AbstractsBusiness Management & Administration

Business strategy and compensation strategy are commonly recognized as important strategic issues in an organization over the past decades. Collectively, they play a crucial role in determining organization’s performance and economic success, hence the correlation and interaction between the two is gaining more attention among companies and researchers. Literature states that an optimal alignment between business strategy and compensation strategy facilitates organization to secure its competitive advantages in specific market place.   The purpose of this thesis was to examine the alignment of business strategy and compensation strategy. For this reason, a qualitative case study was conducted in a company within the service industry, operating in the Nordic market. This was supported by existing literature that was studied to gain comprehensive knowledge of the researched topics and their current stage. The empirical data was collected by interviewing three managers, as well as three employees, in order to obtain triangulated and deep insight. The results showed that the organisation has adapted a cost leadership business strategy and the pay structure is largely dictated by the union. Due to this, the competitiveness of monetary compensation is limited, hence in order to retain talent and motivate employees, the company has established an extensive intangible compensation strategy. The professionality and quality of service is assured and in line with the strategy when it is facilitated by management transparency, team spirit, and positive or constructive feedback. Furthermore, the analysis demonstrated that the link between business strategy and compensation strategy in the case is stewardship theory, and the empowerment of employees is enabled in order to foster commitment and engagement.