How to Strengthen Individual Competencies? the Role of Compensation: an Alignment Between Firm Strategy, Human Capital, Competencies and Compensation

Individual competencies are defined as the set of knowledge, skills and abilities that the employees possess and apply in their jobs. The purpose of this work is to analyze to what extent different strategies require a diverse set of individual competencies and different human capital and which compensation systems may incentive employees to acquire the desirable competencies for each strategic option. We carried out an analysis in a sample of manufacturing firms using structural equations models. Our findings suggested that the compensation systems strengthen the strategic option of a company by fostering the necessary competencies for its development.