Reward & Employee Relations

strategies
Chap 12, 13
 Reward Strategy
• Reward strategy defines what the organization wants to do
in the longer term to develop and implement reward
policies, practices and processes that will further the
achievement of its business goals and meet the needs of its
stakeholders.
• It is based on an understanding of the needs of the
organization and its employees
• It is also concerned with developing the values of the
organization
• It is underpinned by a reward philosophy, expressing the
basis on which employees are valued & rewarded.
 Why and what?
• Why have a reward strategy?
To know where you are going and when do you arrive
there; compensation is one of the largest items on a
firm’s expenses (up to 60% or more); to encourage
good performance; to support other HR strategies.
• Characteristics of reward strategies
Reward strategies differ according to past legacy and
future strategies of an organization, its culture and
business needs.
 Gap Analysis
• Reward strategy should be based on an analysis of the present
arrangements for reward, which would include a statement of
their strengths and weaknesses. This gap analysis answers
questions such as:
• whether the reward strategy is aligned with company mission,
values and business strategy; is there an appropriate mix of
financial & non-financial rewards; are pay policies based on job
analysis and market research data; are these policies cost-
effective; are they motivating employees to improve
performance; are they flexible; do line managers managing
rewards have sufficient autonomy and responsibility, etc?
 Structure of Reward Strategy
After carrying out the gap analysis, a strategy can then be
structured under the following headings:
1. A statement of intentions –proposed initiatives
2. A rationale – why proposal is being made, including
cost-benefit analysis, people issues and means for
addressing them
3. A plan – who will handle initiatives, with what
resources, according to what schedule
4. A definition of guiding principles – values adopted in
formulating and implementing reward strategy
 Content of a reward strategy
• A reward strategy may indicate either a broad sense of
direction in which reward management may go, such as the
development of employment relationship and the work
environment that will enhance commitment and engagement;
supporting the development of a performance culture or
developing a more flexible approach to rewards
• or it may list specific intentions dealing with particular aspects
of reward management, e.g. the introduction of a new grade
and pay structure; replacement of an existing decayed job
evaluation scheme with a new computerized one; training
designed to increase line management capability, or
communication programs to inform everyone of the reward
policies of the organization
 Guiding Principles
• Express the reward philosophy of the organization – its values
and beliefs about how people should be rewarded, which can
then be communicated to everyone to increase understanding
of what underpins reward policies and practices
• What matters to employees is not the philosophies themselves
but the pay practices emanating from them
• Guiding principles should incorporate general beliefs about
fairness, equity, consistency and transparency.
• Specifically they may deal with developing a high-performance
culture, maintaining competitive rates of pay, rewarding people
according to their contribution and allowing a reasonable
degree of flexibility in the operation of reward processes
Reward strategy development process
 Effective reward strategies
• Effective reward strategies are well-linked to business
objectives and strategies
• reinforce organizational values
• cater to the needs of the organization employees and
other stakeholders
• consistent and integrated with one another
• backed by and supporting of HR processes
• based on realistic assessment of costs
• understood, supported and capable of being
implemented by line managers
 Employee relations strategies
• Employee relations strategies define the intentions of the
organization about what needs to be done regarding the
ways the organization manages its relationships with
employees.
• It emphasize processes of involvement and participation,
including the implementation of programs for continuous
improvement and total quality management; cooperation
with the unions.
• Like all other aspects of HR strategy, employee relations
strategy also flows from the business strategy as well as
supports it.
Concerns of employee relations strategies
Generally concerns are
• building stable and cooperative relationships with employees that
minimize conflict
• achieve commitment through employee involvement
• develop mutuality of interest in achieving organizational goals
through development of shared cultural values
More specific concerns include
• new bargaining structures
• Giving voice to employees
• Improving employee relations climate in order to produce more
harmonious and cooperative relationships
• developing a ‘partnership’ with trade unions or bypassing them to
deal directly with employees
Four approaches to employee relations (IRS, 1993)

1. Adversarial: organization decides what it wants to

do, and employees are expected to fit in.
2. Traditional: a good day-to-day working relationship
but management proposes and the workforce
reacts through elected representatives
3. Partnership: organization involves employees in the
drawing up and execution of organization policies,
but retains the right to manage
4. Power sharing: employees are involved in both day-
to-day and strategic decision making
 Formulating employee relations strategies
• The aim of an employee relations strategy is to create a
shared agenda that will communicate a common perspective
on what needs to be done. This can be expressed in writing
but can also be clarified through involvement and
communication processes.
• A partnership agreement is a useful way of getting the
strategy into action. It can be described as one in which both
parties (management and employees) agree to work
together to their mutual advantage to achieve a climate of
cooperation. Key values in such agreements include: mutual
trust and respect, a joint vision for the future, continuous
exchange of information, recognition of the central role of
collective bargaining and devolved decision making.
 5 themes of partnership agreements
1. Shared goals: All employees are involved in developing
the organization’s vision, resulting in a shared direction
2. Shared culture: a culture has to build up over time; it
cannot be imposed by senior executives
3. Shared learning: increased receptiveness to change
brought about by career and personal development plans
4. Shared effort: unified business driven by flexible teams
and organization-wide cooperation
5. Shared information: effective communication that ‘runs
up, down and across the business in a mixture of formal
systems and informal processes.’
 Employee voice strategies
• ‘Employee voice cover(s) a whole variety of processes and
structures which enable and empower employees, directly and
indirectly, to contribute to decision-making in the firm’ (Boxall
and Purcell, 2003)
• It embraces involvement, participation and opportunities to
register discontent.
• Amongst the strongest factors affecting the choice of employee
voice strategy are the values of management towards unions.
• Strategic planning should be based on discussions with
stakeholders (line managers, employees and trade union
representatives) on the effectiveness of existing arrangements
and any improvements required. In the light of these
discussions, new or revised approaches can be developed.
A framework for employee voice (from Marchington et al, 2001)