Compensation Management to Stimulate Performance in Organizations

Abstract

Compensation management is a strategic mechanism that enhances employee motivation and performance, contributing directly to organizational productivity and competitiveness. This article aimed to 1) explain the concept and significance of compensation management within the context of organizational development, 2) synthesize the key factors influencing compensation practices that support employee performance, and 3) propose compensation approaches that align with current economic, social, and technological conditions. This study employed qualitative synthesis based on interviews with entrepreneurs, human resource professionals, and academic experts conducted through online communication platforms, together with a review of relevant literature and empirical research. The analysis revealed four essential dimensions of effective compensation management: 1) a clear yet flexible compensation structure, 2) fair job evaluation and performance-based rewards, 3) labor market benchmarking to ensure competitiveness, and 4) the promotion of essential hard skills, soft skills, and competencies in digital technologies or artificial intelligence (AI) to foster continuous self-development. In conclusion, compensation strategies that are well-aligned with organizational goals and responsive to contemporary contexts can strengthen organizational capabilities and support sustainable growth.