What makes an effective total reward strategy?
You may have an employee reward programme. Employees may be taking advantage of the benefits you offer. However, is it the best fit for your organisation and its culture? What underpins the reward, compensation and benefits you offer?
In this blog, we explore what makes an effective reward strategy and why it is important.
The importance of a reward strategy
We frequently discuss with clients the importance of taking a strategic position on reward before making changes. We believe that Reward Strategy is key. But what is it and how do you get started?
In Reward Management, Armstrong and Murlis say that reward strategy “…clarifies what the organisation wants to do in the longer term to develop and implement reward policies, practices and processes that will further the achievement of its business goals. It is a declaration of intent, which establishes priorities for developing and acting on reward plans that can be aligned to business and HR strategies and to the needs of people in the organisation.”
A definition we like is, “an approach to reward based on a set of coherent principles in support of the organisation’s aims.” But we know that most organisations don’t have a reward strategy. According to a CIPD Reward Management survey, only just over 1/3rd of participant organisations have a reward strategy.
It is the totality of what we do that is important and all of the elements of reward carry messages. Professor Shaun Tyson (Human Resource Strategy, 1995) talked about just that. He said, “Monetary rewards may not motivate in the long term, but they certainly symbolise the value corporations attached to specific behaviours – for example rewarding long service, interpreted as loyalty, or rewarding performance above other attributes.”
How to get started with a reward strategy
The main problem very many people have is how to get started.
We recommend a Reward Strategy Framework. This includes a simple reward philosophy or statement of the organisation’s beliefs about reward, and its reward principles. Thinking about the following can help to build the framework:
- reward compared with other things about working in the organisation
- what internal equity means
- market position
- organisation’s ability to pay/profitability
- the relationship between base pay and variable pay
- position on benefits
- recognition and reward
This can be covered in less than a page of A4. Going through the process will raise the relevant issues that need to be agreed which will give you the reward framework within which you can develop change.
If you are looking to develop a total reward strategy and reward principles for your organisation, using the basic reward framework above is a great way to start.
If you think you need more guidance, then do contact us. Our reward consultants can both assess your current reward offering and work with you to create an effective reward strategy.