REWARD MANAGEMENT
Reward rules are being rewritten, says Hay
Long gone are the days when reward was just about cash and benefits. Hay Management Consultants thinks reward strategies still need to become much more complex, embracing everything from work environment and quality of life considerations, to the opportunity for advancement and recognition. But above all, employers must satisfy employees’ emotional and practical needs. Hay, in its new study Reward in the 21st Century , has dubbed this concept emotional reward for engaged performing people .
Recruitment and retention
The report covers a broad range of topics centring on what really motivates staff at work — whether pay and incentives, or personal development and the work environment.
But one powerful message comes through: recruitment and retention are the central issues in the battle to push your business ahead of its rivals.
In the words of the Hay researchers:
The winners will be those organisations that create the climate in which talent can flourish. They understand that reward, in its widest sense, is a key determinant of a climate that maximises performance and minimises the loss of their best people. And they are taking practical steps to align their reward strategy and business goals. It is about having people engaged in the business and performing to the best of their ability.
Reward strategies must become more complex . . .
There was a time when a company’ s reward package was a straightforward thing. However, greater labour mobility, changing demographics and higher levels of education have intensified the need for businesses to think more creatively about how they are going to keep their people. According to Hay: Employees’ aspirations and requirements are becoming more diverse, and reward strategies must, in turn, become more complex.
This kind of thinking leads to a much broader approach to reward, embracing elements such as work-life polices, more flexible benefits, recognition, flexible working practices and a challenging, varied role.
. . . with a greater focus on non-financial aspects of reward
In short, employees will expect something that HR commentators call the psychological contract — a concept that runs the whole gamut of how people are rewarded by work. The elements of reward in the contract are both the monetary and non-monetary factors that influence each and every employees' feeling about what they get back from their efforts.
As Hay puts it: It is all about how employees feel about their job, how motivated they are to perform and, in turn, how likely they are to stay. It is a key weapon in the finding people who are engaged and performing.
Ten golden rules for implementing a strategy based on emotional reward
So, how can you start creating an environment that is more emotionally rewarding? Here, distilled down, are Hay’ s 10 golden rules:
1. Don’ t rely too heavily on pay.
2. Give employees challenging opportunities and goals.
3. Look at your workplace and the physical equipment.
4. Listen to your staff and respond to their ideas.
5. Commit to your employees’ future employability through training, feedback and opportunities for career development.
6. Address the work-life balance.
7. Assess your staff fairly and consistently.
8. Consider who exactly you are rewarding, and why.
9. Remember that you cannot keep all your people forever.
10. The people who leave are ambassadors for your company.
Increased flexibility in benefits
One of the other dominant themes to emerge from Hay’ s research was the use of flexible benefits to achieve various goals. Flexibility in benefits is currently at the margins of mainstream reward practice, but it finally looks set to take off. According to the figures gathered by Hay, just 2% of survey participants now operate a formal flex scheme for their staff, but 26% are likely to do so in the future (see table below).
Many employers are under pressure to beat their rivals by offering more competitive pay and benefits packages. Flexible benefits, including child care, flexible working practices and lifestyle management, in addition to differentiated reward strategies for varying functions, will enhance this competitiveness , Hay says.
Closer link to performance
Increasingly, the performance of employees, especially those at more senior levels, will be linked to organisational goals. Performance is probably the top priority of organisations currently and in the near future , Hay suggests.
Pay for performance is already the norm among the survey participants, but this relationship will become much closer in the future . Hay predicts that more and more organisations will introduce incentive schemes to reward employees’ contribution.
The shape of reward in 2005
| Per cent of organisations | Directors | Managers | Upper staff | Staff | Manual |
| Paying for performance |
|
|
|
|
|
| Link pay wholly to company or individual performance | 70% | 76% | 87% | 55% | 51% |
| Pay at risk | 61% | 69% | 44% | 37% | 34% |
| Benefits |
|
|
|
|
|
| Clean cash | — | 2% | 6% | 2% | — |
| Cafeteria-style scheme | 29% | 28% | 19% | 16% | 15% |
| Limited flexibility in benefits provision | 24% | 19% | 19% | 29% | 18% |
| Work-life |
|
|
|
|
|
| Sufficient flexibility to determine work patterns and hours | 9% | 19% | 6% | 5% | 6% |
Source: Hay Management Consultants.
Want to know more?
Title: Reward in the 21st Century: Why do people work for you? Hay Management Consultants
Methodology: HR professionals responded to a questionnaire. Data is analysed in two ways: by job level (directors, managers, upper staff — those with professional qualifications or supervisory responsibilities — staff and manual) and by sector (finance, industrial and service, and not for profit/public sector).
Sample size: information for the report was provided by 123 organisations.
Business sectors: firms participating in the survey span a broad range of sectors. They are almost evenly spread between national and multinational organisations.
Availability: contact the HR service centre at Hay Management Consultants in London, tel: 020 7881 7200 or email UK_Infobus@haygroup.com
Find out more about Hay . . . www.haygroup.com