With dramatic changes in work, growth of information technology, globalisation of business and the growth of transnational corporations, human resource specialists face new challenges to evolve innovative compensation and incentive packages, retain the best employees the companies have, look into issues of job hopping, high attrition rates and cope with a competitive environment.

Says John L Anderson, owner, Hewitt Associates, a leading HR consulting organisation in the US: ``In recent years, European and Asianbusinesses have seen an Americanisation of pay. Stock options, which started in the US in 1960s, picked up in the 80s and today these are an important part of compensation packages. The reason being that owners run companies differently and are better tuned to aspects like enhancing shareholder value. With stock options, the employees' personal involvement in business is much more and the results are also better.''

Another reason for increase in stock options is the difficulty in finding the right talent. States Anderson: ``Talent shortage is going to be a major problem. Particularly in areas of technology and computers, the demand far outstrips supply. With the imminent skills shortage, keeping the right people will be very difficult and challenging.''

In Europe alone, there are more than 367,000 job vacancies in the IT sector. To attract qualified IT staff, many large companies in Europe and the US are offering high salaries, flexible benefits and promises of a dynamic working environment. CommentsAnderson, ``To retain people compensation in technology companies has to be very creative. Normally professionals switch three to eight companies in a lifetime. Long-term loyalty is very different today. Companies might see early retirements, fiercely competitive work environment and more loyalty to skills that individuals possess than the companies they work for. Lack of loyalty does not mean that they fail to deliver, but only conveys that they may not be with a particular company for a lifetime. Accountability is through the annual results. Those not performing will definitely be shown the door. In such a situation they may not find positions even in other companies.''

The complexity involved in evolving compensation packages can be gauged from the fact that these have grown from a personnel concern driven to a management tool designed to support the strategic plans and business goals of an organisation. Work culture and work environment are definitely important for an individual but good money is alwaysseen as an outcome of high performance and often the first thing that people look for.

``The more you pay the more I am going to stay,'' is the norm, says Anderson, and adds, ``pay has to be backed by adequate incentives. Compensation packages strive to have a right combination of pay and incentives. Also, when it comes to money, there is no maximum limit that a company can set at the CEO level. Very often people at that level move for better opportunity and money may not help retain them.''

As traditional routes to gaining competitive advantage become obsolete, companies will have to come up with attractive compensation packages to hire and retain the best talent. Even the most advanced technology, effective financial management and creative marketing are easily equalled by competitors. The only remaining source of competitive advantage is to leverage your number one asset - the people. And the kind of policies you have to retain the best of them will determine the outcome of your balance sheet.