Inside the Offer Letter: Teaching Compensation Design Through Simulation at IIM Lucknow
By stepping into the role of a Talent Acquisition manager, students at IIM Lucknow navigated real hiring and compensation trade-offs under realistic budget and time constraints. The simulation created a useful experiential learning environment for the class. It helped students apply concepts related to hiring and compensation in a structured and data-driven manner.
The simulation exercise was conducted as part of the core Human Resource Management course for students of the Indian Institute of Management Lucknow, to provide students with an applied understanding of issues related to talent acquisition and compensation design. The single-player format of the microsimulation game created an immersive learning environment in which students assumed the role of Talent Acquisition. They were required to make decisions under realistic constraints. Instead of approaching the topic only from a conceptual perspective, students were placed in a situation where they had to analyze information, evaluate alternatives, and make trade-offs similar to those faced by organizations in practice.
A useful feature of the simulation was the integrated evaluation component. The evaluation helped assess how effectively students applied the concepts discussed in class. It also encouraged participants to reflect on the outcomes of their decisions and the reasoning behind them, thereby reinforcing the learning process.
The simulation aligned well with the session's learning objectives. Students were required to evaluate candidate profiles and prioritize hiring decisions under conditions of limited budgets and time pressure. They also had to design compensation packages that took into account role seniority, market benchmarks, and the firm's strategic priorities. Although the major focus was on transactional rewards, they also explored non-cash levers — such as equity, benefits, and signing bonuses — to influence offer acceptance while managing dilution. The exercise also introduced them to the use of analytical rubrics, such as compa-ratios and percentile benchmarks, thereby encouraging a more data-driven approach to compensation decisions.
The interactive nature of the simulation contributed to a high level of student engagement during the session. Students participated actively in discussions and deliberations while making their decisions. The format also appeared to generate greater interest in the topic, as students could see how theoretical ideas translate into practical decision-making contexts.
Overall, the simulation worked well as a teaching tool. It supported the achievement of the learning objectives while also enhancing student engagement and interest in the subject.
