UK organisations adopting pragmatic approach to reward strategy

REWARD STRATEGY

UK organisations adopting pragmatic approach to reward strategy

Most UK organisations have now adopted the American-originated concept of reward strategy, but they have abandoned the rhetoric and grand claims that were initially associated with this ambitious approach to reward. That's the main message to emerge from a study by Michael Armstrong and Duncan Brown, published in a recent issue of the US reward journal Compensation & Benefits Review.

Drawing on a series of extensive research projects carried out by the Chartered Institute of Personnel and Development and e-reward into contemporary reward practice in the UK, Armstrong and Brown attempt to summarise all this work and provide a picture of reward strategies and trends. From this raft of data, the authors conclude: "The UK reward scene today is characterised by diversity, empiricism and, to a degree, conservatism."

The report suggests that UK organisations are adopting a "more realistic and pragmatic assessment" of the role of reward strategy as a long-term contributor to organisational success. The authors note: "The belief that reward can be a leading driver of, rather than a contributor to, cultural change is not accepted in the United Kingdom so readily as it used to be."

Best fit

One overriding theme running throughout this study by Armstrong, a joint managing partner of e-reward, and Brown, assistant director general of the CIPD, is the desirability of organisation's adopting a "contingency approach" to reward.

Put simply, contingency theory states that to be effective, organisational policies and practices should be appropriate to the firm's unique characteristics. There is no one best way to do things in an organisation except to fit what is done to the particular circumstances: your culture, structure, work processes and business objectives.

As Armstrong and Brown explain: "Today, 'best fit' is more important than following supposed 'best practice'. Reward systems are tailored to the circumstance of the organisation -- its business environment, structure and culture. New ideas, including those originating from the other side of the Atlantic, are greeted with interest but also with some suspicion. The question raised is, 'Are they right for us?'."

Challenges facing reward professionals

Armstrong and Brown highlight three key challenges UK reward managers have faced and examine some of the solutions arrived at in important areas, including total reward, job evaluation, pay structures and contingent and variable pay.

• Challenge 1: The daunting task of implementing reward strategy and change. As Armstrong and Brown succinctly put it: "Formulation is easy implementation is hard."
• Challenge 2: Achieving line management commitment and capability. "Reward professionals can initiate new policies, but the line has the main responsibility for implementing them," the authors contend.
• Challenge 3: Aligning reward and business strategies. Armstrong and Brown explain: "Here again, aligning reward policies with business goals is easy to draw on a chart in a boardroom but much harder to deliver in practice."

Want to know more?

Title: "Reward strategies and trends in the UK: The land of diverse and pragmatic dreams", by Michael Armstrong and Duncan Brown, Compensation & Benefits Review, July/August 2005.

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Posted 13 January 2006