Compensation research past, present, and future

Past compensation research has largely reflected organizational characteristics and personnel practices that had an internal rather than an external focus. Internal labor markets typically characterized organizations following WWII up until the 1980s. Consequently compensation research focused on issues related to managing compensation in this type of structure that emphasized areas such as internal equity, job evaluation, and individual reactions to pay. Recent changes in the environment have resulted in a greater role of external factors, such as external labor markets, market pricing, and external competitiveness, on compensation practice. While practitioners today have more of an external focus in compensation system design, present compensation research has not kept pace. In the following paper we argue there is a need to redirect future compensation research to include a consideration of external factors.