Reward Reward StrategiesStrategies

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

RewardRewardss

ExtrinsicExtrinsic IntrinsiIntrinsicc

•ResponsibilityResponsibility•Interesting workInteresting work•Personal growthPersonal growth•Diversity of Diversity of activitiesactivities

FinancialFinancial

Non-Non-FinancialFinancial

1: EXTRINSIC FINANCIAL 1: EXTRINSIC FINANCIAL REWARDSREWARDS

• Wages• Bonuses• Profit-sharing• Vacations• Sick leave• Purchase discounts

2. EXTRINSIC NON-2. EXTRINSIC NON-FINANCIAL REWARDSFINANCIAL REWARDS

• Office furnishings• Lunch hours• Parking spaces• Work assignments,

locations• Business cards• Secretary• Titles

REWARD STRATEGY

LAWLER’S MODEL OF REWARD LAWLER’S MODEL OF REWARD STRATEGYSTRATEGY

RESOURCES

ENVIRONMENT

CORPORATE GOALS & OBJECTIVES

ORGANIZATION DESIGN &MANAGEMENT STYLE

REWARD SYSTEM

INDIVIDUAL & ORGANIZATIONAL BEHAVIUOR

Reward system – An important means of Reward system – An important means of communicationcommunication

RELATIONSHIP BETWEEN HR & REWARD RELATIONSHIP BETWEEN HR & REWARD PRACTICES & BUSINESS PERFORMANCEPRACTICES & BUSINESS PERFORMANCE

JOBJOB SATISFACTIONSATISFACTION

EMPLOYEE EMPLOYEE INVOLVEMENT / INVOLVEMENT /

COMMUNICATIONCOMMUNICATION

BUSINESS BUSINESS PERFORMANCEPERFORMANCE

HR PRACTICESHR PRACTICES

DYNAMIC REWARD DYNAMIC REWARD STRATEGIESSTRATEGIES

DYNAMIC REWARD STRATEGIES

RESPONSIBLE, DYNAMIC AND FLEXIBLE HR PROFESSIONALS

ALIGNING REWARD SYSTEM WITH STRATEGY

BUSINESS STRATEGY

PEOPLE REQUIREMENT

PREVIOUS REWARD METHODS

CHANGES TO

REWARDS

EFFECTIVE REWARD STRATEGYEFFECTIVE REWARD STRATEGY

EFFECTIVE EFFECTIVE REWARD REWARD

STRATEGYSTRATEGY

WELL DEFINED GOALS &

OBJECTIVES

WELL DESIGNED PAY & REWARD PROGRAMMES

ACCORDING TO THE NEEDS

EFFECTIVE & SUPPORTIVE

HR

BALANCED, PRACTICAL REWARD BALANCED, PRACTICAL REWARD STRATEGY MODELSTRATEGY MODEL

ORGANIZATIOORGANIZATION N CAPABILITIESCAPABILITIES

BUSINESS BUSINESS STRATEGYSTRATEGY

ORGANIZATIOORGANIZATION STRUCTUREN STRUCTURE

EMPLOYMENT EMPLOYMENT DEALDEAL

COMPETENCIESCOMPETENCIES

DEMOGRAPHICSDEMOGRAPHICS

VALUESVALUESTOTAL REWARD TOTAL REWARD STRATEGYSTRATEGYPAYPAY BENEFITBENEFIT

SSLEARNING & LEARNING & DEVELOPMENTDEVELOPMENT

WORK WORK ENVIRONMENTENVIRONMENT

IMPOROVED BUSINESS RESULTS & ALIGNED EMPLOYEE IMPOROVED BUSINESS RESULTS & ALIGNED EMPLOYEE BEHAVIOURSBEHAVIOURS

EMPLOYER’S EMPLOYER’S PERSPECTIVEPERSPECTIVE

EMPLOYEE’S EMPLOYEE’S PERSPECTIVEPERSPECTIVE

CONFLICTSCONFLICTS

• 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 PAYPERFORMANCE RELATED PAY

• Score card driven Score card driven bonusbonus

– 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 outFlexible HolidaysFlexible PensionsFlexible 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.

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