Strategic Orientation Towards Internal Customers : The Success Mantra of Volkswagen

Highly motivated, loyal and satisfied workforce is a key to corporate success. It results in new innovations, increased productivity, improved performance, higher profits and growth for the organizations. In the modern hypercompetitive era, the knowledge and skills of human resource are acknowledged as a source of differentiation from the rivals and creation of a sustainable competitive advantage. Due to such importance, companies spend a lot of time, money and effort in recruiting the right talent and designing attractive remuneration packages to ensure their retention. This act of pleasing their people, however, creates issues in ensuring accurate distribution of net income among all the factors of production, ultimately affecting the company’s overall performance. In this light, the present paper attempts to examine the impact of employee compensation strategy on firm financial performance, using the case of Volkswagen Group. Data for the period 1991-2017 has been collected from the company’s annual reports and analyzed using the regression method. The results show that Volkswagen Group gives the maximum proportion of its net income to its employees in the form of wages, salaries and other benefits. This strategy of delighting its people has a significant positive impact on its financial performance, measured using sales revenue