Reward Management

Managing Human Resources

Definition of Reward Management

Reward Management is concerned with the formulation and implementation of strategies and policies that aim to reward people fairly, equitably and consistently in accordance with their value to the organization (Armstrong and Murlis 2004)

Shift in Jobs & Reward Systems

1960s & 70s
manual workers, piece-rates/wage drift, measured day work, incomes policies

1980 & 90s

service/knowledge workers, PRP, shares

2000s
Reward management PRP 1998 20%, 2004 32%, 36% 2007 Total Reward

Objectives of Reward Management

Support the organisations strategy Recruit & retain Motivate employees Internal & external equity Strengthen psychological contract Financially sustainable Comply with legislation Efficiently administered

Basic Types of Reward

Extrinsic rewards
satisfy basic needs: survival, security Pay, conditions, treatment

Intrinsic rewards
satisfy higher needs: esteem,development

Reward Options
Base pay--fixed or minimum wage/salary Plussage--capability, qualification Premia/Overtime Performance related pay Indirect pay--benefits, non-cash, shares Non-monetary: recognition, advancement Total Reward Pay, non-pay, flexible hours, cafeteria benefits

Rewards by Individual, Team, Organisation

Individual: base pay, incentives, benefits
rewards attendance, performance, competence

Team
team bonus, rewards group cooperation

Organisation
profit-sharing, shares, gain-sharing

Motivation theories I
Maslows hierarchy of needs
Physiological, safety, social, esteem, selfactualisation

Herzberg
Hygiene, motivators (e.g.,sense of achievement)

McClelland
Learned needs

Motivation theories II
Vrooms expectancy theory
Valance: attractive outcome Instrumentality: performance results in desired reward or achievement Expectancy: effort will lead to level of performance

Equity theory
fairness judged by comparison--internal, external

Determining Reward: Job Evaluation

Ranking of jobs by relative worth to the organisation Non-Analytical
whole jobs, paired jobs (matrix), job classifications

Analytical
components, factors, competencies points rating(e.g.; 1-10)

Pay & SHRM

Achievable organisational objectives Clear link between pay and objectives Contingency model:
Vertical fit--alignment of pay systems & business objectives Horizontal fit--pay and HR practice support one another

Use of Reward Management (CIPD 2008)

Written Reward Strategy Total rewards approach Key factor in salary level
market rates ability to pay

33% 29%
31%, 22% 53% 44%

Key factor in pay review

organisational performance inflation

Incentive plans (CIPD 2008)

Individual Business results Combination Team-based 60% 51% 50% 27%

Performance appraisal: MAJOR GOALS

Improve performance Increase motivation identify training/development needs manage careers set levels of reward control

APPRAISAL METHODS
OUT Rank & Yank Critical Incident IN Psychometric Scales 360 Appraisal Frequent Review Role of line manager

WHO DOES APPRAILSAL?

owned and driven by line-manager (Armstrong, 2006) 360 Appraisal
Managers (alone 180) HRM personnel Peers Subordinates Self Customers (540)

PSYCHOMETRIC SCALES
BARS--Behavior Anchored Rating Scale
Anonymous questionnaire 1-7 unacceptable to excellent behavior

BOS--Behavioral Observation Scale

Anonymous questionnaire 1-5 never to always behavior traits

Use by HR Practitioners
Annual Appraisal 83% Personal development 68% Self-appraisal 45% Coaching 39% Competence Assessment 31% Twice-yearly appraisal 24% Subordinate 20% Continuous assessment 17% 360 appraisal 11%

Problems with PRP

Objectivity Psychological contract & equity Inhibits open discussion of training needs Time consuming short-termism PRP is not a silver bullet (CIPD) Shift from performance to contribution