The way these three components of compensation are allocated sends a message to the employees about what management believes is important and the types of activities it encourages. Furthermore, for an employer, compensation constitutes a sizable operating costs. In certain manufacturing environments, compensation is as high as 60 percent of total costs and even higher for many service organizations. Ravin Jesuthasan, compensation specialist at Towers Perrin, notes, "Labor costs are a significant portion of expenses for any organization and a very substantial portion for some, but companies continue to spend on pay programs without any evidence of business relevance. This means that compensation should be managed strategically to ensure that costs are kept down while employee motivation and performance are kept down while employee motivation and performance are kept tip. Achieving such a balance is no easy task.