Guiding reward principles in tough economic times

REWARD MANAGEMNT

Guiding reward principles in tough economic times

In a period of economic adversity it is essential that organisations lay the reward groundwork so they are as well placed as possible to benefit from recovery. For the Hay Group, a firm of management consultants, the key to long-term growth is ensuring that reward programmes are aligned with strategic business objectives and support the work culture of the organisation.

Hay has developed a set of reward recommendations to help businesses which are "uncertain about how to manage their company's future". Its essential message is that even in times of cost cutting, be sure to identify and reward your high performers and key contributors.

Hay's seven guiding principles for reward programmes

1. Continue to reward your top performers - well

Businesses should consider bonuses, share options and above-market pay increases when rewarding top-performers regardless of budgetary constraints. "Many top-performing companies use difficult economic times to attract the best talent from their competitors," Hay argues.

2. Don’ t blindly follow the herd

Invariably, with the onset of a harsher economic climate the first response is to take drastic cost-cutting measures and lay off people. But Hay has a stark warning for those businesses which "follow the herd": redundancies have rarely helped organisations in the long run.

The consequences of widespread corporate layoffs can be hugely damaging: severance costs, litigation, lost institutional knowledge, low morale and trust in management. "Finally, they increase recruiting costs when the economy rebounds, along with a culture where 'survivors' are often risk-averse and more politically driven," says Hay. "Companies that avoid massive downsizing find that they have advantages, such as a more loyal workforce, quicker reaction time to rebound, and workers who are more productive and innovative."

3. Use performance management processes to cut the fat, but not the muscle

Hay reckons that forward-thinking companies understand it is imperative to have the right talent on board ready to deliver long-term success once the economy has recovered. "Rigorous performance planning, coaching, assessment and reward processes help ensure that your top people are motivated and engaged in the organisation."

4. Organise work for maximum efficiency and optimum results

As Hay observes: "Through processes that more clearly define jobs and roles and match jobs to individual capabilities, organisations can increase their performance and even reduce costs as they achieve more with less."

5. Do not hastily alter your incentive and bonus programmes

If short- and long-term programmes are not working as intended, then, of course they need to be reviewed. But, as Hay points out: "The key is to ensure that the incentive programmes reinforce the business strategy and reward strategy of the organisation."

6. Non-cash benefits programmes and other rewards count big in down times

"The value of non-cash benefits often becomes heightened in a down economy because employees are more nervous about their own security and look for reinforcement that their employer is indeed committed to them," says Hay. So, when the hard time hit, the best companies become "proactive". They focus on work-life balance, employee recognition, value statements and communication.

As Hay explains: "Studies show that some non-cash benefits can be psychologically worth three-to-five times their cash equivalent to employees, so take advantage of that. If you don’ t know what rewards are important to your employees, then consider conducting a brief survey."

7. Leaders need to set a compelling vision and reframe employee expectations

Finally, Hay suggests that, above all else, leadership is the key to long-term business success. "Leaders must use repeated and consistent messages in dealing with employees during these times. Employees are anxious so there should also be a mechanism for them to ask questions and receive timely answers. Realistic communication is absolutely critical during tough periods of economic change."

A final word

Want to know more?

Title: Reward Management: The impact of current economic conditions on reward programmes, Hay Group.

Availability: You can download a copy of the report, free of charge, in PDF format. Visit the Hay Group web site and click on the "Online library" . . .

www.haygroup.com

Posted 1 May 2002