Results of CIPD reward survey for 2004

REWARD MANAGEMENT

Results of CIPD reward survey for 2004

The relentless chase after the perfect reward system has all too often been reflected in pay fads and fashions rather than rational decision-making. But new research by the CIPD concludes that the key to reward success is not so much a single magic bullet but a strategic, integrated framework that allows you to select the most appropriate reward initiatives for your organisation and then implement and operate them in a way that managers and staff understand and support.

In the mythical search for the magic pay formula to push their companies ahead of rivals, organisations have been lured into adopting all manner of new reward approaches. Yet there are many examples of failure and, indeed, much dissatisfaction among employees with some of these less than effective reward creations. So, why are changes to reward not always a resounding success in the context of generating trust and commitment?

For the CIPD, the answer is straightforward: either they were inappropriate for the organisations, or they were implemented ineffectively.

As Charles Cotton, the CIPD reward's adviser, explains: "Many reward initiatives tend to fail, not because they were inappropriately chosen or poorly designed, but because insufficient attention was paid to implementation, especially around the idea of communication."

Involvement and communication

It seems that the reality is that organisations could do a lot worse than remember one golden rule for rethinking reward: involve your staff in reward changes, listen to their concerns and fears.

But the CIPD research found that employers are simply not doing enough to educate their employees and involve their line managers in the policy determination and evaluation process. Although 76% of employers claim that they carry out a regular evaluation of their reward policies, only 58% involve line managers in implementing the organisation's reward policies and practices, which suggests that "implementation of these policies often leaves something to be desired," says the CIPD.

Another 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. But the CIPD found that most employers devote the main focus of their reward communication to the start of the employment relationship -- in the recruitment and selection process, during induction or through the staff handbook.

As the CIPD points out: "There appears to be a less widespread attempt to communicate in a strategic co-ordinated way with employees once they start work."

Key survey results

The CIPD research is based on survey returns received form 572 organisations employing 1.5 million employees.

Base pay management Just under half of respondents (48%) use job evaluation and this is predicted to grow to 53% in 2004, "prompted in part by concerns over equal pay," says the CIPD. Two-fifths of respondents (39%) use broadbands to organise their pay structures.

Variable pay There is widespread use of variable pay, although this is concentrated more among private sector organisations and among management employees. The vast majority of manual workers receive between 1% and 10% of basic salary as "variable pay".

Benefits Despite continuing cost pressures, employers are concerned with ensuring that their total rewards offering makes them an employer of choice, with more planning to introduce new and extended benefits than reduce them. Family-friendly benefits will see the most activity in 2004, with 7% of employers planning to introduce them. Flexible benefits will become increasingly popular among employers in 2004, with 9% of employers planning to introduce this type of scheme.

Evaluation of reward policies As many as 93% of survey respondents say they evaluate the effectiveness of their current reward policies and practices. The most popular measures are "HR-based", with labour turnover and staff satisfaction as the main indication of success. Three-quarters of the sample (76%) report that they carry out a regular systematic appraisal. Less than 10% involve employees in assessing the effectiveness and need for change.

Equal pay audits Nearly half (48%) of the employers surveyed plan to carry out pay audits in 2004, spurred on by the threat of government intervention. This compares to 29% of employers in 2003, and 20% in the previous five years. Says the CIPD: "This shows that progress is being made to address equal pay issues through government encouragement rather than legislative enforcement"

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Title: Reward Management 2004: A survey of policy and practice, Chartered Institute of Personnel and Development.

Methodology: Questionnaires were sent to reward specialists and people managers in the public, private and voluntary sectors in November 2003.

Sample size: Replies were received from 572 organisations employing around 1.5 million people.

Availability: To download the 50-page report, free of charge, in PDF format visit the "Pay" section of the Institute's site at www.cipd.co.uk

The Chartered Institute of Personnel and Development has over 118,000 members and is the leading professional institute in the UK for those involved in the management and development of people. To find out more visit www.cipd.co.uk