This report presents the results of a survey of 173 employers carried out by e-reward in partnership with the Institute for Employment Studies examining current practice and opinions relating to the evaluation of reward effectiveness in UK organisations. Among the key aims of the research were to find out what organisations are doing about assessing the impact of their reward programmes - the most important methods, criteria and measures used - and what are the major obstacles.
Reward professionals have never been under more pressure to demonstrate the efficacy of the major investments they make in their pay and reward arrangements and the impact of any changes to them. Recessionary conditions show few signs of abating, yet there are still manifestations of key skill shortages, while increasing attention is being placed on “evidence-based management” and “management by analytics” ideas.
The research project involves a survey of practice and experiences, the results of which are set out in this report. We will be supplementing this with some in-depth case studies, to be published in a forthcoming eresearch report, which will examine in different settings how organisations are wrestling with issues concerning the evaluation of reward policy and practice.
From the vast tranche of survey data we have gathered, what emerges is a complex picture. It’s encouraging that some organisations are taking action and engaging in evaluation practices but many others are not. Moreover, where they do, there are numerous approaches - both formal and informal - to assessment, various criteria and several measures used. This range of diverse practices makes it quite a challenge to pick out what it is that separates those organisations that are happy with their processes and outcomes and those that are not. Nevertheless, it has been possible to single out some of the crucial factors necessary to ensure that effectiveness reviews are a success and the ultimate goal - rewards that stimulate performance and engagement - is achieved.
Practical insights and advice
A regular and hugely popular feature of all e-reward surveys is the analysis we publish drawing on the experiences and practical insights of the reward professionals participating in our research projects. Such practical knowledge is perhaps the most valuable source of guidance to those new or less well informed on the topic in question. This is why respondents were again asked their opinions on the key factors that can make or break success when evaluating reward practices. For this reason, following on from our summary of findings, there’s a dedicated section outlining the “Do’s” and “Don’ts” associated with reward effectiveness assessment.
Based on this detailed advice and the wider results emerging from the other questions in the survey, it has also been possible to compose a further list of tips setting out some of the main conditions that need to be in place to ensure success as well as the characteristics of actual assessment processes and measures used that tend to be associated with effective reward outcomes.
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REPORT CONTENTS
INTRODUCTION
What the survey covers
Practical insights
SUMMARY OF KEY FINDINGS
Who took part in the survey?
Recent changes to reward
Reward objectives
Views on reward system effectiveness
Evaluating the effectiveness of reward arrangements
Methods used to assess reward effectiveness
General criteria used to assess reward effectiveness
Specific measures used to assess reward effectiveness
Ways of improving organisations’ ability to assess and demonstrate the effectiveness of pay and reward
Obstacles to improving the effectiveness of reward
SECTION 1: EVALUATING REWARD - MAKING IT WORK
Getting it right – conditions for success
Getting it right – avoiding failure
Checklist 1: The Do’s when evaluating reward effectiveness
Checklist 2: The Don’ts when evaluating reward effectiveness
Evaluating reward effectiveness: Tips on what to do and how to avoid the pitfalls
SECTION 2: CHANGES TO REWARD
Extent of changes to reward
Why organisations have made changes to reward
SECTION 3: REWARD OBJECTIVES
Main reward goals
Are reward objectives being delivered?
Does carrying out a reward evaluation improve delivery of reward goals?
SECTION 4: VIEWS ON REWARD SYSTEM EFFECTIVENESS
How respondents rate the effectiveness of their reward systems
Does pressure on the reward function drive greater effectiveness?
Effectiveness of reward compared with one year ago
Reward effectiveness ratings for different employee groups
Effectiveness ratings attributed to different areas of reward
Attributes of high-performing organisations
Obstacles to improving the effectiveness of reward programmes
SECTION 5: EVALUATING THE EFFECTIVENESS OF REWARD ARRANGEMENTS
Private sector more likely to evaluate
Why organisations don’t evaluate
Satisfaction with reward effectiveness reviews
Methods used to assess reward effectiveness
“Hard” and “soft” methods of assessment
General criteria used to assess reward effectiveness
Specific measures used to assess effectiveness
Most influential measures
Factors likely to improve organisations’ ability to assess and demonstrate effectiveness of reward
Three main factors lacking
SECTION 6: CONCLUSIONS
SECTION 7: SURVEY DETAILS
Purpose
Methodology
Number of participants
Business sectors
Workforce size
Validity
Confidentiality guaranteed
List of participants
LIST OF BOXES
2.1: Proportion of organisations making changes to various reward areas in last three years
2.2: Reasons for changes to areas of reward in last three years
2.3: Relationship between changes to reward strategy and pressure to demonstrate the value from reward systems
2.4: Are reward functions under more pressure to demonstrate the value they deliver?
3.1: Most important reward objectives
3.2: Reward objective ratings weighted by number of times mentioned
3.3: Opinions on whether reward objectives are being delivered by sector
3.4: Effectiveness with which reward objectives are delivered by whether a reward evaluation has been attempted
4.1: Views on effectiveness of reward systems
4.2: Ratings for reward system effectiveness by staff numbers
4.3: Average scores for reward system effectiveness by number of changes to key areas of reward in last three years
4.4: Changes in rating for reward effectiveness over the 12 months
4.5: Changes in reward effectiveness ratings over the 12 months by whether an evaluation has taken place
4.6: Reward effectiveness scores for different employee groups by business sector
4.7: Effectiveness ratings for different areas of reward by business sector
4.8: Obstacles to improving the effectiveness of reward programmes
5.1: Proportion of organisations evaluating reward by sector
5.2: Main reasons why organisations have not evaluated reward effectiveness by sector
5.3: Degree of pressure on reward functions by whether a review has taken place
5.4: Satisfaction with reward effectiveness reviews by sector
5.5: Methods used to assess reward effectiveness
5.6: Average reward effectiveness scores by number of assessment methods used
5.7: General criteria used to assess reward effectiveness by sector
5.8: Average effectiveness scores by number of general criteria used
5.9: Specific measures used to assess reward effectiveness by sector
5.10: Factors likely to improve organisations’ ability to assess and demonstrate effectiveness of reward by sector
5.11: Factors helping to improve ability to evaluate rewards by effectiveness of reward systems
7.1: Survey responses – summary
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