STRATEGIC HARMONIZATION OF PAY PRACTICES IN QUEBEC PRODUCTION AND DISTRIBUTION FIRMS

Under the constant pressure of economic factors, pay determination is now recognized as a human resource management practice, likely to incr ease organizational efficiency and, at the same time, stimulate cooper ation and trust between organizations and their employees. Even though there has been a wealth of literature on the subject of compensation, until now most proposals have been very conceptual and few efforts at empirical verification have been made. In the light of the strategic perspective on compensation, the objective of this study is to define the impact of organizational strategies on compensation systems of pro duction and distribution firms in the province of Quebec. According to some authors, compensation is becoming increasingly important in the management of organizations. However, can the existence of significant links between compensation and business unit strategy be verified? Do internal or external factors have an impact on compensation strategy? Furthermore, is pay determination influenced by market strategy, tech nological innovation, organizational structure, or the organization's size, age, sector of economic activity or union representation ? Is th e pay system for top management different from that for non-management employees? Finally, are new forms of remuneration emerging in Quebec organizations, as the evidence suggests, and to what extent?In keeping with current research trends on strategic pay determination, the pres ent study focuses on both management and non-management employees. Thr ee different hypotheses are investigated: (1) the relationship between business unit strategy and compensation strategy; (2) the link betwee n business unit strategy and the strategic pay choices; and (3) the li nk between organizational characteristics and compensation strategy. T he analysis of business unit strategy is based on Miles and Snow's (19 78) typology while compensation is measured with Gomez-Mejia and Balki n's (1992) model. Miles and Snow's (1978) typology is well known in th e field of organizational strategic management and is based on sound e mpirical data whose validity has been tested. Gomez-Mejia and Balkin's model is at the centre of recent studies based on the pairing of comp ensation strategy dimensions. Aimed at production and distribution org anizations employing 100 people or more, the present research was admi nistered by means of a questionnaire in the summer of 1995. Of the peo ple surveyed, 21% answered the questionnaire, which is a good represen tation of reality. Results show that theories based on the strategic p erspective, according to which compensation is influenced by organizat ional strategic development, are largely invalidated. Where it was exp ected that compensation strategy would differ from one organization to the other, consistent with the type of strategy adopted, similarities were identified. Analysis of the data on the relationship between bus iness unit strategy and strategic pay choices revealed significant dif ferences only in terms of risk taking where non-management employees a re concerned and of basic pay for management employees. Organizations whose success is based on their ability to innovate in the development of new product lines and which have management programs that give ind ividuals the utmost autonomy by promoting informal communication and i nternal competition, favour compensation policies where the firm's per formance influences the pay determination of non-management employees. On the other hand, management personnel are subject to knowledge acqu isition programs which have taken over the traditional job evaluation. They are thus required to further their knowledge and qualifications so as to increase their pay level rather than rely on promotion to hig her ranks with more responsibilities. As regards the influence of orga nizational characteristics, union presence was the only one shown to p lay an important role in the establishment of compensation strategy. C ompensation in unionized organizations is based on a mechanistic or mi xed pattern, in contrast with the organic pattern of non-unionized org anizations. To conclude, the results of this study clearly indicate th at strategic harmonization of pay practices is not yet prevalent withi n production and distribution firms in Quebec.