The “High-Road” Approach to Compensation and Benefits Practices: Enhancing Competitive Advantages

2. Types Of Hrm Systems: Control-Based Versus Commitment-Based Systems

Organizations can vary in the focus of their HRM systems and whether an organization emphasizes control or commitment. Control-based HRM systems as a traditional HRM approach involve an emphasis on rules and procedures, punishment, and close employee monitoring whereas commitment-based HRM systems or high-performance work systems reflect investing in training, career opportunities, higher wages, and employee benefits (Madhani, 2021b). Low-road approach organizations adopt high control-based HRM systems and are thus stuck in a “vicious cycle”, where employers are constrained with labor budget, and hence they are hesitant to invest in employee training or other benefits that increase employee engagement and retention and boost organizational performance. Low morale and high rates of turnover further reduce sales and profitability; thus, the vicious cycle continues. Organizations with commitment-based systems capitalize on improving employee skills, motivation, and opportunities to contribute, to improve organizational performance on measures such as turnover (Lepak et al., 2006). When employees see their jobs as long-term career opportunities, rather than short-term stints, their satisfaction with their organization increases which, in turn, reduces turnover rates (Grewal et al., 2017)