A Study For The Implication Of Compensation Strategies On Performance In Information Technology Enterprises

Forrester research predicted the growth of IT global purchasement would increase 7.1%, to$1.69 trillion in 2011. Chinese software industry association (CISA) survey showed that China’sinformation service industry scale in 2010 increased about 26% than that in 2009, to 1.12 trillionYuan. China’s IT industry will also show the same strong growth momentum in 2011. AndHangzhou, China’s“electronic business capital”, has carried out key construction of 7 high-techparks.IT enterprises’features—high-technology and rapid development—determine thecharacteristics of employees. Employees in IT enterprises are more independent, pay more attentionto the realization of self value, and pursue higher work flexibility and more challenging work. Theyhave some kind of ability for self-design and self-management, and desire more respect. Theyprefer the atmosphere of cooperation and teamwork. However, nowadays few IT enterprises treatcompensation management seriously. Most enterprises pay for position as a traditional way, andcarry out compensation management in terms of past experience. There are more randomness andhuman factors, less rational planning ingredients.The study examines the links between compensation strategy and organizational performancewith the control variables of business strategies and firm size. The study does statistical analysiswith the data which was collected by using the questionnaire method to get the results forsupporting hypothesis. The compensation strategy elements include the pay level, criteria for payincreases, the degree of emphasis on incentive pay, and the degree of participation in decision. Moststudies in the past only use perceived measure as the index for firm performance, the present studyincorporates both perceived and objective performance indices in order to get a more completesense on which compensation strategy will influence the organizational performance most. Theorganizational performance measures consist of both the subjective market performance and theobjective financial measures-ROE & ROA.For perceived market performance, compensation strategies explained an additional 27.6percent of the variance. The results showed compensation strategies and organizational performancehad a significant influence. Compensation strategies affected perceived market performance andfinancial performance directly. The present study found that higher pay levels and pay raise basedon performance are positively associated with the perceived market performance. However, theemphasis on incentive pay is negatively associated with the perceived performance, which isopposite to Hypothesis 3a. To some extent, high pay levels can improve the financial performance. There is some practical significance according to the research results. IT enterprises should payattention to two points as follows when design strategic compensation: Firstly, IT enterprises shouldoffer competitive compensation, which is closely related to performance. Best performers deservethe best compensation. Secondly, IT enterprises should provide employees with challenging workand opportunities. We should not ignore the“internal compensation”management and pay toomuch attention to“external compensation”.