An organization with a Free Agent HR strategy:
a) must be concerned with external equity, which concerns the fairness of what the company pays compared to other possible employers
b) must be concerned with justice
c) must be concerned with internal equity, which concerns the fairness of what the company pays compared to other possible employers
d) should have narrow pay bands
The correct answer and explanation is :
The correct answer is: a) must be concerned with external equity, which concerns the fairness of what the company pays compared to other possible employers.
Detailed Explanation:
A Free Agent HR strategy focuses on attracting and retaining high-performing individuals from the external labor market rather than developing talent internally over a long period. This strategy is commonly used in industries where organizations compete aggressively for the best available talent, such as tech companies, consulting firms, and entertainment industries.
In a Free Agent HR model, employees are often seen as independent contributors who may not stay with the company long-term. Instead of fostering long-term loyalty, the organization offers competitive wages, benefits, and other incentives to entice these talented individuals to join — and stay — even if only temporarily.
Because these employees have multiple job opportunities available to them, external equity becomes crucial. External equity refers to ensuring that an organization’s pay rates and benefits are competitive compared to what other employers offer for similar roles. If an organization following a Free Agent strategy does not match or exceed the compensation packages of its competitors, it risks losing top talent to other companies.
By contrast, internal equity (mentioned in option c) is concerned with fair pay within the organization — how employees’ salaries compare to each other internally — but Free Agent strategies focus less on this. Free agents are typically more concerned with how much they can earn on the market rather than how their pay compares to coworkers.
Similarly, although justice and fairness (option b) are always important in HR, the key distinctive factor for a Free Agent strategy is external competitiveness. Also, option d is incorrect because Free Agent strategies usually prefer broad pay bands to allow greater flexibility in offering competitive salaries to desirable candidates.
In summary, Free Agent HR strategies must focus on external equity to successfully attract and retain top talent who have many external job options.