The Limits on Pay as a Strategic Tool: Obstacles to Alignment in Non‐Union Environments

Strategic human resource management literature emphasizes the potential of pay to secure strategically desirable employee outcomes for the employer. Strategic pay, in contrast with pluralist models of pay determination, assumes an absence of collective bargaining constraints. This article analyses the process of determination of non-unionized managerial, professional and technical pay in seven leading consumer goods firms that claim to use pay as a strategic tool. It demonstrates that implemented pay practice is often remote from what is aspired to strategically. Despite the absence of collective bargaining constraints, there remain unavoidable obstacles to the ability of management to implement pay systems aligned to strategic goals. These constraints impose fundamental limitations on the use of pay as a strategic tool.