep dive into the ITC framework that is presented as a key tool in Chapter 6 and used by the fledgling DDOs in Chapter 7.
- In Over Our Heads: The Mental Demands of Modern Life · Robert Kegan
This book lays out the foundational theory of adult development and mental complexity that underpins the entire DDO concept, explaining the 'adaptive gap' that DDOs are designed to address.
- Mindset: The New Psychology of Success · Carol Dweck
The book explicitly references Dweck's work, contrasting the 'fixed mindset' (prevalent in ordinary organizations) with the 'growth mindset' that is fundamental to a DDO's culture.
- Organizational Culture and Leadership · Edgar H. Schein
Mentioned in the book, Schein's work provides a foundational understanding of organizational culture, which is the primary medium through which DDOs operate.
- The Functions of the Executive · Chester Barnard (1938)
Chapter 10 identifies this book as providing the seminal concept of 'willingness to contribute to the cooperative system,' which forms the theoretical foundation for the modern construct of Organizational Citizenship Behavior (OCB).
- The Psychology of Careers · Donald E. Super (1957)
Chapter 3 cites this as a foundational work that established the concept of career stages, a model that has profoundly influenced career development theory and research for decades.
- Decision-making in the employment interview · E. C. Webster (1964)
Chapter 6 highlights this as the key report from the influential McGill University studies, which revealed the cognitive biases inherent in unstructured interviews and shifted the focus of research toward understanding the interviewer's decision process.
- Principles for the Validation and Use of Personnel Selection Procedures · Society for Industrial and Organizational Psychology (SIOP)
Multiple chapters (e.g., 13, 15) refer to this document and the related AERA/APA/NCME 'Standards' as the authoritative professional guidelines that define best practices and core concepts, like the modern unitarian view of validity, for the entire field of personnel selection.
- Managing Human Assets · Beer, M. et al. (1984)
This is a seminal book that introduced the 'Harvard framework' of HRM, emphasizing a multi-stakeholder approach that considers the interests of employees, not just shareholders. It provides a foundational 'soft' HRM perspective.
- Strategic Human Resource Management · Fombrun, C. J., Tichy, N. M. and Devanna, M. A. (1984)
This book introduced the 'Michigan framework,' which advocated for a 'hard' HRM approach focused on tightly matching HR strategy to the business strategy (vertical fit). It is a foundational text for the strategic alignment concept.