Pay Strategy:Resolving Tension between Institutional Conformity & Organizational Differentiation

The standard choices before organizations for its pay practices are either to abide by institutional norms or to incorporate firm-specific behavior (idiosyncratic fit) or to follow a combination of the two. Organizations’ choice of a practice is based on the human capital it has or the ones it seeks to acquire. This article examines how workforce characteristics and job characteristics among gold, white, pink and blue-collar workers act as the key to determine organizational pay strategy. The article outlines the pay strategy continuum based on workforce characteristics and use Institutional Theory and Resource Dependence Theory to support the propositions. It concludes that a combination of the three based on the distribution of various worker categories would contribute more significantly to organizational efficacy.