Reward Strategies

Rewards
Saying ‘thank you’ for a job well done, and thereby motivating the recipient to continue to do those things that benefit the organization

Rewards
Extrinsic
Non-Financial

Intrinsic
•Responsibility •Interesting work •Personal growth •Diversity of activities

Financial

1: EXTRINSIC FINANCIAL REWARDS
• • • • • • Wages Bonuses Profit-sharing Vacations Sick leave Purchase discounts

2. EXTRINSIC NON-FINANCIAL REWARDS
• • • • Office furnishings Lunch hours Parking spaces Work assignments, locations • Business cards • Secretary • Titles

REWARD STRATEGY

LAWLER’S MODEL OF REWARD STRATEGY
RESOURCES
INDIVIDUAL & ORGANIZATIONAL BEHAVIUOR

CORPORATE GOALS & OBJECTIVES

ORGANIZATION

DESIGN &MANAGEMENT STYLE

REWARD SYSTEM

ENVIRONMENT

Reward system – An important means of communication

RELATIONSHIP BETWEEN HR & REWARD PRACTICES & BUSINESS PERFORMANCE
JOB SATISFACTION

EMPLOYEE INVOLVEMENT / COMMUNICATION

BUSINESS PERFORMANCE

HR PRACTICES

DYNAMIC REWARD STRATEGIES

RESPONSIBLE, DYNAMIC AND FLEXIBLE HR PROFESSIONALS

DYNAMIC REWARD STRATEGIES

ALIGNING REWARD SYSTEM WITH STRATEGY
BUSINESS STRATEGY PEOPLE REQUIREMENT PREVIOUS REWARD METHODS CHANGES TO REWARDS

EFFECTIVE REWARD STRATEGY
EFFECTIVE REWARD STRATEGY

WELL DEFINED GOALS & OBJECTIVES

WELL DESIGNED PAY & REWARD PROGRAMMES ACCORDING TO THE NEEDS

EFFECTIVE & SUPPORTIVE HR

BALANCED, PRACTICAL REWARD STRATEGY MODEL
EMPLOYER’S PERSPECTIVE EMPLOYEE’S PERSPECTIVE

ORGANIZATION CAPABILITIES BUSINESS STRATEGY ORGANIZATION STRUCTURE

COMPETENCIES

EMPLOYMENT DEAL

DEMOGRAPHICS VALUES

TOTAL REWARD STRATEGY
PAY LEARNING & DEVELOPMENT BENEFITS
WORK ENVIRONMENT

IMPOROVED BUSINESS RESULTS & ALIGNED EMPLOYEE BEHAVIOURS

CONFLICTS
• Focus on individual performance in teams • Lack of customer service rewards • Lack of relationship between pay & performance • Absence of learning and development • Pay levels and benefits entitlement strongly related to the length of service • Lack of variable portion in pay

PERFORMANCE RELATED PAY
• Score card driven bonus
– Customer satisfaction (customer survey) – Shareholder returns (profitability vs. targets) – Process excellence – Learn ‘n’ Grow

Reward Policies

Reward Policies
Reward Policies provide guidelines for the implementation of reward strategies and the design and management of reward process.

Considerations
• The level of reward • The relative importance attached to market rates and equity • Attraction and retention • The relationship of rewards to business performance • Total reward policy

Considerations
• The scope for the use of contingent rewards related to performance, competence, contribution or skills. • Assimilation policies • The degree of flexibility required. • The role of line managers. • Involve employees in the design of reward systems • Communicate the reward policies to employees • Transparency.

Level of Reward
• Organizations philosophy about Rewards:
– High payer, Average , Below Average

• Policy depends on a number of factors:
– Level of performance – Competition for good quality people – Tradition stance & organizational culture of the company – Affordability

Market Rate and Equity
• Policy needs to be formulated on the extent to which rewards are market driven rather than equitable.
– Obtain and keep high quality staff – Response to market pressures

• Market considerations will derive levels of pay in the organization.

Attraction policies
• • • • • Career prospects Training and development Intrinsic interest of the work Flexible working arrangements Work life balance

Retention policies
• Capelli says “market determines the movement of employees, not the company” • Talent management (attraction and retention of quality employees) • Talent management policies
– – – – To attract employees To develop employees Retain employees Motivate employees

Talent Management Policies
• Talent Management Process:
– – – – – Employer of Choice Recruitment procedures Designing jobs and roles Opportunities to develop skills Working environment

Talent Management process
– – – – Work life balance Leadership qualities of line managers Recognition Conducting talent audits

Reward to Business Performance
• Link between reward and business performance. • Gain sharing
– A commitment to employee involvement that ties additional pay to improvements in workforce performance.

• Profit sharing
– A plan under which an employer pays to eligible employees, as an addition to their normal remuneration, additional sums in the form of cash or shares in the company related to the profits of the business.

Total Rewards
The total reward policy should state that although contingent rewards play an important part in the reward policies of the organization other forms of non financial reward are regarded as being equally important

Contingent Rewards
Pay for individual that is related to performance, competence, contribution or service.

Assimilation Policies
• How existing employees should be assimilated into revised pay structure.
– Red circling (identifying and dealing with overpaid people) – Green circling (identifying and dealing with underpaid people)

Flexibility
• Flexing Company Cars
– Trading up – Trading down – Trading out Flexible Holidays Flexible Pensions Flexible private medical Insurance

Role of line Managers
• Direct interaction with employees • Trained

Involving Employees
• Employees should be given voice in the design and management of reward processes.

Communication to Employees
• Reward processes are powerful media for conveying messages to employees about the organizations values and the contribution they are expected to make in upholding those values and achieving the organization’s goals.

Transparency
• Reward process should not be secret activity.
– Pay progression – Lack of understanding breeds suspicion.

THANKS

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