Practical guidance on implementing new reward systems


Practical guidance on implementing new reward systems

As reward practitioners, perhaps the most daunting task you will have to undertake is that of developing and implementing new or revised reward systems. It is not enough to know what to do, it is just as necessary to know how best to go about introducing and operating the resulting programme. Our new e-research guide provides a practical description of what you need to do in order to develop and implement a total reward programme in your organisation.

What you will find in this 72-page report by

  • How to develop and implement a total reward programme
Pages 11-58
We take you through the key steps that you should follow. You will learn how to conduct an analysis of the features of a reward system and a diagnosis of the causes of any problems revealed by the analysis.
  • Appendices
Pages 59-69
> Problem diagnosis
> Reward problem solving
> Total reward strategy checklist
> Reward policy checklist
> An example of a reward policy statement
  • Resources
Pages 70-72
A listing of research on how to develop, change, implement and operate reward systems.


Drawing on his vast experience both as an HR practitioner and a consultant, Michael Armstrong of has devised a step-by-step programme. It describes an effective approach for analysing, diagnosing and designing a total reward programme, highlighting all the key phases involved in the process.

Step 1: Project planning

Key stages

  • Define objectives.
  • Set terms of reference and decide scope of project.
  • Decide how work should be done.
  • Establish and brief project teams, form steering group and clarify decision-making responsibilities.
  • Determine sequence and timescale of operation.
  • Establish success criteria.

This initial stage involves a great deal of preparatory work and provides you with an agenda to go into the analysis and diagnostic phases of the work. The total reward programme should be implemented by means of a carefully planned and managed project. The normal rules of project management should apply.

Objectives should be set in terms of what has to be achieved and why

It its vital to define at the outset the objectives to be achieved by implementing the total reward programme, when is it to be achieved, and the anticipated costs and benefits. These objectives will form the basis for defining the scope of the project and its terms of reference.

Allocate responsibility for the project to a project manager and preferably a project team.

A project design team, made up of a mixture of line and HR staff from across the organisation, would carry out the vast majority of the detailed design work. Many organisations also form a steering group to act as decision-makers.

Prepare a project plan

The project plan sets out the timetable, the resources required, the cost budget and the responsibility for each part of the programme.


Step 2: Analysis - context and reward system

Key stages

  • Analyse present reward arrangements.
  • Examine organisation's structure, culture and operational processes.
  • Review current business, political, legal and reward context.
  • Assess strengths and weaknesses, threats and opportunities
  • Benchmark, but remember that "best fit" is more important than "best practice".

Your next step in assessing, designing and implementing a total reward programme should cover a thorough investigation into the context of the organisation - its internal and external environment - and the characteristics of the present reward system and the views of all the relevant stakeholders.

The aim is to get, via an in-depth research exercise, a full understanding of the existing arrangements, changing situation and future requirements.


Step 3: Diagnosis

Key stages

  • Identify key issues and problems to indicate where action needs to be taken under main headings of reward system.
  • Set and agree goals, principles and direction of future total reward strategy.

A diagnostic review examines each aspect of reward management and identifies the strategic issues that need to be addressed and any problems and their likely causes in order to provide the basis for the preparation of action plans.

It involves identifying where rewards are not effectively aligned with what the business and your staff need, leading to an assessment of what needs to be done, and why.

The diagnosis will, of course, provide a basis for an outline of relevant, practical and implementable programmes which will address the real issues in line with the strategy.

The best ways to gain an understanding of employee needs and the rewards that motivate your people to deliver results is through carefully-crafted attitude surveys, focus groups and the like.


Step 4: Proposals - development and evaluation

Key stages

  • Develop and evaluate proposals for design of total reward programme to deliver your principles and goals.
  • Detail total reward changes and practices - total reward philosophy, total reward strategy, reward policy and key elements of total reward mix.
  • Secure senior management agreement.
  • Formulate final proposals.

Your analysis (step 2) and diagnosis (step 3) should provide the basis for developing and evaluating proposals for the design or evolution of the main elements of the total reward programme.

Putting it all together

Begin this phase by looking at the over-riding areas of total reward philosophy, strategy and policy. Thereafter, you need to develop the myriad financial and non-financial rewards - job evaluation, pay structures, contingent pay, performance management, pensions and benefits and work-life practices.

Finalising proposals

Your final proposals for the total reward programme will flow from the initial analysis and diagnosis processes. The overriding message is that the organisation always needs to consider critically what it is really trying to achieve.

Policy approval

Policy should always be formulated in consultation with top management, who will need to be convinced that any proposals produced by the HR function will add value.


Step 5: action plan

Key stages

  • Formulate action plan

A detailed action plan is vital to the success of any development work. Your action plan indicates how agreed proposals will be implemented. In essence, it involves deciding what activities and tasks need to be carried out, and by whom, in order to arrive at a set of costed proposals for your new total reward strategy.


Step 6: Implementation

Key stages

  • Involve people at all stages to maximum extent possible.
  • Communicate fully on what is going to happen, why it is going to happen and how people will be effected.
  • Train line managers in skills they will have to acquire to carry out their new responsibilities - staff generally will also need training.
  • Test programme in part of organisation to assess likely impact of programme.

Time spent on implementation is time well spent - it can determine the success or failure of the total reward programme itself.


Running a pilot test in a part of the organisation can often play an invaluable role in helping genuinely to assess the likely impact of the total reward programme, and to tailor and fine-tune the subsequent roll-out and communications.

Involve those affected

The consensus among reward experts is that ownership and acceptance is much more likely if the maximum degree of involvement of all concerned is built into each stage of the programme.

Communicating to employees

An essential feature of any implementation programme is the very clear, effective and regular communication of aims, methods of operation and the impact. Transparency is essential.

Train all those involved

Training is necessary in any new procedures to help people to acquire the different skills required to manage and participate in the new system.


Step 7: Monitoring and fine-tuning

Key stages

  • Evaluate effectiveness of programmes and take action as required.
  • Conduct attitude surveys and focus groups.
  • Undertake quantitative analysis of employee and organisational data.
  • Review regularly and periodically the system to ensure that it is meeting changing business needs.
  • Modify reward policies and processes in accordance with changing needs of business.

Evaluating, monitoring - carrying out regular audits to ensure policies are working well and giving value for money - and revising your total reward programme is the final, ongoing step in the process.

Project management should continue after the process or system has been developed in order to ensure that is has been implemented smoothly. Remember that strategy formulation and implementation is an evolutionary process. New strategic demands on your organisation will require that new total reward strategies evolve to meet them.

Assess the value added and benefits realised to the business and also determine refinements - ideally this should include an attitude survey, as well as the use of focus groups, workshops and face-to-face interviews.

Want to know more?

Title: A guide to total reward: part 2 - Developing and implementing total reward, e-research, issue no. 4, October 2002, published by

Availability: A single subscription (11 issues) costs just £110 a year.

Click on "Research Reports" on the left-hand navigation panel of the web site and complete the online booking form.

For more details . . .


Tel: 020 7607 2686


Posted 3 October 2002