| REWARD MANAGEMENT Why do so many reward initiatives fail? The late-1990s were a period of spectacular change in reward management in North America. Yet the vast majority of these initiatives – almost six in ten – were considered unsuccessful or only "modestly successful", according to new US research. Why then are programmes that appear to be identical in design successful from the employee’ s or employer’ s perspective in one instance but not in another? No fewer than three significant and startling revelations emerge from the study by Charles Fay and Michael Thompson in a recent issue of the US journal Human Resource Management: 1. Change is widespread The first concerns the degree of change in reward practices. The management of reward is widely believed to have undergone a profound transformation over the last decade as companies strive to strengthen their competitiveness, enhance attractiveness to employees and increase shareholder returns. And the overwhelming impression from the survey was that innovation of some kind was widespread – the average organisation responding to the survey had made no fewer than 6.5 new or modified initiatives between 1995 and 2000. What’ s more over half of these initiatives were new programmes. As Fay and Thompson point out: "Reward managers should examine if this pace of change is appropriate and sustainable." The successful investment in new reward practices involves a great deal of effort, commitment and expertise. And it is probably the most difficult task facing HR managers. As Fay and Thompson warn: "Reward programmes communicate, in their design and application, the values and expectations of an organisation. It is surprising that the level of change is as high as it is." 2. Design and communication not significantly associated with degree of success You might have imagined that a well-designed plan is vital for reward system success and a carefully thought-out and well-communicated implementation is necessary. But the report's second revelation is that levels of success in plan design are not significant in explaining success on any of the reward systems outcomes, nor was success in achieving roll-out and communications effectiveness "This is perhaps the most troubling of the findings because it seems to contradict what many believe to be the major determinants of success," Fay and Thompson say. "Organisations were just as likely to be successful, or fail, in reaching any of the goals studied regardless of perceived success of plan design or the effectiveness of roll-out and communications." 3. Some spectacular failures Among the plethora of reward initiatives that jostle for our attention – everything from merit pay to broadbanding, work-life policies to share options – there are, it seems, many examples of failure. For the report's third revelation is that the number of unsuccessful initiatives was nothing short of spectacular – 59% of the 267 new or modified reward plans were deemed unsuccessful or only somewhat successful. "Modest success for initiatives that impact the heart of the employment relationship may not be good enough," Fay and Thompson say. "The success rate of the organisations in this study suggests a careful examination of the determinants of success is warranted before a reward programme change is initiated and a commitment be made to success in meeting these conditions prior to initiating any programme change." New and modified rewards programmes initiated between 1995 and 2000 1. New plans
2. Modified plans
3. New and modified plans
Source: "Contextual determinants of reward systems' success: An exploratory study", by Charles Fay and Michael Thompson, Human Resource Management, Fall 2001, (40) 3, 213-226. Want to know more? Title: "Contextual determinants of reward systems' success: An exploratory study", by Charles Fay and Michael Thompson, Human Resource Management, Fall 2001, (40) 3, 213-226. Methodology: Information was obtained via a questionnaire distributed by HayGroup offices to organisations in Canada and the US. Follow-up interviews were held with the vast majority of respondents. Five categories of reward initiative were examined:
For each initiative, respondents were asked to rank order by level of importance seven indicators of programme success, including financial results, increased productivity, reduced turnover and improved employee satisfaction Respondents were also asked to rank conditions leading to reward initiative success – including sound and user-friendly design, fairness as seen by employees, and ability to set and measure targets for results. Sample size: The research is based on information provided by 300 organisations: 231 were based in the US and 69 in Canada. "Respondents do not form a random sample of Canadian or United States organisations, and the results of the study should not be assumed to reflect the practices of all North American organisations." In total, data was received on 492 initiatives, but because of missing data the sample was cut to 267 initiatives in 162 organisations. Business sectors: Almost two-thirds of respondents employed more than 5,000 people. More than a fifth of respondents were based in the manufacturing sector, while 8.3% were in retail and wholesale. Availability: Human Resource Management is published on a quarterly basis by the University of Michigan Business School, John Wiley & Sons and the Society for Human Resource Management (SHRM). This journal "brings you management ideas and insights from the world's top HR experts – from the academic thought leaders to the professional managers who provide cutting-edge leadership. You'll find out about the trends before they become mainstream". To find out more jump to . . . www.shrm.org/hrjournal/index.html Posted 14 March 2002
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