Creating Strategic Alignment Between Organizations and IT Professionals Through Compensation

As information systems become an important competitive advantage for firms in the information age, how to attract and retain IT professionals through compensation plans has been a critical issue in human resource management. This paper presents the rationale of designing compensation for IT professionals based on the perspectives of agency theory and contingency theory. With rapid change in IT professions and increasing complexity of IT work, firms face the challenges of ineffective monitoring and outcome uncertainty. Under these constraints, incentive-based and competency-based compensation are encouraged as they help create risk-sharing and reduce uncertainty for firms. In addition, they motivate IT professionals to achieve firms’ strategic goals and encourage continuous learning.