In Part One, we looked at comparison inside the organization. In external competitiveness, our second pay policy, we look comparisons outside the organization comparisons with other employers that hire people with the same skills. A major strategic decision is whether to mirror what competitors are paying or to design a pay package that may differ from competitors but better fist the business strategy.
External competitiveness is expressed in practice by (1) setting a pay level that is above, below, or equal to that of competitors; and (2) determining the mix of pay forms relative to those of competitors.
Both pay level and pay mix decision focus on two objective: (1) control costs and increase revenues and (2) attract and retain employees.