REWARD MANAGEMENT
What works when it comes to rewards?
This is an obvious question but one that, at least up until now, seems to have an elusive answer. Nevertheless, a recent study appearing in WorldatWork Journal has sought to discover the solution by asking more than 450 US compensation professionals what they believed to be the key to effective reward management programmes.
More precisely they were asked what does work when it comes to reward-programme design and execution and what are the key areas that need to be improved?
Three clear themes
While no definitive solutions emerged, a consensus did, with respondents highlighting three clear themes:
1. Pay-programme attributes.
2. Communication of reward programmes to employees.
3. Alignment of rewards with organisational goals, strategy and results.
These three highlighted areas represented umbrella terms covering a number of sub-categories within each one.
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For the pay-programme attributes, for example, sub-categories included:
programme eligibility
consistency over time
flexibility
standards and goals
connection between pay and performance.
As a whole, 35% of those questioned perceived one of these pay-programme attributes as key to improving reward programmes, while 26% saw one of these attributes as a key strength of their existing reward programmes.
Communication was the next most mentioned theme, with 29% of respondents indicating that reward communications needed improvement.
Perhaps more striking is that only 15% saw communication as a strength in respect of their reward programmes, illustrating this is yet again an area that requires attention.
The third major theme mentioned was alignment of rewards with an organisation’s business, which was slightly more likely to be reported as a strength than as an area in need of improvement (22% and 20% respectively).
Themes illustrate what to focus on
But, even at the authors’ own admission, these may seem like straightforward solutions to major problems, but success will be much easier said than done. Nevertheless, as they add, the themes at least provide a clear idea of the areas companies need to focus on and pointers for the future policy direction and to help with this, practical steps are provided.
Pay programme attributes
Organisations need to do much more than develop the ideal performance appraisal form or devise the perfect merit-increase guide – instead they should do so in an inclusive manner.
Establish linkages between performance and rewards that are clear and understandable to employees.
Differentiate rewards – not just performance ratings – between high and average performers, and between average and below-average performers. This undoubtedly will mean that some employees will not receive performance-based salary increases or incentive pay.
Ensure that managers and employees understand and appreciate all of the rewards available in the organisation. This goes beyond base-salary increases and variable pay programmes and includes promotions, recognition and learning and development opportunities.
Communication
Effective rewards communications typically include the following:
Simple and focused messages that offer brief explanations of rewards elements.
The use of multiple methods of communication, including newsletters, manager presentations, web sites and video segments.
Pilot tests of communications messages before broader rollout.
The education of managers and supervisors regarding the reward programmes before communicating to the broader workforce.
Keep repeating the message.
Alignment
Key steps to creating alignment, include the following:
Clearly define and articulate the business and reward strategies.
Determine the reward elements best reinforcing the achievement of desired goals and strategies.
Design reward contingencies (if-then’s) that reinforce the achievement of results.
Secure the support of leaders so that they lead the charge in communicating and sustaining employee commitment.
Create connections between employee accountabilities and business outcomes.
Not just money
In addition to traditional forms of reward, the report reminds us not to forget non-financial rewards, such as career and development opportunities, work-life balance and organisation culture as important forms of reward.
Research methodology
When asked about the term “rewards”, the study included non-monetary as well as monetary awards. The research was based on just two open-ended questions and with over 900 answers, the researchers needed to categorise answers according to specific themes. In total, 18 were defined including communication, work environment and benefits.
Answers came from 461 compensation and HR professionals in 435 organisations from both the public and private sectors, while firms were of various sizes and individuals responding were mainly mid- to senior-level staff.
A final word
Illustrating some of the lessons learned, two of the case-study respondents shared what they had discovered from their own experiences.
The first said: “One of our most effective pay-programme characteristics is that all rewards are tied into individual performance and accomplishment of objectives. Making sure financial objectives are continually reinforced is a critical gatekeeper for any reward being made.”
The other illustrated the importance of communication adding: “One of our most effective pay-programme characteristics is that all rewards are tied into individual performance and accomplishment of objectives. Making sure financial objectives are continually reinforced is a critical gatekeeper for any reward being made.”
Want to know more?
Title: “Reward programs: What works and what needs to be improved”, by Dow Scott, Tom McMullen, Richard S Sperling, Bill Bowbin, WorldatWork Journal, Third quarter 2007, Volume 16, no. 3.
Availability: Contact WorldatWork, 14040 N. Northsight Blvd, Scottsdale, Arizona, USA AZ 85260, tel: 001 480 951 9191 or email: worldatworkjournal@worldatwork.org.
WorldatWork, formerly the American Compensation Association, is one of the HR professions oldest and most distinguished bodies. Founded in 1955, it "provides practitioners with knowledge leadership to effectively implement total rewards – compensation, benefits, work-life, performance and recognition, development and career opportunities – by connecting employee engagement to business performance”. WorldatWork is a not-for-profit association with a membership of more than 30,000 human resource professionals, consultants, educators and others, in 30 countries.
For further details about WorldatWork visit www.worldatwork.org.