Total Reward Strategy
The total reward strategy must identify how an organisation intends to position itself in the competitive employee market to achieve the fundamentals of people management:
Both the remuneration aspect, (the pay andbenefits), and the performance aspect, (the leadership of the employees), contribute to the success of these fundamentals. It is recognised that pay alone is a blunt tool and that more underlying management practices can have a more powerful influence on the success of the reward program.
How do we design a reward strategy? Use the flow chart below as a guide, but recognise that this is going to be anincremental process, and that the result will be more of a planning blueprint than a tablet of stone. HR and reward strategies change as the internal organisation and external market changes.
Total Reward Strategy Development Map
Key Elements in Total Reward Strategy Development
• Building a good understanding of the organisation's strategy, goals,priorities, capability to deliver and sustain changes in total reward practice and key measures of success
• Understanding what motivates people and how they contribute to organisational success, the competences and capabilities required and the values and culture needed to secure high performance
• Understanding current HR strategy and the way key HRprogrammes are focused
• Understanding how current total rewards are perceived by staff and the leadership group, where the gaps are with what is needed for the future
• Analysis and diagnosis of what to keep and what to change and the related communications and capability issues
• Creating and agreeing a total reward philosophywhich underpins and sets criteria for effective total reward strategy development
• Building a set of total reward programmes, policies and practices for planned implementation.
• Setting a process for evaluation and review against the success criteria set for each programme to enable continuous performance improvement.
We stress the importance ofeffective consultation and communication throughout as a well as the development of HR and line management capability to implement and sustain the total reward approaches adopted
Components of Effective Reward Strategies
1. Clearly defined goals and a well-defined link to business objectives;
2. Well-designed pay and reward programmes, tailored tothe needs of the organisation and its people, and consistent and integrated with one another;
3. Effective and supportive HR and reward processes.
Source: Brown, D (2001) Reward Strategies: From intent to impact, CIPD, London, quoted in Chapter 3, Armstrong, Michael and Helen Murlis (2004) Reward Management: A Handbook of Remuneration Strategy and Practice, Kogan Page, LondonCase Study
For a real example, read the Insurance (pdf, 30Kb) case study.
By recognising that pay is not the only motivator, and acknowledging the importance of not only tangible but also intangible rewards within the wider context of the work experience, total reward has wide-reaching implications for employers and employees alike. Total reward is potentially very powerful in assistingemployers align their HR and business strategies with employee needs, to improve performance. As a concept, total reward is not new. However, the latest of our annual reward management surveys finds that only around three in 10 employers have adopted this approach so far. However, a further 21% claim that they plan to introduce total reward in the next 12 months.
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