REWARD STRATEGY
Now is the time to set things right - “re-evaluate the role of reward”, says Dr Jonathan Trevor
Reward has become increasingly complex, impossibly technical, focused on too few people, and has serious unintended consequences. That’s the stark warning from Dr Jonathan Trevor, Director of the Centre for People and Organisation, Cambridge Judge Business School, University of Cambridge.
Writing in a recent edition of People Management magazine, Trevor urges reward professionals to embrace a new approach to reward so that we can liberate value across the organisation.
His analysis deserve a wide audience. The questions it raises are both timely and supported by in-depth research. Here are some of the key elements he writes about . . .
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A central theme of Trevor’s research is that the nature and role of reward in organisations has changed dramatically during the past 30 years:
“We have invested instead in the notion that reward is a key element in securing performance and value creation. Management unilaterally, so the theory goes, chooses reward strategies, practices and processes that best support the strategic direction of the organisation. Reward, when managed strategically, is a powerful means through which employers promote employees’ line of sight with managerial goals, align effort and secure desirable behaviours. It is still a critical element of attracting and retaining talent, but its role as the behavioural lever is its real value. However, managing reward in the strategic sense is far from straightforward.”
A critical element of this strategic reward approach is the use of performance pay:
“Unity of interest is the new order of the day, and incentives appealing to the financial self-interest of employees at all levels, from the bottom to the top (especially), have become the primary means through which it is secured.”
However, there are all too many drawbacks to strategic reward. As Trevor explains:
“Research indicates that attempts to use reward strategically can prove to be more of a liability than a benefit, producing conflict rather than unity.”
And Trevor also has reservations about performance-related pay:
“As a result, reward specialists believe an overhaul of performance-based rewards is necessary, given the many acknowledged challenges and unintended consequences experienced when attempting to link pay to performance.”
His research reveals that worries over “talent attrition” of a few key managerial positions are driving reward decisions much more than any other consideration, including performance:
“Companies are prioritising their top management populations more than ever and will do anything to hold on to those precious few because, it is perceived, corporate competitiveness depends upon it. The implication is that value flows from the few at the top – not the many who are destined merely to follow. Performance is the secondary concern in reward – a talent ‘logic’ that favours the few and not the many has supplanted it.”
One of the most telling discussions in Trevor’s work focuses on the “transition from an industrial age to the uncharted territory of the technology enabled”. So what needs to be done about reward systems to ensure that they evolve to support the implementation of new approaches to organisation? The solution, Trevor concludes, is to re-evaluate the role of reward and, in particular, “embrace the many”:
“What reward looks like in future organisations is not yet clear, but investing solely in the few would seem a perversion of the empowering logic of the information age.”
A final word
“Over recent years, reward has become impossibly technical – and not just at the executive level. Firms are locked in a tournament of technical escalation on all fronts. The result is mutually assured abstraction of reward practice to the point where it is no longer grounded in the imperatives of the business, but aligned instead to generic market norms and so-called best practice. It is a path to non-alignment between reward and strategy. Worse still, institutional research indicates that many companies merely follow the herd down the path of technocracy and normative practice adoption when faced with uncertainty over reward outcomes. After all, how wrong can something be if everyone is doing it? Very wrong in fact – just because it appears to work elsewhere does not ensure relevance in all contexts. Equally, overly technical reward systems are fundamentally ineffective – how can they be motivational if they cannot be understood?” - Dr Jonathan Trevor, peoplemanagement.co.uk, 9 January 2012.
Want to know more?
Title: “A rewarding crisis for HR?”, by Dr Jonathan Trevor, peoplemanagement.co.uk, 9 January 2012.
Availability: You can read the article online at www.peoplemanagement.co.uk/pm/articles/2012/01/a-rewarding-crisis-for-hr.htm. To subscribe to People Management magazine visit https://www.alliance-media.org.uk/redactive/PM/.